Budgeting
Guidelines & Procedures
Overview
The Corporation Budget is the
University’s budget of record that is presented to the University Corporation
for approval annually in May for the following fiscal year beginning July
1. The Office of the University CIO
usually submits its Core Funded budgets in early February and its Service
Center (UIS) budgets in early March to the University Budget Office (UBO). Local units calculate detailed line item
departmental budgets using assumptions developed from a variety of information
sources and locally developed budget modeling tools. The format of the submission is determined
annually by the UBO and communicated in the previous fall. Draft budgets are reviewed by the OAS
Director/UIS Executive Director and revised as indicated. All budgets are then presented to the CIO for
individual review. Core Funded Units are
also reviewed in aggregate to ensure the overall goals of the Office of the CIO
are being met as a unit.
Budget Process
The budget format can vary
from year-to-year to meet any new requirements communicated by the UBO. However, the fundamental steps listed below
should be included in the budget process:
- Gather the sources of information to be used in
developing the budget and developing budgeting assumptions based upon that
information
- Calculate the budget using budgeting models,
budgeting assumptions and financial partner assistance
- Prepare the budget for submission using the
prescribed format as developed in prior years and adjusting to meet the
Budget Letter requirements
- Gain approval from the OAS Director/UIS Executive
Director, CIO and Financial Dean
Gather Sources of Budget Information &
Develop Assumptions
Prior to developing the
Corporation Budget, those involved in the budget process must assemble the
relevant information that could potentially impact the budget and develop
assumptions that will be used in the budgeting process.
Local units must determine
the business specific factors that will influence their budget for the coming
year. Below are some common information sources that should consider.
University Budget
Letter
The UBO publishes an annual “Budget Letter”,
at the beginning of the budget season (generally by December 1st), for the
upcoming fiscal year. The Budget Letter
contains specific required budgeting assumptions, such as fringe rates. It also contains information about
anticipated increases in certain types of costs (e.g.; travel, space) which
units should consider when budgeting, but may deviate from as appropriate for
their particular unit. The Budget Letter
also communicates the required format of the submission as well as deliverable
deadlines.
Supplementary
guidance for the Core Funded and Service units is published in the Central
Administration Budget Letter around the same time. It contains further requirements such as
overall year-over-year budget increase limit for the CIO’s Core Funded
operations, guidance on computing specific budget line items, such as vacancy
savings, the core budget submission deadline, and the format of the submission.
Strategic Planning
On an annual basis, directors and managers participate in the strategic
planning and budgeting process, which is managed by Financial Services. This process begins with the identification
of future requirements as defined by our customers and the setting of goals and
priorities by business group, which are then linked to the Corporation
Budget. The High-level Goal Setting
process, completed annually in November, should include 4-6 high level
strategic initiatives that were identified during the Rate Development Budget
process. Managers should ensure that the
financial impact of departmental goals and priorities developed in the
High-level Goal Setting process have been quantified and factored into the
Corporation Budget.
New Projects or Initiatives
Managers/directors should
consider the planned projects for the budgeted fiscal period and what resources
will be needed to successfully complete those projects. Assumptions about funding sources (such as
Reserves, special Core IT funding, new rate programs, pass-through expenses,
and operational budgets) should be reviewed with the Financial Service
organization and potentially the OAS Director/UIS Executive Director and the
CIO.
Operating Impact of
Current/Proposed Projects
Projects recently completed
or to be completed by budgeted fiscal year end often result in an impact to
operating budgets. Projects can result
in an increase or decrease in multiple budget line items such as FTE changes
(resulting in changes to budget salary, fringe, personnel related costs, space,
etc) or server hardware (resulting in changes to hardware maintenance, SOC
support costs, etc). The estimated
on-going financial impact to operations should have been calculated initially
when the project was approved. The
Director/Manager, Project Manager, and Financial Partner should work together
to identify the impact of the project on operating costs and ensure it is
incorporated into the budget. Often it
is useful to understand the aggregate impact of a project on the budget for use
in explaining year-over-year budget changes in the Budget
Narrative.
Changes to Business
Models
Managers/directors should consider the impact that adding new
services, discontinuing services, and re-aligning areas will have on
operational costs throughout the business unit.
Any anticipated changes should be valued and incorporated into the
budget exercise.
5-Year Capital Plan
A requirement of
the Corporation Budget submission is a 5-Year Capital Plan. All groups are required to complete a 5-Year
Capital Plan template that is consolidated to reflect the overall capital needs
of department. The UIS/OAS asset and loan database is updated during the
Corporation Budget exercise and provides individual business units (service and
core groups) with estimated depreciation and debt service payments for both the
Current Fiscal Year-End Forecast and the Corporation Budget. The 5-Year Capital
Plan can also be used as a resource for those groups preparing multi-year
forecasts.
Staffing Plans
Business
activities such as introduction of new technology and/or systems, retirement of
old technology and reorganizations might change the quantity and/or skill level
of resources needed by local units. The
impact of those changes must be incorporated into the budget. They may take the form of requested changes
to headcount, severance payments, training costs to existing staff to introduce
new skills, recruitment fees, etc.
Staffing
plans may also include the use of contractors, temps, and casual labor in
appropriate circumstances. However,
consideration must be made as to the cost of these resources vs. internal
staffing as well contractual requirements.
Any changes to staffing plans, including the use of contractors, temps
and casual labor, should be discussed with the CIO, OAS Director/UIS Executive
Director, and/or CAIT Human Resources as appropriate.
Changes to
staffing can have a direct or indirect impact on other costs. Direct costs include items such as fringe
benefits and telephone expense. Indirect
impacts can include items such as allocations for space and administrative
overhead.
Vendor Contracts
Vendor contract
management is an essential responsibility of those UIS/OAS groups who rely on
outside vendors to provide services to Harvard University. Budget managers should incorporate into the
budget process expected changes in vendor relationships including; new,
existing or re-negotiated rates, volume discounts and potential liability due
to minimum volume thresholds not being met.
Technology Costs
As an information
technology organization, most UIS groups maintain detailed financial
information on the support costs related to the operations or group
managed. Examples of these type of costs
include, but are not limited to; expendable equipment, capital investments,
software licensing, telecommunications, desktop support, hardware and software
maintenance, server hosting, data storage expenses, facilities cost, networking
expense and disaster recovery.
Prior Year Financial
Results
A comparison of
prior year results against both the prior and current year’s budgets should be
done at the line item level. Significant
variances should be analyzed to determine if adjustments to the budget being
prepared are needed. Budget managers should be prepared to support
significant adjustments in the Budget Narrative.
Current Year-End
Forecast
A projection or forecast of
the current year should be completed prior to or as part of the budgeting
process. The
Current Fiscal Year-End Forecast should then be compared to the current year
budget at the line item level. This is
generally done using the current actual year-to-date information through
October 31. Significant variances should be analyzed to determine if
adjustments to the budget being prepared should be made. Generally, the Current Fiscal Year-End
Forecast is a required component of Corporation Budget submission. Budget managers should be prepared to support
significant adjustments in the Budget Narrative.
Other Information
Other expenses must also be
factored into the budget including space, indirect administrative expenses,
dues, membership fees, training, printing, and publishing. Anticipated changes due to FTE count
adjustments and anticipated rates charged by internal/external providers must
also be factored into the budgeting of these line items.
Business Unit Billing
Systems
Many UIS Service
Centers rely on sophisticated electronic billing systems to process and record
monthly customer billing transactions to the general ledger. These systems also maintain other relevant
business data such as unit quantities, average pricing and monthly revenue
totals, which can be useful in applying business assumptions for current
year-end projections and Corporation Budget revenue. Examples of business
assumptions include; expected growth or decline in service, change in product
mix and customer volumes. Depending on the complexity of the service offerings,
the business unit may want to maintain multi-year revenue business reports for
trend analysis, which can assist in the forecasting and budgeting process.
Additional Financial
Analysis
Each local unit may need to
develop additional analysis to calculate its recommended budget for specific
significant budget line items such as software/hardware maintenance. Such analysis typically will not be submitted
as part of the budget, but managers/directors should be prepared to discuss
assumptions developed from this process during the budget review process.
Calculate
Detailed Budget
Using the assumptions
developed during the information gathering process, budget managers should
prepare a line item departmental budget which at a minimum includes a
comparison of the prior year actual, current year budget, current year-end
forecast, and recommended budget along with an explanation for any significant
variances.
Compare
Corporation Budget to Rate Development Budget
Once the Corporation Budget has been completed, each UIS Service
Center unit should
compare the Corporation Budget to the Rate Development Budget created the
previous fall during the UIS rate setting process. Since the Rate Development
Budget was used to determine customer rates, all significant variances
identified when comparing to the Corporation Budget, must be reviewed with the
UIS Executive Director.
Roles and
Responsibilities
Below are the definitions of
roles and responsibilities for individuals participating in the UIS/OAS
Corporation Budget process. All of the
parties detailed below; University Budget Office, Director, Management and
Financial Services work as a team in the Corporation Budget exercise.
Budget
Office Responsibilities
It is the responsibility of
the University Budget Office (UBO) to provide guidance to all parties involved
in the budget processing, including UIS/OAS directors and managers and UIS/OAS
Financial Services, to ensure a complete and proper Corporation Budget is
submitted to the UBO and uploaded to the general ledger in accordance to the
University schedule.
Director
Responsibilities
It is the responsibility of the Director to oversee the Corporation Budget process
for his/her group. Each director must
understand all the components used to develop the Corporation Budget. Service
Center unit directors
must also analyze how the Corporation Budget differs from Rate Development
Budget and what impact that may have on customer rates already communicated.
Management
Responsibilities
It is management’s responsibility to understand the detailed
budgets that have been prepared for the areas they support to ensure that
business decisions (e.g. staffing resources, capital investments, changes to vendor agreements,
quoting of customer rates) are informed by that decisions potential impact to
the budget.
Financial Service Responsibilities
It is the responsibility of
Financial Services to create the Corporation Budget for the businesses they
support. Financial services will assist the directors and management in
completing all required steps of the Corporation Budget process (i.e. budget
uploads to general ledger, narrative, key indicators, reserve information,
etc.) in a timely manner. Financial
Services also acts as a liaison to the University Budget Office.
Budget Office
Submission
The format of the submission
to the UBO is determined annually by the UBO and communicated in the University Budget Letter (as well as the Central
Administration Budget Letter for core funded units). There are generally two major components to
the submission, the Budget Data and the Budget Narrative.
Financial Services consolidates all of the individual business units’
Budget Data and Budget Narratives into a single submission to meet the UBO’s
stated deadline (generally mid-February for the Core Funded Units and mid-March
for the Service Units).
Budget Data
Line Item Budget
The budget data
submitted is generally a line item budget by business area. It is either submitted as an excel document
or uploaded into the General Ledger, depending upon the UBO’s
requirements. It generally includes the
Prior Year Actual, Current Year Budget, Current Year Actual to Date, Current
Year-End Forecast, and Corporation Budget for the upcoming year.
Key Indicators Page
As part of the UBO submission for UIS Service groups, key
business indicators must be provided. The key indicator request uses a
multi-year approach and includes supplemental data such as; staffing levels,
debt service details and reserve balances. Additionally, the UBO selects three
Service groups to provide business metrics and statistics that assist in
quantifying and evaluating the business activities. Examples of some of metrics
previously used are: number of users/customers, select customer rates and
service level expectations.
Projected Capital
Spending Document
The Projected Capital
Spending Document requires information be provided
for each capital expenditure (from the 5 Year
Capital Plan process described above) which exceeds $100K. Information requested includes a schedule of
debt service payments over the five-year period, source of funding, and the
impact on operating/maintenance over the same period. For larger capital expenditures exceeding
$500K, a narrative description of the purchase will also be required.
Sources/Uses of
Reserves
UIS Service
groups are required to submit a detailed description of each of its reserve
balances and, using a roll-forward approach, must account for the sources and
uses of the reserves anticipated in the next budget cycle. Business unit
reserve balances are classified as either undesignated or designated and have
defined stated purposes such as rate stability or future equipment investments.
Core groups are
required to submit a proposal for the use or funding of reserves (both CIO and
Cross VP-contingency reserve) in the month of September, prior to the
Corporation Budget process.
Narrative
Budget Schedule
Once the official
University Budget Office request has been received by Financial Services, an
internal budget schedule will be developed by Financial Services and
communicated to all UIS/OAS budget managers.
Below is the general timeline for some of the major milestones in the
budgeting process.
|
Milestone
|
Service Centers Units
|
Core Funded Units
|
|
Planning
|
University
Budget Letter Published
|
Nov 15th
|
Nov 15th
|
|
University
Budget Office Guidelines Received
|
Dec 15th
|
Nov 22nd
|
|
Budget
Communication Kick-Off
|
Dec 22nd
|
Dec 1st
|
|
Current
Year-End Forecast Calculated
|
Jan 30th
|
Nov 30th
|
|
Service Center Rates Communicated
|
Dec 15th
|
N/A
|
|
Financial Budget Review
|
Draft Budgets
Complete
|
Feb 15th
|
Dec 20th
|
|
Consolidated
Financial Budget CIO Review*
|
Feb 21st
|
Jan 15th
|
|
Financial
Budget Finalized
|
Feb 28th
|
Jan 22nd
|
|
Budget Narrative Review
|
Draft Budget
Narrative Review/Director
|
Feb 211st
|
Jan 15th
|
|
Consolidate
Budget Narrative Review with CIO
|
Mar 1st
|
Feb 7th
|
|
Submission
|
Consolidated
Submission to UBO
|
Mar 15th
|
Feb 15th
|
*CIO Review for Service
Center Units includes UIS Executive Director Review
For More Information
For more information, visit the ABLE web
site http://able.harvard.edu/policies/policies_index.shtml
and click on Fiscal
Budgeting Policies or contact your Financial Partner.
