Financial Procedures
3. Budgets
Budgetary Control Procedures document [PDF]
3.1 Introduction
This document provides guidance for staff engaged in budgeting and budget administration. In particular it:
a) describes the programme for the preparation and approval of budgets;
b) outlines the responsibilities of budget-holders;
c) provides a brief description of the College's system of budgetary control;
d) explains the procedures for viring (transferring) funds between budget heads;
e) provides advice on how to apply for resources.
3.2 Programme for the Preparation and Approval of Budgets
3.2.1 Budgets are prepared for the College's financial year 1 August to 31 July. The planning/budgeting process begins during the autumn term when departments are asked to review their plans for the year ahead. Further requests may be made for budgeting or planning information up to the end of March of the following year. The precise deadline for the receipt of information will be sent to Heads of Departments annually.
3.2.2 The Finance Department uses the information received from departments to calculate the overall financial position of the College. This initial forecast is then presented to the Senior Management Team (SMT) who will review its underlying assumptions and prioritise any requests for resources prior to its submission to the Finance and Resources Committee (FRC). FRC advises SMT of any changes that need to be incorporated such as new developments or reduction in services. FRC’s broad guidelines form the framework within which detailed budget proposals are compiled.
3.2.3 During May SMT will consider whether or not individual budget proposals reflect the priorities and plans of the College and fit within the financial framework agreed by FRC. A budget is then recommended for approval at the June meeting of FRC.
3.2.4 The June meeting of FRC considers and approves the Staff budget for all departments, the Non-Staff budgets of individual non-academic departments, the College’s Capital budget and the total Non-Staff budget for all Academic departments. The calculation of individual Non-Staff budgets of Academic departments is carried out at a later stage using agreed procedures and formulae.
3.3 Responsibilities of Budget Holders
3.3.1 Definition of Budget Holders
Budgets are formally issued to budget-holders who are members of the Senior Management Team and/ or Heads of Departments. The budget-holder may delegate the authority to manage some or all of his or her budget to a budget manager, but the responsibility for the budget remains with the budget-holder.
3.3.2 Responsibility of Budget Holders
Budget holders have the following responsibilities:
i) Financial Regulations/Purchasing Policy
Budget holders must ensure that expenditure is incurred in accordance with the Financial Regulations and College Purchasing Policy.
ii) Overspending
Budgets represent the College's plan for the coming year and reflect a considered assessment of how much the College is able to allocate to funding particular activities, after taking account of all relevant factors. Budgets will, therefore, not automatically be increased for any unforeseen changes in workload. Budget holders must not make commitments which will result in an overspend against the budget.
iii) Virements
Budgets must be used for the purposes for which they are allocated. It is, however, possible to seek to change individual allocations by applying to the Finance Department for funds to be vired (ie. transferred) from one budget head (eg. Travel and Subsistence) to another. The restrictions on virements are explained in section 6.
iv) Coding
Budget holders must ensure that all transactions are coded correctly. Budget holders are not permitted to charge items to an (Analysis) code for which there is no budget, nor to a code for which they have no budget responsibility.
v) Budgetary Information
Budget holders must ensure that the Finance Department is informed at an early stage of any projects or schemes that involve significant resource commitments. Budget holders are required to provide cost estimates to assist preparation of the College's budgets, forecasts, and overall financial plan. Information may also be required to inform College Committees and/or external Organisations.
vi) Value for Money
Budget holders are expected to seek to use resources economically, efficiently and effectively so that maximum benefit can be gained from College funds.
vii) Authorisation of Expenditure
Arrangements should be in place to ensure that expenditure is properly authorised and the risk of fraud is minimised.
viii) Safeguarding of Assets
Budget holders are required to keep adequate records of equipment (including computers and furnishings) and to periodically carry out checks of the stock of these items.
3.4 Budget types
3.4.1 'College' budgets
The College expenditure budget is divided into the following categories:
i) Staff
a. Permanent posts
b. Hourly paid (mostly Visiting Tutors)
ii) Non-Staff (including equipment)
iii) Capital
3.4.2 'Other’ budgets
In addition to the 'College' budgets listed above, Academic departments also have budgetary responsibilities for:
(i) Research Grants
(ii) Short Courses
(iii) Consultancies
(iv) Conferences
(v) Discretionary Accounts
(vi) Miscellaneous Funding Council ‘earmarked’ allocations
It should be noted that, non-Academic departments also receive ‘earmarked allocations‘for specific initiatives. eg. implementation of the HEFCE approved Human Resources Strategy.
A brief description of each type of budget is given below.
3.4.3 Staff Budgets: Permanent
Heads of Departments do not have responsibilities for Staff budgets because these are held and managed centrally. Any appointment to a vacant post (within the total approved by FRC) must be approved by the Warden, usually on the advice of the Establishment Control Form (ECF) Group or a member of the Senior Management Team with delegated authority.
3.4.4 Staff Budgets: Hourly Paid (Visiting Tutors etc.)
Heads of Academic departments may have responsibility for an Hourly Paid or Visiting Tutor budget. The size of this allocation is influenced by a department's student staff ratio and the extent to which it is necessary to employ, eg. specialist practitioners to supplement the skill base of permanent staff. Usually staff employed against this allocation are paid for the number of hours they work at one of a limited number of approved rates.
Overspending against the Hourly Paid budget should be avoided, but if it occurs, the excess will be subtracted from the Department’s non-staff budget. An underspend is considered to be a saving against the College's Staff budget and therefore will not be carried forward.
3.4.5 Non-Staff budget
The non-Staff budget is intended to fund all non-staff costs including equipment and payments to non-contracted staff (ie. those correctly paid by invoice and usually not on College payroll). Visiting Tutors should not be charged to this account.
Academic departments may carry forward balances against their non-Staff budget from one year to the next. However, the year-end balances of non-Academic departments are not carried forward. Heads of non-Academic departments should note that the year-end position of non-Academic departments will be taken into account when the following year's budget is being considered.
3.4.6 Capital Budgets
The Estates and Services Department manage the College’s main capital budget. It is used to purchase land, buildings or other assets or make improvements to existing buildings. Expenditure against this budget must conform to HEFCE rules and guidance including where necessary the provision of an independent statement covering project expenditure from College Auditors.
Periodically capital budgets for major equipment purchases are allocated to individual departments. Usually these are funded from specific HEFCE allocations and care must be taken to keep within the terms of the grant.
3.4.7 Research Grants
Research Grant budgets are governed by the rules of the sponsoring organisation. Day to day control of the particular research project is usually delegated to the member of academic staff within the department who has been designated project supervisor. However, it is the Head of Department's responsibility to ensure that the rules of the funding body are strictly observed.
If there are any doubts about the finance related rules for a particular grant, advice should be sought from the Management Accountant – Academic or Research grant assistant in the Finance department.
3.4.8 Short Courses/Consultancies/Conferences
Plans for delivering short courses and providing consultancy services should be sent to the Finance department for approval at an early stage. The Finance department will provide advice on the charges to be levied for the activity to aid the recovery of the full costs of each activity. Heads of Departments should note that income will be shared between the department and the ’ College', in accordance with College Policy.
Balances against departmental short course budgets will be carried forward at the year-end.
3.4.9 Discretionary Accounts
The funding of research grants, short courses, consultancies and conferences usually consists of an element for the direct costs involved in the activity (eg. staff employed for the project, the cost of equipment etc.) and some or all of the indirect costs (energy, cleaning etc.). Providing the minimum overall funding threshold is achieved, a proportion of the income for indirect costs is kept by the College and the balance is transferred to the relevant departments’ Discretionary account. Discretionary accounts should not be credited with funds from other sources.
Details of how the funding for indirect costs on Research Grants is shared between the College and Departments are as follows:
Please note adjustments to fEC based grant residual sharing (potentially leading to a greater departmental share) may occur if:
- at project application stage it is demonstrated that the principal investigator is unavoidably required to work away from the College for a prolonged period (where a ‘prolonged period’ is defined as a continuous period of three months or longer) or where;
- The principal investigator has included 20% or more of their time in previous fEC grants awarded and is required to undertake work on one or more additional fEC based grants concurrently.
More details of the adjustments to the sharing methodology may be obtained from the Management Accountant - Pro Warden Research and Enterprise or from the Research Office.
The College does not place many restrictions on the types of expenditure that can be financed from Discretionary accounts, but all expenditure must be in support of the strategic objectives of the College and in accordance with the financial regulations.
| Category | College | Department |
|---|---|---|
| Full Economic Cost (FEC) Grants | ||
| Split based on Residual Value | 70% | 30% |
| Non-FEC grants | ||
| Non-Research Council Grants with overheads below 40% | First 10% | Balance above 10% |
| Non-Research Council Grants with overheads above 40% | 25% | 75% |
Amongst other things Discretionary funds may be used for:
(a) Pump priming research initiatives;
(b) Financing research studentships;
(c) non-staff expenditure including equipment and furniture;
(d) offsetting any overspending on standard ‘College’ non - staff budgets.
Discretionary accounts must be kept in credit.
3.4.10 Earmarked Allocations
Both Academic and non-Academic departments sometime receive ‘earmarked’ funding from Funding Councils to undertake specific initiatives and achieve predetermined objectives. Separate budgets must be set up for earmarked grants and budget holders are required to observe the conditions of the Award and accurately account for expenditure. Earmarked funding may be withdrawn if the Funding Council is not satisfied that the allocation has been used for its intended purpose and the expenditure may be subject to independent audit.
3.5 Accounting Information
3.5.1 Every month budget-holders will receive:
- A transaction listing showing details of invoices paid, inter-departmental transfers etc. for departmental activity. The transaction listing provides a detailed breakdown of the income, non-staff expenditure and VT expenditure included in the budgetary control report.
Budget-holders are expected to ensure that the transaction list is correct.
- Budgetary control reports showing expenditure against budget.
Each quarter a detailed salary budget report is produced showing the expenditure and budget of all staff charged to a Department's code in the year.
- Budget Statements
The monthly budget reports issued from the Finance Department provide budget-holders with information to monitor and control expenditure within their department/section. Budget reports also provide information to senior management and give advance warning of potential problems in meeting the overall College budget.
- Profiling
The value of Budget reports can be considerably increased if the budgets are profiled, ie. an attempt is made to match the timing of the budget over the year with the anticipated timing of the expenditure. For example, if a subscription payment £1,000 is due in August, the budget of £1,000 for that subscription should also be shown in August. At the start of the year Management Accounts will use all available information to predict the likely pattern of departmental income and expenditure over the year but departments are also invited to notify the Finance office when they plan to undertake significant activity.
Departments that do not send the relevant profile information will generally be assumed to incur expenditure at a uniform rate (ie. 12ths). Profiles can be adjusted throughout the year if a budget holder changes his or her views on the likely pattern of expenditure.
- Layout of Budget Reports
Budgets are specified for a number of separate items. Where a number of account codes are grouped under one head (as is usually the case for Academic department’s non-staff budgets) only the aggregate spending on those heads needs to be controlled. Otherwise each budget should be controlled separately.
3.6 Virement
3.6.1 Virement is the facility available to budget-holders, within defined rules, to transfer funds from one budget heading to another. Generally, virement is exercised in order to finance an item not provided for in the budget and the budget-holder makes a commensurate saving on another budget heading. Fortuitous savings are normally excluded from these arrangements and accrue to the College to offset any overspending which may have arisen for reasons outside the control of managers.
3.6.2 Requests for virement should be sent to the Management Accountant - Academic or Management Accountant - Support as appropriate. All requests will be considered sympathetically; however, in some instances it will be necessary to obtain approval from senior management before permission to vire can be granted.
3.6.3 Virement will not normally be allowed from:
a) College-wide budgets managed centrally, eg. Insurance.
b) Staff budgets, including hourly paid staff, (unless required to fund appropriately approved Agency or other non-contracted staff expenditure);
c) Income accounts;
d) Capital budgets.
3.6.4 Virement between two Cost Centres requires the consent of both budget holders and the approval of the Director of Finance.
3.6.5 Requests for virement must be submitted on a .
3.7 Monitoring
3.7.1 Monthly
Each month the Finance Department will examine expenditure against each budget. Judgement will be applied in the monitoring process bit, if for no immediately discernable reason, cumulative expenditure exceeds budget to date by more than 10% or £10k, whichever is the smaller, a memo or an e-mail will be sent to the budget holder to request an explanation for the cause of the overspending. If the reason given is unsatisfactory the overspending will be reported to the Director of Finance who will take appropriate action.
It should be noted that large monthly variances are often the result of poor profiling (see section 5.3). Budget holders are therefore encouraged to provide profiles and so avoid unnecessary correspondence.
3.7.2 Year End
Budget holders are expected to remain within budget. If at the year end a budget is overspent the budget-holder will be expected to provide a written explanation of why the overspending has occurred. If the overspending is large (above 5% or £10k) and the written explanation is considered to be unsatisfactory, the budget-holder will be required to explain to the Director of Finance the reasons for the overspending and the action that will be taken to prevent a recurrence. Budget-holders who consistently demonstrate that they are incapable of managing their budgets will be relieved of the responsibility.
The non-pay budgets of Academic departments are rolled forward and therefore any overspending automatically becomes a charge against the following year's allocation. Non-Academic departments' budgets are not rolled forward, but the year-end position is taken into account before a recommendation is made about the following year's budget. The annual budgets for non Academic departments are dependent on an assessment of the department’s need and the College’s overall financial position, but unless an adequate explanation is provided for an overspend at the year end, the overspend will be set against the following year's budget.
3.8 Additional Resources
Requests for additional resources must be formally assessed by the Finance department in the first instance. Requests should be restricted to ‘planning and budgeting round’ prior to the start of the financial year and in time to be considered against other priorities. All requests, other than minor ones, will be considered by SMT. (Please note that requests with a full year effect of more than £10k will automatically be considered by SMT.)
The College's contingencies and reserves are limited and it should be assumed that additional resources will not be made available unless the need arises from one or more of the following reasons:
1. The funds are required to meet a new strategic objective approved by relevant College Committees (including Finance and Resources Committee).
2. The funds are necessary to comply with legislation or Health and Safety Guidelines.
3. Costs have increased significantly because of unforeseen external factors outside of the budget holder's control, for example, an unusually large increase in the price of an essential commodity.
Prior to requesting additional resources, budget holders should consider virement. Additional resources will only be granted if it can be demonstrated that it is not possible to fund the expense by viring from one budget heading to another.
3.9 Coding Structure
It is important that budget holders understand the coding structure. The main code has eleven digits broken down into two separate elements. The first four digit item code describes the type of goods or service and the second seven digit analysis code identifies the Cost Centre (eg. department, section, or project). See Agresso Coding Structure and Agresso Item Codes.
3.9.1 Creation of New Codes
If you wish to create a new (Analysis) code please contact the Management Accountant - Academic or Management Accountant - Support as appropriate. Please note that new codes will only be set up if:
a) an additional budget has been approved;
Or b) a budget is transferred from an existing allocation;
Or c) it is for additional analysis of expenditure against an existing budget.
3.10 Further Advice
This document is not intended to be comprehensive. If you have any queries please contact the relevant member of staff listed in Who does What.