|Approved by:||The President|
|History:||Issued -- March 14, 2002|
|Revised -- July 9, 2015|
|Last Reviewed --|
|Related Policies:||Capital Budget Policy; Reserve Funds Policy; New Program Policy|
|Additional References:||Guidelines for submitting Capital Budget Requests; Zero-based budgeting guidelines; Performance-based budgeting guidelines; Guidelines for submitting Auxiliary Enterprise fund 15 budgets; Guidelines for submitting Reserve Fund (18,19) budgets; Guidelines for submitting new and existing fund 12 budgets (http://treasurer.cua.edu/Budget-Office/budgetoffice.cfm)|
|Responsible Official:||Associate Vice President, Financial Planning, Institutional Research and Assessment tel. (202) 319-5012|
The goal of the University's budget and business planning process is to achieve a balanced budget while maximizing resources and allocating those resources to align with the University's strategic mission. To achieve this goal, the University has a responsibility to submit an annual operating budget to the Board of Trustees each year. This policy outlines the University's annual budget process and describes the budget components and other related procedures integral to the process.
This policy applies to all University departments and affiliated programs in preparation and management of operating and capital budgets.
A. Academic Year: The University's academic year follows the academic calendar and schedule of classes.
B. Calendar Year: is defined as the twelve month period beginning January 1 through December 31 of any given year. Some maintenance and service agreements may be contracted on a calendar year basis which would need to be translated to a fiscal year basis for budget purposes.
C. Capital: are those items purchased that have both a unit cost of $5,000 or more and a useful life of greater than one year. Capital items are recorded as assets (capitalized) and depreciated over their estimated useful lives in accordance with University guidelines and generally accepted accounting principles.
D. Fiscal Year: The University's fiscal year is defined as the twelve month period beginning May 1 and ending April 30 of the following calendar year. It is important to make the distinction of the fiscal year to plan for and budget all projected operating activity within the appropriate timeframe.
E. Fund: is a certain part of the organization defined in accounting terms and for which separate accounting records are kept. Fund accounting segregates assets, liabilities into separate accounting entities associated with specific activities, and donor-imposed restrictions, or objectives. All fund activity must be classified in the appropriate net asset classification; unrestricted, temporarily restricted, or permanently restricted, based on the absence or existence and type of donor-imposed restrictions. Specific questions relating to fund accounting classifications may be directed to the University Controller.
F. Operating activities: involve receiving contributions, collecting tuition revenue, and procuring and receiving goods or services within the twelve months of the designated fiscal year. Operating activities are therefore distinct from investing and financing activities. Investing activities are transactions which affect the University's assets (purchase or sale of plant, equipment, or investment instruments). Financing activities are transactions relating to acquiring or repaying capital (borrowings, repayments, etc.).
G. Organization aka "Org" (also referred to as "DEPTID."): This is a cost center used to accumulate charges for a specific activity, project or donor fund. Orgs can only be created with a written request to the Controller's Office. General operating orgs (funds 11, 12, 15, 18, and 19) can only be created with written Budget Office approval.
The University Budget Committee is responsible for the oversight of the annual budget process, reports directly to the University President, and is chaired by the Vice President for Finance and Treasurer. The Committee consists of: the Provost; the University Vice Presidents; the Secretary to the Board of Trustees; and, an Academic Senate representative.
The Vice President for Finance and Treasurer is responsible for recommending the University's fiscal year budget and capital budget for submission to the University President for review and then through the Finance Committee of the Board of Trustees. The Finance Committee of the Board of Trustees makes the recommendation to the full Board as to whether to approve the annual fiscal budget as presented.
The University Budget Office has fiduciary responsibility to the University for overseeing actual performance against budget and providing recommendations on budget adjustments and revisions throughout the fiscal year. The Budget Office is also responsible for reporting on actual business activity to University stakeholders. The Associate Vice President has responsibility for communicating any spending violations and recommending corrective actions as appropriate to the responsible party. [Refer to Section IX.A below.]
University Departments are accountable for their budget and responsible for maintaining a balanced budget by monitoring spending and notifying the Budget Office in advance of any potential cost overruns. If overspending occurs, departments are responsible for working in conjunction with the Budget Office to resolve the situation.
IV. Annual Budget Calendar
The Vice President for Finance and Treasurer develops a budget calendar for the fiscal year. The calendar includes; all meeting dates, presentation dates, Board of Trustee budget report dates, date of the submission of the detailed budgets from University departments to the Budget Office, and associated other submissions, such as salary increases. Once finalized, the calendar is available on the University's web-site.
V. Fiscal Year Operating Budget Targets
The fiscal year budget presented to the Board of Trustees includes projections for all fund activity. Although projections initially represent overall revenue and expense budget targets, the budget includes University balanced budget activity (funds 11, 12 and 15), endowment payout activity (fund 31) and all other reserve funds (funds 18, 19, etc.).
Budget activity includes separate budget target projections for "Central University Operations" (which excludes the Law School), the Law School, Auxiliary Operations, New Programs, Sponsored Activity, Endowment Payout and Reserves. The budgeting of revenues and expenses should align with the presentation of the Consolidated Statement of Activities, which is part of the University's financial statements based on generally accepted accounting principles or GAAP. Expenses are in natural classifications (salaries, benefits, scholarships, professional services, etc.) rather than financial statement functional classifications (education and general, auxiliaries, etc.). The fiscal budget includes a capital budget detailing planned capital expenditures for the upcoming year. During the fiscal year, the Budget Office is responsible for preparing a comparison of budget to actual revenues and expenses as well as a forecasted projection of year-end results for the Board of Trustees. The comparison includes a written explanation of known changes or variances.
VI. Capital Project Budgets
While the operating budget focus is the twelve months of the fiscal year, the focus of capital budgeting is the planning process used to determine an organization's long term investment in assets that have a useful life of greater than one year, such as: new and replacement machinery and equipment; major upgrades or repairs; new buildings; building improvements; system infrastructures (such as security, fire prevention, utilities); technology; and vehicles. The capital budget comprises part of the operating budget process because it impacts operating expenses through depreciation expense and requires funding decisions.
To accumulate the comprehensive list of capital spending requests, each Vice President and the Provost is asked to complete a capital request form covering the next three budget years and submit the request to the Budget Committee. The three-year project plan helps the department or division look further ahead at its needs in congruence with the University's move towards a longer-term approach in budget and planning. While the three-year request will still be updated annually, planning for the next three years will assist areas in thinking about future needs, such as upcoming accreditation reviews, while allowing Budget and Planning to better project future depreciation expense.
Capital budget requests should prioritize the approved projects according to those identified in the Campus Master Plan ("Master Plan") and the Strategic Plan. Master Plan requests must be approved by Facilities and will usually be submitted on Facilities' own capital request list. Strategic Plan requests must reference the specific action item in the Strategic Plan that the request supports. Any requests not included in the Strategic Plan or Master Plan must be categorized as one of the following: deferred maintenance (requires specific Facilities approval), accreditation, or safety. The requestor should include a description of the project/equipment along with a priority ranking of 1 to 5, with 1 being a top priority and 5 being the lowest priority. In addition, the requestor should provide a brief narrative that addresses the objective/purpose of the project and/or impact on the University. All submitted requests must have funding in terms of a specific fund and org.
Requests pertaining to acquisitions that will go through Facilities or Technology Services must have been discussed with Facilities or Technology Services and signed off on Request Form before presentation to the Budget Committee. Each capital budget request should include the anticipated expenditure for the next three years for each project. Formal cost estimates will not be performed until a specific project is approved; however, when vetting the request, the area should work with Facilities or Technology Services to determine an approximate amount and project time period. Additionally, any capital request that requires an accompanying increment (positive or negative) to operational requirements must also include that amount in the notes on the capital request as well as in the operating budget submission.
Any machinery or equipment with a purchase price greater than or equal to $5,000 should be included on the capital request form. (Accumulated items of smaller dollar value that are part of a larger piece of equipment that exceeds $5,000 in total are also considered capital.) As noted previously, this amount needs to include any support (infrastructure, etc.) required for installation and operation. The Budget Committee identifies a listing of capital projects/equipment that will be recommended to the Board of Trustees for approval for spending in the upcoming fiscal year.
Once a capital request is approved for spending, the relevant Vice President or Provost will be notified that the project can proceed and the approved budget amount is communicated. If a Vice President decides to substitute one project for another project during the year, a switch can be done only if the funding is not greater than the approved budget and with approval from either Technology Services or Facilities. A technology project cannot necessarily be substituted with a facilities project or vice versa due to the resource planning in those areas. If the approved spending is for a facilities or technology project, the initiating department must contact Facilities or Technology Services so that the project can be started through those areas' specific processes. If the approved spending is for equipment, the University's purchasing policies and procedures must be followed. Projects and departments will be charged at the time of payment or when a transfer occurs. Depreciation expense is tracked and recorded centrally.
VII. Fiscal Budget Approval
The Vice President for Finance and Treasurer presents the annual fiscal budget to the President for the President's comments, adjustments, and approval before submission to the Board of Trustees. The Finance Committee of the Board of Trustees reviews and approves the annual budget and submits it to the full Board of Trustees. The Board of Trustees provides the final approval of the annual fiscal budget.
VIII. Submission of Fiscal Year Detailed Operating Budgets
The University's budget is a centrally administered budget. Each Vice President and the Provost is provided a defined expense budget target for the upcoming fiscal year. Once the fiscal budget is approved by the Board, each department creates detailed budgets within their approved budget target. The Vice Presidents and Provost decide on the allocation of their respective expense budgets to their departments/schools.
The responsibility-centered budgets are; auxiliary operations, the Law School, and new program activities. These activities can be responsible for funding an allocation for central services, such as: utilities, maintenance, housekeeping, security, insurance, etc.; providing a positive net to the University; an overhead allocation based on a percentage of expenses; or a combination of these recoveries.
In accordance with the Annual Budget Calendar, University departments are responsible for submitting detailed operating budgets (all funds) and associated staffing and salary information to the Vice Presidents and the Provost for review. After the Vice Presidents' and Provost's approval, the budgets are forwarded to the Budget Office. The Budget Office then consolidates them and ensures that the detailed budget submissions and roll-up remain in balance with the Board approved budget.
The level at which detailed budgets are submitted is dependent on the type of expense. Salary expenses are budgeted at the detailed account code level. Fringe benefits are budgeted at a summary level and are calculated based on the type of salary expense. The Budget Office provides the percentage calculation as part of its annual budget guidelines distributed to the Vice Presidents and Provost for dissemination to their respective departments/schools. Salary and benefit activity should be minimal for reserve fund budgets as a reserve fund does not provide a permanent source of funding. Scholarships are budgeted at a summary level. Other expenses can be budgeted at a detailed level and are left to the discretion of the departments. Allocations are budgeted at a summary level.
The Budget Office coordinates budget submissions, and loads the detailed budgets into the financial system. The Budget Office is responsible for ensuring that the University remains in balance as budget changes occur. Each department includes an employee list with their budgeted salaries along with their budget submissions. The Budget Office maintains position budgets for all employees paid from operating funds. Some position budgets are pooled positions as in the case of temporary and student employment. The positions must be fully budgeted for the fiscal year. Funding permanent employees on "soft money" is discouraged. "Soft money" is defined as one-time sources, such as gifts, which have no written commitment for future years. Reserve funds cannot be used to fund permanent employee salaries and wages. Only temporary employees with a documented end date can be funded from a reserve fund
IX. Budget Accountability
The objective is to maintain an annual balanced budget, and keep spending within available reserve fund balances. The University's Budget Office has fiduciary responsibility for overseeing actual performance against budget and providing recommendations on budget adjustments and revisions throughout the fiscal year. The Budget Office is also responsible for reporting on actual business activity to University stakeholders. The University's departments are accountable for their budget and responsible for maintaining a balanced budget by monitoring and tracking cost centers (orgs) spending and notifying the Budget Office in advance of any potential cost overruns. The University's financial system (PeopleSoft) does not allow for overspending in direct expenses by cost center. The system's budget checking functionality, Commitment Control, prevents overspending with regards to general and administrative expenses.
The Budget Office is responsible for providing quarterly reports which outline actual performance versus budget to the Associate Vice President for review. Where deficit fund balances occur, The Associate Vice President for Finance works with the responsible manager or director to resolve these deficits and communicate recommended actions to the Vice President for Finance. . Exceptions to these proposed guidelines will be reviewed on a case-by-case basis.
X. Budget Adjustments
The Board of Trustees approves the annual budget at the March meeting. The University's fiscal year begins on May 1. In the interim, adjustments to the budget are possible, either by increases or decreases in revenue or operating expenses. These adjustments need approval by the Finance Committee of the Board of Trustees.
Departments may want to make adjustments to the detailed budgets (funds 11, 12 and 15). In order to make any adjustments, a budget revision form must be completed, which is available on the University's website. Any budget adjustment for funds 11, 12 and 15 must be balanced with a funding source identified to fully cover them.
A budget revision can be made to any one of the four natural account roll-up levels of: (1) salary and fringe benefits; (2) scholarship; (3) other expenses; and, (4) allocations. A revision cannot be made between (1) salary and fringe to any of the remaining three categories. A revision can occur between organizations (Orgs), as in the shifting of resources. Revisions can occur because of increases to revenues, and therefore, increases to expenses, and vice versa.
XI. Annual Fiscal Year-End Close Process: Budget Transactions
At the end of each fiscal year, during the University's annual fiscal financial close process, the Budget Office works in concert with the Controller's Office to close out budgeted funds by making the necessary transfers into reserve funds and ensuring that the funds are in balance (revenues equal expenses). This includes the following required transactions:
- Law School overhead transfer
- Overhead charges for workshops and off-campus activity
- Faculty compensation accrual requirements
- Department or school participation in the University's Financial Incentive Plan
XII. University's Financial Incentive Plan
To encourage prudent budget management, within any given year, the University has the discretion to offer an annual incentive program to departments that come in under budget. If eligible, the department retains a percentage of the year-end positive actual budget variance of the Other General and Administrative Expenses and those funds are transferred to a reserve fund identified by the department/school.