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Thoughts on Budgetary Control in Oracle Projects and Oracle Grants

Budgetary control (or “funds checking”) functionality exists in both the Oracle Projects (PA) and Oracle Grants (GMS) E-Business Suite applications. The purpose of the functionality is to provide an extra level of control over a project budget, preventing or warning users of overspends when or if they occur.

The functionality offered by Oracle Projects is somewhat limited in scope; only Procure-to-Pay transactions (requisitions, purchase orders and supplier invoices) are subject to budgetary control. Consider the following scenario:

• A project has an approved cost budget of £1m
• £0.5m of expenditure is charged against the project through Transaction Import (e.g. an interface from an external system)
• Budgetary control in Payables and Purchasing will still perceive that there is £1m budget available to spend; only amounts charged to the project through Payables and Purchasing will be included in the budgetary control calculations

With the above in mind, this does not exactly offer a great degree of control over the budget! The only way that I see this functionality being of any use is if either:

1. All project costs will be sourced from the Procure-to-Pay process
2. The project budget is split by task or resource, ring-fencing the Procure-to-Pay element of the budget

As per Barry Crawley’s post, rather more limiting is the fact that the aforementioned functionality is only available for legacy project budgets, and not financial plans. Due to the existing shortcomings of the functionality, it is no surprise therefore that Oracle have made no apparent effort in porting it to the financial plan model in 11i or R12.1.

So, what are the other options? For those organisations who perceive that budgetary control is a must, there is a little known application called Oracle Grants. Oracle Grants is largely built on the Oracle Projects costing and billing product; to the extent that the two applications cannot co-exist within the same Operating Unit.

Oracle Grants offers the same degree of real-time budgetary control for the Procure-to-Pay applications, but also takes into account all other project expenditures (from all other transaction sources). There is, however, one big drawback. The budgetary control approach for non-Procure-to-Pay expenditure only works on a reactive basis. The budgetary control routines in Oracle Grants have simply been added as a “wrapper” to the Oracle Projects Costing concurrent programs. This means that expenditures are only funds checked when they have already hit the project (and are submitted for cost distribution). Again, this hardly offers a great degree of control over the budget.

Having spent many years working with both Oracle Grants and Oracle Projects customers, there is definitely a perceived need for budgetary control. Personally, I would like to see this functionality brought into the core Oracle Projects application, where all project expenditures are funds checked at the point of entry (or in the very least, before they are interfaced to the Projects ledger).

One pertinent question to ask of any budgetary control mechanism, whether in Oracle Projects or Oracle Grants, is what happens to expenditures that do not pass funds checking? If a project has got to the stage where a requisition is being entered, it is quite plausible that the goods or services being procured are required for the project to progress. If this is the case, does budgetary control actually prevent the funds from being spent, or does it merely delay the process? More alarmingly, if the items being procured are project critical, does budgetary control force the expenditure to be charged to a different project? The danger of the latter of course is that the true cost of a project can never be calculated; the system audit trail of which project a cost is actually attributable to is lost at point of entry.

The answers to some of the above questions may depend on the culture within an organisation, and more importantly, the sector in which they operate. In some industries for example, contractual flexibilities permit expenditure to be booked across different projects. This obviously still makes it very difficult to reflect the true cost of an individual project.

In extreme circumstances, budgetary control functionality could actually be detrimental to an organisation. It is possible that an over reliance on budgetary control could, over time, replace proactive management of project budgets. Whilst attempting to use budgetary control to mitigate overspends, the actuality may be that a “spend until the system stops it” culture is embedded. Under such circumstances, the emphasis on closely monitoring project balances may be relaxed, with the apparent safety of budgetary control as a backup. However, it is only when a funds checking failure is encountered that the business realises that a project is in trouble. By which time of course, it may already be too late.

Whilst the above scenario would only occur in extreme cases, I think that it highlights that budgetary control should never be seen to replace, in full or in part, good project management.

Moving on, I would like to discuss an alternative viewpoint. Organisations from around the world that use Oracle Projects, across many industry sectors, manage to survive without any budgetary control functionality. Perhaps said organisations are desperate to see the current functionality extended in R12 and we are all suffering in silence! However, it is more likely that organisations survive without budgetary control in Oracle Projects is because they do not need it.

For an organisation to successfully operate without budgetary controls, I believe that the following four elements need to be in place:

1. Reporting

Precise, accessible and timely project reporting is required so that project managers and administrators are empowered with a clear view of spend to budget to forecast, throughout the project lifecycle

2. Business Process

Business processes should clearly state what needs to be done, and what is permitted, at each stage of the project lifecycle by whom. Well structured project phases, regular project reviews and approval workflows should all help to ensure that any problems are flagged up as early as possible

3. Review and Adapt

If an overspend does occur, a review process should ascertain how and why it has happened. Measures should then be put in place to prevent any repeat occurrences

4. Accountability

Ultimately, the successful management of project budgets relies on accountability. Without named individuals being accountable for project budgets, overspends will be difficult to mitigate

Obviously there will be other extenuating factors that can affect a project, but if the above four elements are in place, is there really any need for automated budgetary control? Perhaps this is why it appears to be a low priority for future Oracle Projects development. Perhaps the best practice is to enforce good project management, and not to be over reliant on systems doing it for us.

I hope you have found this article interesting. I would love to hear other people’s experiences with (or without) budgetary control in Oracle Projects and Oracle Grants. I would be especially interested to hear from anyone using Oracle Grants without budgetary control.

24 Jun, 2011 by Andy Coates

E-Business Suite