3.11.1 Purpose of Procedure

This procedure ensures that budgets are prepared in a planned, controlled, and cost-effective manner, in accordance with agreed management, technical, crew, operational, accounting, and safety assumptions, which are common to the entire group for new business proposals and recurring annual budgets for existing ships already in our management. This procedure should be used in association with the business management procedure.

3.11.2 Applicability

This procedure is to be used by all departments of the Offices and the Shipboard Management Team, where applicable.

3.11.3 Responsibility

• The TSI in co-operation with the shipboard management team and the crew, purchasing, accounts and marine, safety and quality departments, is responsible for the preparation of the annual budget for each individual vessel under his responsibility.
• The Tech Director and/or Tech Manager in consultation with the Managing Director, have the responsibility to approve the budget and present it to the Owner within the time and conditions specified in the management agreement.

3.11.4 New Business Proposals & New Vessels Coming Into Management

Estimated vessel budgets for new business proposals or for vessels coming into management must be prepared in the Company budget program (see figure 6 of this chapter as an example), taking into consideration a number of parameters.

The following parameters should be taken into consideration when creating a new budget:

All new proposals are considered to be ‘estimated budgets’ until the proposal has been accepted by both the owner and also the regional office Managing Director, and are subject to a satisfactory vessel inspection and satisfactory closeout of the risk assessment of the business.

New business proposals and estimated budgets are subject to the business management procedure.

3.11.5 Planning Phase

Estimated budgets are agreed with the owners, either when a vessel enters into management, or as part of a planned running estimate during the course of management, and based on a defined need.

The annual budgeting process for existing ships for the next accounting period is to be started at least four months prior to the start of the period. The budgeting process is started by the Directors agreeing upon the budget assumptions for the following year and issuing these to all regional offices, TSIs, departments, and vessels. The Tech Director is responsible for the issuance of the Budget Assumptions.

Estimated budgets must be prepared according to best industry practice, including explanations where required. It is the ship’s staff responsibility to contribute information to the office. The responsible TSI shall discuss the needs with the vessel to enable an effective budget.

The following criteria are to be taken into account in preparing estimated budgets. The vessel’s initial parameters and items without account codes may be discussed with the owner, if any changes are applicable. The items listed below with account codes will be updated by each department's Marine Operations Technical head and form part of the budget assumptions.

Estimated budget proposals are based on a budget period agreed with the owner and are valid from the date the budget is agreed in writing and is in compliance with the relevant management agreement.

Budgets are normally prepared in United States Dollars. In case budgets are prepared in other currencies, the estimated costs are to be converted at the exchange rates on the date of budget submission.

The shipboard management team (SMT) will produce a list of anticipated requirements and the TSI will endeavour to visit the vessel and review the requirements with the SMT. The TSI shall identify the high cost items and put an estimated value to it. These values are entered into the budget program under the appropriate chart of account codes. The list of anticipated requirements shall take into consideration the outstanding orders, planned maintenance system, class survey requirements, critical spares conditions, onboard inventories and the vessel inspection reports.

All other departments provide estimated budget figures for their respective departments.

Drydocking, major repair and upgrading budgets are estimated in close co-operation between the SMT and TSI on a case by case basis.

Budget codes may differ for different owners and the above codes are from the Company Master Chart of Accounts.

The Tech Manager and/or the Fleet Director shall review the estimated overall budget with reference to the previous year operating budget and actual forecasted year end summary figures, taking responsibility for all the departments and submit to the Managing Director.

The Managing Director shall decide on the general adjustment of the management fees and costs in line with Group guidelines and approve the budget before it is submitted to the owner.

3.11.6 Approval Process

The budgets are sent to the owners within the agreed timing as applicable, and a budget meeting with them is set-up if required to discuss and finalise the ‘approved budget’, using the SMT list of anticipated requirements and TSI notes. The budget discussions with the owners (either at a meeting or by message communications) must be minuted or documented carefully.

When the budget is ‘approved’, it shall be entered into the accounting system.

Drydocking, major repair, and upgrading budgets are to be produced as agreed with owners, under a similar approval process, considering the drydocking Procedure requirements.