The University can be compared to that of a large business. It has multiple sources of income and has many types of expenses associated with the operation of its business.
The greatest sources of revenue include (in typical order of greatest to least) Tuition and Fees, Auxiliary Enterprises, State Appropriations, and Grant funding.
Regarding expenditures, the single largest category is salaries and fringe benefits, which accounts for more than half of the total expenditures. Other major expenditures include those for scholarships, contractual services, supplies and materials, equipment purchases, debt service, utilities, maintenance, and repairs.
A budget is a plan expressed in dollars that acts as a road map to carry out an organization's objectives, strategies and assumptions. Budgeting is the setting of expenditure levels for each of an organization’s functions. It is a plan for the accomplishment of programs related to objectives and goals within a definite time period. It provides a concrete, organized, and easily understood breakdown of how much an entity is spending as well as how much income the entity is generating (if a self-supporting activity). Budgeting is an invaluable tool to help you prioritize your spending and manage your money—no matter how much or how little you have. Planning and monitoring a budget will help you identify wasteful expenditures, adapt quickly as your financial situation changes, and achieve your financial and strategic goals.
The major benefit of formal budgeting lies in ensuring that responsible managers take time each year (and then at fixed intervals throughout the year) in thinking about their operation by looking at all of its aspects. Budgeting creates a comprehensive picture of the future and makes both opportunities and barriers conscious. This helps to guide the day-to-day activities and decision making process.
There are many different thoughts and approaches to budgeting. However; the two dominant approaches for what we need to accomplish at this time are: traditional line item and zero-based approaches. Typically, a good budget encompasses a combination of the two.
Traditional line item budgeting is based on a review of historical performance and then the projection of such findings to the future with modifications, such as incorporating inflation increases and new activities or programs. Advantages of this approach include: simplicity, ease of preparation, familiarity to those involved in the process, and consistency with lines of authority and responsibility in each unit. This approach typically enhances organizational control and allows the accumulation of data to be at each functional level.
Zero-based budgeting is the creation of a completely new budget from the ground up—as if no history existed. When using this method, the operation must justify and document every item of expenditure. This approach takes a step back and looks more at the program in whole and evaluates changes that may be needed to succeed and then costs are evaluated on more of an output and outcome theory at first, rather than going directly to each specific expenditure line item from the beginning and comparing the past.
Regardless of which budget approach is taken, projections should be as realistic and as quantifiable as possible. If projections are out of line with historical patterns, up or down, there should be documentation and justification to support it. Currently, SU is using more of a traditional line item budgeting approach.
Academic Versus Non-Academic
Academic departments are those departments that report to a dean, director, or chair within a particular school or college and are generally involved in the instructional and the academic support functions within the general fund. These units in general report to the Office of the Provost.
Non-academic departments are those departments that report to all vice presidents other than the provost and in general support the following areas: research, public service, student services, institutional support, and operation and maintenance of the physical plant.
These broad definitions are loosely defined, and as such, some departments may be units that could be classified as either nonacademic or academic. The Budget Officer can be consulted if there is any uncertainty related to the classification of a unit.
Departments with a Control Budget
A Controlled Budget means that a budget is developed for that department and they will not be able to spend more than the amount allotted, without override approvals from the Budget Office. To keep up with how much a department has spent during the year, department personnel will be able to inquire online in the PeopleSoft Financial System, view the status of their budgets, and review transactions that have been processed against the budget.
All state-support departments will have a controlled budget in the PeopleSoft Financial System due to the fact that they are dependent upon State general funds and tuition and mandatory fee revenue – and are provided a budget allotted to spend during a specific period that does not accumulate unspent funds year to year.
Some Auxiliary Departments are provided a budget and given funding for hosting special events or having food related expenditures, which are not allowed to charge in a typical state-support budget code.
All of the departments that fall under the mandatory fees revenue category are required to submit and have a controlled budget created as well. These departments are not able to spend all of the proceeds that come in for that area. These include: Athletics, Student Recreation, Housing, Dining Services, Student Activities, Facilities and Student Union.
Other larger operating self-support operations are also required to spend within the means of a controlled budget such as the University Bookstore and Conference Planning.
Departments without a Control Budget
Most auxiliary (also referred to as self-support) departments should analyze their program and have a “plan” in place for spending during the year. Decisions for spending in these departments are not based on a budget; instead they are based on analyzing the beginning cash balance plus/minus revenues and expenditures made throughout the fiscal year.
These department codes (38xxxx and 17xxxx), act similar to that of a business checking account, whereby funds that are unspent at the end of the fiscal year continue to roll going forward each year. Departments should monitor and budget internally for these funds, however; a formal budget request does not need to be submitted to the Budget Office for these department codes.
At times, the proceeds generated from these revenue producing programs can be used to support the department it’s connected with. Keep in mind that the preference is to have “true baseline operating costs” in your primary state department code whenever possible. These additional auxiliary funds should be used to support the department with additional equipment and possibly extra travel expenses that may occur. All in all, every department code and its expenditures should be considered in the big picture for your school or division.