Key Actions by:

Standard 8: Timely and comprehensive project financial set-up.

Set up a project financial management system based on updated activity plans that supports a quick start-up and effective financial management throughout the project.

Refine the project budget based on changes in the operating context and detailed implementation planning, including all program and operations activities.

  • Why

    The operating context within which a project is implemented often changes between proposal submission and project start-up. Project validation and detailed implementation planning can also lead to changes that impact budget figures and/or the timing of project spending. Effective financial planning and management requires that the project manager and project partners understand these budgetary impacts before moving into implementation.

  • Who

    • Primary responsible: Project manager/chief of party (PM/CoP)
      • The PM/CoP leads the budget refinement process; if the PM/CoP is not yet available at the time of the initial operating context review, the acting project manager/chief of party is responsible for this key action.

    • Others involved: Finance manager (FM) and/or finance officer or accountant; head of operations (HoOps); supply chain management staff including procurement staff, as needed; human resources (HR); and CRS partners
      • Finance staff support the PM/CoP with necessary budget updates;
      • The HoOps, and CRS and partner finance, procurement, other supply chain management, and HR staff assist the PM/CoP to identify any important changes in the operating environment that may impact the project budget.

  • When
    • For budget refinements related to the operating context: Shortly after project approval and before detailed budget entry.
    • For budget refinements related to detailed activity planning: Immediately after the detailed implementation plan (DIP) is developed (see Standard 7, key action 3).
  • How

    Follow these steps to analyze and make necessary adjustments to the year-1 project budget and spending forecasts:

    Budget refinement to reflect changes in the operating context
    1. The PM/CoP reviews the Questions to Guide Budget Updates tool and consults with operations staff to analyze the potential budgetary impacts of changes in the operational context (e.g., new security issues, exchange rate changes, recent CRS salary scale revisions). If project validation is complete, the PM/CoP should review any additional information from the validation process.

    Project financial start-up meeting: Good practice is for the PM/CoP to initiate the operating context review during a financial start-up meeting. The PM/CoP organizes this meeting with the HoOps and finance staff. The head of programming (HoP) and country representative (CR) may also participate in discussions that concern wider project financial management tasks, roles, responsibilities, and deadlines (see Standard 8, key action 5). If the financial start-up meeting occurs before project validation, be sure to document key points, as they will serve as inputs for the operating context review during project validation.

    1. The PM/CoP works with finance staff to revise the budget based on the Questions to Guide Project Budget Updates tool. Revising the budget at this stage helps to:
    • Identify changes in the level of resources available for project activities before development of the DIP, thereby ensuring that the DIP is built on the most up-to-date budget information. For example, favorable exchange rate fluctuations could allow for project expansion or intensifying certain activities.
    • Ensure that the budget that is entered in the financial system is based on accurate numbers that reflect the situation on the ground at the time of project start-up.

    Operating context changes and “1550” projects: For discretionary funded projects, proposals are typically approved shortly after submission and review. In these cases, there should be fewer operating context changes at project start-up.

    1. During operating context review and budget refinement, the PM/CoP discusses with the country program senior management team (SMT) any emerging concerns (e.g., budget flexibility constraints, additional cost-share resources needed; etc.). If the project is grant-funded and there is an Award ManagerThe Award Manager is the individual responsible for managing a project in accordance with the terms of the award, and who represents CRS to the donor for that award. This is not a position, but rather an assigned role: this individual can be an IDEA staff, chief of party, head of programming or project manager/chief of party. external to the country program, the PM/CoP should also involve the Award Manager in these discussions.
    • For grant-funded projects, the PM/CoP and SMT and/or Award Manager may need to discuss with the donor budget adjustments that require donor concurrence or approval (see Standard 15, key action 4).
    • For all projects, the PM/CoP documents the agreed budget changes for future reference (this documentation is particularly important if there are project staff transitions). Add a "Notes" column or "Budget Updates" sheet to the approved budget file, update the project budget notes, and/or record the budget changes in a general project change log.
    Budget review after DIP development
    1. Following DIP development, the PM/CoP:
    • Reviews and responds to the DIP-related questions in the Questions to Guide Project Budget Updates tool.
    • Uses these responses to analyze any significant changes from the original budget.
    • Discusses key concerns about budgetary impacts with senior management. As in step 3 above, for grant-funded projects, the PM/CoP and senior management and/or the Award Manager may need to discuss with the donor any DIP-related proposed budget adjustments that require donor concurrence or approval.
    • Documents the changes made to the budget based on DIP development. Changes may be noted in the approved budget file (“Notes” column or “Budget Updates” sheet), in an updated version of the project budget notes, and/or in a project change log.
    1. After the PM/CoP has analyzed the budget; identified DIP-related changes in timing or resource levels; and secured donor approval if needed for any proposed changes, the PM/CoP uses the schedule in the DIP to forecast monthly spending by budget line item (as needed), bringing the budget into alignment with the DIP and procurement plans. The forecast then serves as a reference throughout the fiscal year.

    TIP: It may be useful for the PM/CoP to enter the monthly spending forecast directly into the budget workbook, as this can help with other financial management duties—from entering the donor budget into the CRS financial system to preparing cash forecasts and quarterly spending plans.

  • Partnership
  • When CRS is a sub-recipient
    • Follow the same process when CRS is a sub-recipient.
    • Review CRS’ agreement with the prime and seek concurrence as needed before making any changes to the budget.
  • Emergency projects
    • Due to typically short project design timelines and rapid changes in the operational context, including security issues, changes to targeting and activities are common in emergency projects and may require budget updates.
    • It is also common in emergencies to see changes in CRS-allocated direct (“pooled”) costs, as new emergency response projects are approved.
    • For these reasons, close communications with operations staff and frequent use of Questions to Guide Project Budget Updates tool is critical in emergency projects.