Manage Strategy -
Financial Management – IT Budgeting
Table of Contents
Process Name
Process Description
Key Systems
Key Forms / Reports
Policy / Policies
Process: Annual Operating Plan (AOP) Phase - I (August – October)
1.0Guidelines for Expenses and Projects
2.0Build and Align AOP Phase - I draft
Process: Annual Operating Plan (AOP) Phase - II (January – February)
3.0Guidelines for Expenses and Projects
4.0Build and Align AOP Phase - II draft
Process: Q1 Forecast (March)
5.0Guidelines for Forecasting
6.0Build Q1 Forecast
Process: Q2 Forecast (May – June)
7.0Build and Align Q2 Forecast
Process: Q3 Forecast (September - October)
8.0Build and Align Q3 Forecast
Process: Financial Strategy Planning
9.0Set Guidelines
10.0Build Financial Strategy Plan
Process: Capital Expenditure (CapEx)
11.0Build CapEx, ESR and CAR
COBIT Controls
Process Name
Financial Management – IT Budgeting
Process Description
IT Budgeting involves identifying, prioritizing, specifying and agreeing on business functional and technical requirements, covering the full scope of initiatives required to achieve the set business objectives through acquisition, implementation and maintenance of the technological infrastructure.
Key Systems
- None
Key Forms / Reports
- Expenses
- Projects Abstract
Policy / Policies
- Financial Management for IT Services
Process: Annual Operating Plan (AOP) Phase - I(August – October)
Description of the process steps
1.0Guidelines for Expenses and Projects
1.1The Finance Department sets the guidelines for evaluation expenses which would also include financial expenditure required for projects. These guidelines describe how to prepareexpenses and the projects list.(PO5.1)
1.2These guidelines are communicated to the different finance departments / units.
2.0Build and Align AOP Phase - I draft
2.1The ITDirector requests the IT Managers from each department / unit to submit expenses and the projects list.
2.2(Input: Q3 Forecast)ITManager prepares first draft of expenses and the projects listbased on the forecast and guidelines. (PO5.3)
2.3Once the first draft of the budget is prepared, the ITManager presents it to the CFO to get it aligned with business targets and strategy. Once IT and Finance are aligned, the budget is submitted to Finance Department for validation.
2.4Individual financial targets are set by the CFO for the different departments / units and communicated to the IT Managers
2.5After validation, the Finance Department prepares a master project list as well as a high-level presentation of the expenses for the IT AOP Kick - off meeting with the CIO.
2.6Once the budget is agreed upon, it is communicated to departments / unitsby the ITDirector.
2.7The ITManagers, based on the latest communication, starts building the 2nddraft of the AOP.
2.8The new budget needs to be realigned with the CFO before being submitted again to IT Managers.(PO5.2)
2.9IT Managers receive the new draft and checks that all the changes communicated after the IT AOP Kick Off meeting are made and analyzes if there are new variations suggested by the CFO.
2.10Once the information is reviewed, it is submitted to the CIO for approval.
2.11If there is an agreement on the final budget, then it is communicated to the ITDirector. If an issue arises, IT Managers work with the Finance departmentto modify the draft and re-align it with finance.
2.12Once all issues are resolved, the final draft of the Expenses & Projects documents is sent to the IT Managers who close the budget with the departments / units.(Output: AOP Phase – II, Project Portfolio Management, Service Portfolio Management)
2.13Budget Closure forms a touch point to the acquisition process.(Output: Acquire and Maintain Application Software and Technology Infrastructure)
Process: Annual Operating Plan (AOP) Phase - II(January – February)
Description of the process steps
3.0Guidelines for Expenses and Projects
3.1The Finance Department sets the guidelines and communicates the same to the different finance departments / units.(PO5.1)
3.2(Input: AOP Phase I)The CIO along with the CFO review the expenses and projectsdocumentation received from AOP Phase I to set the final expenses and project targets.(PO5.2)
3.3Once the expenses andprojects are finalized, the CIO prepares the final document outlining the expected expenses and projects for AOP Phase II and communicates it to the ITDirectors.
4.0Build and Align AOP Phase - II draft
4.1(Input: Actuals Reporting Process)The expenses are updated by IT Managers taking into account last year actual numbers from IT Accounting - Actuals Reporting, instead of forecast figures.
4.2Once the budget is built, the IT Managers submit the last version to CIO for validation; after aligning it with the CFO.(PO5.2)
4.3The CIO checks the final Expensesand Projects for errors, misalignments and variances and sends confirmation to the various departments / units.
4.4If there are any issues, IT Managers work with the Finance department to modify the draft and re-align it with finance.
4.5IT Managers officially close the budgeting process with the finance department. This triggers the Capex-ERS Process. Budget closure forms a touch point to the acquisition process.(Output: Project Portfolio Management, Q1 Forecast, Q2 Forecast, CapEx – ESR, Acquire and Maintain Application Software and Technology Infrastructure, Service Portfolio Management)
Process: Q1 Forecast (March)
Description of the process steps
5.0Guidelines for Forecasting
5.1The Finance Departmentsets the Q1 Forecast guidelines based on which the CIO builds the Q1 Forecast guidelines which are then cascaded to the ITDirectors.(PO5.1)(PO5.3)
6.0Build Q1 Forecast
6.1(Input: AOP Phase II)ITDirectors, based on inputs from AOP Phase II, proceed to build the Q1 Forecast. Upon completion, it is sent to the CFO to align with business targets and strategy.(PO5.2)
6.2The CFO compiles all the Q1 Forecasts received from ITDirectors and once are validated; the final Q1 Forecast is presented to the CIO.
6.3If there are issues, the Q1 Forecast is sent back to the IT Director for modifications. If there are no issues, the CIO finalizes the Q1 Forecast.(Output: Q2 Forecast)
Process: Q2 Forecast (May – June)
Description of the process steps
7.0Build and Align Q2 Forecast
7.1The Finance Department sets the criteria and targets for building expenses and the projects list. These guidelines are communicated to the different finance departments / units. (PO5.1)
7.2(Input: AOP Phase II, Q1 Forecast, Actuals Reporting)To build the budget the IT Managers use AOP Phase II as a base and make the agreed changes with the CFO and/or the variations due to Q1 actual numbers. The expenses will be prepared with actual figures for Q1 and best estimated forecast for Q2-Q4. The projects are discussed with IT Director and the CFO.(PO5.3)
7.3Once finalizedIT Managers proceed to align this draft of the budget with the CFO and then send the draft to the CIO.(PO5.2)
7.4The CIO checks the final Q2 Forecast for errors, misalignments and variances and sends confirmation to the IT Managers if the draft is correct. If issues arise, IT Managers work with finance to rectify the issue and modify the draft and re-align it with finance.
7.5If there are no issues, the CIO approves the Q2 Forecast. IT Managers officially close the budgeting process with finance, thus closing the Q2 Forecast process. This triggers the Capex-ESR Process. Budget closure forms a touch point to IT Acquisition Process.(Output: Q3 Forecast, CapEx – ESR, Acquire and Maintain Application Software and Technology Infrastructure)
Process: Q3 Forecast (September - October)
Description of the process steps
8.0Build and Align Q3 Forecast
8.1The Finance Department sets the criteria and targets for building expenses and the projects list. These guidelines are communicated to the different finance departments / units. (PO5.1)
8.2(Input: AOP Phase II, Q1 Forecast, Actuals Reporting)To build the budget the IT Managers use Q2 as a base and make the agreed changes with the CFO and/or the variations due to Q1 actual numbers. The expenses will be prepared with actual figures for Q1-Q2 and the best estimated forecast for Q3-Q4. The projects are discussed with ITDirector and the CFO. (PO5.3)
8.3Once finalizedIT Managers proceed to align this draft of the budget with the CFO and then send the draft to CIO.(PO5.2)
8.4The CIO checks the final Q2 Forecast for errors, misalignments and variances and sends confirmation to the IT Managers if the draft is correct. If issues arise, IT Managers work with finance to rectify the issue and modify the draft and re-align it with finance.
8.5If there are no issues, the CIO approves the Q2 Forecast. IT Managers officially closethe budgeting process with finance, thus closing the Q2 Forecast process. This triggers the Capex-ESR Process. Budget closure forms a touch point to IT Acquisition Process.(Output: AOP Phase – I, CapEx – ESR, Acquire and Maintain Application Software and Technology Infrastructure)
Process: Financial Strategy Planning
Description of the process steps
9.0Set Guidelines
9.1The Finance Department setsthe Strategy Plan guidelines and communicates to the different finance departments / units. Based on these guidelines, the CIO and the IT Director modifies and builds the final guidelines. (PO5.1)
10.0Build Financial Strategy Plan
10.1ITDirector based on inputs from the ITManagers from the different departments / units proceed to build the Strategy Plan, a forecast for next three years.
10.2The CFO aligns the Strategy Plan with the business targets and strategy.(PO5.2)
10.3The IT Director compiles all the Strategy Plans received from the IT Managers and presents it to the CIO for validation.
10.4Post validation of the Strategy Plan, it is finalized by the CIO. If there are issues, the Strategy Plan is modified and re-built.(Output: IT Strategy Planning)
Process: Capital Expenditure (CapEx)
Description of the process steps
11.0Build CapEx, ESR and CAR
11.1(Input: AOP Phase – II, Q2 Forecast, Q3 Forecast) Once a project is included in the budget through any of the planning process (AOP and / or Forecasting), the IT Director / IT Managers determines if any of the projects require Capital Expenditure.
11.2A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year.
11.3Sometimes, in exceptional circumstances, before the CapEx is written and approved, when outcome is uncertain, it may be necessary to make an early investment. This is called Early Spend Request (ESR).
11.4Both the CapEx details or documents and ESR (if required) are approved by the Finance Department.
11.5If later on, the project needs some more funds due to a change in scope or higher than expected expenses, then it is necessary to prepare a Capital Appropriation Request (CAR).
11.6If the CAR is approved the new approved amount is submitted in the next budget. Otherwise the project is executed with the previously approved amount.
COBIT Controls
The Control Objectives for this Process are:
- PO5.1 – Financial Management Framework:Establish a financial framework for IT that drives budgeting and cost/benefit analysis, based on investment, service and asset portfolios. Maintain the portfolios of IT-enabled investment programs, IT services and IT assets, which form the basis for the current IT budget.
- PO5.2– Prioritization within IT Budget:Implement a decision-making process to prioritize the allocation of IT resources for operations, projects and maintenance to maximize IT’s contribution to optimizing the return on the enterprise’s portfolio of IT-enabled investment programs and other IT services and assets.
- PO5.3– IT Budgeting Process:Establish a process to prepare and manage a budget reflecting the priorities established by the enterprise’s portfolio of IT-enabled investment programs, and including the ongoing costs of operating and maintaining the current infrastructure. The process should allow for ongoing review, refinement and approval of the overall budget and the budgets for individual programs.
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