Indiana University Overview of Budget June 19 Presentation Campus Administrative Training Series Chris Puckett Introduction… name and title Reference the UBO lists of products and services and staff

Budget Overview What is a Budget and How is it Used? Unique Budget Orientations of Various Fund Groups Types of Budgets Where/how is the Budget Used? The Budget Cycle

NOT AT IU! What is a Budget? Definition from Webster’s New World Dictionary: Budget - “a statement of the financial position of a sovereign body …. based on detailed estimates of planned or expected expenditures …. and proposals for financing them” NOT AT IU! Webster’s New World Dictionary, Sovereign – supreme in power v. independent of all others NFP, so we first estimate resources, THEN expenditures!!

Why Budget? (What functions does it serve?) Ideas? Planning tool Identification and Allocation of Scarce Resources Communication mechanism Control system Benchmark for Goal Achievement

Unique Orientation of Budget General Fund (10) represents the fundamental academic mission Designated/Restricted Funds (2x) increasingly significant, segregated based on source of funds and intended uses Contracts and Grants (4x/5x) externally-sponsored funding for research efforts Auxiliary & Service (6x) business enterprises maintained for the convenience of faculty, staff and students Anna covered the fund groups in a prior session – we budget only current funds We tend to aggregate some funds when reporting and analyzing the budget Designated funds – rightly or wrongly increasing in significance

IU’s Base Budget (Policies and Practices) All aspects budgeted in detail if more than $10,000 annual operations or if personnel are paid only salaries in BC; nothing loaded to G/L base budget Budgeted in detail, by month if desired General Fund Designated and Restricted Contracts and Grants Auxiliary and Service Designated and restricted… not enough are budgeted C&G – Steve Martin and staff covered, but unique lifespan dictates exclusion from annual budget process

Indiana University 2002-03 Base Budget In 1980-81, GF was 47%, D&R 7%, C&G 10%, and Aux 36% 1990-91 GF 48%, D&R 7%, C&G 8%, aux 36% More to follow….

Indiana University 2002-03 Base Budget General Fund State Appropriation $ 495,753,230 42% Student Fees 524,756,794 45% Other Income 147,328,427 13% Total Funds Available $ 1,167,838,451 Compensation $ 722,568,114 62% General Expense 413,339,093 35% Capital 31,931,244 3% Total Allocations $ 1,167,838,451 General fund hit 10 digits last year!! In 1986-87, state appropriation represented 59% of the total GF budget

College of Arts and Sciences 2002-03 Budget $ millions % Total Compensation $ 119.5 82.6% Financial Aid 12.9 8.9% Total General Expense 7.6 5.3% Travel 0.5 0.4% Capital Assets 1.2 0.8% Reserves 2.9 2.0% Total $ 144.6 $ millions % Total Student Fees $ 157.6 109.0% State Appropriation 85.4 59.0% Other Revenues 0.7 0.5% Indirect Cost Recovery 7.5 5.2% Assessment Revenue (106.5) -73.7% Total $ 144.6

Types of Budgets July 1 Base Budget Adjusted Base Budget Current Budget July 1 - “official” budget, serves as the cumulative record of resource allocation decisions Adj Base - July 1, as revised for long-term anticipated changes in revenue and expenditure levels Current - reflects one-time, current year adjustments to the base budget

Types of Budgets July 1: “Plan” presented to Trustees for approval State appropriation request – modified! Fiscal Analysis reported to Trustees Official external reports Comparative analyses and time series External reports would include… bonding authority documents, OAR, Official Budget, Fact Book, salary list, AAUP, AAUDE?, IPEDS

Types of Budgets Adj. Base: Basis for permanent changes in budget allocations Examples? Starting point for budget construction New degree programs would result in higher enrollments (fee income) faculty lines, other expenses

Types of Budgets Current Internal management tool standard reports and FIS screens Fiscal Analysis preparation Year-end reversions and carry-forwards Purchasing: availability of funds Current

Current Budget at Year-End Disappears!!! Other than carry-forward of in-process items such as purchases that should have been completed but were delayed…. The current budget for next year is increased to accommodate the acquisition of these items without drawing against that year’s current budget

The Budget Cycle July 1 Base Budget Plans Actual Adjusted Base Budget Adjustments: base current Budget Construction Year-end Reversions Plans Actual Adjusted Base Current Budget Long-term Short-term

Budget Overview Questions?

Indiana University The Budget Construction Process Campus Administrative Training Series June 19, 2003

The Budget Cycle July 1 Base Budget Plans Actual Adjusted Base Budget Adjustments: base current Budget Construction Year-end Reversions Plans Actual Adjusted Base Current Budget Long-term Short-term

The Budget Cycle July 1 Base Budget Plans Actual Adjusted Base Budget Adjustments: base current Budget Construction Year-end Reversions Plans Actual Adjusted Base Current Budget Long-term Short-term

Budget Construction Process Review the base budget & develop budget planning models Develop budget guidelines Estimate resources available Allocate resources to planned uses Perform detailed budget construction Obtain Trustee approval of budget Upload budget and salaries to systems

Budget Construction Process Timeline: December to June! Players: UBO, VP&CFO and President Campus, with input from RC’s External Constituents Account managers and departmental administrators

Base Budget and Planning Model realignments and reorganizations

Base Budget and Planning Model realignments and reorganizations Apply preliminary planning parameters

Base Budget and Planning Model realignments and reorganizations Apply preliminary planning parameters Develop initial proforma budgets

Base Budget and Planning Model realignments and reorganizations Apply preliminary planning parameters Develop initial proforma budgets Identify future needs and potential reallocation opportunities

Base Budget and Planning Model realignments and reorganizations Apply preliminary planning parameters Develop initial proforma budgets Identify future needs and potential reallocation opportunities Adjust proforma budgets Detailed base/CSF Tracker reviews!

2. Develop Budget Guidelines Calculate pooled benefit rates Document known factors such as state appropriation and debt service payments Obtain Trustee approval for instructional fee rate increases and salary guidelines Identify inter-campus support levels Summarize institutional strategic initiatives

3. Estimate Resources Available State appropriations - defined by state legislature Student fees - based on enrollment projections and student fee rate increases Other earned income: interest income - as available and moved to GF gift income - projected to be moved from IUF sales and services - based on projected levels indirect cost recovery - earned from C&G accounts other - as projected

4. Allocate Resources Compensation - salary guidelines and known workforce changes, application of pooled benefits Financial Aid - student fee rates & campus programs Other expenditures: energy & utilities - provider rates & growth S&E - as needed and supportable from revenues budget allotments/assessments - campus-defined univ. tax/insurance/IUF Development fee - from institutional guidelines capital - as required, UITS strategic plan

5. Detailed Budget Construction FIS electronic application automatic calculations pre-defined routing structure for review and approvals reporting and download options Detailed reviews performed by schools, campuses, UBO conformity with guidelines regarding operating levels and salary-setting parameters

Closure of Cycle 6. Obtain final Trustee approvals “Request” becomes “July 1 Budget” upon approval 7. Upload budget and salaries to systems Object code data loaded to the general ledger Salary data loaded to the payroll system

Budget Construction Questions?

Indiana University Budget Administration and Year-End Closing Introduction… name and title Reference the UBO lists of products and services and staff Campus Administrative Training Series June 19, 2003

The Budget Cycle July 1 Base Budget Plans Actual Adjusted Base Budget Adjustments: base current Budget Construction Year-end Reversions Plans Actual Adjusted Base Current Budget Long-term Short-term

The Budget Cycle July 1 Base Budget Plans Actual Adjusted Base Budget Adjustments: base current Budget Construction Year-end Reversions Plans Actual Adjusted Base Current Budget Long-term Short-term

Budget Administration July 1, 12:00:00 am Base Budget = Adjusted Base = Current Budget July 1, 12:00:01 am Adjusted Base Permanent changes realized post-budget construction should be made Current Budget Increased for encumbrances (and other funds) carried forward May have significant realignments for current year planned activities

Budget Administration Campus-wide sufficient funds checking General Fund: Budget is primary control mechanism For daily management/operations, current budget rules! Often, compensation and financial aid controlled by RC’s S&E, capital, travel and wages more discretionary at departmental level Non-General Funds: Most are “cash control”

Budget Administration Sufficient Funds Checking: General Fund (10) and FEMP (28) – overall expenditure available balance Non-General Funds (2x) – cash, after encumbrances and pending documents Auxiliary and Service (6x)/External Agency (97) – no sufficient funds checking

Budget Administration Sufficient Funds Checking Calculation Budget Controlled: Current Budget Less: Actual Transaction Total Encumbrances Pending Documents Equals: Funds Available Cash Controlled: Cash Balance Less: Encumbrances Pending Documents Equals: Cash Available

Budget Administration Where to find balance information: FIS balances screens (in menu, “Inquiries”, “Balances”) Balances by Consolidation – for big picture, can drill down to detailed transactions Available Balances – for object code detailed info Pending Ledger Entries – for in-process items Open Encumbrances – detail info available Cash Balance – shows July 1 and current

Budget Administration Some Guidelines: Transactions between GF accounts processed on a Budget Adjustment (TF if across charts) Transactions between GF and other accounts processed on a Transfer of Funds using 5199/1699 Cannot transfer funds out of FEMP (28) or C&G (4x or 5x), use DI or GEC to move expenses See Handout for more examples

Closing: Big Picture Snapshot of the University at a certain point in time (June 30) Required by external constituents to have an official periodic view of operations and fiscal stability Net of revenue and expense balances (operating margin) calculated Revenue and expense balances eliminated Asset, liability and fund balance absorb net operating margin for that year

Closing: Closer to Home General fund operating results evaluated Balances either carry forward in departmental account or revert to RC Compensation and financial aid balances generally revert Other expense categories - If budget available to cover encumbrances, balance carries forward to subsequent year

Closing: Closer to Home All non-GF negative cash balances MUST be covered Trustees want this process 2x/year Likely sources of funds: IUF gift funds Commitments from department/RC/campus offices May result from timing of sales or other revenue sources

Closing: Closer to Home Most activity is handled at the RC level Continues through most of July, so we have two years of activity running parallel for a few weeks At “final closing”, subsequent year beginning balances loaded and available for use and/or review

Budget Administration and Closing Questions?

References CATS Website: IU Fact Book: http://www.indiana.edu/~bfarp/ IU Fact Book: http://factbook.indiana.edu Budget Policies: http://www.indiana.edu/~vpcfo/policies/budget Operating Appropriation Request: http://www.indiana.edu/~state Budget Construction: http://www.fms.indiana.edu/fis/documentation Bloomington BOG Report Group: http://www.fms.indiana.edu/fdrs/bog.asp