Government departments and agencies rely on models for their day-to-day activities including estimating costs; distributing funding within organisations; and testing policy options. They routinely develop and use models to generate insight into a question or to better understand a problem related to their business. 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 very real impacts on people’s lives and can involve large amounts of money and resources.
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; and
- inadequate sensitivity and scenario analysis.
The framework provides a structured approach to review models, which organisations can use to determine whether the modelling outputs they produce are reasonable, robust and have a minimal likelihood of errors being made.