Fiscal policy In economics, fiscal policy is the use of government expenditure and revenue collection (taxation) to influence the

economy. Fiscal policy can be contrasted with the other main type of macroeconomic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the money supply. The two main instruments of fiscal policy are government expenditure and taxation. Changes in the level and composition of taxation and government spending can impact on the following variables in the economy:

Aggregate demand and the level of economic activity; The pattern of resource allocation; The distribution of income. Fiscal policy refers to the use of the government budget to influence the first of these: economic activity.

Stances of fiscal policy The three possible stances of fiscal policy are neutral, expansionary and contractionary. The simplest definitions of these stances are as follows:

A neutral stance of fiscal policy implies a balanced economy. This results in a large tax revenue. Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity. An expansionary stance of fiscal policy involves government spending exceeding tax revenue. A contractionary fiscal policy occurs when government spending is lower than tax revenue.

However, these definitions can be misleading because, even with no changes in spending or tax laws at all, cyclical fluctuations of the economy cause cyclical fluctuations of tax revenues and of some types of government spending, altering the deficit situation; these are not considered to be policy changes. Therefore, for purposes of the above definitions, "government spending" and "tax revenue" are normally replaced by "cyclically adjusted government spending" and "cyclically adjusted tax revenue". Thus, for example, a government budget that is balanced over the course of the business cycle is considered to represent a neutral fiscal policy stance. Methods of funding Governments spend money on a wide variety of things, from the military and police to services like education and healthcare, as well as transfer payments such as welfare benefits. This expenditure can be funded in a number of different ways:

Taxation Seigniorage, the benefit from printing money Borrowing money from the population or from abroad Consumption of fiscal reserves. Sale of fixed assets (e.g., land).

All of these except taxation are forms of deficit financing Borrowing A fiscal deficit is often funded by issuing bonds, like treasury bills or consols and gilt-edged securities. These pay interest, either for a fixed period or indefinitely. If the interest and capital repayments are too large, a nation may default on its debts, usually to foreign creditors. Consuming prior surpluses A fiscal surplus is often saved for future use, and may be invested in local (same currency) financial instruments, until needed. When income from taxation or other sources falls, as during an economic slump, reserves allow spending to continue at the same rate, without incurring additional debt. Economic effects of fiscal policy Governments use fiscal policy to influence the level of aggregate demand in the economy, in an effort to achieve economic objectives of price stability, full employment, and economic growth. Keynesian economics suggests that increasing government spending and decreasing tax rates are the best ways to stimulate aggregate demand. This can be used in times of recession or low economic activity as an essential tool for building the framework for strong economic growth and working towards full employment. In theory, the resulting deficits would be paid for by an expanded economy during the boom that would follow; this was the reasoning behind the New Deal. Governments can use a budget surplus to do two things: to slow the pace of strong economic growth, and to stabilize prices when inflation is too high. Keynesian theory posits that removing spending from the economy will reduce levels of aggregate demand and contract the economy, thus stabilizing prices.

Economists debate the effectiveness of fiscal stimulus. The argument mostly centers on crowding out, a phenomenon where government borrowing leads to higher interest rates that offset the stimulative impact of spending. When the government runs a budget deficit, funds will need to come from public borrowing (the issue of government bonds), overseas borrowing, or monetizing the debt. When governments fund a deficit with the issuing of government bonds, interest rates can increase across the market, because government borrowing creates higher demand for credit in the financial markets. This causes a lower aggregate demand for goods and services, contrary to the objective of a fiscal stimulus. Neoclassical economists generally emphasize crowding out while Keynesians argue that fiscal policy can still be effective especially in a liquidity trap where, they argue, crowding out is minimal. Some classical and neoclassical economists argue that crowding out completely negates any fiscal stimulus; this is known as the Treasury View[citation needed], which Keynesian economics rejects. The Treasury View refers to the theoretical positions of classical economists in the British Treasury, who opposed Keynes' call in the 1930s for fiscal stimulus. The same general argument has been repeated by some neoclassical economists up to the present. In the classical view, the expansionary fiscal policy also decreases net exports, which has a mitigating effect on national output and income. When government borrowing increases interest rates it attracts foreign capital from foreign investors. This is because, all other things being equal, the bonds issued from a country executing expansionary fiscal policy now offer a higher rate of return. In other words, companies wanting to finance projects must compete with their government for capital so they offer higher rates of return. To purchase bonds originating from a certain country, foreign investors must obtain that country's currency. Therefore, when foreign capital flows into the country undergoing fiscal expansion, demand for that country's currency increases. The increased demand causes that country's currency to appreciate. Once the currency appreciates, goods originating from that country now cost more to foreigners than they did before and foreign goods now cost less than they did before. Consequently, exports decrease and imports increase.[2] Other possible problems with fiscal stimulus include the time lag between the implementation of the policy and detectable effects in the economy, and inflationary effects driven by increased demand. In theory, fiscal stimulus does not cause inflation when it uses resources that would have otherwise been idle. For instance, if a fiscal stimulus employs a worker who otherwise would have been unemployed, there is no inflationary effect; however, if the stimulus employs a worker who otherwise would have had a job, the stimulus is increasing labor demand while labor supply remains fixed, leading to wage inflation and therefore price inflation. Fiscal Straitjacket The concept of a fiscal straitjacket is a general economic principle that suggests strict constraints on government spending and public sector borrowing, to limit or regulate the budget deficit over a time period. The term probably originated from the definition of straitjacket: anything that severely confines, constricts, or hinders.[3] Various states in the United States have various forms of self-imposed fiscal straitjackets. Budget Preparation Guide Budget preparation is a common affair in most established companies. Most of the time, the preparation procedures and formats are inherited from the predecessors. Giving short time and tight deadline are very common. Most people who are involved in the budget, were always too engrossed to rush and meet the deadline. How many people involved really understand the full budget preparation process? I have been preparing budgeting for the last 10 years of my working career. I realised that many of the people who are involved in budgeting, that I met, don't really have a proper training or knowledge of the full budget preparation process. Therefore, I prepared this guide with an objective to give a better understanding of the budgeting process. This guide is based on real practice and may differs from organization to organization. Budget Preparation Guide: Budget templates and schedules may differs from organization to organization. However, most master budgets have two major common components such as the operating budget and the financial budget. From my experience, it is pertinent to have first two years prepared in monthly format and the next three or whatever years in yearly format. 1. Operating budget consists of the following components: a. Sales/revenues budget provides the various sources of revenue lines and how they would be achieved. b. Cost of sales/direct cost budget provides the associated cost directly linked to the various revenue lines. The difference between the sales/revenues budget and cost of sales/direct cost is the Gross Profit Margin. c. Operating expenses budget provides the details of the indirect operating cost such staff salary, office rental, printing and stationery, telephone expense and etc. Such expenses normally will be incurred regardless whether there are sales/revenues. d. Advertising & promotion budget provides the various plans of how the organization is going to promote its business. Example would be the advertisement cost, product promotion cost and etc. The overall operating budget basically provides a full picture of the business operation and its bottom line. 2. Financial budget consists of the following components: a. Capital budget provides the details of the capital expenditures such as office renovation, hardware investment cost and etc.

b. Income from operations budget is the end result (bottom line or profitability) of the above operating budget. It can be a cash deficit or contribution from the operating activities. c. Cashflow budget provides the funding requirements of the business operations. It consist of the following components: i. Cash generated/used in operating activities. ii. Cash from/used in investment activities. iii. Cash from funding activities. The financial budget focuses on the financial aspects of the business. It would tell whether the business is cash self sustaining or requires external cash funding from else where. A critical aspect of intervention planning is preparing a budget of income and expenses. The budget must include funding for materials and supplies for the intervention activities, but also for staff, facilities, and promotion. Keep in mind that each intervention requires different resources, and organizations have unique capacities to conduct interventions with existing resources. The following are typical budget categories. Categories for an intervention budget: Personnel and benefits expense: Personnel includes all individuals who will have responsibilities in the intervention. Others who may be hired to help with the project, such as consultants or contractors, are not budgeted in Personnel, rather are included in the Purchased, Consultant or Contractual Services. Fringe benefits are typically budgeted at a percent of the personnel salary, and are dependent upon the benefits paid by the employer. Things to consider: Do you have enough people to implement the intervention? Will you need to hire additional part-time or full-time staff to help you? What benefits will be paid and to whom? Will your staffing needs change over the duration of your intervention from year to year? Examples: Principal investigator, project director, project staff, paid interns full and part-time General Office Expenses: Includes office supplies needed to support the intervention. Things to consider: What basic materials or supplies are needed to support the intervention? You should be able to budget more for office supplies the first year of the project and less in subsequent years. Examples: Computers, software, office supplies/materials, telephones, copy machines, office furniture, postage, etc. Intervention Supplies and Materials: Intervention materials are the actual materials you will need to implement your intervention. Things to consider: How many participants you are anticipating? Can you prepare the materials yourself or do you need to hire someone to prepare them for you (e.g., a printing company or an advertising agency)? Do you need to conduct research or a needs assessment before designing your materials? Examples: Educational materials or curriculum, incentive or promotional materials, copies of pre/post surveys, brochures, posters, equipment for a physical activity intervention. Meeting and Activity Expenses: Space outside your organizations office may be needed for meetings or intervention activities. Some places may charge a rental fee as well as for use of audio visual equipment, such as projectors or TVs. Food and drinks provided at the meeting may be included in this category or in Intervention Supplies, depending on the organizations preference. Things to consider: Does your current office space accommodate everything you will need for the intervention? Do you have room to conduct meetings with other partners or internal staff? Do you have appropriate space to conduct your intervention activities or will you need to use other spaces? Will any of your partners donate space for meetings or intervention activities? Will you need to rent facilities to conduct your intervention? Will you need to travel to your interventions participants or partners, if so where will you meet with them? Examples: Meeting rooms, church basements, school gymnasiums, community centers, multi-purpose rooms, park pavilions, etc. Transportation/Travel Expenses: Transportation can involve providing a means for participants to travel to your intervention activities in order to increase participation or providing transportation for you and your staff to travel to other locations to conduct intervention activities. This may also include fees or stipends to attend professional meetings or perform interviews and surveys out-of-town. Things to consider: Do your participants have access to public or personal transportation or will you need to provide it? Do your staff members need to travel to participants homes or communities to conduct intervention activities? Will your staff need to travel to conferences or to make presentations outside of your city? Examples: Bus tokens or cab fare for program participants, rental vans to pick up participants, mileage reimbursement for staff members conducting intervention activities, travel stipends, air fare and per diem for out-of-town travel Purchased, Consultant or Contractual Service Expenses: These expenses are payments to individuals or companies for a specific service, usually occurring temporarily during the project, that are not completed by the regular project staff.

Things to consider: What specific expertise and services will you need in planning, implementing and evaluating your intervention? Examples: Development and placement of media ads;consultant for identifying interventions for priority populations; contractor to conduct an evaluation of the intervention. Indirect Costs: Indirect costs are the expenses incurred by the organization to keep the organization operating. Indirect cost are typically calculated by multiplying an agreed upon percentage by the total direct costs, or by the total of personnel and benefit costs. These costs are sometimes also referred to as administrative costs. Things to consider: Will your organization obtain sufficient indirect costs from your intervention income? Are there partners who are willing to cover some indirect costs? Examples: Rent, utilities (e.g., gas, electric, sewage, trash removal), telecommunications (phone line charges, long distance, fax machine, e-mail, internet), property insurance, legal expenses, or building maintenance costs. An in-kind donation is a contribution of time, service or goods made by a donor to help support the operations or services provided by your organization. It isnt cash. Therefore the donor does retain a degree of control over the donation that doesnt occur when the donor gives you a cash donation. Because of this relationship your organization should keep the donor well informed on how their donation is being used. Some examples of in-kind donations include:

Bookkeeping service Copying Office equipment Office/meeting space Printing Professional services (accounting, lawyer, etc.) Refreshments Volunteer time

As you prepare your budget it is critical you account for anticipated in-kind donations. If you dont track these donations, you arent truly acknowledging the total capacity of your organization. Also tracking these donations will help you better acknowledge the donors for their contribution. To get a better sense of how to track and value in-kind donations, use In-Kind Donations Hidden Assets for your Organization A Resource Guide. The following printable worksheets are provided to help you with planning your intervention budget. Budget Preparation Explanation Use this Budget Preparation Explanation Worksheet to better understand how to calculate specific details of your budget (personnel expenses, fringe benefits, indirect costs, etc.) Budget Preparation Worksheet Use this worksheet to plan your intervention budget. Example Budget Spreadsheet with Calculations This Excel file shows sample calculations for an entire intervention, which will assist you in setting up the budget spreadsheet for your own intervention. Remember to budget for multiple years if your intervention will last longer than one year. Additional assistance with budget preparation may be obtained from the Foundation Center or the Non-Profit Guides.

Budget Execution PPC develops integrated systems and tools that address the complete sequence of events in the budget execution cycle, including appropriations, apportionments, allotments, commitments, obligations, expenditures, and outlays. Budget execution is the process by which the financial resources made available to an agency are directed and controlled toward achieving the purposes and objectives of the requesting agency. In todays complex budgeting world, having systems and people that can link core financial management data with budget and performance data is critical to an agencys success. Integrating the systems, resources, and best practices that exist in the budget execution space with their counterparts in the financial management space helps ensure that funds are managed in the most efficient and effective manner and are communicated to management and stakeholders in real time. PPC develops integrated systems and tools that address the complete sequence of events in the budget execution cycle, including appropriations, apportionments, allotments, commitments, obligations, expenditures, and outlays. Our approach is to ensure that the information contained in financial management systems are properly tracked and measured in a way that is meaningful for budget processes and analysis. This integrated approach allows budget execution data to be available for current-year reporting and analysis and readily available for out-year planning efforts concurrently under way. Financial Management of Business Operations in Government

THIS COURSE IS DESIGNED FOR: Experienced federal accountants, financial managers, operational managers, and budget analysts who are involved in or wish to understand the financial management aspects of working capital funds, revolving funds, franchise funds, and reimbursable activities. NOTE: Individuals involved in accounting procedures for such activities should also attend Accounting for Business Operations in Government YOU WILL BE ABLE TO:

Compare funding mechanisms used in the federal government Discuss the advantages of using business operations Determine the approval path for revolving funds and reimbursements Budget to establish a revolving fund Budget for and execute fiscal year funds Define cash management

COURSE TOPICS INCLUDE:

Advantages of business operations in government Establishing a fund Budgeting and executing for the fiscal year Managing business operations Analyzing financial data

MEETS SELECTED CORE COMPETENCIES FOR:

Budget analysts Financial managers

SUGGESTED PREREQUISITES:

Accounting for Business Operations in Government

RECOMMENDED FOLLOW-ON COURSES:

Appropriations Law for Business Operations in Government

RECOMMENDED FOLLOW-ON RESOURCES:

Activity-Based Cost-Management in Government

Operations Management An important element of any business system is management, whether an individual or a team performs it. In our society, we no longer think of company management in terms of one person acting as the entrepreneur, but rather as a team effort. Each member possesses specialized knowledge and understanding of one functional area of the business system and is by temperament and training able to work cooperatively with other members of the team toward a common goal. Whatever the system or organization, the functions of management are always the same: (1) designing, (2) planning, (3) organizing, (4) directing, and (5) controlling. Management establishes the goals and objectives of the firm or organization and plans how to attain them. It is management that organizes the system and directs it so that its goals can be reached. Finally, management must be able to analyze the working of the system in order to control it and to correct any variations from the planned procedures in order to reach the predetermined goals. These functions interact with one another and managers must be skilled in these coordinating processes and functions if they are to accomplish their goals through the efforts of other people. The concepts of managerial functions has some hidden difficulties when one attempts to apply them to a specific managerial job. First, one cannot tell which functions are most important and how much time must be allocated to each. All functions are important parts of a manager's job, but the significance attached to each one may vary at different times, such as at different stages of a product life cycle. Furthermore, the significance of each function varies at different management levels in the same organization. Operations management, for example, is more focused on directing and controlling than on planning or organizing. All organizations have operations. Operation management, or technical management, is comprised of department managers and persons with professional technical competence. This level is oriented downward to basic operations, such as producing goods and moving them out the door. Amanufacturing company may conduct

operation in a mill or factory. The driving force in operations management must be an overriding goal of continually improving service to customers, where "customer" means the next process as well as the final, external user. Since there is an operations element in every function of the enterprise, all people in all jobs in every department of the organization should work together for the improvement of their own operations management elements. It is important to note that the technical expert often seeks recognition from peers and colleagues rather than from managers at the administrative level. INPUT The input of a system depends on its specific objective. What raw materials will yield the desired output? If one were to visually illustrate a system, the input would be shown as the components vital to it. A television repairperson needs a diagram of a TV set in order to repair it, or an auditor might need a flowchart of a company's accounting system to check for possible diversion of funds. If a system is designed to maintain a state, the input is information or feedback concerning the essential variable that must be maintained. If the purpose of a system is to make a decision, the input is relevant information about the problem. In a production system, the input consists of raw material, labor, and other manufacturing costs that are combined in the final product. TRANSFORMATION After input is established the input, it is necessary to transform it into a desirable output. In business, the transformation operation is extremely important. Manufacturing, marketing, and distribution must be studied and known in detail. However, there are some areas in which little is known. In a business system, for example, one must consider the way people act and react. Often behavior is placed in this gray area because so little is known about what motivates it. Also, for some people in an organization it may not matter how something works, while others may be vitally interested. A manager may not care how a report gets to him or her, but an accountant would be concerned with all the steps in gathering data, preparing the report, and communicating it to the manager. Thus, in studying any transformation operation, it is important to know the reliability of the process and who is interested in it. This system will vary depending on the output. OUTPUT In one sense, output is the quality and quantity of the services and goods produced. In another sense, output may be thought of as the payments made for all the factors of production used. In the first sense, the entire system of the firm is designed to produce something that is desired in a market. Consumers want and seek out goods and services that will make their lives happier, more comfortable, healthier, longer, and so on. In order to produce those goods and services, the firm needs inputs. What may be output for one business may be input for another. In the second sense, output is converted into revenue for the firm that is used to compensate the owners for the risks they have taken, management for its role in producing the revenue, and employees for their role in producing the good or service; it is also used to pay interest for the use of borrowed capital and wages for labor. Rent must be paid for the use of land; goods and materials used in production must be paid for; and taxes must be paid to the government. The output is the result of the system and is closely related to its objective. Output will accomplish or help to accomplish the specific objective if the system has been designed correctly. FEEDBACK All systems should include feedback. When an input is received in the system and undergoes a transformation operation, the result or output is then monitored and transmitted for comparison with a standard. If there is variation between the output and the standard, suitable action can be taken to correct the variation. A business organization with many systems that range from very simple to very complex requires a much more complicated feedback network. Information must be communicated from person to person and from one part of the organization to another. In fact, the original data may be transformed many times before it reaches its final destination. Each of these transformations is subject to feedback. Feedback can be defined as knowledge of results. Three basic types of feedback are needed: informational feedback, corrective feedback, and reinforcing feedback. The flow of information in an organization should be two-wayfrom managers to workers as well as vice versa. In contrast to informational feedback, corrective feedback is evaluative and judgmental. An effective manager will not only point out mistakes but also get the individual worker headed in the right direction by means of corrective feedback. Positive consequences or reinforcements are one key to desired performance. In other words, reinforcing feedback is a prime means of achieving growth in job performance. PRODUCTION MANAGEMENT Products can be classified in many ways and their distribution can take many forms. But the essence of production management is that the factors of productionland, labor, and capital are transformed by management from raw materials into something finished, something to be used, or something to be sold profitably in order to keep the business in operation. Before production can be started, the firm must determine what kind of product it can profitably produce. Management must decide what markets the product will satisfy, what materials it will contain, what processes will be required to form it, by what means it can be transported, and what quality and quantity of labor will be needed to produce it. Knowledge of all this provides direction to the planning and organization of manufacturing. Once the firm has decided on the basic product or service to produce, design and development can begin. Planning the product involves all parts of the business system. The marketing department may discover the need for a new or improved product, and the production department may then determine whether it can manufacture the product for sale at a given price. The finance department then decides whether the venture will be profitable and whether financing is available to cover the costs of development, manufacturing, and distribution. Such product planning determines whether development and design will go forward. The process of refining a product to a finished form sheds further light on the problems of manufacture: the equipment, raw materials, and fabricated parts that will be required, as well as the flow of production. Planning for production actually starts as soon as the decision is made to develop and design a product.

Production management makes suggestions for manufacturing that will save time, effort, and money without impairing the design of the product. Production management is very complex. Decisions must be made about labors, money, machinery, and materials. Inventories of parts must be maintained, and proper machinery and equipment must be combined with labor. All these activities, although performed within the production system, must be closely coordinated with the overall system of the firm. Production managers are involved in many diverse areas. They are concerned with all the peripheral aspects of production and must be able to manage workers, materials, and machines in a changing environment. Why is productivity so important? The basic reason is that productivity is a measure of the efficiency with which a person, business, or entire economy produces goods and services. It is a key indicator of a nation's economic strength. In general, the concept of productivity refers to a comparison of the output of a production process with one or more of its inputs. Thus, productivity may mean different things in different situations. Manufacturing is simply a special form of production by which raw and semifinished materials are processed and converted into finished products needed by consumers. In a broader and more basic sense, production is the transformation of inputs from human and physical resources into outputs desired by consumers. These outputs may be either goods or services. The production of services is often called operations management. We are now entering an era in which production and corporate management are becoming recommitted to one of the basics of business: making a better product faster and cheaper. This effort is important because the great bulk of assets used in manufacturing companies capital invested, people employed, and management timeare allotted to the production function of the business rather than to marketing or finance. This situation is also true in service firms. The organization for manufacturing depends on the complexity of the products manufactured and the size of the company. In a large company the manufacturing organization has divisions such as engineering, production control, inspection, and purchasing. The success of a product depends on the proper development and management of the product. CONCLUSION Management is universal. When more than one person is concerned with a goal, there is need for a process by which this goal can be attained. Management is active in every part of business and at every level. Its functions are performed in every department and in every function of the business. The practice of operations management is a continuous process of problem solving and decision making. The functions of management are based on the ability to make decisions and then to carry out all the implications of those decisions.

Accounting What It Is: Accounting is the process of systematically recording, measuring, and communicating information about financial transactions. How It Works/Example: At the heart of accounting is the double-entry bookkeeping method. This involves making at least two recording entries for every transaction: a debit in one account and a credit in another account. The method helps prevent errors because the sum of the debits should equal the sum of the credits. The three major financial statements produced by accounting are the income statement, the balance sheet, and the cash flow statement. Accounting can be done on a cash basis (cash accounting) or on an accrual basis (accrual accounting). Cash accounting records cash inflows and outflows in the period in which they occur. Accrual accounting records income and expenses in the period to which they are attributable rather than when cash payments come and go. For example, a check written in April for March's utilities would appear as a March expense under the accrual method and as an April expense under the cash method. There are two general kinds of accounting. Financial accounting is the recording and communication of economic information in accordance with Generally Accepted Accounting Principles (GAAP) and is primarily for external users. Managerial accounting is the recording and communication of economic information that may or may not be in accordance with GAAP and is for internal users. Other accounting specialty areas exist, such as tax accounting, oil and gas accounting, or forensic accounting. There are two kinds of users of accounting information: internal users and external users. Internal users are usually company managers who use accounting information to decide how to plan and control operations on a daily and long-term basis. External users are existing or potential investors, creditors, analysts, financial advisers, regulatory authorities, unions, and the general public. They use accounting information to make a myriad of decisions about whether to buy, hold, sell, lend, continue a relationship, or make an agreement. The Financial Accounting Standards Board (FASB), the Securities and Exchange Commission (SEC), the IRS, and other regulatory bodies set accounting standards and requirements for accounting frequency and presentation. [InvestingAnswers Feature: Gold Prices in 2011 -- Is The Party Over?] Why It Matters: Accounting is tremendously important because it is the language of business, and it is at the root of making informed business decisions. Without accounting, managers would not know which products were successful, which business decisions were the right ones, and whether the company was earning money. It would not know how much to pay in taxes, whether to lease or buy an asset, or whether to merge with another company. In short, accounting doesn't just count the beans, it measures a company's success at meeting its goals and it helps investors understand how efficiently their economic resources are being used. This is why companies must be proficient in

accounting in order to make good decisions. Accounting can be controversial, in that accounting rules and methods are sometimes subject to interpretation or can appear to distort a company's true performance. This is another important reason that effective leaders and managers must thoroughly understand the accounting impact of their decisions.

Difference Between Audit and Evaluation EVALUATION

Evaluation is all about identifying and understanding a particular process and then the willingness to redesign and improve the process or make the necessary alterations in the process to result in an improved achievement. Basically, evaluation is considered as a learning tool as it is always done during the middle of the process or at the end of the process. It is all about identifying and understanding the results of a process and their impacts and what can be the best alternatives to help in decision-making which would lead further improvement in the process. The most important intention behind evaluation is to enable `learning-by-doing`. By `learning-by-doing` we mean that a process can be understood and performed in a better way only by doing it first and then finding out ways to improvise upon it. Also it would further help in improving the results-oriented activities by re-engineering or say re-designing the ongoing activities and by crafting improved design for new ones. The most important factor regulating evaluation is accountability; i.e. whether results are achieved or not and what are the reasons behind the success or failure of the process followed. Evaluation comprises three things: Whether we are doing the right things Whether we are doing it right Whether there are better ways of doing it AUDIT

Audit may be defined as an independent assurance activity designed with an objective to add value and improve the working and operations of a particular organization. It is introduced to improve the control and governance processes in an organization and also to check the efficiency of risk management. This is done by bringing in a systematic and disciplined approach to assess the overall working of the organization. In audit, accountability is very important as it focuses on the success of the management framework and its appropriateness and provides assurance for the effective management practices in the organization. Audit comprises: INTERNAL AUDIT: Here, auditing is done within the organization and reporting is done to the senior management of the organization. EXTERNAL AUDIT: Here, auditing is done by an independent entity and reporting is done to the governing body of the organization being audited. DIFFERENCE BETWEEN EVALUATION AND AUDIT Evaluation is a part of the Management Cycle(planning implementation evaluation) Audit is independent from Management Cycle since it comes into scene after the completion of Management Cycle. Evaluation talks about doing the right thing while audit talks about how the things are done. Evaluation involves doing it right while audit involves managing it right. Evaluation is about sustainability while audit is about efficiency. Evaluation approach follows good practices while audit works against norms. Evaluation is done at the end-of-phase while audit can be done any time. Anything can be evaluated while things falling under the management control only can be evaluated.

Audit and Evaluation Function Model

Introduction

Introduction Links to Relevant Audit and Evaluation Policies and Legislation Audit and Evaluation Function Business Process Model Audit and Evaluation Sub-function Business Process Model Audit and Evaluation Function Draft Classification Model Legislative and Government Policy Requirements for BASCS Audit and Evaluation Draft Classification Model Sample Conversion Plans for Audit and Evaluation Records

This section covers the Audit and Evaluation Function, sub-functions, processes, activities, and transactions of common administrative business, commonly conducted in and across all government institutions to facilitate the delivery of programmes and services.

Links to relevant Audit and Evaluation policies and legislation The Audit and Evaluation function has been modeled according to specific policies, legislations or documents related to Audit and Evaluation within the Government of Canada, in addition to a number of common laws, policies and publications that relate to all common administrative functions addressed within this BASCS Guide. Common legislation:

Privacy Act Personal Information Protection and Electronic Documents Act Access to Information Act

Common Treasury Board Secretariat policies and publications:

Management of Government Information Access to Information and Privacy (ATIP) Privacy and Data Protection Government Security Policy

A search for other links to policies that may relate to the Audit and Evaluation function can be undertaken by accessing the Treasury Board website, while links to related legislation can be further researched on the Justice Canada website. Audit and Evaluation Function Business Process Model According to our research and consultation process, we have identified a number of sequential sub-functions within the Audit and Evaluation business process model. These sub-functions, shown in black text in the diagram below, provide a foundation for BASCS classifications related to the Audit and Evaluation function.

Audit and Evaluation Sub-function Business Process Model A number of sequential activities in each sub-function management were identified for the Audit and Evaluation process. These activities, shown in black text in the diagram below, provide the next level of BASCS classifications related to the Audit and Evaluation function.

Audit and Evaluation Function Draft Classification Model This model records classification structure addresses the Audit and Evaluation function, the steps in the business process developed to fulfill the function (i.e., subfunctions), the activities associated with each of these sub-functions, and the transactions of administrative business concerning the audits and evaluation within the federal government-as commonly conducted in and across all government institutions to facilitate the delivery of programmes and services. The four sub-functions of the Audit & Evaluation business process, listed in order of a life-cycle concept of managing an audit and/or evaluation function, are: Audit & Evaluation - Plan Audit & Evaluation - Implement Audit & Evaluation - Monitor Audit & Evaluation - Review (Knowledge Construction) As a business process, these sub-functions are arranged in the following sequence:

AUDIT & EVALUATION FUNCTION PRIMARY NUMBERS AND SUB-FUNCTIONS X.0 Audit & Evaluation - Comprehensive Matters X.1 Audit & Evaluation - Plan X.2 Audit & Evaluation - Implement X.3 Audit & Evaluation - Monitor

X.4 Audit & Evaluation - Review Note: the numeric coding system presented in this draft model classification structure is used for example purposes only. As of the date of this model, LAC has made no final decisions regarding the application of a standard coding system (including delimiters) to complement classification structures for common administrative records.

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X.0 AUDIT & EVALUATION - COMPREHENSIVE MATTERS The Audit & Evaluation - Comprehensive Matters record grouping is reserved for records of activities and transactions that relate to or affect, in a comprehensive the Audit & Evaluation function or the business process developed to fulfill that function (i.e., this record grouping is reserved for records of activities and transactions that relate to or affect all or most sub-functions of the Audit & Evaluation business process). Examples of such activities and/or transactions are:

developing, applying, monitoring, and/or evaluating policies, guidelines, systems, procedures, etc., that address or encompass all or most aspects of the Audit & Evaluation function and/or business process (example record types include: draft and approved policies, guidelines, procedures; draft and final requirements definitions for Audit & Evaluation information systems1; draft and final requirements definitions for comprehensive Audit & Evaluation learning programs2); group activities and initiatives (e.g., those of committees, project teams, delegations, etc.) that focus on all or most aspects of the Audit & Evaluation function and/or business process (example record types include committee and/or work group meeting agenda and minutes, records of decisions, issue logs); liaison activities that address or encompass all or most aspects of the Audit & Evaluation function and/or business process (example record types include documents of inter-organizational information sessions and/or collaborative initiatives); reporting activities that address or encompass all or most aspects of the Audit & Evaluation function and/or business process (example record types include draft and final reports addressing the overall Audit & Evaluation function and/or business process).
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Note: for records of activities relating to information technology systems, see the model records classification structure developed for the Management of Information Technology function.
2

Note: for records of activities relating to the delivery of learning programs, see the model records classification structure developed for the Human Resources Management function. Note: records of activities and transactions that relate to specific aspects of the Audit & Evaluation business process (i.e., plan, implement, monitor and review) should be classified to those sections of this classification structure. Records that simultaneously address two or more, but not all, sub-functions of the business process should be classified to one of those sub-functions; the existence of these records should be noted in the descriptions of the related sub-function, activity, and/or transaction records groupings or, if appropriate, in the profiles of related individual documents (as a metadata 'cross-reference' element). Example file codes and titles for: Audit & Evaluation - Comprehensive Matters X.0-0 Audit & Evaluation - Comprehensive Matters - Policy Matters (reserved for records related to developing, applying, monitoring, and/or evaluating policies that simultaneously address all or most sub-functions of the Audit & Evaluation function) X.0-0-1 - GC Internal Audit Policies X.0-0-2 - GC Evaluation Policies X.0-0-3 - Requirements of the Treasury Board Policies on RBAF and RMAF X.0-1 Audit & Evaluation - Comprehensive Matters - General Matters (reserved for records related to the Audit & Evaluation - Comprehensive Matters record grouping but for which no specific file or file grouping has been created) X.0-1-1 - Applying the Treasury Board Guide to the Monitoring of Audit and Evaluation X.0-2 Audit & Evaluation - Comprehensive Matters - (Departmental/Sector/Branch) Audit & Evaluation Committee (reserved for records related to the deliberations of the [departmental/sector/branch] Audit & Evaluation committee)

X.0-2-1 - Terms of Reference X.0-2-2 - Cumulative Record of Decisions X.0-2-2005/06 - Meetings Agenda and Minutes - Fiscal Year 2005-2006 X.0-3 Audit & Evaluation - Comprehensive Matters - Liaison Activities (reserved for records related to internal or external relations on a spectrum of issues and/or initiatives that encompass all or most aspects of the Audit & Evaluation function) X.0-3-1 - Procedures for Liaison with Private Contractors X.0-3-CEIA - Centre of Excellence for Internal Audit X.0-3-CEE - Centre of Excellence for Evaluation X.0-3-IIA - Institute of Internal Auditors X.0-3-CES - Canadian Evaluation Society X.0-4 Audit & Evaluation - Comprehensive Matters - Reporting Activities (reserved for records related to the activity of reporting to management on [departmental/sector/branch] audit and evaluation matters of a comprehensive nature not covered by any Audit & Evaluation sub-function)

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[back to Audit & Evaluation Function - Primary Numbers and Sub-functions] X.1 Audit & Evaluation - PLAN This sub-function record grouping is reserved for records of activities and transactions that relate to or affect, in a strategic manner, the development of multi-year plans for audits and evaluations. Activities associated with the Audit & Evaluation - Plan sub-function may have a sequential relationship as follows:

'Audit & Evaluation - Plan' entails the activities of:

Example file codes and titles for: Audit & Evaluation - Plan

gathering planning inputs including risks; assessing and prioritizing audit and evaluation requirements; documenting multi-year plans for audits and evaluations; approving the plan(s); and communicating the plan(s).

X.1-0 Audit & Evaluation - Plan - Policy Matters (reserved for records related to developing, applying, monitoring, and/or evaluating policies that specifically address the 'planning' sub-function of Audit and Evaluation) X.1-0-1 - Requirements of the Federal Administration Act X.1-0-2 - Planning implications of the Treasury Board Policies on Internal Audit, Transfer Payments and Evaluation X.1-1 Audit & Evaluation - Plan - General Matters (reserved for records related to the Audit & Evaluation - Plan sub-function record grouping but for which no specific file or file grouping has been created) X.1-2 Audit & Evaluation - Plan - Government Audit & Evaluation Planning Process (reserved for records related to the Government of Canada and external institutionspecific planning processes that have Audit & Evaluation planning implications)

X.1-2-1 - Government of Canada Planning Cycle X.1-2-2 - Strategic Planning X.1-2-3 - Business Planning X.1-3 Audit & Evaluation - Plan - Audit and Evaluation Planning Committee (reserved for records related to the deliberations of a [departmental/sector/branch] Audit & Evaluation planning committee) X.1-3-1 - Terms of Reference X.1-3-2005/06 - Meetings Agenda and Minutes - Fiscal Year 2005-2006 X.1-4 Audit & Evaluation - Plan - Gather (reserved for records related to activities associated with obtaining all planning inputs, including, but limited to

X.1-5

environmental scanning; specifying the A&E universe; corporate risk assessment; identifying GC (especially TBS and OCG) requirements; identifying external audits (e.g., OAG, PSC, OIC, OLC); promised work in TB approved RMAFs and RBAFs; carry-over items from previous years (incl. projects in progress);

audit and evaluation results, including findings from previous audit and evaluations whether from internal or external sources; internal consultations; work promised in third party agreements, whether in data sharing agreements or more general MOUs with other government priorities; departmental priorities; and performance information) agencies;

Audit & Evaluation - Plan - Assess and Prioritise

(reserved for records that relate to the assessing and prioritizing of departmental auditing and evaluation requirements, including:

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level of risk to the organization; required work (mandatory); resources (time, funds, staff, available skill sets); gap analyses;

issues affecting appropriateness of timing (e.g. the introduction of new business processes or the end of programs); validation of views on planning factors; consultations (internal/external); potential project list; assign ment of priority to projects; and consultations on internal and external priorities)

Audit & Evaluation - Plan - Document (reserved for records related to documentation of the draft plan, identifying and documenting risks to its delivery and completion, obtaining clearance, translation, editing, and transmittal of the final draft plan) X.1-7 Audit & Evaluation - Plan - Approve (reserved for records related to presenting the plan to management and obtaining their approval of it)

X.1-8 Audit & Evaluation - Plan - Communicate (reserved for records related to obtaining ATIP clearance, disseminating the plan, and preparing briefing notes and House cards)

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[back to Audit & Evaluation Function - Primary Numbers and Sub-functions] X.2 Audit & Evaluation - IMPLEMENT This sub-function record grouping is reserved for records of activities and transactions that relate to or affect, in a specific manner, the implementation of the audit and evaluation plan through audit and evaluation projects. Activities associated with the Audit & Evaluation - Implement sub-function may have a sequential relationship as follows:

'Audit & Evaluation - Implement' entails the activities of:

initiating and planning audits and evaluations on a technical and attribute level, and developing and setting related specifications; conducting audits and evaluations including data collection, data analysis based on proscribed standards and criteria; reporting on the audit or evaluation and the drawing of conclusions based on the evidence;

obtaining a response to audit and evaluation conclusions from management, in the form of a management action plan; approving audit and evaluation reports; and communicating results.

Example file codes and titles for: Audit & Evaluation - Implement X.2-0 Audit & Evaluation - Implement - Policy Matters (reserved for records related to developing, applying, monitoring, and/or evaluating policies that specifically address the 'Implementing' sub-function of Audit and Evaluation) X.2-1 Audit & Evaluation - Implement - General Matters (reserved for records related to the Audit & Evaluation - Implement sub-function record grouping but for which no specific file or file grouping has been created) X.2-2 Audit & Evaluation - Implement - Government Audit and Evaluation Implementation Process (reserved for records related to the Government of Canada and external institution-specific Audit & Evaluation processes) X.2-2-1 - Management of Major Crown Projects Policy (TBS) X.2-3 Audit & Evaluation - Implement - Audit & Evaluation Implementation Committee (reserved for records related to the deliberations of a [departmental/sector/branch] committee focussed on implementing audit and program evaluation plans) X.2-3-1 - Terms of Reference X.2-3-2004/05 - Meetings Agenda and Minutes - Fiscal Year 2004-2005 X.2-3-2005/06 - Meetings Agenda and Minutes - Fiscal Year 2005-2006 X.2-4 Audit & Evaluation - Implement - Initiate and Plan (reserved for records related to initiating and planning audit and evaluation projects at the technical and attribute level, and developing and setting related specifications) X.2-4-1 - Requirements of Treasury Board Policy for internal audits X.2-4-2 - Requirements of Treasury Board Policy on evaluations X.2-5 Audit & Evaluation - Implement - Conduct (reserved for records related to conducting audits and evaluations including such tasks as:

gathering background information; gathering evidence;


X.2-5-1 - Data collection tools and methodologies X.2-5-2 - Analysis

analysing evidence; preparing observations; Audit program sign-off; Evaluation work completed; preparing working papers; and validating evidence)

X.2-6 Audit & Evaluation - Implement - Report (reserved for records related to the preparation of audit and evaluation reports for management, Parliament, and the public and includes such tasks as:

debriefing; preparing drafts; external quality assurance (e.g., peer review); obtaining clearance; translation; editing; addressing management letters concerning out-of-scope issues; and transmission of the final draft)

X.2-7 Audit & Evaluation - Implement - Management Response (reserved for records related to the development of management action plan in response to audits and evaluations, and the assessment of these responses) X.2-8 Audit & Evaluation - Implement - Approve (reserved for records related to the preparation of audit and evaluation reports for presentation to management and audit and evaluation committees) X.2-9 Audit & Evaluation - Implement - Communicate (reserved for records related to obtaining ATIP clearance, dissemination of the plan, and preparation of briefing notes and House cards)

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[back to Audit & Evaluation Function - Primary Numbers and Sub-functions] X.3 Audit & Evaluation - MONITOR This sub-function record grouping is reserved for records of activities and transactions that relate to or affect, in a specific manner, the monitoring of progress towards the implementation of the audit and evaluation multi-year plans at both the plan and audit/evaluation follow-up levels. Activities associated with the Audit & Evaluation Monitor sub-function may have a sequential relationship as follows:

'Audit & Evaluation - Monitor' entails the activities of:

Example file codes and titles for: Audit & Evaluation - Monitor

following up on plan; updating the plan; approving the updated plan; communicating the updated plan; and following up on management responses.

X.3-0 Audit & Evaluation - Monitor - Policy Matters (reserved for records related to developing, applying, monitoring, and/or evaluating policies that specifically address the 'monitoring' sub-function of Audit and Evaluations) X.3-1 Audit & Evaluation - Monitor - General Matters (reserved for records related to the Audit & Evaluation - Monitor sub-function record grouping but for which no specific file or file grouping has been created)

X.3-2 Audit & Evaluation - Monitor - Government Process for Monitoring Audits and Evaluations (reserved for records related to the Government of Canada and external institution-specific processes addressing monitoring of internal audits and evaluations) X.3-3 Audit & Evaluation - Monitor - Audit & Evaluation Monitoring Committee (reserved for records related to the deliberations of a [departmental/sector/branch] committee focussed on monitoring audits and evaluations) X.3-3-1 - Terms of Reference X.3-3-2005/06 - Meetings Agenda and Minutes - Fiscal Year 2005-2006 X.3-4 Audit & Evaluation - Monitor - Liaison Activities (reserved for records related to internal or external relations on issues and/or initiatives relating to audits and evaluations) X.3-5 Audit & Evaluation - Monitor - Follow Up (on Audit and Evaluation plans) (reserved for records related to assessing changes to the multi-year audit and evaluation plans including:

changed environment; changed priorities; changed risks; changed resources (time, funds, staff) vs. planned utilization; and performance against targets)

X.3-6 Audit & Evaluation - Monitor - Follow Up (on Management Action plans) (reserved for records related to progress made on management action plans in response to audits and evaluations as well as revisions to these plans) X.3-7 Audit & Evaluation - Monitor - Update (Audit and Evaluation plans) (reserved for records related to updating audit and evaluation plans) X.3-8 Audit & Evaluation - Monitor - Approve (updated plans) (reserved for records related to approving updated Audit & Evaluation plans) X.3-9 Audit & Evaluation - Monitor - Communicate (updated plan) (reserved for records related to disseminating the updated plan including the preparation of reports, briefing notes and House Cards)

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[back to Audit & Evaluation Function - Primary Numbers and Sub-functions] X.4 Audit & Evaluation - REVIEW This sub-function record grouping is reserved for records of activities and transactions that relate to or affect, in a specific manner, the holistic analysis, reporting, and communication of the state of the institution based on audits and evaluations. Activities associated with the Audit & Evaluation - Review sub-function may have a sequential relationship as follows:

'Audit & Evaluation - Review' entails the activities of:

analyzing holistic results of audits and evaluations to reflect on the overall state of the institution as well as its audit and evaluation function; reporting on the analysis; and communicating the results.

Example file codes and titles for: Audit & Evaluation - Review X.4-0 Audit & Evaluation - Review - Policy Matters (reserved for records related to developing, applying, monitoring, and/or evaluating policies that specifically address the 'Review' sub-function of the Audit and Evaluation function) X.4-1 Audit & Evaluation - Review - General Matters (reserved for records related to the Audit & Evaluation - Review sub-function record grouping but for which no specific file or file grouping has been created) X.4-2 Audit & Evaluation - Review - Government Process for the Review of Audits and Evaluations (reserved for records related to the Government of Canada and external institution-specific processes for the global or holistic review of the results of audits and evaluations)

X.4-3 Audit & Evaluation - Review - Audit and Evaluation Review Committee (reserved for records related to the deliberations of a [departmental/sector/branch] committee whose focus is the global or holistic review of the results of audits and evaluations) X.4-3-1 - Terms of Reference X.4-3-2004/05 - Meetings Agenda and Minutes - Fiscal Year 2004-2005 X.4-3-2005/06 - Meetings Agenda and Minutes - Fiscal Year 2005-2006 X.4-4 Audit & Evaluation - Review - Liaison Activities (reserved for records related to internal or external relations on the global or holistic review of the results of audits and evaluations) X.4-5 Audit & Evaluation - Review - Analyse (impacts) (reserved for records related to aggregating audit and evaluation project results and the uptake of recommendations, and to the global or holistic review of performance relating to implementation of the audit and evaluation plan including information, intelligence and knowledge gained [often in the form of "lessons learned"]) X.4-6 Audit & Evaluation - Review - Report (reserved for records related to:

reporting performance of the Audit and Evaluation function; providing Audit and Evaluation management input into the DPR and RPP or into ad hoc or annual reports; reporting on lessons learned; and making holistic observations based on meta-audit and meta-evaluation findings)

X.4-7 Audit & Evaluation - Review - Communicate (reserved for records related to the activity of disseminating 'Review' reports including their preparation and the preparation of briefing notes and House Cards) Legislative and Government Policy Requirements for BASCS Audit and Evaluation Draft Classification Model