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PLANNING AND ADMINISTRATION OF STATE BUDGETS

Financial Planning and Budgets Section (FPB)

PROCEDURE 1

Effective Date: 01/01/1999

Last Modified Date: 09/03/2003


General

Continuous monitoring is necessary in order to appropriately administer each program or account (cost center) within the financial resources available and/or budgeted for its operation. Accordingly, department heads are expected to administer the accounts under their supervision in such a manner as to keep expenditures within budgets established for their operation.

Planning and Control

To discharge this administrative responsibility, it is necessary for department heads to plan departmental programs and control the accounts in such a manner as to ensure that current budgets at all times represent their financial plans for the various programs (cost centers). Expenditures should be anticipated and curtailed where appropriate. Program goals in most cases can be met by realignment of budgets, provided adequate planning has been done and adequate controls have been maintained.

Business Manual

Familiarity with University policies and procedures is essential if University financial and administrative systems are to be important tools to help meet program goals. The Business Manual is a compilation of most of the administrative policies and procedures that the department head and staff will need on a day-to-day basis.

Budget and Expenditure Reports—State Funds

A primary aid in planning and administering each program is the issuance of a monthly FBM090/91 Account Statement for each account. These reports provide an updated financial status report on each account and are distributed via E-Print, under Finance Central on the Web, generally by the fifth workday of the following month.

An explanation of the purpose and use of the FBM090/91 is given in Accounting Policy 9 and Appendix 8, both titled "FBM090, Account Statement; and FBM091, Report of Transactions." For all object control levels within each account (X-XXXXX), the FBM090 shows the year-to-date and current-month amounts for budget, expenditures, and encumbrances; and budget balances available as of the end of the previous month. The FBM091 shows all transactions posted during the previous month to each object within the account.

Automatic Budget Reallocation (ABR)

Under the Financial Reporting System (FRS) installed on December 1, 1987, budgets are established in whole dollars, normally at the budget control level, as original budget. FRS provides for Automatic Budget Reallocation (ABR) to transfer in dollars and cents the exact amount of each commitment and/or expenditure from the original budget to the revised budget as required on the FBM090t. The use of original budget and revised budget, with associated use of ABR, results in the FBM090 matching budgets with commitments at the UNC–Chapel Hill object level.

Timeliness

Although FBM090s will be as up-to-date as possible, they will undoubtedly not reflect all expenditures or outstanding obligations as of the report closing date. There will always be some processing lag. Encumbrances are not made for standing order purchases from commercial vendors, Student Stores, Scientific and General Storerooms, intra-state travel, or requests for reimbursement (such as departmental invoices covering Xerox charges, postage, telephone, etc.). Therefore, it is necessary to consider such outstanding obligations in determining the actual financial status of any particular account. The department head must ensure that unencumbered commitments of this type are adequately controlled so as not to overdraw an account.

Report Review

Reports should be promptly reviewed and actively used in the financial management process for each account. "Balance available" should be continuously evaluated in regard to such things as expenditure trends, new or continuing requirements, and operating requirements for the remainder of the fiscal period. Prompt action should be taken where necessary to request budget revisions or to curtail program costs.

Budget Revisions

Budget revisions should be based upon the financial plan and cost trends for the current fiscal period. Budget Control Level object codes and UNC–Chapel Hill expenditure object codes are shown in FPB Appendix 1, Object Codes for Budgets and Expenditures. To the extent possible, budget revisions should reflect all necessary reallocations of resources that are foreseen through the end of the current budget period. Revisions solely for the purpose of temporarily coping with near-term problems—such as a $25 account overdraft in the supply category when more funds will probably be needed for other anticipated expenditures—should be avoided whenever possible.

Avoiding Overdrafts and Retroactive Adjustments

It is also imperative that accounts not be overdrawn with the idea of straightening matters out later. Doing so imposes an unnecessary administrative burden on all concerned, involving retroactive adjustments and/or budget revisions after the fact, rather than before the fact, as should be the case when adequate planning and control is exercised.

Limited Resources Solution

By planning ahead, the number of budget revisions can be minimized and the administrative task reduced for everyone involved. Even more important, careful financial planning will indicate whether a reallocation of budget resources is a feasible approach for coping with unfavorable cost trends, unforeseen requirements, etc. When budget resources in all categories are already substantially committed to known requirements, a budget revision can defer but not resolve a financial problem. In such cases, reduction of the program's scope and effort, or the location of additional state or non-state funds, may be the only viable solutions.


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