The Budget Process - TRACS · • Institutional budgeting is the process whereby the ... • Capital expenditures The Budget Process Developing the budget and gaining institutional

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The 2014 TRACS Annual Conference

Orlando, Florida

October 22, 2014

Jan M. Haas, Sr. VP,

Finance & Administration

The Budget ProcessDeveloping the budget and gaining institutional buy-in.

Objectives• Definition

• Relationship to strategic planning

• Types of budgets

• Process preparation

• Presentation

• Monitoring


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Definitions• Institutional budgeting is the process whereby the

plans of an institution are translated into an itemized, authorized, and systematic plan of operation, expressed in dollars for a given period.

• Budgets are the blueprints for the orderly execution of program plans; they serve as control mechanisms to match anticipated and actual revenues and expenditures.


Page 3Source: National Association of College and Universities Business Officers, College and University Business Administration, 4th Edition, 1982.

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Definitions (continued)

• Budgeting is a management tool for both planning and control.

• Fundamentally, the budgeting process is a method to improve operations - a continuous effort to specify what should be done to get the job completed in the best possible way.


Page 4Source: Managerial Finance, Seventh Edition, J. Fred Watson & Eugene F. Brigham, The Dryden Press, Hinsdale, IL, 1981.

Bridge to Strategic Planning

Budget


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Mission

Core Values

Vision

Goals/Strategies

Annual Plan

Bridge to Strategic Planning

• Coordinated effort of strategy and budgeting

• Effective translation of annual plan to a financial

plan (the budget)

• Standard framework for both annual and financial

planning


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Operating Budget• Revenue

• Expenses

� Salary and Benefits

� Operations

Capital Budget• Relationship to the mission

• Strategic importance

• Multi year, committed projects

• Essential projects (e.g., safety, accreditation)

• Financial return (NPV, IRR, Break-Even)

• Probability of success


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Factors Affecting the Budget ProcessInternal Factors

• Mission

• Fiscal policies

• Compensation goals and policies

• Pricing policies

• Management style

• Accountability

• Debt policies


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Source: National Association of College and Universities Business Officers, College and University Business Administration, 4th Edition, 1982.

Factors Affecting the Budget ProcessExternal factors

• Sources of support

• Government regulations - OSHA, EPA, ADA, FERPA,

PPACA, Title IX, etc.

• Competition for students

• Demographic trends

• Inflation


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Process

• The process should communicate:

� institutional priorities to various

constituencies,

� identify specific commitments, and

� establish preliminary control over

institutional resources.

• The result of this process is a document

that is used to monitor and control the

ongoing operations of an institution.


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Process

Major participants include:

• The Governing Board

• Chief Executive Officer

• Senior Administrators

• Budget Officer

• Planning and Budgeting group

• Faculty


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Key Success Factors• Process must provide a clear mission as well

as strategic and financial context for decision making

• Overall capacity should be communicated early in the process

• Budget calendar must provide adequate timeframes for completion of tasks

• A process for ongoing feedback should be implemented to promote continuous improvement of the process


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Preparation1. Create a budget calendar

2. Determination and communication of budget

guidelines

3. Estimates of revenues and expenditures

4. Internal budget hearings with academic and

support units

5. Preparation of budget requests

6. Standards/Targets/Benchmarks


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Source: Budgeting, Ken Martin, Ph.D., Messiah College, February 11, 2003.

Preparation1. Develop a budget calendar

• Leadership discusses preliminary targets

• Present budget parameters to budget group

• Set budget targets

• Distribute budget materials

• Budget workshops

• Budget submissions reviewed

• Reviews consolidated for leadership

• Report to Finance Committee

• Board of Trustees approval


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Preparation2. Determination and communication of budget guidelines

• Salary and wage increases

• Tuition rates

• Levels of support for student aid

• Increased operational expenses

• Improvements in certain programs

• Implementation f new programs

• Reduction or elimination of existing programs


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Preparation3. Estimating Revenues …

• Enrollment data

• Economic conditions

• Investment earnings

• Revenues from gifts

• Auxiliary enterprises

and Expenditures• Improvement of existing programs

• Development of new programs

• Policies for salaries, promotions & employee benefits

• Student-faculty ratios, class size, teaching loads

• Increased costs


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Preparation4. Internal budget hearings with academic and

support units

5. Preparation of budget request

Standardized forms

• Personnel

• Operating expenses

• Capital expenditures


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Source: Managerial Finance, Seventh Edition, J. Fred Watson & Eugene F. Brigham, The Dryden Press, Hinsdale, IL, 1981.

Preparation6. Standards/Targets/Benchmarks

• Accreditation agency guidelines

• National association recommendations

• ABACC financial benchmarking

• State agency reports

• Key Performance Indicators


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Presentation

• Costs and benefits of offering programs

• Consequences of reducing support services

• Effects of demographic trends

• Effects of other factors (both internal and external)

• Assumptions


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Presentation (continued)

• Comparison to budgets of prior years

• Explanations of major changes

• Description of programs added or eliminated

• Wage and salary policies


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Source: Budgeting, Ken Martin, Ph.D., Messiah College, February 11, 2003.

Lessons Learned

• New positions = permanent $

• Leadership needs to assess departmental needs

early in the process

• Provide feedback on priorities and communicate

decisions firmly

• Remain flexible

• Encourage staff to become involved in cost

reduction efforts

• Communication builds alliances


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)

Lessons Learned (continued)

• Decisions should be based on trends and

introduce increment tally; it is difficult to retract

• Quick fixes can increase deferred maintenance

with expensive consequences

• Managing the budget process is different than

controlling revenues and expenditures

• Educate others by saying it often and in a variety

of ways

• Avoid the “shotgun” approach


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Q & A


Jan M. Haas

Sr. VP, Finance & Administration

[email protected]

www.cairn.edu

215-702-4312

Documents

The Budget Process - TRACS · • Institutional budgeting is the process whereby the ... • Capital expenditures The Budget Process Developing the budget and gaining institutional