Budget Management and its Cycle discussion PowerPoint presentation. Report for Masteral Class in Financial Management. Professor: T. Faminial

2. Management of the
Budget Cycle
Reporter: Ms. Marjorie M. Pablo

3. Budget management is a never ending task
for any administrator with financial
responsibilities in higher education.

4. https://www.presentermedia.com/powerpoint-animation/figure-juggling-balls-pid-4301

5. Additional ideas from: https://samples.jblearning.com/0763746681/31293_ch03_lee.pdf
Photo from: https://www.datamensional.com/budgets-budget-cycles-long-long-enough/budget-cycle/

6. Common Scenario:
The person with budget management
responsibilities in the unit is likely to be
supervising expenditures under the current
operating budget and closing or getting ready
to close the previous year's operating budget
while making financial projections for the
upcoming fiscal year.

7. If new facilities are in the planning stages or
under construction, attention must also be
given to the capital budget (which may have
timing issues different from those of the
operating budget). If the unit is involved in
management of a facility, then attention must
also be given to building operating costs and
plans for ongoing maintenance and repair.

8. Budget Managers Other Tasks:
- Project Budgets beyond current and
next fiscal year in order to support the
overall fiscal plan in the institution.
- projecting expenses
- estimating revenues

9.  Budget cycle involved in:
 developing and implementing
the operating budget
 creating a new budget request
 creating ongoing budget management processes
and procedures
 discussing forecasting both revenue and
expenses into future fiscal years

10. General Issues
 Institutional characteristics,
 participants in the process, and
 the amount of time available to
seek input on budgetary matters.

11. Institutional Characteristics
 Institutional size and complexity influence both
the budget process and who is involved in the
development of the institutional budget.

12. Institutional Characteristics
 Large institutions or those without a
highly participative governance
structure will more likely have a
relatively closed budget process without
much input from constituents.
Generally speaking, a more open
process is desirable” (2005, p. 98).

13. Participants
 Selection of representatives
Example:
At a large private institution undergraduate
students were interested in becoming more
involved in the budget process.
Student Budget Committee

14.  Available Time
Time
is also a large factor in how inclusive
a budget process can be.
Delays and changes should be
communicated well to interested
members of the campus community

15. Developing and Managing the
Fiscal Year Operating Budget

16. PHASES
OF THE
BUDGET
YEAR
Setting
Guidelines
Sharing
information
Establishing
Internal
Guidelines &
Process
Reviewing
Past
Performance
Reviewing
Internal
Proposals
Reviewing
Funding &
Program
Options
Preparing &
Submitting
Budget
Institutional
review and
Approved
Monitoring
Performance
Making
Adjustments
Closing

17. Setting Institutional and Unit
Budget Guidelines
Institutional guidelines for budget submission are
usually issued very early in the process. The
guidelines at state supported institutions must
comport with parameters set by state budget and
higher education agencies as well as by the
institution's governing board;

18. Setting Institutional and Unit
Budget Guidelines
guidelines for public institutions need only reflect
guidance from their governing board.
Institutional guidelines are set after a great deal of
study and debate within the central administration
and the budget office of the institution.

19. Setting Institutional and Unit
Budget Guidelines
1st Step in the development of new institutional budget
guidelines:
“Understanding where prior institutional budget
parameters were accurate and where they missed the
“mark”.

20. Setting Institutional and Unit
Budget Guidelines
Institutional guidelines commonly set the “outside limits”
for spending or, in more recent times, the minimum
expectations for reductions. They are usually couched in
“not more than” or “not less than” language.
For example, “increases in travel may not exceed 2 percent”
or “elimination of all out of state travel.” Separate decision
rules usually govern personnel and other operating budget
expenditures.

21. Setting Institutional and Unit
Budget Guidelines
Personnel budget rules usually set the limit
for total budget commitments in each unit
for salaries and benefits for all full time, part
time, and student employees.

22. Environmental scan
The scan of the outside environment
- is an essential second step in the
development of institutional budget guidelines.
Identification of the outside forces that will
influence the budget at the institution requires
a rigorous environmental scan.

23. Environmental scan
The scan of the outside environment is an essential
second step in the development of institutional
budget guidelines. Identification of the outside
forces that will influence the budget at the
institution requires a rigorous environmental scan.

24. Environmental scan
External Cost factors
 Cost of Utilities Raise
 Cost of Insurance
 Cost of Obtaining Services from the local municipality
 The local experience in negotiation with unions that are
presented in the campus workforce
 Rate of return on investments
 Changes in fees for banking services

25. Past Performance Across the
Institution
A review of past performance of all line
items across the institution is usually an
essential step in developing budget
guidelines.
Problem areas are identified.

26. Forecasting Expense and Revenue
Forecasting outcomes for the current budget year and
beyond is a routine part of the planning process, and
unit budget managers should be prepared to share
their best thinking about what the current fiscal year
will eventually look like and what the future might be.
Forecasting is, at best, an inexact process, so a word
of caution is in order: Revenues should be forecast as
conservative figures, but expenses should not!

27.  Three Principles of Forecasting Revenue :
- Analysis
- Management
- Strategy

28.  Forecasting for the end of the current fiscal year is
a great deal easier than projecting revenue and
expenses several years into the future. The prior
budget analysis conducted by the unit budget
manager will provide valuable information.

29.  Forecasting for the end of the current fiscal year is
a great deal easier than projecting revenue and
expenses several years into the future. The prior
budget analysis conducted by the unit budget
manager will provide valuable information.

30.  Forecasting beyond the current fiscal
year becomes more inexact. A
multiple year performance should be
based on past experience and
performance of the unit.

31.  Developing and formulating a series of
“what if” scenarios when making
multiple year forecasts will help clarify
assumptions and highlight concerns
faced by the institution and the unit.

32. Planning Processes
A strong link must be established
between any institutional planning
processes and the new institutional
budget guidelines.

33. Planning Processes
The process of developing institutional budget
guidelines is based on a series of assumptions
and beliefs. Budget guidelines, however they
are determined, will reflect the assumptions
held by planners regarding enrollment, demand
for services, opportunities, and problems facing
the institution.

34. Time Tables
Established institutional timetable enable
the administrator with budget
responsibilities to establish earlier
schedules for budget request submissions
within the unit.

35. Typical Institutional and Unit Budget Schedules
Institutional schedule Unit Schedule
November
–March Meet with units to review strategic plans
November
–March Review strategic plan with administration
Adjust strategic plan Continue to monitor current
budget Internal prioritization of new proposals
December
Review of last FY performance by Trustee Budget
Committee Approval of tuition, fees, and room and
board rates for next FY by Trustee Budget Committee
Approval of budget parameters for next FY by Trustee
Budget Committee
March
Faculty salary plans sent to schools
March
Respond to faculty salary plans (if applicable) Continue
to monitor current budget

36. Typical Institutional and
Unit Budget Schedules
Institutional schedule Unit Schedule
April
Finalize and distribute budget allocations for next FY
April
Develop and share unit budget guidelines Finalize
new program proposals
May
Faculty hiring plans due to Provost Detailed appropriated
budgets for units due at Budget Office Budget summary
prepared for Trustees Exempt and non exempt staff salaries
due at Human Resources
May
Finalize unit budget requests (including new
program proposals), being sure to check and
confirm figures Submit appropriated budget
Respond to questions regarding budget requests
Prepare and submit staff salary proposals
Continue to monitor current budget
June
Budget for next FY approved by Trustees
June
Continue to monitor current budget
July
Approved budget for next FY entered into financial systems
July
Continue to monitor current budget Remind unit
of closing rules for current FY

37. Typical Institutional and Unit Budget Schedules
Institutional schedule Unit Schedule
August
Budgets for upcoming FY distributed to units Closing process
for current FY begins
August
New budget allocations distributed Begin closing
process
September 1
Begin new fiscal year The cycle continues
September 1
Begin new fiscal year

38. Sharing Information About the Institutional
Budget Process
Budget development is not a secret process,
although it seems that way in some collegiate
environments. Information regarding the
parameters established by the institution and the
rationale for those budget rules should be shared
widely across the camps and within every agency or
department preparing a budget request.

39. Establishing an Internal Unit Budget
Guidelines and Process
Unit budget guidelines should detail the decision
parameters regarding each line item or categories of line
items in the budget. Such guidelines should easily inform
those expected to develop budget proposals about the
form for submission, the limits on submissions, the
expectations for justification of the request, the long and
short term implications of the request, and so forth. The
guidelines need not be lengthy, but they must be clear
and easy to understand.

40. Typical Additional Unit Budget Guidelines
1. Read the institutional guidelines very carefully. If you have
questions see _________ [insert person's name] immediately.
2. The dean/director is reserving 5 percent of the salary
increment money to provide extraordinary increments across
the division. Therefore, your incremental dollars are _______ .
3. Provide in writing your assumptions underlying the costs in
your proposed budget. For example, how many students will
be served? The cost per student?
4. If you are submitting a new program proposal, include the
following:

41. Typical Additional Unit Budget Guidelines
a. Who will be served?
b. What is the cost per student?
c. Why is this new initiative important?
d. How does this new initiative connect to our unit
strategic plan?
e. What is the total budget for the new initiative?
f. What revenue will support the plan? (Use of our
program plan)

42. The internal budget process within the unit should be
clear and unambiguous. Everyone involved in the
budget process should be made aware of how and
when decisions will be made regarding ideas and
proposals that they may bring forward. Budget
requests are rarely the work of just one person within
a unit. Although the ultimate responsibility for the
budget submission remains with the dean, chair, or
other unit head, development of a process that
includes wider input helps inform decisions.

43. Most often, a budget committee is formed within the
department or unit to help prioritize the needs of the
department. In smaller units, the use of a “committee
of the whole” permits everyone in the department to
have an opportunity to comment on needs and wants
for the unit. No matter what process is chosen, it is
critical that the budget of the unit reflect unit goals
and objectives and be consistent with stated unit
plans and priorities.

44. Listen. It is essential to provide an opportunity for members
of the organization to be heard regarding their needs and
wants both before and during the budget preparation process.
Depending on the size and complexity of 99 the unit, formal
hearings or informal conversations can be held. The important
task is to provide a genuine opportunity for members of the
organization to express their hopes, concerns, and aspirations
for the coming year(s) and to assure them that their ideas are
seriously considered by the unit budget manager and other
decision makers within the unit.

45. Be consistent. Once a process is
established it should be followed. Nothing
frustrates people more than trying to play by
“the rules” and then discovering exceptions
have been made for other individuals or
programs within the organization.

46. Analyzing Previous Unit Budget Performance
Past performance is thought by many to be an
indicator of future performance when it
comes to budgets. Even if you are a new
budget manager, it is important to carefully
analyze the prior year's budget performance
of the unit.

47. Developing and Reviewing Internal Unit
Proposals
Requests for funding from programs or
departments should be linked to the plan for
the unit and the objectives of the institution.
Each proposal should also outline the
implications of the proposal beyond the fiscal
year in question.

48. Developing and Reviewing Internal Unit
Proposals
What impact will the proposal have for
funding in future years?
The answer to that question determines the
real costs to the institution.

49. Developing and Reviewing Internal Unit
Proposals
What impact will the proposal have for
funding in future years?
The answer to that question determines the
real costs to the institution.

50. Developing and Reviewing Internal Unit
Proposals
What will change as the result of funding this
proposal?
What will remain the same? How many
people will be served? And how will success
be measured?

51. Developing and Reviewing Internal Unit
Proposals
When issues are early identified and assessed
the budget development process, fake savings
and reallocation of funds will be evaluated
and regarded carefully.

52. The easy way to build the budget for the next year
is to apply the rate increase percentage to the
currently budgeted line item for electricity, but
that is not the most accurate approach and may
present a false picture.
Other approaches could also be used, including
taking the highest use year and projecting costs
with an inflation factor into the current fiscal year
and using that as a new base.

53. Prior to the submission of budget, the next level of
the administration, should be involved about the
aspirations and plans of the unit if he/she has any
concerns about the new program proposal.

54. Reviewing Unit Funding and program options
A strategic budget manager should:
-test the feasibility of other options. Those options might include
developing a source of income to support the new program/service.
-eliminate or curtail a current program or activity in order to start a
new initiative.
-carefully examine whether cost savings could be captured by
changing the way business is done within the unit.
-examine whether some full time positions could be modified to
part time/whether twelve month positions could be converted to
academic year positions without negatively affecting services to
faculty, staff, and students.

55. Preparing and Submitting Unit Budget Requests
Several steps in budget submission from a unit:
- The budget materials have to be approved by the
dean, director, or vice president.
- Properly prepared budget documents submitted to
the central budget office in a timely fashion will
receive the warranted attention.
- Follow the institutional guidelines carefully and ask
for clarification if there is uncertainty regarding the
form or substance of the budget request.

56. Preparing and Submitting Unit Budget
Requests
Several steps in budget submission from a unit:
- As part of the budget request, whether it is
asked for or not, prepare a statement
clarifying the implications of the new request
beyond the current fiscal year.

57. Implications
Failure to identify the implications of the
budget request to other offices or agencies
across the institution is a critical mistake often
made by new budget managers.

58. Reference:
Barr, M. et al. “Budgets and Financial
Management in Higher Education”. 3rd Edition.
Pages 89-112. (2018)
https://www.datamensional.com/budgets-
budget-cycles-long-long-enough/budget-cycle/

59. God Bless!!!