Background to the guide

Government departments and agencies rely on models for their day-to-day activities including estimating costs, distributing funding within organisations and testing policy options. These models can vary in complexity from relatively simple spreadsheets to detailed forecasts using specialist software. Outputs from models underpin decisions made by departments and arm’s-length bodies that often have real impacts on people’s lives and can involve large amounts of money and resources.

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Errors in government models can cause problems and delays for critical public programmes.

In our audit work across government, we continue to find weaknesses in models such as:

  • limited or poor-quality data
  • unrealistic assumptions and optimism bias
  • inadequate sensitivity and scenario analysis

Departments and public bodies need to have confidence that the modelling outputs they produce are reasonable, robust and used appropriately.

Scope of the guide

This good practice guide will help audit committees:

  • understand and question the quality assurance framework for business-critical models
  • assess if model risks are effectively managed
  • ensure business-critical models are fit for use by decision-makers

Our guide provides:

  • a structured approach audit committees can use to assess the effectiveness of arrangements to manage model risk
  • questions to ask on governance, assurance and control arrangements for business-critical models
  • examples of what a good answer looks like

We draw on our 2022 Financial Modelling in Government report and Framework to Review Models, as well as our work auditing models across government.