Project Financial Management
Project Financial Management is a process which brings together planning, budgeting, accounting, financial reporting, internal control, auditing, procurement, disbursement and the physical performance of the project with the aim of managing project resources properly and achieving the project’s objectives. Like the concept of Project Management, it is a strategic competency for organizations and can make the difference between a successful project and audit reports.
We all have heard before about the pitfalls that happen to projects that lack sound financial management, or about a successful project whose primary support tool was the incredible support given by their business manager, or about the project that almost imploded but was saved at the last minute because of good financial management and stewardship. But what is good financial management or stewardship for that matter? Does it means being financially sound or making sure that the documents, personnel and procurement actions are running as per you intuition’s policies?
At its core, an effective Financial Management is an ongoing process that features a cycle of good management habits. It means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the institution or enterprise in a consistent and responsible manner. It also means applying general management principles to financial resources of a project.
In order to successfully manage a project a coherent set of accounting procedures and standards are a must. Not only because they ensure that sponsored programs funded with public or private monies were spent in accordance with due authority, that all transactions were recorded accurately, and that a complete audit trail exists to facilitate a post expenditure review, but also because they are an important tool for the development of your own
***It is important not to confuse financial planning with Financial Management. Although interconnected these are not terms that you should use interchangeably. Financial planning is budgeting, and although the root of many problems in the financial management of a project can be traced to a poor budgeting or to bad forecast or project’s needs, these are two entirely concepts and systems.
In order to successfully manage a sponsored project the first order of business is to attain full knowledge of your institutional policies and administrative procedures. Knowing your institution also means knowing your researchers and the institution’s research priorities. Moreover, it also means “ownership” of administrative and financial processes that will govern the pre- and post-award phases of any project.
How important is my budget?
A PI should consider the budget as a financial blueprint designed to help the project meet its goals and objectives. A budget is a tool to help ensure that the project is on track.
How do I do a re-budget?
Generally speaking sponsors have specific guidelines on how and when to request a budget revision. If you project does not have a particular budget revision guidelines please contact ORSP or Special Funds Accounting for assistance. Please note that not all budget revisions are permissible and that you should always request a budget revision before over-expending in a budget category. Some Funding Agencies/Sponsors are known for denying certain types of budget revision
What are the most common problems with a budget?
Expenditures past end date, keeping up with salaries as encumbrances, monitoring expenses on multiple awards, reconciling grant budgets, unallowable expenses in last month of project (for example, some Funding Agencies will not allow purchase of equipment during the last quarter of a grant period); P Card, phone and postage charges that may be posted several weeks after the end of a project.
Do I have to keep track of In-kind contributions?
In-kind contributions have to be documented using the same standards as other expenditures. They must be entered into the accounting and financial reports submitted to the Funding Agencies/Sponsors.
What is “over expense,” and why is a problem?
“Over expense” usually happens when the scope of work changes but the budget is not adjusted. “Over expense” in one category may affect the fringe benefit line or alter the indirect cost line; sometimes this won’t be apparent until the end of the grant. Additionally, if the Funding Agency elects to keep the budget as it is, the department will have to absorb the cost of “over expense”.