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Budgeting, Forecasting & Management Reporting

Budgeting, Forecasting & Management Reporting Procedure

Policy Code: FN1843

Purpose

The following Procedure outlines the University’s requirements in respect of the University’s budget, financial forecasting, processes adopted to carry forward balances and the development of management reports to assist the University to make decisions and monitor its performance.

Scope

This Procedure relates to both the top level budgeting, forecasting, brought forward balances and management reporting undertaken by the Finance Directorate as well as all Portfolios and Schools, commercial areas and regional campuses.

The University’s annual budget is prepared and presented to University Council (and its relevant Committee) for approval.

Definitions

Term Definition
Budget A budget is an organisational plan in financial terms.  The financial document is used to estimate future income and expenses. A budget can also serve as a plan for action for achieving quantified objectives, standard for measuring performance and a device for coping with foreseeable adverse situations.
Brought forward balances   A balance which is entered in a general ledger at the start of a year (1 January) and represents the net balance of income less expenditure for a fund, at the end of the preceding year (31 December).
Forecast Is a projection about the year-end position, based on a number of factors including the use of historical data and current information and knowledge. It is developed in conjunction with the financial planning and budget team and budget managers during the year.
Management Reporting Management reporting is a detailed report of the actual year to date position and a full year forecast. It includes a Profit and Loss statement, cash flow balances and a Balance Sheet.

Budget Basic Principles

The following principles underpin the development of the budget:

  1. The budget supports the implementation of the University’s Strategic Plan and the underpinning Core Plans, Supporting Plans and Organisational Unit Plans.
  2. The budget is transparent and flexible and encourages efficiency in the use of resources.
  3. The budget is fully comprehensive and covers all activities including all expenditure commitments held against prior year grant funding where applicable.
  4. The budget aims to place the University on a more viable and long term sustainable financial basis
  5. The budget will ensure accountability for budget outcomes and support better understanding of the University’s financial situation by providing each head of the budget unit the responsibility for the monitoring and performance of their individual budget against target.
  6. In order to ensure long term financial sustainability and support future growth and renewal, the budget is based on the achievement of a positive underlying operating margin.
  7. Budget units are encouraged to improve efficiency and to pursue activities which contribute to the University’s strategic direction through implementing a continuous improvement approach.
  8. Recognition of Carry Forward Balances- Funds brought forward include externally funded research which have specific contractual obligations along with consultancy. When planning on utilising carry forward balances areas are required to budget in the year the expense will occur.

Overview

Each Portfolio or School, (also referred to as a cost centre) for both operating and research activities (where applicable) must prepare an annual budget in line with the guidelines set by the Finance Directorate.

Budget units will be required to control spending within the limits of the approved budget. Commercial areas are required to operate to achieve an agreed contribution margin. Corporate and central areas, research areas and regional campuses are required to operate within their expenditure targets. Unless specific approval has been granted to over spend in a given year, all areas are not allowed to spend more than their agreed budget. Expenditure from carried forward balances is to be identified within the budget submission so that appropriate approval for such expenditure may be sought.

The operating budget consists of the following main funding streams:

  1. Commonwealth Grants Scheme (CGS)
  2. Student Contributions
  3. Student Fees
  4. Other income generated in the course of performing the teaching & learning function. It also includes commercial income, other grants and donations

The research budget includes grants and contracts for special research projects, generally external agreements with the University. The annual budget also includes University-wide activities such as any University initiatives, investment income, operating capital expenditure and scholarships.

A significant grant received by the University is the CGS. The authority for the provision of the CGS is covered under sections 30-25 of the Higher Education Support Act 2003 Act. Section 30-28 of the Act requires that a copy of each funding agreement is published on the Departmental website. The CGS provides funding to eligible Higher Education providers for students enrolling in bachelor degrees and other Higher Education courses of study ‘designated’ by the Minister for Tertiary Education.

Public universities determine the number of students they enrol in Commonwealth courses and receive funding for these places up to University’s maximum grant allocations.

  1. The University's Budget model is maintained by Finance. The model captures all University expense and income estimates, based on submissions from schools. In addition, information is fed into this in relation to student fee income based on data throughout the load planning process.
  2. All budget units are required to discuss their management reports with their Finance Business Partner so that accurate forecasts can be maintained.

Accrual Accounting

The University prepares its Annual Financial Statements and management reports on a full accrual accounting basis and in accordance with the Financial Management Act 1994 which incorporates relevant Australian and International Accounting Standards.

Accrual accounting recognises events on a basis other than the timing of receipts and payments. It is designed to record the full cost of providing services e.g. Cost of utilising assets (depreciation) and staff resources (provision for Long Service Leave etc.) at the time of employment of those resources, not when cash transactions such as payment of Long Service Leave occur.

Funding Sources

All budget units,  in addition to budgeting for income and expenditure by the organisational unit are also required to budget by activity department codes (5 characters) for operating and activity project codes (6 characters) for research and other contractual activities.

The categories for operating and research activities are:

- Operating 10 – Commonwealth Operating

- Operating 15 – Commonwealth Research

- Operating 20 – TAFE  

- Operating 35 – Consultancy

- Operating 40 - Continuing Education

- Operating 45 - Fee for Service

- Operating 50 - External Research

- Operating 55 - Student Fees

- Operating 60 - Other

Budget Categories

The main high level categories of income and expenses within the chart of accounts are as follows:

INCOME
 Commonwealth Grants
 State Government Grants
 Consulting & Contract Research
 Investment Income
 Other Income
 Fee for Service
 Fee Paying Overseas Students
 HE Domestic Fee Paying
 TAFE Domestic Fee Paying
 
EXPENSES
 Salary & related - Academic
 Salary & related - Non Academic
 Scholarships
 Partner Related Teaching Costs
 Depreciation and Amortisation
 Bad and Doubtful Debts
 Other Expenses

Development of Financial Plans

In formulating budgets, the operating unit should have an operation plan of their anticipated activity for the forthcoming year according to the University Strategic Planning Framework.  This will invariably result in financial plans being developed on how the plans will need to be resourced.

Planning & Budgeting Cycle

The Planning and Budgeting Cycle is deemed to be a continual cycle. Budgeting and forecasting exercises are highly integrated. The budgeting process begins mid-year and finalised by the last quarter of the financial year. The cycle will ensure that during the course of the year, current year forecasting is reviewed. This will provide an indication on whether the existing budgets are providing satisfactory performance.

Budgeting and Planning Consolidation

Budgets will invariably start to be developed early on in the cycle, however there are a certain number of unknown variables once the firm student numbers are known budget is then approved.

Student Load Projections

Regular updates in respect of student load plans are constantly reviewed throughout the budgetary and forecasting process and as a result of this budgets may need to be adjusted. When Census dates are finalised, the overall University Budget is reviewed to reflect whether there are any adjustments needed.

Research Activities

External research income is determined by analysis the pipeline of existing funding agreements and supplementing this amount with an estimate of research contracts and funding derived from historical application and success rate patterns. Estimation of the Research Block Grant is based on the research performance metrics of research income and mainly has two components – Research Support Program (RSP) and Research Training Program (RTP). Research activity is reflected in annual plans to ensure that the expense is factored into any budgetary plans.  However, the income in respect of these projects may have been received in prior years, so it is necessary as part of the year end to ensure that appropriate carry forward requests are made. Approval from funding body is required if contract end dates are to be extended.

Salary Expenditure

Salaries are built based on the resourced based allocation to support the agreed revenue and organisational work force planning activity. Due diligence is given to expected future vacancy management requirements, contract end dates, and in light of the strategic direction, constraints and demands. Budget is also prepared for casual & sessional employees on an activity level and this is estimated based on the work load planner and the activities required to support university objectives.

Non-salary expenditure

When establishing non-salary expenditure budgets, appropriate regard will need to be made for non-salary related expenditure. Particular focus is given on known contracts, price/contract changes, activity level changes, CPI uplifts and savings opportunities.

Corporate Costs

There are a number of corporate items which will need to be budgeted at a corporate level.  These items are those that cannot be attributed to a particular responsible budget officer and hence is considered to be better managed at the corporate level. 

Capital Budget

A corporate allowance is made each year in respect of Capital Items. Within this allocation is predominantly planned maintenance of works; however there is a balance of monies available each year for capital investment. The Project Governance Steering Committee reviews and recommends any minor or BAU investment requirements to Finance to allocate within the budget. For strategic investment funding, an appropriate investment concept brief and business case needs to be developed in line with the University’s Strategic Plan. All strategic investments are to be submitted to the Strategic Investment Group (SIG) who are responsible for reviewing the University’s strategic capital planning and funding requirements and prioritising investments in accordance with the needs and priorities of the University.

Budget Timetable

The Budget Timetable will be released annually, outlining appropriate budget targets.

Financial Forecasting

Financial forecasting procedures provide information on the monthly forecasting processes and the key parameters within which forecasts are prepared.

Introduction

Financial forecasts are reviewed on a monthly basis and at key reporting dates at the consolidated University level. All budget units are expected to provide information on all areas in respect of activity across all areas including Commercial areas, Corporate and Central areas, Research and Regional campuses.

A financial forecast should be based on all available information at the time of preparation, including historical data, commitments and expected income and expenditure.

Financial Planning and Budget team together with budget units are required to prepare forecasts and monitor the University’s performance against the approved budget.

Management reports are sent out prior to meetings by Finance Business Partners. The reports provide a useful point of discussion, highlighting significant variances and form the basis of any corrective action steps required in order for the financial position to be improved. These are then reviewed with the budget managers and the forecasts amended as necessary. Explanations  for  major changes to the forecast should be provided. All of the key agreed KPI’s in the budget are monitored as well to make sure that the targets are on track and off track items are reviewed for further corrective action plan.

Managing the Forecasts

Reporting and forecasting on the University’s operating position is undertaken on a monthly basis and reported to Senior Management with the latest available reports submitted to each Finance Committee meeting. It is essential that we receive information from business units in order to feed these forecasts to ensure that we are reflecting activity. The move towards a greater demand driven environment means that it is essential that regular forecasting and tracking is done to ensure that the organisation's financial position is not detrimented.

Capital Expenditure and Projects

Reporting and forecasting on the University’s Capital Expenditure & Projects is sent to Resources Committee. Information is incorporated in both the top down and bottom up processes for budget preparation, reporting and forecasting.

Budget Variations

Budget variations should be minimal and any significant variations will be reported through Senior Management to Resources Committee.

Responsibility

•  Chief Operating Officer/ Chief Financial Officer (as the Approval Authority) is responsible for monitoring the implementation, outcomes and scheduled review of this procedure.

•  Associate Director - Financial Planning and Analytics (as the Policy Sponsor) is responsible for maintaining the content of this procedure as delegated by the Chief Operating Officer/ Chief Financial Officer .

Promulgation

The Budgeting, Forecasting & Management Reporting Procedure will be communicated throughout the University via:

1. Announcement on the FedNews website;

2. ‘Recently Approved Documents’ webpage to alert the University-wide community of the approved Policy;

3. Information/Training Sessions; and/or

4. Inclusion in the University's online Policy Library;

5. Distribution of e-mails to relevant University Staff and Stakeholders

Implementation

The Budgeting, Forecasting & Management Reporting Procedure will be implemented throughout the University via:

1.   A FedNews announcement and on the ‘Recently Approved Documents’ page on the University’s Policy Central website.

2.   Staff induction sessions.