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Unformatted text preview: Information Technology Control and Audit, Third Edition ; by Sandra Senft and Frederick Gallegos ; Auerbach Publications 2009; extracted from DePaul ebooks for classroom use. Chapter 12: Financial Management As more business processes have been converted to information technology (IT) applications and the Internet infrastructure has grown, IT spending as a percentage of total spend has continued to increase in many industries. In addition, increased regulatory requirements are driving demand and related IT costs higher. However, pressure remains on keeping operating budgets flat (Gartner). Therefore, it is critical for IT to have a solid financial framework to meet these conflicting demands. In an environment where there is an unlimited demand for technology and limited resources available, the IT spend has to be controlled and managed. At the same time, it is important to protect against underinvestment in technology. The organization is responsible for determining the appropriate level of investment in technology as part of the overall business plan and profit and loss goals. IT cannot plan or budget in a vacuum, but rather takes direction from the organization it supports to determine what and how much to budget. The drivers of cost for IT include the number of employees, customers, locations, and the type and scope of applications. An organization may decide it wants to move from a call center support desk to a Web- based application for customer self-service. This new application will drive the amount budgeted by the IT organization for the initial development costs and the ongoing support costs. After years of double-digit spending increases in IT, CFOs and their finance staff articulated the need to bring discipline to the management of technology funding, as well as the ever-present desire to improve yields on IT investments (Working Council for Chief Financial Officers, 2003). This trend has increased the need for financial control over IT investments and operating budgets. IT spending is controlled by implementing a solid financial framework that defines decision-making rules, prioritizing IT investments, ensuring that benefits are realized from IT investments, managing to an operating budget, and understanding and managing IT costs. Financial Management Framework A solid financial framework establishes the rights and responsibilities of business and IT management in making financial decisions. Investments in IT as well as normal operations require decisions on significant financial transactions on a regular basis. These transactions can commit an organization to a technology, financial transactions on a regular basis....
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- Fall '11