Post on 15-Apr-2018
transcript
10/7/2014
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The 2014 TRACS Annual Conference
Orlando, Florida
October 22, 2014
Jan M. Haas, Sr. VP,
Finance & Administration
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
Objectives• Definition
• Relationship to strategic planning
• Types of budgets
• Process preparation
• Presentation
• Monitoring
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Definitions• Institutional budgeting is the process whereby the
plans of an institution are translated into an itemized, authorized, and systematic plan of operation, expressed in dollars for a given period.
• Budgets are the blueprints for the orderly execution of program plans; they serve as control mechanisms to match anticipated and actual revenues and expenditures.
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
Page 3Source: National Association of College and Universities Business Officers, College and University Business Administration, 4th Edition, 1982.
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Definitions (continued)
• Budgeting is a management tool for both planning and control.
• Fundamentally, the budgeting process is a method to improve operations - a continuous effort to specify what should be done to get the job completed in the best possible way.
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
Page 4Source: Managerial Finance, Seventh Edition, J. Fred Watson & Eugene F. Brigham, The Dryden Press, Hinsdale, IL, 1981.
Bridge to Strategic Planning
Budget
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Mission
Core Values
Vision
Goals/Strategies
Annual Plan
Bridge to Strategic Planning
• Coordinated effort of strategy and budgeting
• Effective translation of annual plan to a financial
plan (the budget)
• Standard framework for both annual and financial
planning
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Operating Budget• Revenue
• Expenses
� Salary and Benefits
� Operations
Capital Budget• Relationship to the mission
• Strategic importance
• Multi year, committed projects
• Essential projects (e.g., safety, accreditation)
• Financial return (NPV, IRR, Break-Even)
• Probability of success
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Factors Affecting the Budget ProcessInternal Factors
• Mission
• Fiscal policies
• Compensation goals and policies
• Pricing policies
• Management style
• Accountability
• Debt policies
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Source: National Association of College and Universities Business Officers, College and University Business Administration, 4th Edition, 1982.
Factors Affecting the Budget ProcessExternal factors
• Sources of support
• Government regulations - OSHA, EPA, ADA, FERPA,
PPACA, Title IX, etc.
• Competition for students
• Demographic trends
• Inflation
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Process
• The process should communicate:
� institutional priorities to various
constituencies,
� identify specific commitments, and
� establish preliminary control over
institutional resources.
• The result of this process is a document
that is used to monitor and control the
ongoing operations of an institution.
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Process
Major participants include:
• The Governing Board
• Chief Executive Officer
• Senior Administrators
• Budget Officer
• Planning and Budgeting group
• Faculty
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Key Success Factors• Process must provide a clear mission as well
as strategic and financial context for decision making
• Overall capacity should be communicated early in the process
• Budget calendar must provide adequate timeframes for completion of tasks
• A process for ongoing feedback should be implemented to promote continuous improvement of the process
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Preparation1. Create a budget calendar
2. Determination and communication of budget
guidelines
3. Estimates of revenues and expenditures
4. Internal budget hearings with academic and
support units
5. Preparation of budget requests
6. Standards/Targets/Benchmarks
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Source: Budgeting, Ken Martin, Ph.D., Messiah College, February 11, 2003.
Preparation1. Develop a budget calendar
• Leadership discusses preliminary targets
• Present budget parameters to budget group
• Set budget targets
• Distribute budget materials
• Budget workshops
• Budget submissions reviewed
• Reviews consolidated for leadership
• Report to Finance Committee
• Board of Trustees approval
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Preparation2. Determination and communication of budget guidelines
• Salary and wage increases
• Tuition rates
• Levels of support for student aid
• Increased operational expenses
• Improvements in certain programs
• Implementation f new programs
• Reduction or elimination of existing programs
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Preparation3. Estimating Revenues …
• Enrollment data
• Economic conditions
• Investment earnings
• Revenues from gifts
• Auxiliary enterprises
and Expenditures• Improvement of existing programs
• Development of new programs
• Policies for salaries, promotions & employee benefits
• Student-faculty ratios, class size, teaching loads
• Increased costs
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Preparation4. Internal budget hearings with academic and
support units
5. Preparation of budget request
Standardized forms
• Personnel
• Operating expenses
• Capital expenditures
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Source: Managerial Finance, Seventh Edition, J. Fred Watson & Eugene F. Brigham, The Dryden Press, Hinsdale, IL, 1981.
Preparation6. Standards/Targets/Benchmarks
• Accreditation agency guidelines
• National association recommendations
• ABACC financial benchmarking
• State agency reports
• Key Performance Indicators
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Presentation
• Costs and benefits of offering programs
• Consequences of reducing support services
• Effects of demographic trends
• Effects of other factors (both internal and external)
• Assumptions
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Presentation (continued)
• Comparison to budgets of prior years
• Explanations of major changes
• Description of programs added or eliminated
• Wage and salary policies
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Source: Budgeting, Ken Martin, Ph.D., Messiah College, February 11, 2003.
Lessons Learned
• New positions = permanent $
• Leadership needs to assess departmental needs
early in the process
• Provide feedback on priorities and communicate
decisions firmly
• Remain flexible
• Encourage staff to become involved in cost
reduction efforts
• Communication builds alliances
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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)
Lessons Learned (continued)
• Decisions should be based on trends and
introduce increment tally; it is difficult to retract
• Quick fixes can increase deferred maintenance
with expensive consequences
• Managing the budget process is different than
controlling revenues and expenditures
• Educate others by saying it often and in a variety
of ways
• Avoid the “shotgun” approach
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
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Q & A
The Budget ProcessDeveloping the budget and gaining institutional buy-in.
Jan M. Haas
Sr. VP, Finance & Administration
jhaas@cairn.edu
www.cairn.edu
215-702-4312