General Budget Issues and Terminology
GENERAL BUDGET ISSUES & TERMS
Following are general budgetary information and relevant terms. Note, these reflect the current state of budgeting at UMass Boston and are subject to modification as the Budget Office reviews its business processes relative to how budget balances are presented in the PeopleSoft Finance system.
General Information Pertaining to the Operating Budget
- UMass Boston General Operating Budget – Per a calendar determined by the President’s Office, each April the campus develops an all-funds operating budget for the review and approval of the university Board of Trustees. The budget is constructed using guidelines provided by the President’s Office and includes a number of assumptions and estimates. With respect to FY08 operating revenue, the following are significant estimates or assumptions:
- The Governor’s House 1 budget is used to determine the appropriation to the university system; UMass Boston’s allocation is estimated using its recent historical share of the system appropriation;
- Curriculum Support Fee revenue is estimated by incorporating the campus’ target enrollment and other assumptions;
- Revenue estimates from other mandatory and non-mandatory student fees are provided by the respective budget managers on campus who are responsible for the stewardship of those funds; estimates are vetted by the Budget Office;
- The value of tuition waivers is estimated based on projected enrollment;
- Sponsored program revenue, including F&A cost recovery, has been provided by the Vice provost for Research and Sponsored Programs;
- Auxiliary fund revenue estimates have been provided by the respective budget managers on campus who are responsible for the stewardship of those funds; estimates are vetted by the Budget Office;
- With respect to operating expenses, the following are significant assumptions and estimates:
- UMass Boston will have at its disposal the system maintenance appropriation estimated, less the central assessment transferred to the president’s office;
- Curriculum Trust Fund spending will, on the whole, not exceed the FY08 base allocations made to campus budgetary units;
- Spending on all other mandatory and non-mandatory student fee trust funds will not exceed the budgets put forth by the funds’ business managers;
- Sponsored program expense will equal sponsored program revenue, including F&A cost recovery;
- It is assumed that F&A recovery in FY08 will equal or exceed spending of prior year F&A costs recovered and available to support research-related and scholarly activity in FY08;
- Spending within Auxiliary trust funds will not exceed the budgeted expenses put forth by the budget managers on campus who are responsible for the stewardship of those funds.
For purposes of internal monitoring, after the start of FY08, UMass Boston will modify the General Operating Budget that was submitted to the President’s Office in order to incorporate the actual maintenance appropriation received, update Curriculum Support and other fee revenue estimates based on fall semester enrollments, and update expenditure estimates based on data gathered during the internal budget process.
Following are some General Budget Terms.
- Budget – The term “Budget” is meant to refer to the current year allocation of the maintenance appropriation, the base allocations made of Curriculum Support Fee revenue; and the budgeted spending plans in the Trust Fund Worksheets submitted for the other mandatory and non-mandatory student fees and auxiliary trust funds. In addition, at the macro level, it is assumed that current-year F&A recovery will equal or exceed the current year’s spending of F&A costs recovered in prior years and available to support operations in FY08.
- Budget Amount – Currently, in the PeopleSoft Finance system, “Budget Amount” is calculated as carry forward + either the current year revenue estimate or the current year allocation of new monies. The system incorporates carry forward into the budget amount and makes it available for spending.
- Budget Available – Currently, in PeopleSoft, “Budget Available” is calculated as: ((beginning fund balance + plus either current year estimated revenue or current year allocation) – actual expenses and encumbrances).
- Carry Forward – The term “carry forward” refers to the amount of unspent monies available at the end of a fiscal year that is then available to be rolled forward and spent in the next year.
At present, “carry forward” is calculated one way with respect to the Curriculum Support Fee, and another way for all other funds.
Regarding the Curriculum Trust Fund, when beginning a new year, a portion of unspent monies held by a department will be reported as “encumbered” to cover any open purchase orders that continue into the new fiscal year. Any unspent monies from the prior year that are not so encumbered are reported as “carry forward.”
For all other funds, carry forward is calculated without regard to open purchase orders.
For instance, in CTF, if Anthropology had $10,000 of unspent budgeted funds at the close of FY06 and an open Purchase Order with a potential obligation of $1,000, FY07 “carry forward” would equal $9,000, budget would equal $10,000, “encumbrances” would equal $1,000, and “budget available” would equal $9,000.
Within all other funds (generally speaking), “carry forward” and “budget” would each equal $10,000, while “encumbrances” and “budget available” would each equal $9,000.
It is important to note that no amount of carry forward is specifically “earmarked” in the PeopleSoft finance system when we enter a new fiscal year for expenditures committed to, but not fulfilled in the prior year. The system does not use prior year monies to pay expenses related to purchase orders originally opened in a prior year.
- Carry Forward Reserve – With respect to carry forwards, in November and December of 2006 (since reversed except for a handful of funds), the Budget Office acted to “reserve” the carry forwards that departments brought into FY07 across virtually all student fee and auxiliary trust funds. The act of “reserving” carry forward had the effect of reducing the budget available to units by subtracting the carry forward from the “budget available” equation.
It is significant to note that the differing ways carry forward was calculated with respect to CTF vs. all other fee- and revenue-based trust funds resulted in relatively lesser amounts of CTF carry forward being reserved as the FY07 beginning CTF carry forwards were reduced by the amounts encumbered for FY07 open purchase orders.
- Fund, or Trust Fund – Per current board of trustee policy (Trustee document T92-031, UMass Boston has established separate trust funds, or “funds,” (accounting mechanisms within the PeopleSoft finance system similar to a personal bank account) that allow for the tracking of revenue, expenses and net assets (actual revenue less actual expenses) for each mandatory and non-mandatory fee, each auxiliary service, etc. Also, per T92-031, expenditures must relate to and support the purpose for which the fund was established.
- Reserves (not including Carry Forwards – UMass Boston periodically sets aside funds (“reserves”) for anticipated expenditures, such as the debt service reserve within CTF to help the campus manage future debt service payments, or for unfunded mandates such as salary increases for non-bargaining-unit personnel.
UMass Boston has not followed the practice of establishing reserves within any fund for significant future-year planned expenditures.
- Spending Plan Review – At least approaching the mid-year point of a fiscal year, UMass Boston will hold spending plan review sessions with Vice Chancellors, Deans and Directors of other major budgetary units, such as Facilities, to discuss mid-year performance, by fund, and discuss issues impacting end-of-year projections.
IV FYO8 CHANGES IN BUSINESS PROCESSES FOR DISCUSSION
- Changing what the PeopleSoft Finance system and related reports show as “budget” to reflect current year allocations.
- Changing what the PeopleSoft Finance system and related reports show as “budget amount” to reflect current year allocations
- Changing what the PeopleSoft Finance system and related reports show as “budget available” to reflect current year allocations
- Standardize the way ‘carry forward” is calculated across all funds
- Implementing a practice of establishing reserves for accumulated unspent monies in a fund that are intended for significant future-year expenditures.