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Budget Management

  • Responsible Office: Office of Budget and Resource Analysis, Vice President for Finance and Budget, Finance and Budget
  • Current Approved Version: 05/07/2021
  • Policy Type: Administrative

Policy Statement and Purpose 

 

As specified in the University Code of Conduct, all employees “must exercise reasonable care to ensure resources are not wasted or misused, and take advantage of opportunities for improving performance and reducing costs.”  This policy provides parameters for responsible management and accountability by VPs, Deans, Directors, and their responsible fiscal officers (often referred to as Chief Business Officers) for the maintenance and forecast monitoring of their end-of-year financial condition. 

Individual vice presidents (VP) have oversight responsibility for monitoring, reporting, and controlling operating budgets for Major Business Units (MBU’s) under their purview. This policy sets expectations as to the processes and guidance to be provided by each VP to their respective units. The Chief Financial Officer (CFO) has overall responsibility for ensuring that the university as a whole remains within authorized budget levels.

In addition, this policy outlines the responsibilities of university employees who are directed to exercise control over the maintenance, oversight, and management of financial resources for ledgers 1, 2, 3, 4, 6 & 8. Ledgers 5, 7 & HEETF are excluded as they fall under policies and procedures for grants and external awards. Each of the ledgers within a Major Business Unit (MBU), as defined by the banner hierarchy, is to be in a positive net condition on their own by year-end, regardless of the cumulative net position of that MBU.

Funding restrictions for each ledger type prohibit using funding from one ledger type to balance another ledger type except for specific circumstances initiated and approved by the controller’s office. For example, positive balances in a gift or research ledger cannot be used to offset a deficit in an E&G ledger. If a deficit is expected, each ledger will be evaluated to determine what other sources or reductions in expenditures might be possible to eliminate the deficit. If approved by the controller, expenses may be transferred between ledgers. If questions arise regarding the transferring of ledgers, the Controller’s Office and VP staff will be consulted.   

If a ledger will not be in a positive net condition by year-end, regardless of the cumulative net position of that MBU including all ledgers, it is the responsibility of the unit head (i.e., MBU, whether that is a dean or other position title) to work with their business office and vice president’s office to follow this policy.

The Office of Budget and Resource Analysis (OBRA), within Finance and Budget, is responsible for annual monitoring of ledgers at the Major Business Unit (MBU) level across the university in:

  • E&G
  • FACR
  • Auxiliary Enterprises
  • Local Funds
  • Repair and Renovation Funds and
  • Hospital Service Funds.

OBRA will provide a summary report to the University Budget and Strategic Planning Committee by June 1st of the ending fiscal year with final review and approval of all MBU’s year end positions occurring in July of the immediately following fiscal year.

Links to policies guiding other Ledgers can be found in the FAQ.

Noncompliance with this policy may result in disciplinary action up to and including termination. VCU supports an environment free from retaliation. Retaliation against any employee who brings forth a good faith concern, asks a clarifying question, or participates in an investigation is prohibited.

 

Table of Contents  

 

 
Who Should Know This Policy
Definitions
Contacts
Policy Speficis and Procedures
Forms
Related Documents
Revision History
FAQ

 

Who Should Know This Policy 

 

  • Vice presidents and senior executives
  • Deans, directors, department heads, and department chairs
  • Fiscal administrators, MBU Financial Officer, Chief Business Officers (CBO)
  • Office of the Senior Vice President & CFO

 

Definitions 

 

Deficit

A deficit is an amount reflecting a net condition of less than zero, calculated as follow:

Revenue Actual – Revenue Current Budget =      Net Revenue

Expense Current budget – Expense Actuals =      Net Expense

Net Revenue – Net Expense =                            Net Condition (or Position/Deviation)

 

University Ledgers

VCU operates under a ledger or fund accounting system.  Ledger or Fund accounting requires the separation and recording of resources whose use has been limited by the donor, grant authority, governing agency, other individuals or organizations, or by law.  Ledger or Fund definitions and restrictions on use can be found in the fiscal handbook.  See the definitions for University Ledgers which can be found here.

 

Major Budget Unit (MBU)

Major Budget Unit (MBU) is the financial equivalent of a school, division, or office. It is defined within the hierarchy set in the General Ledger (Banner) system. Further information about the Banner hierarchy can be found here. 

 

MBU Finance Officer /Chief Business Officer (CBO)

MBU Finance Officer and/or Chief Business Officer (CBO) is the individual or team of individuals responsible for finances and for reviewing information in Banner Finance for accuracy and ensuring that an accurate and sufficient revenue and expenditure budgets are available to support the fiscal year activities. To the extent that these duties have been delegated to an individual responsible for the financial operations at a department, sub-department or index level, these same responsibilities apply. 

 

Contacts 

 

The Office of Budget and Resource Analysis within the Office of the Senior Vice President and CFO, officially interprets this policy and is responsible for obtaining approval for any revisions as required by the policy Creating and Maintaining Policies and Procedures through the appropriate governance structures. Please direct policy questions to the director of Budget and Resource Analysis.

 

Policy Specifics and Procedures 

It is the expectation that each MBU will end the year without a deficit in any fund category, unless prior approval is obtained from the University Budget and Strategic Planning Committee. 

Responsibility of the VP:

  1. Each vice president and CBO must establish clear expectations as to the frequency, format and processes for reporting on net conditions by fund type for each MBU under their management.  At a minimum, each VP must require at least one interim report from each MBU between the months of March to May of the fiscal year, including a forecast of the anticipated year-end condition. 
  2. In the event a deficit is forecasted for the current fiscal year, it is the responsibility of the VP to determine the best course of action to eliminate the deficit by year-end through consultation with the MBU’s management officials and with the OBRA. If a deficit is unable to be resolved, the VP must request that an MBU’s negative position be carried forward into the next fiscal year through the process outlined below.  Such actions might include reduction of anticipated expenditures prior to the end of the fiscal year or the addition of budget funding to the respective MBU.  Transfers between ledgers, as long as all fund restrictions are met and with approval of the controller, is also possible.
  3. If a deficit is unable to be resolved prior to the end of the fiscal year, a vice president may request approval from the University Budget and Strategic Planning Committee for a negative carryforward at the individual MBU level as long as (a) there is sufficient funding at the executive level to support the deficit; (b) approval from the University Budget and Strategic Planning Committee, respective VP, and MBU head is documented through the deficit exception form generated by the OBRA (See procedures for requesting a negative carryforward below). Such documentation will be approved prior to June 30th by written communications with the final form to be complete before July 31st to capture final fund balance figures.

Responsibility of OBRA:

  1. Provide an annual report to the university Budget and Strategic Planning Committee (UBSPC) on a per fund MBU net condition basis at the start of the 4th quarter (April) and again in June of each fiscal year to highlight MBU’s that may have a deficit at the end of the fiscal year.
  2. Work collaboratively with the VP’s to produce a deficit reduction plan. OBRA is responsible to liaise with the CFO, the respective VP and the Budget and Strategic Planning Committee.
  3. Manage the exception process by working with the MBU and VP to develop and complete the exception form and to present it to the UBSPC for their review and approval (signed).
  4. Advise the Budget and Strategic Planning Committee on progress against identified milestones and goals for any deficit reduction plan in the following fiscal year.   

Responsibility of MBU Finance Officers and CBOs:

In conjunction with the responsibilities for each finance officer and/or CBO as determined by the Fiscal Handbook, it is the responsibility of each MBU finance officer and/or CBO to report as required to the VP on current and expected year ending net condition. Responsibility by fund are as follows:

Education & General Ledgers (Ledger 1):

  1. When a potential deficit is projected due to variances from budgets or realized from an under-collection of receipts or over-expenditure of available funding, it is the responsibility of the MBU’s leadership in conjunction with the finance officer and/or CBO to ensure the appropriate adjustments are made to planned expenditures to reduce spending or to increase revenues. Both OBRA and the VP office will provide support and consultation to assist each MBU in meeting the required targets. 
  2. Fiscal staff operating at a department, sub-department or index level (below that of an MBU) similarly have the responsibility to bring such variances to the attention of the MBU finance officer.
  3. In the event it is anticipated that an E&G ledger within an MBU will end the year with a deficit, the MBU finance officer must bring the potential deficit position to the attention of the senior finance officer for the respective vice president as soon as possible. Budget and expense modifications as needed must be implemented to avoid a year-end deficit. Responsibility for implementing these modifications will follow the Banner budget modification hierarchy as detailed in the Fiscal Handbook

FACR, Auxiliary Enterprises, Local Funds, Repair and Renovation Funds, and Hospital Service Funds (Ledgers (1, 2, 3, 4, 6, & 8)):

  1. Excepting Local Funds (Ledger 6), budget control will be established for each ledger independent of other ledgers at the MBU level. For Local Funds (Ledger 6), more restrictive budget controls apply (often due to donor intent), generally at the Index level, to ensure compliance with donor intent/index restrictions.
  2. Expenditure budget controls for all of the above ledgers will be limited by the availability of anticipated (year-end) revenue balances. Auxiliary Enterprise ledgers must result in a net balanced or positive condition (inclusive of fund balances).
  3. The MBU finance officer is responsible for reviewing information in Banner Finance for accuracy and ensuring revenues are available to support the fiscal year activities. In the event that variances are anticipated or realized resulting in a deficit, it is the responsibility of the MBU finance officer to ensure this is brought to the attention of the senior finance officer for the respective vice president as soon as possible.

Procedures for requesting a negative carry forward

  1. When a potential year end deficit is identified by a financially responsible individual (positions listed above), they will elevate their concern to their appropriate VP and/or VP finance officer.
  2. The VP and/or finance officer will review the projected deficit with finance officer and determine if a solution can be implemented that would prevent a year end deficit. During this review, the fund balances for the ledger that is projecting the deficit for the VP’s area will be collected to see if there is a level of fund balance that would allow for the VP area to end the year in a positive condition with the deficit. If no solution can be identified within the close of the fiscal year, a deficit exception will be requested and the VP and their finance officer shall notify the OBRA that there is a need for a deficit exception for the fund within the MBU by May 1st. At that time the budget office and the VP area will begin working with the responsible unit facing the deficit to create an action plan that outlines how the deficit with be eliminated by the close of the next fiscal year. The action plan will be submitted to the OBRA by May 20th.
  3. On or after May 20th, the Office of Budget and Resource Analysis will determine the scope of the deficit and begin working with the VP’s finance officer to develop and evaluate the financial plan. Once these two items are determined the Office of Budget and Resource Analysis will present the issue and plan to the Budget and Strategic Planning Committee.
  4. The Budget and Strategic Planning Committee will (verbally by vote) approve deficit conditions to be carried forward pending final year end figures.
  5. In July of the next fiscal year, the deficit exception form will be completed and will be electronically signed by the MBU unit head and finance officer, the VP (if not on the Budget and Strategic Planning Committee) and their finance officer, the remaining voting members of the Budget and Strategic Planning Committee, and the Director of the Office of Budget and Resource Analysis.
  6. Through the next fiscal year, the progress toward deficit reduction will be reviewed but the Office of Budget and Resource Analysis and the respective VP’s finance officer and updates will be provided to the Budget and Strategic Planning Committee.
  7. If a second year of deficit carry forward be needed, this process shall be followed again.

Forms 

 

Related Documents 

  1. Fiscal Handbook
  2. Banner Fundamentals
  3. Internal Controls

 

Revision History 

This policy supersedes the following archived policies:

December 1, 2020                 University Budget Management Policy Statement

 

FAQ 

1. Can a negative position in one fund type be balanced out by a positive position in another, resulting in a balanced position for my MBU?

No. Funding restrictions for each fund type prohibit this. For example, positive balances in a gift or research ledger cannot be used to offset a deficit in E&G. Each fund will be evaluated to determine what other sources or reductions in expenditures might be possible to eliminate the deficit. If appropriate for the fund, expenses may be transferred between ledgers with approval of the controller. If questions arise regarding the transferring of funding between ledgers, the Controller’s Office and VP staff will be consulted.

2. Generally, how soon or how long is it acceptable to wait before notifying the senior finance officer in my vice president’s office of a potential deficit? If I expect my variance to disappear next month after the fiscal year due to timing, do I still need to contact my vice president’s office?

It is the responsibility of each VP finance officer to establish the format, frequency and hierarchy of reporting within the VP area.  This policy addresses the closing, annual condition for each MBU. If a deficit is anticipated at year end, regardless of future available funding (timing of transfers or future revenues in another fiscal year), an exception request and approval must be made to the Budget and Strategic Planning Committee and their respective VP.   Any employee with concerns about the availability of funding with in ledgers will contact their fiscal supervisor.

3. What about deficits below the MBU level? (For example, if I work within a department?)

It is the responsibility of each MBU finance officer to set the frequency and hierarchy of reporting needed within their unit to ensure adequate monitoring and notification at the MBU level. For example, departments may be expected to provide monthly forecasts or MBU reporting may occur centrally. Staff such as departmental fiscal administrators and MBU finance officers and/or CBOs will work together to identify clear deadlines and local reporting requirements.

While this policy focuses on maintaining positive net conditions at the MBU by fund level, fiscal personnel will also monitor indexes within ledgers to identify areas where negative net conditions may result and lead to a cumulative year after year issue if the negative net condition carries over to create a negative budgeted expense in the following fiscal year and inform leadership as appropriate to determine how to address.

4. What will be included a net deficit condition mitigation plan? 

Deficit mitigation plans will specify the starting net deficit condition on July 1st of the new year and anticipated net condition improvements at regular milestones to be determined by the VP.  The responsible parties will be identified and clearly defined plan of action (for example, an internal hiring freeze or a fee increase) will be specified.

5.  Where do I find guidance for other ledgers?

Guidance for Sponsored Programs can be found here.  Additional guidance on Gift funds and Repair and Reserve funds can be found here