GFOA Forecasting Guide
GFOA Forecasting Process Work Breakdown Structure
Below is a work breakdown structure (WBS) for the 10 steps presented by GFOA. The WBS details the tasks associated with each of the 10 steps and gives an estimated duration for each task. Please note that many of the tasks are completed in parallel. Therefore, the durations presented are not additive. Also, you may find it necessary to adjust the estimated durations (or even the tasks) based on local experiences and conditions. We have also included the links and contact information referenced in the presentation at the end of this handout.
1. Form forecast teamLevel 1 Sub Tasks / Level 2 Sub Tasks / Level 2 Duration
Identify team members / Identify core expert(s) on revenue sources / 3 days
Identify core expert(s) on items of expenditure / 3 days
Identify auxiliary resources (people whose advise may be needed for specific sources or uses) / 5 days
Identify external resource(s) to provide validation ("reality check") / 5 days
Recruit team members / Get permission from home departments to involve recruits / 3 days
Give personal invitation to recruits / 3 days
Orient team members / Develop team charter / 3 days
Review and sign team charter / 1 day
Develop work breakdown structure / 5 days
Review work breakdown structure / 1 day
Train in forecasting methods / 1 day
Demonstrate forecasting software / 1 day
2. Define account groupings
Level 1 Sub Tasks / Level 2 Sub Tasks / Level 2 Duration
Review chart of accounts structure / Obtain electronic copy of chart and 5 years of historical data / 5 days
Identify logical groupings already in chart structure to use as a forecast grouping. / 1 day
Identify logical groupings of accounts / Identify revenue groupings / 5 days
Identify expenditure groupings / 5 days
Validate groupings / Use historical data to see if accounts in grouping have exhibited similar behavior in the past / 3 days
Review groupings with forecast team members / 1 day
Review groupings with auxiliary resources where appropriate / 3 days
Review groupings with external resource(s) / 5 days
Document decisions / Record account grouping decisions and rationale / 2 days
Enter groupings into forecasting software / 2 days
3. Determine potential drivers of account groupings
Level 1 Sub Tasks / Level 2 Sub Tasks / Level 2 Duration
Identify most important account groupings / Determine which account groupings have the greatest influence on future financial position / 1 day
Identify any other account groupings that generate substantial political interest / 2 days
Identify drivers for most important account groupings / Identify specific legal or technical factors that drive behavior of the account grouping (e.g., collection rates, contractual agreements) / 5 days
Identify more general economic factors that drive behavior (e.g., inflation) / 10 days
Identify special events that impact the account grouping (e.g., factory closing, annexation) / 10 days
Develop pictorial representations of drivers, where appropriate. / 5 days
Identify drivers for other account groupings. / Identify specific legal or technical factors that drive behavior of the account grouping (e.g., collection rates, contractual agreements) / 3 days
Identify more general economic factors that drive behavior (e.g., inflation) / 5 days
Identify special events that impact the account grouping (e.g., factory closing, annexation) / 5 days
Validate drivers / Make sure team members agree on drivers / 1 day
Validate drivers of department program revenue with departments / 5 days
Validate drivers of special areas of expenditure (e.g., fuel) with departments / 5 days
Validate driver with external resource(s) / 5 days
Document drivers / Record drivers in work files / 1 day
Record revenue drivers in a dedicated revenue manual / 3 days
4. Identify Statistical Correlations
Level 1 Sub Tasks / Level 2 Sub Tasks / Level 2 Duration
Set up correlation tests / Use work from Major Task 3 to identify relationships between independent and dependent variables to be tested. / 5 days
Gather historical data for variables / 5 days
Set up computer model to run tests / 5 days
Run tests / Define a correlation coefficient threshold above which correlations will be accepted / 1 day
Run tests through computer model / 3 days
Identify potentially useful correlations / 2 days
Document / Document useable correlations in work files / 1 day
5. Find Use of Correlations in Statistical Equations
Level 1 Sub Tasks / Level 2 Sub Tasks / Level 2 Duration
Test regressions / Build regression models for useful correlations found in Major Task 4 / 5 days
Feed in data and run regressions / 2 days
Test results of regression using statistical validation techniques / 2 days
Test historical trends / Build historical trending models for account grouping where regression is not being used / 3 days
6. Identify Critical Contextual Information
Level 1 Sub Tasks / Level 2 Sub Tasks / Level 2 Duration
Scan the economic environment / Interview external experts / 10 days
Interview experts inside the government / 5 days
Reflect on results of Major Task 3 to identify other special events or factors / 3 days
Identify most important pieces of contextual information / Distribute results of interviews to team members / 3 days
Hold team meeting to come to a consensus on most important factors / 1 day
Arrive at consensus on likely impact of factors / 1 day
Document decisions in work files / 1 day
7. Develop Forecast Assumptions
Level 1 Sub Tasks / Level 2 Sub Tasks / Level 2 Duration
Develop baseline / Identify mathematical / statistical technique to be use for each account grouping (see results of Major Task 5) / 3 days
Identify contextual information to go into the baseline forecast (see results of Major Task 6) / 1 day
Develop scenarios / Identify any variables or contextual information that is too uncertain or controversial to be included in the baseline / 3 days
Develop foregoing into assumptions for alternative forecast scenarios / 5 days
Document assumptions / Document baseline and scenario assumptions in working files / 1 day
8. Validate Assumptions
Level 1 Sub Tasks / Level 2 Sub Tasks / Duration
Prepare validation document / Develop documentation into a presentation than can be shared with others / 2 days
Validate with team / Hold meeting to review all assumptions and make sure there is consensus on assumptions / 1 day
Validate with external expert(s) / Review assumptions with external expert(s) / 5 days
Validate with departments / Identify specific revenues or expenditures assumptions that could benefit from review by operating departments / 2 days
Hold meetings with departments to validate / 3 days
Validate with project sponsors / Review assumptions with CEO and/or CFO / 1 day
Gain certainty that CEO and/or CFO are comfortable with assumptions / 1 day
Validate with governing board / Hold informal individual meetings with board members to review crucial assumptions / 5 days
Respond to feedback / Modify assumptions in response to legitimate concerns raised / 3 days
9. Make Forecast
Level 1 Sub Tasks / Level 2 Sub Tasks / Duration
Make forecast / Apply assumptions to baseline data / 1 day
Use alternative assumptions to develop forecast scenarios / 2 days
Team conducts a "smell test" to see if the forecasts "feel right" / 1 day
Modify forecasts as necessary / 3 days
Validate forecast / Run forecast results past individuals from Major Task 8 / 10 days
10. Present Forecast
Level 1 Sub Tasks / Level 2 Sub Tasks / Duration
Develop forecast presentation / Confer with parties who have validated team's work to get their perspective on presentation strategies / 5 days
Determine forecast lengths to present (e.g., 5 years, ten years, etc.) / 2 days
Determine economic scenarios to present / 2 days
Determine financial strategy scenarios to present / 2 days
Translate foregoing determinations into visualizations, using forecast software / 3 days
Present forecast / Develop forecast report / 5 days
Give board members individual briefings on forecast / 5 days
Work with CEO and CFO to prepare presentation for public meeting / 3 days
Present forecast at public meeting / 1 day
Interface more complicated forecast models, where needed / 5 days
Other resources
o Financing the Future - GFOA’s financial planning book
o MuniCast - GFOA’s forecasting model,
o www.gfoa.org/municast
o GFOA financial planning blog,
o http://ltfp.gfoa.org
o City of Irvine 2010 Strategic Business Plan
o www.cityofirvine.org/about/strategic_business_plan/default.asp
Contact information
o Shayne Kavanagh, GFOA,
o Ken Brown, Budget Officer, City of Irvine,
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