20.3 Monitoring and Reporting Financial Performance
Key Takeaways
- Financial reports are not interchangeable: budget versus actual answers what has been spent, while forecast reports answer whether the project will finish within the approved investment.
- Commitment reports capture money legally committed but not yet invoiced, which is how apparently sudden overspends actually build up.
- Reporting cadence must align with the organisation’s financial periods or project and finance figures will never reconcile.
- Work done but not yet invoiced must be accrued; under-accrual is the most common cause of a project reporting on-budget one month and over the next.
- A financial report should end in a decision: variance, cause, forecast, options, and the authority required.
Outcome 22c is separate from the forecasting outcome for a reason: know how to monitor and report financial performance, including different types of financial reports. The syllabus wants the reporting layer — what each report is for, who reads it, and what decision it supports.
Monitoring and types of financial reports
LO22c expects you to monitor and report financial performance using appropriate report types for different audiences.
| Report type | Typical content | Primary audience | Use |
|---|---|---|---|
| Budget vs actual | Baseline budget, actuals to date, variance by CBS/WBS | PM, PMO, finance partner | Package-level cost control |
| Forecast / EAC report | EAC, ETC, VAC, assumptions | Sponsor, board | Out-turn and funding decisions |
| Cash flow report | Inflows/funding vs outflows by period | Finance, PM | Liquidity; not the same as value performance |
| Commitments report | Purchase orders and contracts committed but not fully invoiced | PM, commercial | Future spend already obligated |
| Accruals report | Work done not yet invoiced | Finance, PM | True cost of work in period |
| Earned value summary | PV, EV, AC, CV, SV, CPI, SPI, trends | Sponsor, assurance | Integrated cost–schedule health |
| Exception / variance narrative | Root causes, impact, actions, decisions required | Sponsor, board | Turns numbers into governance choices |
| Funding / drawdown report | Releases vs remaining approved funds | Sponsor, finance | Stage-gate and grant compliance |
Good reporting principles:
- One data date and consistent coding.
- Separate baseline, actuals, commitments, and forecast.
- Explain why variances happened and what will change.
- Escalate when forecasts breach tolerance or financial authority.
- Match detail to audience: board wants exception and decision; package leads need line-item control.
Scenario C — wrong report for the question
A finance committee asks whether the project will finish within the approved investment. The PM only presents last month's invoices (cash). Better answer: EAC vs BAC, remaining commitments, risk contingency status, and change pipeline — a forecast and exception narrative, not a bank statement alone.
Cost control techniques in practice (beyond the formulas)
Earned value is a flagship technique; others support LO22b:
| Technique | What you do |
|---|---|
| Variance analysis | Compare actual/EV to baseline; find root causes |
| Trend analysis | Watch CPI/SPI over time — is recovery real? |
| Change control on cost | Only authorised scope/cost enters the baseline |
| Commitment control | Do not approve POs that break remaining budget without authority |
| Re-estimating remaining work | Replace outdated ETC with bottom-up knowledge |
| Value engineering / cost reduction | Reduce cost while preserving required function (not arbitrary quality cuts) |
| Supplier commercial control | Applications for payment, retention, pain/gain, audit of cost-plus |
Choosing the right report for the question being asked
Financial reports are not interchangeable, and a very common exam scenario gives a decision maker the wrong one. Match the report to the question:
| Question being asked | Report that answers it | Report that does not |
|---|---|---|
| "How much have we spent?" | Budget versus actual | Forecast report alone |
| "Will we finish within the approved investment?" | Forecast / estimate at completion | Last month's invoices |
| "Do we have the cash when we need it?" | Cash flow forecast | Cumulative spend total |
| "What have we already legally committed?" | Commitment report | Actuals report — commitments precede invoices |
| "Why are we over budget?" | Variance / exception report with root cause | A status colour |
| "Is delivery efficient relative to value earned?" | Earned value summary | Spend against profile |
The commitment report is the one candidates most often omit, and it matters. A purchase order raised today is money the organisation has agreed to spend even though no invoice has arrived. A project reporting only actuals can look comfortably under budget while being fully committed — which is exactly how an overspend appears "suddenly".
Cadence, audience and accruals
Three practical disciplines make financial reporting trustworthy:
Cadence. Reporting must align with the organisation's financial periods, or project and finance figures will never reconcile and both will be disbelieved. Agree the data date and stick to it.
Audience. The board needs forecast out-turn, variance from the approved investment, and the decision required. The sponsor needs early warning of anything threatening the business case. The finance function needs accruals, commitments, and reconciliation to the ledger. The delivery team needs cost against the work packages it controls. Sending everyone the same pack means most of them are reading someone else's report.
Accruals. Work done but not yet invoiced must be accrued, or the reported position flatters the project. Under-accrual is the single most common reason a project reports on-budget one month and materially over the next.
Acting on the numbers
Reporting exists to trigger action, so a report should end with the decision it requires. In an answer, follow the same chain used for reviews: state the variance, explain the cause, give the forecast out-turn, present options with their benefit and risk consequences, and name the authority whose decision is needed. A financial report that describes a problem without proposing a response has stopped one step short of governance.
A project reports actual spend of £1.2m against a £2m budget and declares itself comfortably on track. Purchase orders totalling a further £750,000 have been raised but not yet invoiced. What is the most accurate assessment?
A finance committee asks whether a project will complete within its approved investment. The project manager presents last month’s invoice total. Why is this an inadequate answer?