Project Budget Reports and Reporting Frequency

Worksheet 34. Project Budget Reports and Reporting Frequency

Responsibility Issue # Expenditures

Report Type Report Name

Frequency

Expenditure Audits

Variances

Control Chart

Analysis of Budget Reports The project manager and Black Belt should review the variance data for patterns that

contain useful information. Ideally, the pattern will be a mixture of positive and negative but economically and statistically insignificant variances. Assuming that this pattern is accompanied by an on-schedule project, this indicates a reasonably good budget, i.e., an accurate forecasting of expenditures. Variances should be evaluated separately for each type of budget (direct labor, materials, etc.). However, the variance report for the entire project is the primary source of information concerning the status of the project in terms of resource use. Reports are received and analyzed periodically. For most quality improvement projects, monthly or weekly reports are adequate. Budget variance analysis 30 should include the following:

• Trends: Occasional departures from budget are to be expected. Of greater concern is a pattern that indicates a fundamental problem with the budget. Trends are easier to detect from graphic reports.

• Overspending: Since budgeted resources are generally scarce, overspending represents a serious threat to the project and, perhaps, to the organization itself. When a project overspends its budget, it depletes the resources available for other activities and projects. The project team, team leader, and sponsors should design monitoring systems to detect and correct overspending quickly. Overspending is often a symptom of other problems with the project, e.g., paying extra in an attempt to catch up after falling behind schedule, additional expenses for rework, etc.

• Underspending is potentially as serious a problem as overspending. If the project

budget was prepared properly, then the expenses reflect a given schedule and quality level. Underspending may reflect “cutting corners” or allowing suppliers an allowance for slower delivery. The reasons for any significant departure from the plan should be explained. If the underspending is justified, the project manager should report the situation to the project sponsor at once so that resources can be redirected to other enterprise priorities.

Schedule Control Plan * The primary means of controlling the project’s schedule are periodic progress reviews

and timely response to deviations from schedule. Of course, the foundation of this activity is an accurate schedule and ongoing commitment to the project on the part of those involved. Should a pattern of schedule slippages appear and remain uncorrected, the project manager must call it to the attention of the project sponsor quickly enough to save the project delivery date.

30 This is not to be confused with the statistical technique, Analysis of Variance (ANOVA).

Part of the official project plan.

Project Schedule Management The Planner will provide two alternatives for project schedule management. The

traditional approach is to focus on individual activities. A relatively new approach, called the critical chain approach, focuses on the project and the organization’s portfolio of projects as integrated systems. Both methods have their proponents (and opponents) and both are presented here. In all likelihood, the Six Sigma project team will be required to follow the system practiced by its organization.

Traditional project schedule management involves a focus on activities. Status reports are prepared by those responsible for the various activities. For each activity, these reports include percentage completion, expected completion date, issues and plans to overcome them, etc. Activity-based action plans are set in motion when activities are substantially beyond their expected completion dates. The premise of this approach to schedule management is that if activities are carefully monitored, the project due date will take care of itself.