The following table provides a checklist of the internal budget practices covered in the guide.
Organisations should assess the extent that individual practices in this checklist are relevant, appropriate and cost-effective in light of their circumstances. By way of example, a rating of
‘Absent’ for any one practice may be appropriate if the organisation has compensating practices in place, or it is not cost-effective to adopt the practice.
Established Developing Absent Part 2—Embedding the internal budget into organisational planning and management Integrate the internal budget into organisational planning (Part 2.1)
1 Internal budgets closely align to strategic planning processes.
2 Internal budgets are developed and approved at the same time as organisational plans.
3 Internal budgets support each level of planning and performance management.
4 Planning and budgeting processes source information from the same data sets.
Align internal budgeting with organisational roles and responsibilities (Part 2.2) 5 Budget allocations are clearly assigned to
accountable officers or positions.
6 Officers are only held accountable for budget allocations where they have the responsibility and authority to take action.
7 Ownership of budget source data and key budget assumptions is clearly assigned within the organisation.
8 Allocated budgets show the full net cost of services and distinguish between those items that the responsible manager has direct control over from those where control is indirect.
9 The organisation has adopted a reliable costing approach to attribute indirect costs to outputs and programs.
10 Operational managers are consulted in the establishment of cost attribution rules and identification of key cost drivers.
11 All elements of the budget, including balance sheet items, are allocated to operational managers so that they can view the full financial impact of their decisions.
Appendices Established Developing Absent
12 For any budget elements that have not been allocated to operational managers, a formal risk assessment has been undertaken to identify compensating controls and help ensure that each unallocated budget element is managed.
Integrate operational and capital budgets (Part 2.3) 13 The organisation has prepared a long-term
assessment of its capital priorities and associated funding requirements (a capital budget).
14 The timeframe covered by the capital budget encompasses the expected useful life of current and planned asset purchases.
15 The capital budget links to, and flows from, the organisation’s asset management plan.
16 The organisation uses the asset register to assess useful lives and replacement values to estimate capital replacement costs each year.
17 Capital and operating budgets are integrated so that managers can assess the ‘whole of life’ cost of capital investment decisions.
18 The organisation requires all new major capital investment and capital replacement proposals to be supported by an appropriate business case.
Align internal and external budgets (Part 2.4) 19 Consistency is maintained between the
internal and external budgets throughout the external budget cycle.
Harmonise budgeting and reporting (Part 2.5) 20 Consistent policies and formats are adopted
for reporting budget and actual information.
21 Budget accounting policies are consistent with external reporting requirements and standards.
Engage stakeholders in internal budget processes (Part 2.6) 22 Planning and coordination of internal budget
processes includes representation from across the organisation.
23 The Chief Financial Officer reports directly to the Chief Executive on the development and management of the organisation’s internal budget.
Established Developing Absent 24 Managers understand and agree to their
role in the internal budget process and their responsibilities have been clearly articulated in their performance agreements.
25 Managers with budget responsibilities have been provided with training or guidance on the:
organisation’s internal budget processes,
•
including its budget policies and guidelines;
operation of the organisation’s budget
•
system; and
Australian Government’s budgeting and
•
financial management framework.
26 Operational managers are able to submit budgets on the basis of operational drivers.
27 Managers with budget responsibility have access to appropriate systems and tools to assist in developing their budget.
28 The organisation provides opportunities for managers with budget responsibilities to interact and share knowledge on budgeting practices.
29 There is sufficient visibility of that part of the organisation’s internal budget attributed to whole of government activity.
Part 3—Developing and implementing a comprehensive internal budget Effective planning and coordination (Part 3.1)
30 The organisation’s internal budget policy articulates budget priorities and constraints and communicates the organisation’s framework for budget development and decision-making.
31 The internal budget is prepared on a multi-year basis consistent with the organisation’s strategic and capital planning processes.
32 The organisation has a timetable that:
identifies information required for internal
•
budget processes;
describes deliverables in detail;
•
incorporates key checkpoints; and
•
identifies key deadlines and milestones.
•
33 The organisation clearly articulates responsibility for budget coordination and preparation.
Appendices Established Developing Absent
34 The organisation has appropriate contingency arrangements if key budget staff or systems are unavailable.
35 The organisation has issued guidelines and instructions that contain:
budget policies;
•
priorities and assumptions on which the
•
budget is based;
roles and responsibilities;
•
timeframes and deadlines; and
•
protocols for budget development.
•
Effective budget construction (Part 3.2) 36 The organisation uses a combination of
‘top-down’ direction and ‘bottom-up’ participation to develop the internal budget.
37 The organisation has considered
incorporating concepts of zero-based and performance-based budgeting into their budgeting approach.
38 The organisation uses fully integrated budgeting and reporting software, which incorporates sufficient controls and functionality to meet the needs of users.
For example:
the system is subject to appropriate
•
governance and review;
changes to budget systems and tools are
•
centrally governed, including changes to assumptions and calculations;
adequate segregation of duties exists
•
between budget input and budget approval;
operational areas are able to enter data
•
directly into the system;
budget data is regularly backed-up;
•
interfaces to other financial systems are
•
reconciled on a regular basis;
the system supports tracking of
•
adjustments; and
the system provides managers with access
•
to ad-hoc reporting tools and the ability to drill-down through the budget data.
39 The internal budget system and supporting tools have been evaluated in the last three years to assess if they remain appropriate for the efficient and effective development of the
Established Developing Absent Effective oversight, review and communication (Part 3.3)
40 The organisation has established a budget committee to oversight internal budget processes.
41 The Chief Financial Officer has sufficient authority to ensure that budget guidelines and policies are being complied with throughout the organisation at all levels.
42 Operational areas are required to consult with the Chief Financial Officer on all significant budgeting issues, including new budget initiatives.
43 Quality assurance checks are undertaken before budgets are submitted to the budget committee or senior management for deliberation.
44 Managers are consulted on changes to budget submissions before the conclusion of the internal budget process.
45 Approved budgets are communicated to managers as soon as practicable after the conclusion of the internal budget process.
46 The organisation prepares a summary of the approved internal budget for relevant stakeholders.
Part 4—Monitoring and evaluating budgeting performance Monitor and report against internal budgets (Part 4.1) 47 The organisation monitors and reports budget
estimates against actual results on a regular basis.
48 Internal financial reports are prepared for each level of accountability and summarised appropriately for each level of management.
49 Managers are provided with details of actual results against budget within three days of the close of each period.
50 Financial information is presented with operational (non-financial) information to obtain a balanced view of performance.
51 Monthly phasings are prepared to apportion the total approved budget in accordance with foreseeable patterns of expenditure (or revenue), including seasonal factors.
Appendices Established Developing Absent
52 Managers with budget responsibility analyse and explain budget variances on a regular basis.
53 The organisation has a range of internal guidance to help ensure a consistent approach to analysing and explaining budget variances.
Revising the internal budget (Part 4.2)
54 The organisation plans ‘whole of organisation’
updates to its internal budget to coincide with the external budget cycle.
55 Transfers between internal budget allocations are:
adequately justified;
•
appropriately documented; and
•
authorised by senior management.
•
56 Changes to the budget are reported to those affected within the organisation.
57 The organisation maintains accurate documentation of budget adjustments.
Forecasting to manage gaps between budget estimates and actual results (Part 4.3) 58 The organisation prepares forecasts on a
regular basis to identify and respond to gaps between budget estimates and actual results.
59 The organisation prepares forecasts on a rolling basis that extend beyond the current financial year.
60 The forecasting process is completed within three to five days of actual data being available.
61 Senior management promote a culture of honest forecasting; that is the forecast reflects a ‘best estimate’.
Review and improve internal budget processes (Part 4.4) 62 The organisation regularly reviews the
timeliness and accuracy of internal budget processes.
63 Managers are consulted on the establishment of budgeting timeliness and accuracy indicators.
64 Performance of internal budget processes is benchmarked over time and against similar organisations.