Financial Management, Planning and Budgetary Control

As at September 2012

1 Contents

2 Planning Overview

3 University’s Annual Accounting-Timetable

4 Accounts (Types)

5-8 Integrated Planning Exercise-Faculty Process

8 -9 Budget Holder Responsibility

9 Budgets Year End information

9-10 Financial Reporting

Planning Overview

The Faculty Finance Office is responsible to the Dean and to the University for planning financial activity for all Mathematics & Physical SciencesSchoolaccounts in conjunction with the Head of School. This culminates in the annual 5 year Integrated Planning Exercise (IPE) giving a 5 year projection of income and expenditure for each School.

Different Planning & Forecasting techniques are used for the different types of accounts held within the Faculty.

Within theCore Area, whichaccommodates the Schools running costs accounts, incremental budgeting is used (historical cost base inflatedannually, as appropriate) to establish the expenditure base, and a planning tool ‘Prism’ to calculate Allocations (student income & any additional funding) and Central overheads (charges per full time employee & space charge per School). Research recoveries are added as per ARIR forecasts.

Within the Other restricted & Endowment accounts area (accounts starting 95) income is planned across the lifetime of the account and expenditure is budgeted accordingly. Details are sought from individual account holders and contracts and information supplied. Spreadsheets are used for the larger accounts forecasting the income and expenditure.

The Development Accounts (accounts starting DV) information is sourced from Central Management accounting for the amount of income to be allocated within the next planning period and account holders e-mailed for information on expenditure.

The School’s financial projectionsare revised quarterly with forecasts submitted in November [Q1], February [Q2] and April [Q3]. The financial year end is 31st July and the Faculty is expected to achieve the financial outturn submitted within the Q3 forecast, notwithstanding capital projects.

University’s Annual Accounting Timetable

Month / Action / Notes
August / Start of the Financial Year / Budgets confirmed
September/October / Quarter 1 review / Includes review of student related income and if appropriate review of budgets
December/January / Student Number Planning Exercise / Consultation with the relevant parties, review by FMCand Submission of 5 Yr plans
February / Quarter 2 Review / Revise income and expenditure projections for the year in light of latest information
February / ARIR – 5 year plans submitted to Central for Review / Includes research grant, KTPs and consultancy projections
March / IPE - Faculty receives information outlining Allocation and central charges for following 5 years / Pass through model based on student numbers, staffing plan, space requirements, etc
May / Faculty Review Meeting takes place with University / Approval received or revisions required
May / Quarter 3 review / Feeds into University Year end outturn projections presented to Council
July / Financial Year End / Report and commentary with variance analysis against plan and latest forecast.

*Please Note: Timetable dates may vary from year to year.

Accounts

There are 2 main types of core account within the Faculty.

  • School Accounts (Core accounts) are allocated a budget by the HoS for a specific purpose (for example laboratory running costs). The HOS School advises on the budgets for each account within this area (based on available planned costs). Unspent budgets at year end will be rolled up and retained in the Schools reserves and are not available for future use.
  • ‘Incentive’ accounts within this area are calculated as per HOS instructions and currently these types of accounts (incentive accounts) are calculated by the Faculty Finance team (currently based on percentage of research recoveries and include any carry forward balances) and HOS and account holder are advised of the balances. Incentive account budgets are reset each year at the calculated budget.
  • Retained budgets accounts, currently in use within Chemistry are recalculated, and a third of the overall balance set for the new financial year.
  • The full history of an account can still be viewed and full line item reports can be requested via the Finance Team.
  • Other Services Accounts(‘OS’ accounts) are currently in operation. The budget on these accounts is not reset each year but rolls over and they have to be taken into consideration when planning with regards to expected expenditure. These accounts are being phased out and will be transferred to the main school accounts.

Account holders should keep the Finance Office informed of changes to planned income and expenditure throughout the year. If an increase in budget is required the account holder should contact their HoS.

Other Accounts the finance office plan for are as follows;

Other Restricted Accounts; are opened where an activityis earmarked by a donor to be used for specific purposes that they have stipulated. The funding should have a contract or approval in placewith a start & end date. The balances are carried forward each year and finance need to be advised on any changes to the contract (extensions or funding changes). This area also holds the EPSRC (DTA, DTC), STFC’s, BBSRC funds and student consumable accounts linked to the relevant pockets of funding. This funding (balance) is rolled forward each month but requires the budget resetting each year.

Development Accounts; are opened for centrally allocated funding for dowries or an approved contracted development project, and more recently University funded Capital Equipment. These budgets roll over and can be used continually unless a specific end date has been given and funds have to be returned to source if not spent.

Endowment Accounts;are opened to receive annual interest on monies invested from donated funds (bequests) to the Schools and usually have specific details on what the funds are to be spent on. Any expenditure going through these accounts must meet the required criteria of the endowment. Any overspend must be met by the School as these accounts can only roll forward a credit balance.

Integrated Planning Exercise-Faculty Process

Student Number Planning Core Area;

Meetings are held annually, in January/February, with each school to consider the previous year’s recruitment performance and the in-cycle application status. These meetings involve the Head of School and School Admissions Tutors, together with the Dean, Pro-Dean for Student Education, Director of the Graduate School, Faculty Education Service Manager, Faculty Finance Manager and Faculty Marketing Manager. Discussions at these meetings cover performance against plan, the impact of any proposed portfolio changes and the prevailing market environment, as well as considering the ongoing strategic plans for the individual Schools to ensure that student number targets continue to be aligned with the strategic objectives.

Changes to student numbers over the five year planning period are considered together with the academic and marketing actions required to support the recruitment objectives. Student number plans are then amended when required, in light of the prevailing circumstances and the financial implications of any changes then determined by the Faculty Finance Manager following the meetings. The Faculty Marketing Manager and Faculty Finance Manager will then agree the final student numbers figures and supporting commentary, for individual student cohorts, with each Head of School, prior to submission to the Strategy & Planning Group. The proposed student number plans are then considered by the University at the Annual Student Education Review (ASER) meeting before being presented as part of the annual Integrated Planning Exercise (IPE).

Staff CostsPlanning;

To establish staff costs, excel spreadsheets are set up using SIRIUS, which pulls in the information from SAP(HR/Finance accounting system) into an excel spreadsheet. This is then adjusted to reflect additional or reduction in costs, and also adjusted for new starters. This is then reviewed by HOS and Faculty Finance Manager before including within the Schools plan.

Non Staff Costs planning Core area

As part of this process with regards to the School Accounts (core area) Direct Non Staff Costs (Supplies, Office & Travel, Student Recruitment, Equipment & Furniture, Premises & Utilities, Other Costs) weuse an established planning average cost base (incremental budgeting) and any previously planned ongoing additional expenditure per School. The average costs base is then extrapolated using an assumed rate of inflation as per the University’s planning IPE guidance to start the planning process. This information is built into the overall Schools plan.

Income & Charges Core Area

The expected income re Allocations and Contribution to Central Overheads figure is obtained by using PRISM (excel template). The template takes in many variables over a five year period;

  • Student numbers forecasts, Space Data (to add or remove), Staff Data, add staff FTE’s by category of staff (calculates staff charge), Turnover includes all income including research income. It calculates the community charge and strategic funds. This eventually feeds through to a pro-forma which provides the figures for Allocations and the Contribution to Central Overheads for each School.

Prism Overview

The RAM (resource allocation model) pulls in the different income streams and staff data and the space occupied by each School/department, and due to the complexity of this process an excel spreadsheet called PRISM is used. It takes into account the following.

  • Student number forecasts
  • Produces the expected Student income, and the Student charge
  • Space Data; add and remove space
  • Staff Data; adds staff FTE by category of staff and calculate the staff charge
  • Includes all income
  • Calculates the community charge
  • Metrics , provide details measures, indicators and sustainability measures
  • Targets, compares our PRISM forecast to the School or Faculties inspirational targets.

Other Income & Fees Core Area

As part of the planning process External income is reviewed and added to the plan, information is gathered from Schools with regards to income for fees or any recharges (internal sales), collated and fed into the Schools plans. Consultancy income is also included in the review process and an estimate of expected income added to the plan/forecast.

Planning and forecasting spreadsheets;

All of the data is entered onto planning spreadsheets (PUN core); also added is the recoveries and charges from Research Grants projections to the core area;all of which then forms the five year plan, which overwrites/updates previous plans, when uploaded into the SAP system. There is a different spreadsheet for each of the different areas of the accounts.

The first year of the plansare used for the new financial year forecasting (FUN core) by updating any changes each quarter to Allocation & Overhead charges, adjusted for timing differences on expenditure and staff costs reviewed and adjusted. Income is adjusted to project any additional income, and contacts within Schools contacted re any changes to items like DEMs & Tutorial costs.

Other Restricted, Endowment & Development Account planning;

  • Other Restricted accounts, the majority of the larger accounts such as DTA, STFC, DTC’s have individual forecast sheets that are maintained for the PI and administrators and reporting purposes. These are then used for the main IPE planning and quarterly forecasting. The income and expenditure figures for each 95 account is used to calculate each account and every account is planned and forecast and pulled together in an excel spreadsheet (PUN OR). Salary spreadsheets are also used for this area of the accounts to assist with planning and forecasting. We also use a forward planning spreadsheet within the plans and include expected future income such as DTA.

Endowment Accounts

  • Central Finance adviseson how much interest the Endowment account may achieve and this figure is used for planning and forecasting. Historical costs are reviewed and used to provide expenditure for the first year of planning and inflated by the advised rate of inflation in use at the time of planning for subsequent years.

Development Accounts

  • Central Finance advises on any allocations they have for the 5 year planning period which is added to the DV planning spreadsheets. Information is requested via the account holder re expenditure and each account is individually planned for and linked in the planning spreadsheet. If new dowries are to be added for future appointments we use a forward planning spreadsheet to reflect any income or expected equipment or other expenditure.

Activity Analysis

As part of the IPE process an activity analysis forms part of the annual IPE submission for each School in the Faculty. The income and expenditure is analysed into the following categories.

  • Undergraduate Student courses
  • Postgraduate taught Student courses
  • Postgraduate Research Students by research group
  • Research groups
  • Administration

This process highlights net income or expenditure for each activity.

Budget Approval

In accordance with University policy, the Head of School and the Dean, has responsibility for the financial performance of the School. Detailed financial schedules are presented to the Head of School and Dean for approval and sign off.

The plans, incorporating the detailed budgets, are then presented to School Board, Faculty Executive, and IPE Faculty Review Group.

Once approval is received from IPE Faculty Review Group, University requirements in this regard have been met.

The Budget Holder

Each individual account has a separate budget holder – although each budget holder may have more than one account. The budget holder responsibilities are:

To ensure that approved expenditure is appropriate to the account being charged and that there is a business need

  • Each account will have title and a purpose and should only be charged with expenditure related to that purpose – there should be a clear business need for incurring the expenditure.

To approve expenditure against the account (and/or have a nominated signatory in place)

  • All expenditure should be incurred via the purchasing system (purchase order/science warehouse order/purchasing card) and requires electronic approval
  • Travel expenses and out of pocket expenditure can be reclaimed via paper forms that require a budget holder signature
  • All expenditure for travel and non travel (AP forms) will be authorized by the Finance Office to ensure that it complies with University and Faculty policy and procedures, and all receipts should be attached to the form/s.
  • A budget holder can nominate someone to approve expenditure in their absence. A budget holder can have an electronic system cover and a paper nominee if requested.
  • The finance team keep a record of all account holders.
  • If the account holder passes the account onto someone else, either due to leaving or not heading up a section they are responsible for, they must advise finance to change the account holder on the system.

To keep expenditure levels within the approved budget

  • All expenditure accounts will have a budget – either a budget allocated by the HoS or a control budget related to planned income and expenditure.
  • If a budget holder requires a budget increase, they must contact their HoS with details. Approval for an increase will be passed to the finance office by the HoS.
  • Account transaction statements and budget availability reports are provided by the finance team every other month unless specified to be sent on a monthly basis but can also be provided ad hoc on request.
  • Expenditure requests that exceed the account budget will be rejected back to the account holder.
  • Account holders are expected to keep the finance team informed of material changes to income and expenditure.

Budgets year End Information

  • At year end please note that if an account holder triesto use up an in year budget allocation by paying for something in advance, this will be adjusted for the year end accounts to comply with financial accounting regulations. This will affect your following year budget allocation if it is a core account and this could cause issues with setting a new budget. The item has to be delivered (installed and commissioned for capital items) or service received before the 31st July to count within year.
  • Commitment (order) on an account is pushed forward into the next financial year if not received (receipted) and will affect the new financial year’s budget.
  • Budgets on Core (School accounts) & Other Restricted accounts are set for the next financial year around June at half the current year’s budget (approximately) so as not to block purchasing into the new financial year. HOS advises on the budgets to be set for the new financial year on core accounts and these should be in place August/September time.

Financial Reporting;

IPE

Forming part of the overall submission to Central University, a detailed commentary is provided, highlighting main movements to the previous year’s plan, sustainability overview, research funding, strategic investments and key financial risks and opportunities. The latest commentary, plus other IPE documentation including presentation slides are available on the intranet.

Quarterly Forecasts

Set by the central finance timetable, our quarterly reviews take account of actual information to date and revisit the projected expenditure in the light of this information. Budget templates are updated and uploaded into SAP. Commentary explaining any variances identified is presented to FMC and Central University for review by VCEG and council.