Program Financial Plan Instructions

The program financial plan is part of the program financial management knowl-edge area. It helps deal with the myriad challenges that arise in the financial management arena, some of which can be fatal if not properly managed. It is pre-pared in the develop program financial plan process in the Standard for Program Management—Second Edition (2008).

The program financial plan will include the following:

Purpose: A brief introductory statement defining the purpose of the financial plan for the program, such as:

146  Implementing Program Management: Templates for Success

The financial plan documents all the program’s financial aspects, as it describes the funding schedules and milestones, baseline budget, con-tact payments and schedules, financial reporting processes and mecha-nisms, and financial metrics.

This plan takes into account items such as risk reserves, potential cash flow problems, international currency rate fluctuations, future interest rate increases or decreases, local laws as appropriate, trends in the cost of materi-als and supplies, and contract incentives and penalty clauses. It materi-also describes any funds to be retained in contracts as invoices are submitted for payment in those situations in which the contract terms and conditions contain a clause that specifies that a certain percent of the price will be retained and paid once the contract has been completed. It is necessary to recognize that pro-grams may have multiple sources of funding, tend to be long in duration, may have multiple contractors, and may involve international work. Many of the environmental factors that affect this plan may be outside of the program manager’s direct control. Further, although the plan is drafted early in the program, it is an iterative document that should be further refined as the pro-gram progresses through the life cycle.

In the Project Management Institute’s Standard for Program Management—

Second Edition (2008), the program financial plan is an output of the develop program financial plan process. It is an input to the monitor and control pro-gram financials process.

Financial framework and goals: This section identifies the overall financial envi-ronment for the program, as it pinpoints funds to be expended at key milestones and helps to ensure that money is spent efficiently with the least waste possible.

Funding constraints: This section describes methods to receive program fund-ing since it is rare that 100% of the required fundfund-ing is provided when the program is initiated. It describes release of funds at specific milestones or on an annual or fiscal year basis. Other examples of constraints are if it is a global project, whether payment is to be made in local currencies; future changes in material prices; or, for contracts, the percent of payment that is to be retained until the contractor’s work is complete.

Program operational costs: This section describes the specific costs associated with the operation of the program. It includes infrastructure costs, such as required facilities and systems, or the costs associated with the program man-agement office, including human resources.

Format and criteria for cost estimating: This section describes the various tools and techniques to be used to estimate the costs associated with the program in order that an overall cost estimate for the program can be pre-pared. Typically, the cost estimate will be prepared in stages given the dura-tion and complexity of the program. Once the cost estimate is approved, it

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then becomes the basis for the program budget, as the budget baseline is the target for measuring overall financial progress.

Program payment schedule: This section identifies the schedule and milestones where funding for the program is received from the funding organization.

This section is needed because program funds typically are spent in advance of receipt of revenues or benefits realization.

Program financial metrics: This section describes the specific financial met-rics for the program by which the program’s benefits are measured. These metrics are necessary because as changes to schedules and costs occur to the program, these metrics are used against those set at the time the program was approved to help determine whether or not it should be continued. Examples of metrics for consideration are funds expended against total funds avail-able, earned value measurements, the use of contingency and management reserves, return on investment versus that stated in the business case, and the payback period versus that stated in the business case.

Methods for financial monitoring and control: This section describes the approach to be used to identify factors that may create changes to the finan-cial baseline, methods to monitor the environment for changes that may affect the financial plan, ways to monitor the disbursement of funds to con-tractors, methods to identify impacts to program components from overruns or underruns, methods to manage the program’s infrastructure, and methods to communicate the financial situation to the program stakeholders.

Remaining budget allocations: This section describes the process to return any remaining budget allocations to the overall program budget. It is a con-sideration during the close program procurement process when all approved payment requests have been processed.

Approvals: This section contains the written approval of the financial plan by the program sponsor, program manager, program management office, mem-bers of the governance board, and other stakeholders.

Program Financial Plan Template

<Insert Program Name>

Financial Plan

Program name:

Program manager: PM’s email address here as a hyperlink Program sponsor:

Actual start date:

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Approved end date:

Program no.:

Revision history:

Business unit:

A. PurPoSe

A brief introductory statement defining the purpose of the financial plan, such as:

The financial plan documents all the program’s financial aspects as it describes the funding schedules and milestones, baseline budget, contact payments and schedules, financial reporting processes and mechanisms, and financial metrics.

_____________________________________________________________________

B. FInAnCIAl FrAMeWork AnD GoAlS

This section identifies the overall financial environment for the program as it pin-points funds to be expended at key milestones and helps ensure money is spent efficiently with the least waste possible.

_____________________________________________________________________

C. FunDInG ConSTrAInTS

This section describes the methods by which program funding will be received since it is rare that 100% of the required funding will be available at the time the program is initiated. Other financial constraints also are included in this section.

_____________________________________________________________________

D. ProGrAM oPerATIonAl CoSTS

This section describes the specific costs associated with the operation of the pro-gram, such as infrastructure costs—facilities and systems—and costs associated with the program management office, including human resources.

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_____________________________________________________________________

e. ForMAT AnD CrITerIA For CoST eSTIMATInG

This section describes the various tools and techniques to be used to estimate the costs associated with the program in order that an overall cost estimate for the program can be prepared.

_____________________________________________________________________

F. ProGrAM PAyMenT SCheDule

This section identifies the schedule and milestones where funding for the pro-gram is received from the funding organization.

_____________________________________________________________________

G. ProGrAM FInAnCIAl MeTrICS

This section describes the specific financial metrics for the program by which the program’s benefits are measured.

_____________________________________________________________________

h. MeThoDS For FInAnCIAl MonITorInG AnD ConTrol

This section describes the approach to use to identify factors that may create changes to the financial baseline, methods to monitor the environment for changes that may affect the financial plan, ways to monitor the disbursement of funds to contractors, methods to identify impacts to the program components from over-runs and underover-runs, methods to manage the program’s infrastructure costs, and methods to communicate the financial situation to program stakeholders.

_____________________________________________________________________

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I. reMAInInG BuDGeT AlloCATIonS

This section describes the process to return any remaining budget allocations to the overall program budget, which may occur during the close procure-ment process.

_____________________________________________________________________

j. APProvAlS

This section contains the approval of the financial plan by the program sponsor, program manager, program management office, members of the governance board, and other key stakeholders.

SignatureSand date approval obtained

Program manager ____________________________________

Program sponsor ____________________________________

Program management office director ____________________________________

Governance board chairperson ____________________________________

Governance board member 1 ____________________________________

Governance board member 2 ____________________________________

Governance board member N ____________________________________

Stakeholder 1 ____________________________________

Stakeholder 2 ____________________________________

Stakeholder N ____________________________________

In document The Standard for Program Management (Page 164-169)