Analysis

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Analysis is a critical part of any Planning and Budgeting process. Determining the amount of time and resources to devote to analytical activities must be considered prior to engaging in Planning and Budgeting process. This will drive data requirements and dictate many aspects of the process, including roles and responsibilities.

Viewpoint A

Summary:
There is a pereption that analysis time is an issue when completing the Planning & Budgeting process. Ensuring that the analysis time is sufficient (not over or under allocated) and allows for proper review cycles by financial and operational stakeholders, is a key concern. It is also common that the analysis time spent is considered 'non-value added', as management direction may drive out too much detail. Conversely, organizations with a tight time constraints may not have enough analysis time built into the process. Establishing a time line and guidelines for analysis as well as the scope and objectives for the analysis is key to the planning and budgeting process.
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Viewpoint B

Summary: Staying current with respect to the internal and external factors impacting the organization is a critical part of the process requiring ample analysis time and resources. The type of organization can in and of itself complicate the analysis, review, and process management associated with budgeting and planning. In particular, Governmental budgeting and the layers of Departments and Agencies involved creates a level of complexity driving increased analysis.
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Recommendations, Benchmarks, Resources, Implications


Viewpoint A

Analysis is an activity used throughout the planning and budgeting process, albeit with different objectives. Early on, analysis is significant in formulating assumptions and assessing environmental factors. These activities are aimed at setting the foundation for later activities. Where planning and budgeting processes are data driven, early analysis is critical to the entire process. As the Planning & Budgeting process proceeds, analysis is a significant component of testing and validating assumptions and identifing changes. Later, after the budget is finalized, analysis compares actual results against the approved plan for periodic performance reporting.

Ideally, the budgeting process allows sufficient time for analysis. Perceptions are that current budgeting processes spend either too little time in analysis or too much, to where some analysis becomes non value-added.

As the budget cycle evolves, it is important to analyze results, changes, and implications from each iteration. This allows for validation of accuracy, communication of new found impacts, and development of next step plans for the ensuing budget iteration. Analysis informs the decision-making process and supports planning assumptions.

It is typical to review analysis and results between iterations, though there is a significant difference across organizations on the level of detail involved and the level of management visibility. Analysis involves both financial and underlying operational factors and assumptions.

Some organizations are so time constrained by their budget process cycle time that there is little analysis of results and their implications. Others feel that final resource allocation has been predetermined, so they do not bother to spend significant time in analysis. Still others do spend time analyzing the budget results, but do not focus on the important points. This can be because people tend to focus on protecting their own turf or on protecting those elements that provide them the most bonus incentive. This suboptimization, while good for an individual manager, is not ideal for the overall organization. It may also be that they do not understand their true work drivers in relation to consumption and capacity levels levied upon them.

It is also a common occurrence for analysis to be non value-added when conditions or management philosophy focus so much on details and nth degree precision, that they lose sight of how the budget supports company strategy. When every small component is scrutinized across numerous low level budgets, the process bogs down and costs significant resource.

On the other hand, planning and budgeting involves a view into the future. The future by definitition contains uncertainty and is not precise. Sometimes, we force our analysis into an unrealistic degree of precision.

It is clear that analysis requires estimates and models to interpret and develop results, therefore analysis can often only be as good as its system or process. Garbage in means garbage out, regardless of the fact that a number was derived.

One must also address any disconnect between financial players and operational players in the budget process. Both views/parties must be partnered for validation, feasibility, and communication.

Demand requirements, consumption rates, and the resulting capacity requirements should be reviewed with those in the management that can impact budgeting decisions. Appointing product or customer account managers is a current method to help accomplish this, within an appropriate level of executive hierarchy. It is important to pre-plan and schedule such development and review within the scheduled budget iterations. (ss)


Viewpoint B

Budget priorities in an overall Federal Budget have their genesis in each department and agency of the federal government. In a cabinet department, these decisions actually begin in the bureaus -- at the program level. Decisions percolate up through an agency, adding additional layers of complication in analysis, review, and process management.

Analysis revolves around multiple functions that build on data and skill abilities of organizations and systems, including:
(1) Centralized database management (accurate and well presented numbers are the heart of a budget office);
(2) Management of external and congressional inquiries, a process that is becoming more extensive each year, with transcript questions approaching between 1,500 and 2,000 annually for a large federal agency or department;
(3) Labor cost analysis, reviews, and forecasting, with many public sector organizations running as must as 75% for personnel costs);
(4) Performance-Based budgeting (along with enhanced quality of outcome measures);
(5) Internal financial plan management;
(6) Summary documents, graphic presentations, etc.

Formulation of the budget is really a process that exists outside specific time boundaries. Done properly, it is a year-round task. Budget offices are required to manage the current year, while, at the same time, trying to tell the story for the year ahead. Like shifting sand, events occurring today can destroy credibility tomorrow. Reviewers, whether they are Congress, OMB reviews, or oversight and review within an individual agency, have amazing abilities to see right through weaknesses in themes and messages. Therefore, it is essential that reviewers operate with facts and understand what they mean for direction, vision, management progress and effectively monitoring results.

The Budget Formulation and Execution Management process involves and means many things:
(1) Getting to know program functions of the organization – issues, financial and operational trends, and forecasts of direction;
(2) Engaging in decision-making systems at the management level and knowing internal organizational challenges and external priorities;
(3) Analyzing budget data to highlight trends/concerns;
(4) Making sure -- through guidance, oversight, and implementation of the decision process -- that budgets are brought forth from bureaus reflecting internal organizational priorities and addressing previously identified issues;
(5) Strengthening budget presentation documents and internal financial management guidance and plans, while also ensuring clear presentations and a unified voice.

All federal agencies must coordinate their budget and planning processes. To ensure linkage, the budget must also be coordinated with other major administrative support functions: personnel, procurement, and information systems. The purpose of this coordination is to fundamentally change the focus of federal management and accountability from a preoccupation with inputs and processes to a greater emphasis on the outcomes and results that programs are achieving. It brings together manager, worker, and stakeholder to focus on three things:
(1) Purpose of programs
(2) Means to achieve them
(3) Progress towards achievement

Monitoring performance and assessing trends both financially and programmatically are vital to ensuring effectiveness of resources invested. Reviews of trends, patterns and directions of finances and metrics are integral parts of a strong analytical framework supporting budget management.

Solid analyses surrounding the budget arena is critical to fuller management of the process. Observations are:

  • Reviews and analysis are made more complicated by the diversity of programs, covering financial management, manufacturing, compliance, regulatory, and vital support. True analysis uses key mission emphases to bring these together.
  • Each program oversight area also reviews and analyzes financial targets and forecasts to set priorities. Their decisions are not always consistent with budget office analysis of the budget and financial plan. Nevertheless, they have equal, if not sometimes, superior weight as organizational decision makers.
  • Staying current as best as possible is probably the critical element of effective budget management, a process requiring continued analysis of trends, forecasts, progress, and results, allowing executives and management to articulate internal policy and establishing a effective communications links externally that build and use analytical results.

(dz)


Recommendations

  • Schedule sufficient development and review into the planning and budgeting cycle.
  • Product or customer account managers should review and approve demand requirements, consumption rates, and resulting capacity.

Ensure the decision manager has the proper level of authority.

  • Build into the planning and budgeting process continued analysis of trends, forecasts, progress, and results.
  • Structure or improve analysis between iterations to impact the number and quality of iterations.

Benchmarks

  • Your input is welcome here

Resources

  • Your input is welcome here

Implications

1) There is a correct amount of analysis 2) Too much analysis 3) Not all the analysis adds value 4) Need to focus analysis on important points 5) There is a correct amount of development and review 6) Requires estimates and models 7) Too little analysis 8) Homework not Done

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