FY13 Budget Planning Calendar

Now is a great time to begin developing your FY13 budget planning calendar in partnership with your CFO. Perhaps this would be the first time you actually had a budget calendar to work from or simply the first time you had input into the budgeting timeline and sequence of events. Even if you have been fortunate enough to have had structured budget planning process in the past, FY13 budget pressures might require additional time to work through in order to make sound decisions.

Institutional Budget Planning Calendar

It wouldn’t be unusual for an institution to leave creating the budgeting timeline to the last minute giving IT no time to organize their process. It would also not be unusual for an organization to treat all departments the same in the budgeting process making it especially hard for IT to receive input in time to complete their budget with any degree of accuracy. Unfortunately both cases are far more common than they should be which creates incredible problems for CIO’s trying to develop their FY13 IT budget and annual plan of work.

There is no reason CIO’s should allow these issues to persist. Instead CIO’s should draft a suggested budget calendar for FY13 and review it with their CFO. By taking a proactive approach in collaboration with the business office CIO’s should be able to improve the timing and sequencing of the FY13 budgeting process. This is also a great strategy for CIO’s to offer their CFO for producing an IT budget which has to deliver significant savings or absorb major initiatives.

FY12 Budget Planning Timeline

Honestly it wouldn’t take much to illustrate to the CFO your challenge. The easiest way to do this is to create a very simple timeline that starts with the endpoints and works backwards through the major milestones. That means setting the dates for budget approvals by your board and public hearings then allowing time for executive team reviews, reallocation as revenue projections and other inputs are finalized.

Continue the regression and add the time you will need to get a preliminary IT portfolio developed and approved by your IT governance committee to feed your FY13 capital plan and operating budgets and you have your timeline. The result is a FY13 budget timeline like the one shown here, created using Visio.

Gantt chart showing major planning activities described in the postThis approach reflects the challenge of sequencing and timing the various inputs from the organization that IT will need as inputs to its budget. And that is why it is not too early to start creating the budget calendar now.

FY13 Project Portfolio

Because IT has both capital and operating budgets to develop it must be able to have a fairly well defined project portfolio, or annual plan of work, before it can finalize a capital plan or operating budget. This requires the institution to complete or update the institutional strategic plan and assemble the FY13 IT project requests into an IT project portfolio early in the budgeting sequence.

Assembling the IT project portfolio has to be done early enough so that requirements for capital and operating dollars and staffing capacity can estimated to feed downstream project approvals and budgeting steps. Because getting to this point requires a lot of advance planning and communication, CIO’s need to get this organized now so that it is ready for initiation well before the end of the fall semester.

CIO’s should not shy away from being ambitious here since you are probably going to fall short of whatever goal you set just from normal organizational dynamics. So you have to allow for the late submissions and the normal slowness of decision making. It is also useful to keep in mind that it can take a few years even with a concerted effort to establish a mature process for IT portfolio planning and budgeting.

One final note. If you are anticipating any major enterprise projects in FY13, you will also need to account for the lead time required to develop your requirements and solicit budgetary estimates or even time to conduct an RFP so you have enough time to feed the numbers into the IT project portfolio and IT budgets. In fact, if you haven’t already begun this process, you could be setting yourself up for some big headaches in a few months.

Concurrent IT Budget Planning

If you are just being given a number to work with there are still choices to be made in which case you still need to do the portfolio plan first so it can still drive operating budget impacts. Let’s assume you are not just being given a dollar amount and told to fit everything within that number. This perspective reflects a viewpoint where the IT governance process should be the one setting the priorities and deciding what to fund or not fund. If you delay this step until after the budget is essentially finalized, you will likely end up over committing or not doing anything for the first part of FY13 until you can get your portfolio approved by your IT governance committee.

That is why IT planning and budgeting should be done concurrent with institutional and departmental budgeting. You might prefer describing it as a recursive or iterative process that continues until you reach an approved project portfolio and supporting capital plan and operating budget. It doesn’t matter what you call it, just do your IT budgeting in a vacuum.

Minimally you should strive for a two-step process for IT budgeting where IT generates an initial budget from a forecast, or builds it using zero-based budgeting, in order to support overhead allocations if those are used or to simply create an initial budget work-up. The objective for this initial IT budget pass is to only reflect the current required obligations and active commitments in the approved project portfolio. This is the baseline operations and maintenance (O&M) budget required “to keep the lights on.” Taking this approach does require communications and trust between IT and finance so that it is clear what you are doing.

Then as IT governance approves the IT portfolio and non-IT departments complete their budgets, IT adjusts the initial budget to reflect the approved plan of work and the requirements from other departments. This two-step approach to IT budgeting gives CIO’s greater visibility into what is driving IT costs and the basis for demonstrating the value breakdown of the IT budget using the base O&M allocated to running the business with the value add portion that supports growing and transforming the institution.

In organizations that rely on true allocation or chargeback of IT costs you may still have to go first  in the budget sequence to so the other departments can fold their IT allocation into their budgets or make adjustments. When this approach is required IT still has a base budget amount and a variable portion of the budget to use for non-IT requirements and for demonstrating value add. This method also enables the CIO to set aside a specific budgeted amount the IT governance committee will have to fund projects.

I realize this is a simplified version of what can be a complex process of IT budget planning. But hopefully the value of getting organized now and working out a budget calendar with your CFO over the next few weeks while you prepare your project portfolio management system (PPM) for FY13 makes sense and is seen as something easily accomplished.

Footnote: If your CFO is not able to produce a proper forecast file for every cost center that projects year-end for the current fiscal year and loads the new fiscal year from a 3-year trend of budget actuals and the forecast, I would encourage making that an immediate priority even if you have to handle it as a skunk works project.

For related posts to help you organize for FY13 consider:

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