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2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
2008 2009 Budget Presentation To Union Council
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2008 2009 Budget Presentation To Union Council

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  • 1. 2008/2009 Draft Budget Financial Terms Explained 8 May 2008 Peter Cole, Director of Finance
  • 2. What is a Budget? <ul><li>Budgeting is a formalised system of planning, controlling and evaluating the use of resources </li></ul><ul><li>A budget is a plan to achieve a given objective or objectives </li></ul><ul><li>Budgets are detailed quantified financial plans of action for a specific period in the future, both for individual departments within the organisation and the organisation as a whole </li></ul><ul><li>A budget is an expression of an organisation’s strategy in financial terms (if Investing in our People and campaigning are part of the Union’s vision and values, this should be reflected in the budget) </li></ul>
  • 3. The Union’s sources of funding <ul><li>The Union has the following sources of funding: </li></ul><ul><ul><li>University of Kent grant funding (and from the University of Kent, University of Greenwich and Christchurch for the Universities at Medway Students’ Association - UMSA) </li></ul></ul><ul><ul><li>Retail, Licensed Trade and Catering Turnover </li></ul></ul><ul><ul><li>Job Shop and Nursery Income </li></ul></ul><ul><ul><li>Sundry income such as bank interest received and poster board income </li></ul></ul>
  • 4. The Union’s expenditure <ul><li>The Union incurs the following types of expenditure: </li></ul><ul><ul><li>Direct costs of purchases of goods for sale and staffing costs to run the Union’s Retail, Licensed Trade and Catering outlets </li></ul></ul><ul><ul><li>Overhead costs to run the Union’s Retail, Licensed Trade and Catering Outlets </li></ul></ul><ul><ul><ul><li>Rent </li></ul></ul></ul><ul><ul><ul><li>Depreciation </li></ul></ul></ul><ul><ul><ul><li>Equipment Maintenance </li></ul></ul></ul><ul><ul><ul><li>Other operating costs </li></ul></ul></ul><ul><ul><li>Job Shop and Nursery Expenditure </li></ul></ul><ul><ul><li>Central costs (Human Resources, Finance, Administration) to support the Commercial and Membership Services operations </li></ul></ul><ul><ul><li>Membership Services Direct Expenditure </li></ul></ul><ul><ul><ul><li>Sports and Societies </li></ul></ul></ul><ul><ul><ul><li>Advice </li></ul></ul></ul><ul><ul><ul><li>Representation & Campaigns </li></ul></ul></ul><ul><ul><ul><li>Volunteering </li></ul></ul></ul><ul><ul><ul><li>Student Media </li></ul></ul></ul>
  • 5. Income Statement <ul><li>A summary of an organisation’s financial results of its operations for a specified period of time, as is clearly noted in its title, e.g.:- </li></ul><ul><li>Income Statement for year ending 31 July 2008 </li></ul><ul><li>It provides information about revenues generated and expenses incurred </li></ul><ul><li>The difference between total revenues and total expenses is identified as the net surplus or deficit </li></ul>
  • 6. What are reserves and why are they vital? <ul><li>Reserves are the value of an organisation’s accumulated annual surpluses (excess of income over expenditure) less deficits (excess of expenditure over income) over the years </li></ul><ul><li>Reserves are essential to an organisation’s financial health so that: </li></ul><ul><li>The organisation has a buffer available in case of one of more years of difficult trading conditions </li></ul><ul><li>Funds are available to commit to investment in capital assets to support the strategic growth of the organisation and achievement of its objectives </li></ul><ul><li>To be able to demonstrate a position of financial strength to stakeholders and interested parties to encourage their increased investment in the organsiation </li></ul>
  • 7. What are Assets? <ul><li>Assets are the economic resources of the organisation </li></ul><ul><li>Fixed Assets:- </li></ul><ul><ul><li>Land and buildings </li></ul></ul><ul><ul><li>Equipment and fittings </li></ul></ul><ul><li>Current Assets:- </li></ul><ul><ul><li>Stock </li></ul></ul><ul><ul><li>Accounts receivable (debtors) </li></ul></ul><ul><ul><li>Cash </li></ul></ul>
  • 8. What are Liabilities? <ul><li>Liabilities are amounts owed by the organisation to external parties </li></ul><ul><li>Bank loans </li></ul><ul><li>Bank overdraft </li></ul><ul><li>Suppliers </li></ul><ul><li>Government Creditors </li></ul><ul><ul><li>VAT </li></ul></ul><ul><ul><li>PAYE (Payroll tax and National Insurance deductions) </li></ul></ul>
  • 9. Net Current Assets and Liabilities <ul><li>As we have seen current assets are stock, accounts receivable (debtors) and cash </li></ul><ul><ul><li>Current liabilities are all amounts owed to suppliers and other creditors within the near future </li></ul></ul><ul><li>A financially sound organisation needs to have a surplus of current assets compared to its current liabilities, as it needs to have cash available to meets its liabilities when they fall due </li></ul><ul><li>Such an excess of current assets over current liabilities is known as having net current assets </li></ul><ul><li>However, if an organisation’s current liabilities exceed its current assets (known as net current liabilities), under normal circumstances this would not be a sustainable financial situation as the organisation would struggle to find the cash to pay its bills as they become due </li></ul>
  • 10. Capital Expenditure and Depreciation <ul><li>Capital expenditure is expenditure on assets which have a long-term (more than one year) useful economic life. Examples of such item would be </li></ul><ul><ul><li>Structural and major refurbishment work to premises </li></ul></ul><ul><ul><li>Equipment such as fridges, freezers and chiller cabinets </li></ul></ul><ul><ul><li>Electronic tills </li></ul></ul><ul><ul><li>Computer hardware and software </li></ul></ul><ul><li>The cost of capital expenditure is not charged to the Income Statement at the time of purchase, as these assets will support revenues and activities over a lengthy period of time, so it would be wrong to charge all the cost of the capital asset against surplus upfront, but rather the cost should be matched against when the benefit of the revenues or activity is received </li></ul><ul><li>To achieve this, the cost of the capital asset is spread and charged equally against surplus over its useful economic life (e.g. electronic tills cost £12,000 and are expected to last for 4 years, so £3,000 (£12,000 divided by 4) is charged to the Income Statement as a cost for 4 years, as a depreciation charge </li></ul>
  • 11. 2008/2009 Draft Budget 8 May 2008 Peter Cole, Director of Finance
  • 12. Contents <ul><li>Financial background </li></ul><ul><li>Financial objectives 2008/2009 </li></ul><ul><li>2008/2009 Budget Income </li></ul><ul><li>2008/2009 Budget Expenditure </li></ul><ul><li>2008/2009 Budget Surplus </li></ul><ul><li>Financial issues facing the Union </li></ul><ul><li>Capital Expenditure Budget 2008/2009 </li></ul>
  • 13. Financial Background The Union’s financial performance between 1999 and 2004 was poor, culminating in a £300k deficit in 2004
  • 14. Financial Background <ul><li>As a result of this by 31 July 2004, the Union’s reserves had fallen to a very low £65k </li></ul><ul><li>The four subsequent years up to and including 2007/2008 have been much more positive, each year producing as budgeted a surplus of between £50k and £70k, building our projected reserves at 31 July 2008 up to £313k </li></ul>
  • 15. Financial Objectives 2008/09 <ul><li>The Union faces a challenging time to make its budgeted surplus of £70k this financial year (2007/2008), but is confident it will do so </li></ul><ul><li>Given the need to build its reserves, the Union must make a significant (i.e. £90k) surplus again during 2008/2009 </li></ul><ul><li>Reliance cannot be placed on the University increasing the Union’s Block Grant significantly (if at all) above inflation in future years </li></ul>
  • 16. Financial Objectives 2008/09 <ul><li>Controlling costs and improving gross profit margins has been vital over the past few years to improve financial performance, but in order to continue to grow, develop and to improve the services we provide, the Union has recognised that it must increase its revenue streams </li></ul><ul><li>Accordingly, during 2007/08, Rutherford Bar was opened and fully refurbished, the Oaks Nursery joined with Kent Union, and Woody’s Bar was completely refurbished </li></ul><ul><li>During 2008/09, the Union needs to drive contributions from Woody’s and Rutherford in order to maximise the benefit of the refurbishment programmes </li></ul><ul><li>It also needs to continue to expand its commercial activities on campus, diversifying and reducing its reliance on Licensed Trade revenues </li></ul><ul><li>Additional revenues generated can then be utilised to expand and further enhance our services to our members </li></ul>
  • 17. 2008/2009 Budget Income <ul><li>Total Income </li></ul><ul><ul><li>2006/2007 £6,436k </li></ul></ul><ul><ul><li>2007/2008 £7,310k (+ 13.6%) </li></ul></ul><ul><ul><li>2008/2009 £7,827k (+ 7.1%) </li></ul></ul><ul><li>Block Grant </li></ul><ul><ul><li>2006/2007 £1,081k </li></ul></ul><ul><ul><li>2007/2008 £1,258k (+ 16.4%) </li></ul></ul><ul><ul><li>2008/2009 £1,411k (+ 12.2%) (subject to negotiation with Universities) </li></ul></ul><ul><li>Retail, Licensed Trade and Catering Turnover </li></ul><ul><ul><li>2006/2007 £5,240k </li></ul></ul><ul><ul><li>2007/2008 £5,520k (+ 5.3%) </li></ul></ul><ul><ul><li>2008/2009 £5,803k (+ 5.1%) </li></ul></ul><ul><li>Sports and Societies, Job Shop, Nursery and Sundry Income </li></ul><ul><ul><li>2006/2007 £115k </li></ul></ul><ul><ul><li>2007/2008 £532k (Nursery became part of Kent Union in November 2007) </li></ul></ul><ul><ul><li>2008/2009 £613k </li></ul></ul>
  • 18. 2008/2009 Budget Expenditure <ul><li>Retail, Licensed Trade & Catering Direct Costs (Purchase of Goods for Sale and Staff Costs) </li></ul><ul><ul><li>2007/2008 £ 4,071k </li></ul></ul><ul><ul><li>2008/2009 £ 4,246k </li></ul></ul><ul><li>Retail, Licensed Trade & Catering Overheads </li></ul><ul><ul><li>2007/2008 £ 1,240k </li></ul></ul><ul><ul><li>2008/2009 £ 1,324k </li></ul></ul><ul><li>Job Shop and Nursery Expenditure </li></ul><ul><ul><li>2007/2008 £ 395k </li></ul></ul><ul><ul><li>2008/2009 £ 471k </li></ul></ul><ul><li>Central costs to support Commercial and Membership Services operations </li></ul><ul><ul><li>2007/2008 £ 869k </li></ul></ul><ul><ul><li>2008/2009 £ 944k </li></ul></ul><ul><li>Membership Services Direct Expenditure </li></ul><ul><ul><li>2007/2008 £ 665k </li></ul></ul><ul><ul><li>2008/2009 £ 754k </li></ul></ul>
  • 19. 2008/2009 Budget Surplus <ul><li>Budget Surplus </li></ul><ul><ul><li>2007/2008 £70k </li></ul></ul><ul><ul><li>2008/2009 £89k </li></ul></ul>
  • 20. Financial Issues <ul><li>The Union still had net current liabilities at 31st July 2007 of £112k (i.e. its amounts due in the near-term exceeded its current assets of cash, stock and debtors) </li></ul><ul><li>The situation is exacerbated by the high capital spend needed in the last 2 years to drive new and existing income streams, as this capital expenditure (fixed assets), has to be paid for from current assets (cash). Capex in 2007/2008 has been £393k against a depreciation charge of £170k which will increase net current liabilities to £265k at 31 July 2008 </li></ul><ul><li>This is only a sustainable situation for the Union due to credit received from the University of Kent on items initially funded by them and later recharged, principally payroll </li></ul>
  • 21. Financial Issues <ul><li>To build our financial credibility with the University of Kent that Kent Union is able to support itself financially and so that externally published financial statements show a position of strength to external stakeholders, suppliers and other interested parties, the Union has a policy to achieve net current assets by 31 st July 2009 </li></ul><ul><li>Our medium-term financial goal is to improve the Union’s financial stability by reaching £505k in reserves by July 2010 </li></ul><ul><li>The intermediate steps planned to achieve this are: </li></ul><ul><ul><ul><li>£310k by July 2008 (i.e. a £70K surplus in 2007/2008) </li></ul></ul></ul><ul><ul><ul><li>£400k by July 2009 (i.e. a £90K surplus in 2008/2009) </li></ul></ul></ul><ul><ul><ul><li>£505K by July 2010 (i.e. a £105K surplus in 2009/2010) </li></ul></ul></ul>
  • 22. Capital Expenditure Budget 2008/2009 <ul><li>The Union is budgeting for a capital expenditure spend of £174k in 2008/2009 </li></ul><ul><li>The budgeted depreciation charge for the year is £188k </li></ul><ul><li>Principal items in the capital expenditure budget are:- </li></ul><ul><ul><li>Refurbishment of The Lighthouse £ 40k </li></ul></ul><ul><ul><li>Refurbishment of The Venue toilets £ 5k </li></ul></ul><ul><ul><li>Freezers and chillers £ 16k </li></ul></ul><ul><ul><li>Accessibility improvements to premises £ 20k </li></ul></ul><ul><ul><li>Sports Federation equipment £ 10k </li></ul></ul><ul><li>Plus numerous smaller value items across the Union’s outlets and services </li></ul>
  • 23. 2008/2009 Budget Expenditure <ul><li>Membership Services Direct Expenditure </li></ul><ul><ul><li>Student Advice £ 247k </li></ul></ul><ul><ul><li>Representation & Campaigns £ 127k </li></ul></ul><ul><ul><li>Sports & Societies £ 274k </li></ul></ul><ul><ul><li>Volunteering £ 68k </li></ul></ul><ul><ul><li>Student Media £ 38k </li></ul></ul><ul><ul><li>TOTAL £ 754k </li></ul></ul><ul><ul><li>This represents a 13.4% increase compared to membership services direct expenditure of £665k in the current year </li></ul></ul>

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