Policy 55 - Budget Management

Approved Board of Governors 2012.53

BUDGET MANAGEMENT

PURPOSE

1. The strategic plan guides budgeting at the University of Ottawa. This policy sets out the guidelines regarding the budgetary process and budgetary control, and codifies current decisions and practices.

ROLES AND RESPONSIBILITIES

2. The Board of Governors is responsible for ensuring that the budget is consistent with University objectives and for providing final approval.

3. The Finance and Treasury Committee is responsible for reviewing the budget in detail to ensure that it is consistent with University objectives and for recommending to the Board of Governors whether the budget should be approved.

4. The Administration Committee is responsible for presenting a balanced budget that is consistent with University objectives and for recommending to the Finance and Treasury Committee whether it should be approved. To ensure a balanced budget, the Administration Committee must implement processes that maximize income and ensure effective expenditure management.

5. The Vice-President, Resources provides leadership in budget preparation at the University and recommends to the Administration Committee whether the annual budget should be approved.

6. The Financial Planning Service ensures that this policy is applied. It issues guidelines, assists the faculties and services in preparing their budgets and ensures budget coordination and validation.

7. The deans and directors are responsible for ensuring that all units under their authority follow this policy and related procedures and that they limit their expenditures to their budgetary allocations.

8. The faculties and services are responsible for preparing and submitting an annual budget, according to Financial Planning Service budget guidelines and processes. The faculties and services are also responsible for budget updates and explaining any variances.

GUIDING PRINCIPLES

9. The budget is prepared using fund accounting. It is prepared annually and includes all funds. Different budgetary processes apply according to the type of fund. Each faculty and service receives a budgetary allocation, manages its own budget and is responsible for any surplus or deficit.

FUNDS

10. Each fund has a primary function. This allows income to be allocated for specific purposes.

Operating fund: This fund accounts for the costs of teaching and research (other than sponsored or contract research), libraries, student services, administrative services, plant maintenance and other operating expenses. It is financed by tuition fees, operating grants and other unrestricted revenue.

Ancillary enterprises: This fund accounts for the operations provided as supplementary to the primary function of teaching and research. It includes food services, residences, parking and other self-funded services. Activities included in this fund are self-funded and are not financed through grants and tuition fees.

Capital fund: This fund accounts for expenditures of a capital nature, including building and land acquisitions, construction, acquisitions of major equipment and major renovations. Space optimization and deferred maintenance fall under the annual budget, while major capital projects fall under the five-year plan or are approved on a case-by-case basis by the Board of Governors. The capital fund is financed by grants, donations, borrowings and transfers from other funds.

Research fund: This fund accounts for all research activities that are financed from restricted sources such as government, private industry and donors; income and expenditures of affiliated institutions are not included. The funding from contracts and grants is received at different times throughout the year and there may be some limitation on its use imposed by the funding agency.

Trust fund: This fund accounts for other activities that are financed through restricted sources. Restricted funds provided for specific capital and research purposes are reported in the Capital and Research funds, respectively. It also includes the investment income earned on endowment funds, which must be spent in accordance with internal restrictions or specific instructions by the donors.

Endowment fund: This fund accounts for the externally or internally restricted contributions which cannot be spent. It is funded by donations, grants and internal transfers. Only a portion of the accumulated investment income is transferred to the trust fund.

11. The consolidated budget includes all funds except for the endowment fund, whose contributions are included in the statement of net assets in the financial statements. The operating fund, capital fund and ancillary enterprises budgets must be approved by the Board of Governors, while the research fund and the trust fund budgets are presented to the Board for information purposes only.

APPLICATION

12. This policy applies to all operating funds and ancillary enterprises managed by University faculties and services.

BUDGET GROUPS

13. Within the operating fund, different budget rules apply. It is therefore necessary to establish groups to define these rules. The operating fund is made up of five budget groups:

Global: Faculties and certain services with a large payroll. Units operating on this type of budget can allocate funds among all expenditure groups according to their needs, except for the academic salary budget.

Regular: Services, including the Faculty of Graduate and Postdoctoral Studies, that have a smaller payroll. Units operating on this type of budget cannot have access to funds allocated for regular salaries without the authorization of the central administration.

Restricted: Central funds whose management may have been delegated to the faculties and services. These envelopes can only be used for the purposes for which they have been authorized. This group includes two types of expenditures, unavoidable costs and specific projects or initiatives.

Targeted grants: Budget funded through external grants for specific projects or programs.

Self-funded: Balanced budget with income covering expenditures. Income generating services and ancillary enterprises are subject to this group’s budget rules.

BUDGETARY ALLOCATION AND EXPENDITURE FUNDING

14. For the global, regular and restricted budget groups, each faculty and service receives a budget objective at the beginning of the year, which determines the budgetary envelope it can allocate. The previous year’s base budget is the starting point. Faculty budgets are adjusted to take into account variations in their student population and indirect research costs. Faculties and services receive an adjustment for certain salary increases. Units managing a global, regular or restricted budget are not responsible for covering employee benefits. Other adjustments require a budget request and must be approved by the Administration Committee.

15. For the targeted grants and self-funded budget groups, the budget is based on income and he unit is responsible for covering all salary and employee benefit related expenditures.

16. For self-funded services, overhead costs are charged annually to take into account their use of common services.

BUDGET CYCLE

17. The current year’s base budget is the starting point for preparing the following year’s budget.

18. The Financial Planning Service, along with Institutional Research and Planning, drafts budgetary assumptions concerning enrolment growth, calculates projected grant and tuition fee income, and calculates the faculty allocations according to an approved financing formula.

19. The Financial Planning Service, along with the Human Resources Service, drafts budgetary assumptions concerning salary increases (economic, step movement or progress through the ranks) and employee benefits and calculates the projected salary expenditures.

20. These steps help prepare a preliminary budget and a three-year projection, which are presented to the Administration Committee for revision.

21. The Administration Committee puts into place consultation and optimization processes to attain a balanced budget. It can only recommend running a deficit if it has received prior authorization from the Board of Governors.

22. The Financial Planning Service then develops budget objectives and each faculty and service allocates its budget within the financial system. All of this is compiled and validated by the Financial Planning Service, which prepares the annual budget book.

23. The budget is submitted for approval at the various levels.

24. Budget updates are presented to the Board of Governors twice annually, allowing for actual income and expenditures to be compared to the budget.

INTERPRETATION

25. The Associate Vice-President, Financial Resources is responsible for applying this policy.

EXCEPTION

26. No exception may be made to this policy without the written consent of the Administration Committee.

Revised October 29, 2012

(Financial Planning Service)

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