Budgetary Budgetary A accounting ccounting at the budgeting procedure eutsche Bundesbank Budgeting Procedure

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1 Budgetary Accounting accounting at the Deutsche budgeting Bundesbank procedure Budgeting Procedure C 11 1

2 Division C 1 Corporate Controlling and Strategic Planning Central Office Frankfurt C 10 Standard (personal assessment) Operational statistics C 11 Cost accounting, Profitability Analysis, Budgeting and Budget monitoring C 12 Strategic planning C 13 Functional assistance for and Coordination of ESCB/ES related issues Service centre Cost accounting data provision Regional Office Hamburg C 11 2

3 Agenda Budetary accounting as a part of the Accounting System Budgeting and the annual planning process How is the annual planning process designed? What are the different planning segments? Is there a link between strategic planning and annual operational planning? Budget execution and budget monitoring What is the function of budgets? What regulations do we know concerning Budget execution? Budget monitoring and reporting to top management and external addressees C 11 3

4 Purpose of cost accounting The task of cost accounting is to classify, record, distribute and allocate costs incurred in the provision of an institution s output Provision of cost accounting data for management information - Accountablity - Oversight Historical approach = Current cost accounting Future approach - Planning and Budgeting - Internal control = Budgetary accounting Current cost accounting comprises all the costs actually incurred (effective costs). Budgetary accounting deals with planned output and estimated costs (target costs). Costs are kept under constant review (Continuous comparison of target and effective costs) C 11 4

5 Functions of Bundesbank s Department Controlling, Accounting and Organisation Corperate Controlling and Strategic planning Budgeting (Standard costing) Budget monitoring Cost type accounting Cost centre accounting Cost unit accounting Revenue controlling Financial Accounting Risk management (Methodology + bankwide Coordination) Office for Risk Control IT- Controlling All Departments: Responsibility for costeffectiveness, security, orderliness; organisational autonomy Coordination of organisational issues; In-house Consulting Examination of specific procurements and investments Project controlling Organisation surveys (eg analysis of staffing requirements) Automated staffing assessment procedure Operational statistics Job evaluation C 11 5

6 Legal basis of Cost accounting and Budgeting - Bundesbank Act (amendment 2002) 26 Annual accounts, cost accounting... (4) To assist it in its management and administrative tasks, the Deutsche Bundesbank shall prepare a cost account. Before the start of a financial year, the Deutsche Bundesbank shall draw up a standard cost account and an investment plan. At the end of the financial year, it shall make a comparative analysis of the budgeted figures and the actual costs and investments. This analysis shall be reviewed separately by the auditors.... C 11 6

7 Legal basis of Cost accounting and Budgeting - Bundesbank Act (amendment 2002) 26 Annual accounts, cost accounting... (5) The annual accounts, the standard cost account, the investment plan, the analysis of the budgeted figures compared with actual costs and investments, and the auditors report shall be forwarded to the Federal Ministry of Finance and the Federal Court of Auditors. The annual accounts, the analysis of the budgeted figures compared with actual costs and investments and the auditors report shall be presented to the Bundestag (the lower house of parliament).... C 11 7

8 Basic principles and guidelines Basic principles Close connection between annual budgeting procedure and strategic planning procedure (Top down-approach) Decentralised planning, means that heads of cost centres or - more in general - heads of decentralised areas of responsibility are responsible for the creation of budgets (Bottom up-data collection) Guidelines for the annual planning process Planning process should be completed in four months time Planning process is designed as a top down/bottom up-planning (see above) Finalisation of budgets by approval of the Executive board of the bank C 11 8

9 Strategic planning (I) Specific role of the heads of departments and department C in the strategic planning procedure Definition of important measures and projects needed to achieve the strategic goals by the heads of departments Examination of measures and projects by the Controlling department and introduction of the results to the board Communication of measures, projects and initiatives as guidelines for annual creation of budgets C 11 9

10 Strategic planning (II) Strategic horizon and annual timetable Strategic planning is mid-term-planning (strategic horizon 5 years) Review of the planned operational measures designed to achieve the strategic goals by the heads of department and the controlling department (in April/May) Introduction of the results to the Executive board Decision about lessons learnt and the guidelines for the following annual budgeting process C 11 10

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12 Organisational structure Central Office in Frankfurt President I Vice- President II III IV V VI Departments B C F H IT K M P R. Rv S Vb Vo Z Regional Offices Service Centres Integral part of Regional Offices Head of the Internal Operations Division Regional Office President Head of the Banking Supervision Division Regional offices in: Hamburg, Hannover, Berlin, Düsseldorf, Mainz, Frankfurt, Leipzig, Stuttgart, München Business Organisation Administration Human Resources Operational BS BS Audits Credit C 11 Several operational units, depending on the number of tasks 12 As a rule Branches

13 Internal structure of a Regional office Regional Office President Head of Regional Office Section (RefL) Head of at least 3 Heads of Regional Office Groups In case of high complexity separation: in different Regional Office Groups possible Head of Regional Office Group (SGL) Head of at least 7 specialists... Org SGL 1 SGL 2 SGL 3 Head of Internal Operations Admin SGL 1 SGL 2 SGL 3 Human Ressorces SGL 1 SGL 2 SGL Head of Banking Supervision Operat. BS SGL 1 SGL 2 SGL 3 BS Audits SGL 1 SGL 2 SGL 3 Credit SGL 1 SGL 2 SGL 3 C 11 13

14 Framework for annual budgeting procedure Basic structure of cost centres Central Office Regional Offices C 11 14

15 Framework for annual budgeting procedure Basic structure of cost centres (Details) Department C (Controlling, ) Regional office in Berlin C 11 15

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17 Timetable for annual budgeting procedure December: Executive Board Approval of next year s planning results / budgets Final step Step 5 Step 4 November: final discussions on next years staff and financial requirements between department C and heads of departments in central office Step 3 September/October: Controlling Department examines and assesses aggregated plans and if necessary detailed planning results Step 1 August: Departments of central office communicate measures and projects to achieve the strategic objectives (including their HR and cost-related impacts) Step 2 August/September: Planning of staff requirements and next years financial requirements by all departments of central office and in the regional offices C 11 17

18 Planning process Step 1 Communication of business strategy and priorities given by the consultation of the Executive board in April/May (top down-start into the planning process) No formalised process heads of departments are in charge of the determination of (technical) guidelines for business operations and the implementation of business strategy Controlling department is not involved in the communication process As a result, communication process is in a narrower sense not really part of annual planning process, but a preposition of linkage between strategic planning and annual creation of budgets C 11 18

19 Planning process Step 2 Heads of cost centres are planning staff and financial requirements in their specific areas of responsibility Different forms for staff requirements, material costs and investments Specific planning positions for the different job categories and for the different cost types and investment categories Usually based on previous years staff and previous years actuals for material costs and investments (only for ongoing activities) Number of planning units for financial requirements is reduced Centralised planning for some features (e.g. building costs, equipment of workstation/workplace) C 11 19

20 Planning process Step 2: excursion Decentralised data collection (bottom up-principle) At present on the basis of MS-excel-forms for the different planning segments (staff requirements; material costs and investments for ongoing business; financial requirements and staff requirements for projects) Topic for further development using a fully IT-based planning procedure C 11 20

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24 Planning process Step 2 Heads of departments have to comment the aggregated plan of their area of responsibility (including cost centres in regional offices and in the branches) In case of deviations, extensive statements are necessary Automatic calculation of personnel costs in SAP based on human resource planning Planning of depreciation by automatic calculation in SAP based on existing and planned investments C 11 24

25 Planning process Step 3 Examination and assessment of the aggregated plans by Controlling department Are the budget requests in order with the strategic objectives of the bank and the specific business strategy of the departments? Are the planned staff and the expected material costs and investments necessary for business operations of the departments? C 11 25

26 Planning process Step 3 If necessary, adjustment of planning results Top down-approach (focus on strategic objectives and accepted developments on the basis of the business strategy) Identification of the cost centres with excess planning; agreement about possible adjustments with heads of cost centres If no common view is possible, decision by the board is necessary C 11 26

27 Planning process Step 4 Final discussion on the next years financial and staff requirements with the heads of departments (presentation of aggregated budget figures and staff requirements by department C) Preparation of a note to the Executive board by department C (total staff requirements, expected staff costs, total material costs, expected depreciation and aggregated investment plan) Additional information concerning expected costs and investments in the different cost types and investments categories as well as in defined fields of business activity (in accordance to the structure of the budget report to external adressees) C 11 27

28 Planning process Final step Approval of the budget by the Executive board without modifications together with specific decisions concerning reduction of total budget or budgets for single tasks or single cost centres Distribution of total budget to the individual cost centres on the basis of budget requests for ongoing activities and the needed and accepted ressources for (strategic) measures and projects under consideration of the possible modifications after consultation of the Executive board C 11 28

29 Reporting to the Board Note to the Executive board contains primarily information concerning the budget requests by departments of central office and distribution of budgets to the regional offices and branches C 11 29

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31 Reporting to external addressees Budget report and investment plan contains additional information about fields of business activities Art. 26 Bundesbank act C 11 31

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