HKSM

Formal requests to secure, adjust, or release project funds based on actuals and forecasts. They present the needed amount, timing, source, and justification so sponsors and governance can decide. Used to keep the project properly funded and aligned to value.

Key Points

• Output of Monitor and Control Finances; becomes input to governance and change control decisions.
• Triggered by forecasted overruns or underruns, cash flow timing gaps, risk responses, or value-driven opportunities.
• States the amount requested, funding phasing, source of funds, assumptions, and conditions for release.
• Includes analysis of impacts on cost baseline, schedule, benefits, risks, and reserves.
• Backed by objective data such as actuals, EAC/ETC, cash flow curves, and variance trends.
• If approved, leads to updates of the cost baseline, funding limits, and financial plans.

Purpose

Enable timely, transparent decisions about increasing, decreasing, or rephasing funds to protect delivery and value. Provide a structured case that balances costs, risks, and benefits. Maintain liquidity and control by routing significant funding changes through governance.

How to Create

• Identify trigger and scope the ask: variance trend, forecast shortfall, opportunity acceleration, or contingency drawdown.
• Assemble evidence: actual costs, CPI/SPI trends, EAC and ETC, pending changes, cash flow forecasts, and risk exposure.
• Define the amount and timing: total funding required, phased releases by period, and any conditions or milestones for release.
• Propose sources: reallocation within project, use of contingency or management reserve, additional sponsor funding, or deferral of lower-value work.
• Analyze impacts and options: cost-benefit, value or benefit hypothesis, schedule effects, risk/sensitivity, and operational cost implications.
• Document governance needs: approvals required, decision date needed, dependencies, and reporting commitments.
• Compile the package: executive summary, justification, financial tables and charts, risk and option analysis, implementation plan, and baseline change link.
• Route for review: align with financial policies, procurement constraints, and change control procedures.

How to Use

• Submit to the sponsor and relevant governance body for evaluation and decision.
• Support discussions with clear scenarios and what-if analyses to compare options and trade-offs.
• Upon approval, update the cost baseline, funding limits, release schedule, and reserve logs.
• Communicate outcomes to finance, procurement, vendors, and the project team, including any spending conditions.
• Track compliance with approved conditions and monitor benefits realization tied to the funded change.
• If rejected or deferred, implement fallback actions and refresh the proposal if assumptions change.

Ownership & Update Cadence

• Owner: Project manager in partnership with the finance lead or controller; sponsor is the approver.
• Cadence: As needed when triggers arise; commonly aligned to monthly financial reviews and phase gates.
• Maintenance: Version-controlled until decision; archived with decision record; recreated if material changes occur.

Example

A platform modernization project forecasts a USD 450,000 overrun due to vendor price increases and added security controls. The team proposes USD 500,000 in additional funding, released in two tranches across Q2 and Q3, with USD 150,000 contingent on completing a cost-reduction work package. Options compared include scope deferral, reserve use, and supplier renegotiation. The steering committee approves USD 350,000 immediately and USD 150,000 conditional on achieving procurement savings, and the cost baseline and cash flow plan are updated.

PMP Example Question

Midway through execution, your EAC shows a cash shortfall next quarter despite stable CPI. What should you do first to address the funding gap?

1. Draw from management reserve and proceed with work.
2. Reduce scope to fit the available funds.
3. Submit a funding proposal with justification, phasing, and impacts for governance review.
4. Wait for the quarterly portfolio review and raise it then.

Correct Answer: C — Submit a funding proposal with justification, phasing, and impacts for governance review.

Explanation: A formal funding proposal allows timely, data-driven decisions and aligns with governance. Unilateral spending or scope cuts bypass control and may violate policy. Waiting risks liquidity issues and schedule impacts.