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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
TABLE OF CONTENTS - CHAPTER 8
I. CHAPTER 8 – BUDGET THEORY ........................................................... 2
II. OVERVIEW .......................................................................................... 2
III. BUDGET RELATED TERMS AND DEFINITIONS ...................................... 2
IV. THE BUDGET CYCLE ............................................................................ 4
A. Overview............................................................................................... 4
B. Working With the Budget throughout the Budget Cycle ............................... 5
V. BUDGET PLANNING SCHEDULE AT CU-BOULDER ................................. 6
VI. METHODS OF BUDGETING ................................................................... 9
A. Incremental Budgeting ............................................................................ 9
B. Zero-Base Budgeting .............................................................................. 9
VII. BUDGETING PRACTICES BY FUND ....................................................... 9
A. Ledger .................................................................................................. 9
B. Developing and Recording the Budget for the New Fiscal Year .................... 10
C. Budget Management and Adjustment throughout the Fiscal Year ................ 12
D. Summary of Budgeting Practices by Fund ................................................ 14
VIII. BUDGET ADJUSTMENT TRANSACTIONS ............................................. 16
A. Process Flow ........................................................................................ 16
B. When to Use a Budget Journal Entry (BJE)............................................... 18
B. When Not To Use A BJE ......................................................................... 18
C. Mechanics of Budget Revision ................................................................ 18
E. Budgeting Levels .................................................................................. 19
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BUDGET THEORY: CHAPTER 8 11/09
UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
CHAPTER 8 – BUDGET THEORY
The purpose of this chapter of The Guide is to explain the definition and purpose
of budgets, describe the budget cycle, discuss budgeting concepts and practices by
fund, and to identify and understand budget information on financial reports.
I. OVERVIEW
A budget is a financial plan that sets forth the resources necessary to meet a set of
goals, (departmental, college, campus) for a certain period of time. The budget
records, in monetary terms, realistic goals for programs, staffing, and operations.
The revenue portion of the budget identifies the means for financing the plan, and
the expense portion of the budget estimates the cost of the plan. Typically, the
time period covered by the budget is a fiscal year. For the university, the fiscal
year runs from July 1st through June 30th. When working with capital construction
projects or sponsored projects, the time period covered by the budget spans the
duration of the project rather than the fiscal year.
The Finance System provides the ability to budget revenues, expenses and
transfers. In addition to establishing and managing an overall revenue and expense
financial plan, budgets can also be used to manage salaried position numbers,
hourly position numbers, and full-time equivalent (FTE).
II. BUDGET RELATED TERMS AND DEFINITIONS
Account is a six-digit number used to identify specific revenue, revenue
deduction, expense, and transfer items.
Base Budget is the original budget amounts recorded for a FOPPS at the
beginning of the fiscal year. The term base budget is used primarily in the General
Fund (Funds 10 and 11).
Budget is a plan of financial operation for a given period embodying an estimate
of proposed expenditures and the proposed means of financing them. Used
without any modifier, the term budget usually refers to a financial plan for a single
fiscal year.
Budget Cycle describes a process of budget planning and control which includes
the actions of developing a financial plan, comparing the financial plan to actual
performance, and taking corrective action to bring substandard performance into
line with the plan or adjusting the plan to reflect changing financial conditions.
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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
Budget Journal Entry (BJE) is an online process within the Finance System
used for making budget adjustments to a FOPPS.
Budget Ledgers: Two types of ledgers are found within the Finance System:
Actuals and Budget. Budget is divided into four additional ledgers:
B_INI_CONT
B_INI_TEMP
B_CUR_CONT
B_CUR_TEMP
Budgets are recorded or adjusted by entering transactions into one of these
Finance System budget ledgers.
Use of the INITIAL budget ledgers, B_INI_CONT and B_INI_TEMP, is restricted
to authorized staff from Accounting and Business Support (ABS) and/or Planning,
Budget and Analysis (PBA). At the beginning of each fiscal year, PBA records the
initial budget for FOPPS within the General, Auxiliary and Renewal/Replacement
Funds using the appropriate INITIAL ledger.
The CURRENT budget ledgers are available to all Finance System users having
the proper security authorization. The CURRENT ledgers are used throughout the
fiscal year for making budget adjustments.
Cash Carry Forward, also known as the temporary rollforward, is the budget
balance remaining before encumbrances in each General Fund FOPPS on June
30th. In most circumstances, the balance available amount is applied directly to the
budget of the same FOPPS for the upcoming fiscal year. When prior-year actual
expenditures are less than the budget, the cash carry forward is positive and adds
to the overall budget within the FOPPS for the new fiscal year. When prior-year
actual expenditures exceed the budget, the cash carry forward is negative and
decreases the overall budget for the FOPPS in the new fiscal year. The cash carry
forward is, in most cases, recorded in general budget 460000 (Operating
Expenses) within the B_INI_TEMP ledger.
Continuing and Temporary Budgets: Understanding the concept of continuing
budget and temporary budget is essential to doing budget work, particularly in the
General Fund.
Continuing budget is a permanent resource allocation or budget adjustment that
remains recorded in the respective FOPPS from one year to the next. On an annual
basis, budgets recorded in the B_INI_CONT and B_CUR_CONT ledgers will roll
forward from one fiscal year to the next. Typically, the use of continuing budgets
is limited to the General Fund, projects in the Restricted Fund (Funds 30 and 31,
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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
administered by Sponsored Projects Accounting), and projects in the Plant Fund
(71, normally administered by Facilities Management).
A temporary budget stays in place only for the duration of the fiscal year in
which it was recorded. Budgets entered into the B_INI_TEMP and B_CUR_ TEMP
ledgers are reported only for the fiscal year in which they are entered. These
temporary budget transactions are not included during the process of rolling
budgets forward from one fiscal year to the next.
General Budget is a term used to denote the broadest level of budgeting by
category of revenue, expense or transfer.
Rollforward is the process whereby the budgets recorded in the B_INI_CONT
and B_CUR_CONT ledgers for General Fund FOPPS are copied into the
B_INI_CONT ledger for the respective FOPPS new fiscal year. The budget
recorded in the B_INI_CONT ledger for the new fiscal year is called the Base
Budget. Continuing budgets, as well as project-to-date actual activity, are carried
forward to the new fiscal year for projects in Funds 30, 31, and 71.
III. THE BUDGET CYCLE
A. Overview
The budgeting process is a cycle comprised of two main phases: the planning
phase and the control phase. The planning phase identifies the goals to be
attained during the fiscal year, and the financial plan (budget) necessary to
achieve them. The control phase focuses on actual performance towards
achieving the plan. It involves implementation, monitoring and control
functions. The control phase emphasizes a comparison between the budget
and the actual revenue and expense activity as recorded in the financial system
and displayed on the monthly statements. When actual revenue and expense
varies from the plan articulated by the budget, the control phase will then
include corrective action. Corrective action might involve adjusting the budget
to reflect the actual financial activity, adjusting revenue projections and
collections, or adjusting expenditures.
The following diagram shows the illustrates cycle.
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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
BUDGET CYCLE
►
Control Planning
•Take corrective action •Develop goals, objectives
▲ ▼
Monitoring Development
•Compare budget •Estimate cost of attaining
to actual rev, exp each goal
•Investigate variances •Project revenues
◄
Implementation
•Record budget in
Finance System General Ledger
B. Working With the Budget throughout the Budget Cycle
In your role as the departmental finance person, you are likely to be involved
in each and every step of the budget cycle.
1. Planning and Development
The budget must be well conceived and based upon combination of
historical data and future financial projections. During this step of the
budget cycle, employees who handle the day-to-day finances for a
department are often asked to provide information to management about
past revenues, expenses and transfers, and anticipated revenues, expenses
and transfers.
2. Implementation
It is essential to verify that the budgets recorded in the Finance System at
the beginning of each fiscal year are correct. Contact your area accountant
if you find errors or if you have questions.
3. Monitoring
a) Revenue and Expense Statement Detail
For FOPPS in all funds, the Revenue and Expense Statement Detail
report must be reconciled on a monthly basis.
1. Source documents for transactions must be compared to the
revenue, expense and transfer transactions on the statement.
2. Errors must be researched and corrected in a timely fashion.
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DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
b) Revenue and Expense Statement Summary
The Revenue and Expense Statement Summary report must be
reviewed monthly to determine whether or not an organization is in
control of its operations.
1. For FOPPS in Funds 10 and 11, the budget in the FOPPS must
be compared to the actual expenditures.
2. For FOPPS in Funds 20, 26, 28, 29, 71, 72, 73 and 78, the
budget in the FOPPS must be compared to both the actual
revenues and the actual expenditures.
3. For FOPPS in Funds 30 and 31, the budget in the FOPPS must
be compared to the actual expenditures. When doing budget-to-
actual comparisons for FOPPS in these two funds, remember
that the time period covered by the statement is generally the
duration of the project and not the fiscal year.
c) Balance Sheet Summary and Balance Sheet Detail
For FOPPS in Funds 20, 26, 28, 29, 71, 72, 73 and 78, the Balance
Sheet Summary and Balance Sheet Detail reports must be reconciled
and reviewed each month to ensure that both the cash and fund balance
account balances are favorable.
Note: More instructive and detailed information about working with
monthly reports is available in The Guide Chapter 16, Monthly
Statements.
4. Control
Departmental management must be informed when the “budget to actual”
comparison indicates a significant deviation, or when the balance sheet
indicates an unfavorable balance, so that appropriate corrective actions can
be initiated.
With the inception of the new online Reporting Tool, reports will be made
available to all who possess a fiscal role on a FOPPS—no longer just one
paper copy sent to departments. However, if you notice a problem or a
potential problem developing in budget, it’s best to err on the side of
caution and inform management rather than assume they noticed it during
their review. This makes for good interactive teamwork in the department.
IV. BUDGET PLANNING SCHEDULE AT CU-BOULDER
The Boulder campus employs two budget processes: one for the General Fund and
one for cash funds (cash funds include Funds 20, 26, 28, 29, 71, 72, 73, and 78).
Each of these budget processes span an entire year. In addition, each process
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DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
involves a number of steps that are repeated on an annual basis at approximately
the same time each year. The following exhibits, located on the next two pages,
provide tables describing the important elements of the budget planning schedule
for the General Fund and for cash funds.
.General Fund.
Budget Planning, Development and Implementation Calendar
Responsible
Month Task
Party at UCB
JUL Implement the budget for the new fiscal year PBA
Book adjustments approved during the campus budget process PBA
Audit the budget for the new fiscal year and make corrections PBA & Dept
Set up standard journal entries for the new fiscal year ABS & Dept
AUG Prepare the final budget re-write for the previous fiscal year PBA
Record vacancy savings PBA
State issues initial classified staff salary survey for new fiscal year
SEP
OCT Complete Quarter 1 budget vs. actual variance analysis and • Dept does this
projections for its FOPPS.
• PBA & ABS do
this for each
fund at the
campus level.
NOV Governor submits statewide budget request to JBC PBA
CCHE develops its allocation formula for the upcoming fiscal year PBA
CDC holds hearings on capital projects
(Sometimes these have a cash-funded component).
CEC calendar is set PBA, Chancellor
DEC
JAN Complete Quarter 2 budget vs. actual variance analysis and • Dept does this
projections for its FOPPS.
• PBA & ABS do
this for each
fund at the
campus level.
FEB
MAR Prepare budget re-write for the Board of Regents PBA
JBC revenue figure setting
APR Complete Quarter 3 budget vs. actual variance analysis Dept, ABS, PBA
Freeze current-year continuing budgets in the General Fund PBA
Prepare materials for the Board of Regents Budget Retreat PBA, Depts
Long bill introduction and debate
Capital projects introduced in bill form
MAY Do General Fund cash carry-forward projections and estimates of PBA & VC areas
transfers to Plant (Renewal & Replacement) Fund
Governor signs long bill
JUN Issue fiscal year end closing instructions ABS, PBA
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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
.Cash Funds.
(Funds 20, 26, 28, 29, 71, 72, 73, and 78)
Budget Planning, Development and Implementation Calendar
Responsible
Month Task
Party at UCB
JUL Implement, record the budget for the new fiscal year in Finance PBA
System
Audit the budget for the new fiscal year and make corrections PBA & Dept
Set up standard journal entries for the new fiscal year ABS & Dept
AUG State issues initial classified staff salary survey for new fiscal year
SEP
OCT Complete Quarter 1 budget vs. actual variance analysis and • Dept does this
projections for its FOPPS.
• ABS & PBA do
this for each
fund at the
campus level.
NOV CDC holds hearings on capital projects PBA
(Sometimes these have a cash-funded component).
DEC
JAN Complete Quarter 2 budget vs. actual variance analysis and • Dept does this
projections for its FOPPS.
• ABS & PBA do
this for each
fund at the
campus level.
FEB Distribute Auxiliary Fund and Renewal and Replacement Fund PBA & VC
budget development materials for the upcoming fiscal year Assistants
MAR Announce GAR and GIR rates for the upcoming fiscal year PBA
APR Complete Quarter 3 budget vs. actual variance analysis Dept, ABS, PBA
Hold Auxiliary/Renewal & Replacement Fund budget workshops PBA
Prepare bond fund reports PBA, ABS, Depts
Capital projects introduced in bill form
MAY
JUN Deadline to submit Auxiliary/Renewal & Replacement budgets for PBA
upcoming fiscal year
Audit, upload Auxiliary/Renewal & Replacement budgets PBA
Issue fiscal year end closing instructions ABS, PBA
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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
V. METHODS OF BUDGETING
In general, the Boulder Campus uses two methods of budget development:
incremental budgeting and zero-base budgeting. The incremental method is most
often used in the General Fund, whereas zero-base budgeting (ZBB) employs a
“bottom-up” approach. It involves a re-evaluation of all programs, a review of
their associated revenues and expenses, and a projection of how much it will cost
to run each program during the upcoming fiscal year. Many of the larger campus
auxiliary operations utilize the ZBB approach.
A. Incremental Budgeting
The incremental budgeting process begins with last year’s continuing budget
figures as the base budget. These numbers are then adjusted to reflect
inflation, growth, changing conditions and other information gathered from
financial forecasts for the upcoming fiscal year. The advantage to using the
incremental method of budgeting is that the work is greatly simplified, since
this approach starts with a budget that is already in place. The disadvantage to
incremental budgeting is that the inefficiencies and inadequacies of the prior
year’s budget are automatically built into the budget for the upcoming fiscal
year.
B. Zero-Base Budgeting
Zero-Base budgeting (ZBB) employs a “bottom-up” approach. This method
starts with a base budget of zero and calculates the costs of running each
program from scratch. On an annual basis, each cost associated with running a
program must be justified before it can be included in the budget. The
advantage of the ZBB method resides in the extensive review it gives each
program. While the ZBB approach can uncover operating inefficiencies and
identify weaker programs, it also can highlight those programs that are most
vital to the organization. The effort and time requirements of ZBB are its
principal disadvantages.
VI. BUDGETING PRACTICES BY FUND
A. Ledger
The use of a continuing budget or temporary budget depends upon the fund
being budgeted. The following describes the use of continuing and temporary
budget ledgers by fund.
1. General Fund (Funds 10, 11)
General Fund FOPPS use both continuing and temporary budgets.
Continuing budgets and budget transactions are those that will be carried
forward to the next fiscal year. Temporary budgets and budget transactions
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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
will not be carried forward to the next fiscal year. In the General Fund, the
B_INI_CONT ledger is used to record the base budget for each fiscal year,
and the B_INI_TEMP ledger is used to record the annual cash carry
forward. Only PBA uses these two ledgers. The B_CUR_CONT or
B_CUR_TEMP ledgers are used to record subsequent budget changes and
adjustments.
2. Auxiliary/Self-funded Fund (Funds 20, 26, 28, 29)
The FOPPS in this fund use temporary budget ledgers only. The
B_INI_TEMP ledger is used to record the beginning fiscal year budget for
each FOPPS. The B_CUR_TEMP ledger is used to record subsequent
budget adjustments.
3. Grant and Contract Fund (Funds 30, 31)
FOPPS in this fund are budgeted through the Sponsored Program
Information System (SPINS) administered by SPA. Sponsored project
budgets are established for the duration of the project, which often
encompass more than one fiscal year. Therefore, continuing budget ledgers
typically are used in Funds 30 and 31.
4. Gift Fund (Fund 34)
Budgeting FOPPS in this fund is currently optional. If budgets are
recorded in a Fund 34 FOPPS, the temporary ledger is used. Budgets in
Fund 34 will become mandatory in the near future; an official date has not
yet been set.
5. Plant Fund (Funds 71, 72, 73, 78)
Construction activities, which occur in Fund 71, use the continuing budget
ledgers. Construction FOPPS are primarily budgeted by Facilities
Management. Renewal and replacement FOPPS, Funds 72 and 78, use the
temporary budget ledgers. The B_INI_TEMP ledger is used to record the
beginning fiscal year budget in the Renewal and Replacement FOPPS. The
B_CUR_TEMP ledger is used to record subsequent budget adjustments in
these FOPPS. Budgets in Fund 73, Retirement of Indebtedness, are
optional. If a budget is recorded in a Fund 73 FOPPS, it is usually
temporary.
B. Developing and Recording the Budget for the New
Fiscal Year
The Office of Planning, Budget and Analysis records initial fiscal year budgets
for FOPPS in the General Fund, Auxiliary Fund, and Plant Fund (Renewal and
Replacement FOPPS). These budgets are made available to the user after July
1st and appear on the Finance System month-end statements for July.
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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
Sponsored Projecting Accounting (SPA) maintains the budgets for grant and
contract FOPPS. These budgets are available to the user from the inception of
a project through the project’s end-date. Once budgeting in the Gift Fund
becomes mandatory, this fund will be incorporated into the process by PBA.
1. General Fund
Towards the end of each fiscal year, PBA takes a “snapshot” of every
continuing budget recorded in each General Fund FOPPS and “rolls” the
budget forward to the upcoming fiscal year. This budget rollforward then
becomes the base budget in the new fiscal year. The budget entry for the
rollforward is done in the B_INI_CONT ledger. Subsequent continuing
adjustments to the base budget, whether done by PBA or by the
department, will use the B_CUR_CONT ledger. For example, after PBA
completes the rollforward, PBA also books a number of other continuing
budget adjustments to general budgets within General Fund FOPPS. These
include:
Salary increases for professional exempt positions
Salary survey and performance based pay increases for classified
positions.
Continuing budget increases or decreases that were approved
during the campus-wide budget process.
Temporary budgets also play a role in recording the initial budget for the
new fiscal year in General Fund FOPPS. PBA records the Cash Carry
Forward (budget balance available from the previous fiscal year) in the
B_INI_TEMP ledger during July. Generally speaking, the cash carry
forward is recorded on a FOPPS by FOPPS basis in the operating expense
general budget 460000. (Note: In some instances, the Cash Carry Forward
is recorded centrally in a FOPPS at a division or college level.) Budget
adjustments for temporary allocations and one-time support that were
approved during the campus budget process are also recorded in the
B_CUR_TEMP ledger by PBA at the start of the fiscal year. The financial
statement that follows identifies these budget transactions
Base Budget
B_INI_CONT
Rollforward of Continuing
Budget from prior year
Cash Carry Forward
B_INI_TEMP
Budget Balance Available
from 6/30 of prior year
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UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
2. Auxiliary Fund
Each year the budgets for Auxiliary Fund FOPPS are developed “from
scratch” at the departmental level. PBA issues a set of instructions,
provides an Excel workbook, and conducts workshops to assist with this
process. The department prepares an Excel spreadsheet for each of its
auxiliary fund FOPPS. The spreadsheets are then returned electronically to
PBA and uploaded to the Finance System. The beginning fiscal year
budget for each Auxiliary Fund FOPPS is recorded in the B_INI_TEMP
ledger. Subsequent budget adjustments are made in the B_CUR_TEMP
ledger. Since both the initial budget and all budget adjustments are booked
in temporary ledgers, budgets for Auxiliary Fund FOPPS remain in place
only for the duration of the fiscal year in which they were recorded.
3. Renewal and Replacement FOPPS within the Plant Fund
Much like the Auxiliary Fund, each year the budgets for Renewal and
Replacement FOPPS are developed “from scratch” at the departmental
level using Excel spreadsheets and instructions from PBA. These
spreadsheets are then returned electronically to PBA and uploaded to the
Finance System. The beginning fiscal year budget for each FOPPS in the
Renewal and Replacement portion of the Plant Fund is recorded in the
B_INI_TEMP ledger. Thus, the initial fiscal year budgets, and all
subsequent budget adjustments in Renewal and Replacement FOPPS,
remain in place only for the duration of the fiscal year in which they were
recorded. Renewal and Replacement FOPPS are not necessarily budgeted
every fiscal year. These FOPPS are budgeted only during those fiscal years
in which expenditures are anticipated.
C. Budget Management and Adjustment throughout the
Fiscal Year
After PBA records the initial fiscal-year budgets in each FOPPS, the
responsibility for ongoing budget management rests with each department. It
is important to keep in mind that the role of the budget, and the practices
associated with doing budget adjustments, will vary according to fund.
1. General Fund (Funds 10, 11)
Although many departments have individual General Fund FOPPS, the
overall budget for the General Fund is managed as one unit at the campus
level. The sum of the budgets within the individual General Fund FOPPS
located in departments all across campus must always equal the total
campus budget approved by the Board of Regents and the System
administration. Thus, once PBA records the initial budget in each General
Fund FOPPS, all dollar amounts in all subsequent budget transactions
must be balanced so that the bottom line of the budget, in its entirety, does
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DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
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not change. Increases or decreases to the overall General Fund budget for
the campus can be made only in accordance with revisions approved by
system administration. Therefore, budget change transactions must offset
one another and all BJEs done in a General Fund FOPPS must balance
(debits = credits). If a budget is increased in one FOPPS-account
combination, it must have an equal decrease in other FOPPS- account
combinations. General Fund FOPPS are budgeted on a fiscal year basis.
2. Auxiliary/Self-Funded Fund (Funds 20, 26, 28, 29)
The budgets for these FOPPS are managed on a FOPPS-by-FOPPS basis.
Therefore, BJEs typically record increases and decreases in the revenue
and expense general budgets and accounts within one FOPPS without
having identical offsets in a different FOPPS. In fact, budgets should not
be transferred from one Fund 20, 26, 28, 29 FOPPS to another Fund 20,
26, 28, 29 FOPPS. In the Auxiliary Fund, it is appropriate to budget
revenue in an amount different from that budgeted for expense within the
same FOPPS management intends for the FOPPS to generate a surplus or
a loss for the period. Fund 2x FOPPS are budgeted on a fiscal year basis.
3. Grant and Contract Fund (Funds 30, 31)
The budgets for these FOPPS are managed on a FOPPS-by-FOPPS basis
according to the budget approved in the sponsor’s project document plus
any subsequent amendments. These FOPPS are budgeted on a project
basis that may continue past the end of the fiscal year. The Office of
Sponsored Projects Accounting (SPA) maintains these budgets.
4. Gift Fund (Fund 34)
The campus does currently require budgets in the Gift Fund, though
departments may opt to budget their Fund 34 FOPPS.
5. Plant Fund – Construction (Fund 71)
The budgets for these FOPPS are based on an approved construction
project budget plus any subsequent changes. Budgets in one FOPPS do not
affect budgets in a different FOPPS and budgets should not be transferred
from one FOPPS to another. BJEs typically record increases and decreases
in the revenue and expense general budgets and accounts within FOPPS,
without having identical offsets in other FOPPS. Construction FOPPS are
budgeted on a project basis and therefore may continue past the end of the
fiscal year. Facilities Management maintains and administers most
construction project budgets.
6. Plant Fund – Retirement of Indebtedness (Fund 73)
The cash in these FOPPS is used for debt service payments of principal
and associated handling charges or fees, or to retire indebtedness incurred
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DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
in acquisition or construction of fixed assets. The campus does not require
budgeting in Fund 73 FOPPS. When departments choose to record budget
in a Fund 73 FOPPS, the initial budget for a given fiscal year is recorded
in the B_INI_TEMP ledger, and subsequent budget adjustments are done
in the B_CUR_TEMP ledger.
7. Plant Fund – Renewal and Replacement (Funds 72, 78)
Since the financial support for renewal and replacement FOPPS usually
comes from cash transfers, general budget 995000 (Voluntary Transfers
In) may be used to record the funding budgets for these FOPPS. Expense
budgets for these FOPPS are recorded in general budget 810000, Fixed
Asset Costs. BJEs for Fund 72 and 78 FOPPS record increases and
decreases in the expense general budgets and/or accounts within one
FOPPS without recording identical offsets in a different FOPPS. Budgets
should not be transferred from one Fund 72 or 78 FOPPS to another Fund
72 or 78 FOPPS. Renewal and Replacement FOPPS are budgeted on a
fiscal year basis, but only during those years in which expenditures are
anticipated. The initial budget for a given fiscal year is recorded in the
B_INI_TEMP ledger, and subsequent budget adjustments are done in the
B_CUR_TEMP ledger.
8. Agency Fund (Fund 80)
Budgets are not entered for Agency Fund FOPPS.
D. Summary of Budgeting Practices by Fund
The following table highlights key concepts and campus practices for
budgeting on a fund-by-fund basis.
Budget Development and Ongoing Budget
Fund Ledgers Recording of Initial Management and
Used Budget Adjustment
cGeneral Fund B_INI_CONT is used by The CONTINUING budget in BJEs prepared by departments
Fund 10 PBA to record BASE each FOPPS towards the end adjust only expense budgets.
budget. of the fiscal year becomes Adjustments to revenue
B_INI_TEMP is used by CONTINUING BASE budget for budgets are done exclusively
PBA to record Cash the new year. by PBA.
Carry Forward. The “bottom line” budget- All BJEs must be balanced.
B_CUR_CONT, balance-available in each Debits must equal credits.
B_CUR_TEMP are used FOPPS at the end of the fiscal
by PBA and year is recorded as the Cash
departments to record Carry Forward for the new
budget adjustments fiscal year in account 460000,
throughout the fiscal Operating Expense.
year. PBA does a BJE that applies
the allocations approved
during the budget process
(continuing and temporary)
to the base budget.
Table continued on next page
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CHAPTER 8: BUDGET THEORY 11/09
UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
Summary of Budgeting Practices by Fund continued
Budget Development and Ongoing Budget
Fund Ledgers Recording of Initial Management and
Used Budget Adjustment
Auxiliary Fund B_INI_TEMP is used by Department prepares an Revenue, expense and
Fund 20, TABOR PBA to record initial Excel spreadsheet for each transfer budgets can all be
Enterprise budget. FOPPS and sends it adjusted on the BJE.
Fund 26, B_CUR_TEMP is used electronically to PBA for A balanced BJE is not
Non-exempt by PBA and upload into Finance System. required.
Fund 28, ISC departments to record
Fund 29 Non- budget adjustments
enterprises throughout the fiscal
year.
Restricted Fund
Fund 30 Federal, Budgets are based upon the sponsor’s award document.
State and Private Budgets are developed on a project basis and often cross fiscal years.
Sponsors ALL budgets in Funds 30 and 31 are managed by SPA using SPINS
Fund 31, Local Departments never write a BJE to Fund 30 or Fund 31.
Grants and
Contracts
Restricted Gift Fund 34 typically is not Department prepares an Revenue, expense and
Fund budgeted at UCB. online BJE. transfer budgets can all be
Fund 34 If a department wishes adjusted on the BJE.
to record a budget, the A balanced BJE is not
ledger to useis required.
B_CUR_TEMP.
Plant Fund - Budgets in Fund 71 Facilities Management usually Revenue, expenses and
Capital typically are recorded creates the budgets transfers can all be adjusted
Construction in the B_CUR_CONT associated with capital on the BJE.
Fund 71 ledger and remain in construction projects. A balanced BJE is not
place for the duration required.
of the project.
Plant Fund - B_INI_TEMP is used by Department prepares an Budgets are typically recorded
Renewal & PBA to record initial Excel spreadsheet for each in accounts for Fixed Assets
Replacement budget. FOPPS and sends it (810000) and optionally in
Funds 72 B_CUR_TEMP is used electronically to PBA for Voluntary Transfers In
General Fund by PBA and review and upload to Finance (995000) and Voluntary
Renewal & departments to record System. Transfers Out (997000).
Replacement budget adjustments FOPPS is budgeted only if A balanced BJE is not
Fund 78 throughout the fiscal financial activity is anticipated required.
Auxiliary Fund year. for the year.
Renewal &
Replacement
Plant Fund - B_INI_TEMP is used by Department prepares an Budgets are recorded in
Retirement of PBA to record initial Excel spreadsheet for each account 992000, Mandatory
Indebtedness budget. FOPPS and sends it Transfers Out.
Fund 73 B_CUR_TEMP is used electronically to PBA for
by PBA and review and upload to Finance
departments to record System.
budget adjustments FOPPS is budgeted based
throughout the fiscal upon an amortization
year schedule or a debt service
schedule.
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BUDGET THEORY: CHAPTER 8 11/09
UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
VII. BUDGET ADJUSTMENT TRANSACTIONS
A. Process Flow
Budgets may be revised during the fiscal year in order to adjust fiscal
projections to meet changing conditions. The mechanism for making a budget
adjustment is the online Budget Journal Entry (BJE) in the Finance System.
Before doing an online BJE, it is essential to understand the BJE process in its
entirety—both the “offline” as well as the “online” portions. To begin, become
familiar with your departmental process flow. Make sure you know who is
authorized to make the determination that a budget change is needed. Obtain
the BJE approvals required by your departmental policies, and be certain that
an authorized person does the online BJE entry. Consider printing out a copy
of the BJE.
Next, acquaint yourself with the steps that take place subsequent to the online
entry of a BJE. Be aware that, at least once a day—and often more
frequently—Budget Office staff members review the list of outstanding BJEs
for the Boulder campus. If a BJE is in VALID status, the Budget Office staff
will audit, approve and post the BJE. If you prefer that your BJE not be
approved and posted, then save the transaction as incomplete.
Note: If the Budget Office staff has a question or believes there may be a
problem with a particular BJE, they will contact the creator of the BJE to
resolve the issue.
The final step in the BJE process flow is to verify the budget transaction on
the monthly Revenue and Expense Statement Detail report..
The chart on the next page illustrates this process flow.
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CHAPTER 8: BUDGET THEORY 11/09
UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
Budget Journal Entry Process Flow
Obtain approvals required by
.
Determine budget change is needed. departmental/college/division policies
Offline Process
and procedures.
Offline Process
PBA Budget Office staff pull up, on a An employee with the proper
daily basis, outstanding BJEs in VALID authorization uses Finance System
status for review and approval. BJEs in Production to enter the Online Budget
Edit Req’d status or Error status are not Journal Entry (BJE). Online BJE process
processed. should be Validated.
Online Process Online Process
Does the BJE Print a file copy of the BJE if needed.
pass approval? Online Process
Online Process
NO YES Verify budget transaction on the
Budget Office Budget Office monthly Revenue and Expense
staff contacts staff posts the Statement Detail Report.
Offline Process
department to BJE.
resolve problem. Online Process
Offline Process
If not resolved,
delete the BJE.
Online Process
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BUDGET THEORY: CHAPTER 8 11/09
UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
B. When to Use a Budget Journal Entry (BJE)
BJEs are used to adjust budgets for FOPPS in Funds for which budgeting is
required by the Boulder campus. These funds are 10, 11, 20, 26, 28, 29, 71,
72, and 78. At the discretion of a department, budgets in Funds 34 and 73 may
also be recorded and adjusted using a BJE. Budgets for FOPPS in Funds 30
and 31 are managed by SPA through the use of the Sponsored Program
Information System (SPINS).
Budget revisions involve the following types of adjustments:
Moving budget amounts from one general budget or account within
one FOPPS to another general budget or account in a different FOPPS
or series of FOPPS (General Fund)
Moving budget amounts from one general budget or account to another
general budget or account within the same FOPPS. (General Fund,
Auxiliary Fund, Renewal & Replacement Fund)
Moving budget amounts for salaries within the same general budget
from one budget position number to a different budget position, e.g.
for vacancy savings. (General Fund, Auxiliary Fund)
Adjusting full time equivalent (FTE) (General Fund, Auxiliary Fund).
B. When Not To Use A BJE
The BJE should not be used to
Enter budgets for balance sheet accounts such as cash (100000)
through fund balance (199900).
Transfer cash (accounts 99xxxx) between FOPPS. All cash transfers
must be done using a Cash Transfer Journal Entry in the Finance
System. Since transferring budgets between funds is not permitted, do
not use a BJE in an attempt to move financial support budgets from
one fund to a different fund.
C. Mechanics of Budget Revision
Budgets are adjusted in the Finance System in one of three ways.
1. An online BJE is completed directly in the Finance System by
authorized departmental personnel. These budget transactions are
monitored on a daily basis by PBA staff for review, approval and
posting. The BJEs are recorded in the Finance System each night.
2. PBA, or another authorized department, prepares an Excel spreadsheet
containing budget adjustment data. This spreadsheet is then formatted
by PBA so that it is compatible for upload directly into the Finance
System. This process is used to create and manage budgets for FOPPS
in Funds 10, 11, 20, 26, 28, 29, 72 and 78.
3. Budgets are established through the online budget screens in the
Sponsored Program Information System (SPINS) with a feed to the
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CHAPTER 8: BUDGET THEORY 11/09
UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
BUDGET THEORY
Finance System. This process is used to create and manage budgets for
FOPPS in funds 30 and 31. These are based on approved project
budgets and subsequent amendments.
E. Budgeting Levels
There are two levels of budgeting available in the Finance System. The first
and highest level is referred to as Budgeting at the General Budget Level.
The second level of budgeting is referred to as Budgeting at the Account
Level. University policy states that for FOPPS in funds which require budgets
(Funds 10, 11, 20, 26, 28, 29, 71, 72, 78), budgeting must be done at least at
the general budget level.
1. Budgeting at the General Budget Level
This level allows the manager to budget for a group of accounts rather
than to budget for each individual account. Groups of accounts are referred
to as general budgets. A comprehensive list of general budgets and
accounts can be found on the Office of University Controller website at.
http://www.cu.edu/System_Controller/fin-system-info.html. Scroll to and
select Chart of Accounts (Full version formatted for MS Excel).
Budgeting at the General Budget Level
Since budgets are not
recorded at the account
level, the Budget Balance
in each account is $0 –
$Actual to Date
Budget for Operating Actual $ spent at Budget Balance Available
Expense General Operating Expense to spend at the Operating
Budget, 460000. General Budget level Expense General Budget
(Total $ spent in ALL Level for operating
Operating Expense expenses for the rest of
Accounts through April.) the fiscal year.
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BUDGET THEORY: CHAPTER 8 11/09
Expense
budgets are
shown UNIVERSITY OF COLORADO AT BOULDER
DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE
asBudget Revenue as a CREDIT.
Exhibit 1
Budget Expense as a DEBIT.
DE BUDGET THEORY
BITS.
2. Detailed Budgeting at the Account Level
The second level of budgeting is referred to as Budgeting at the Account
Level. Although this level of budgeting is a technically acceptable practice
for recording both revenue and expense budgets, this more discrete level
of budgeting is not the preferred practice for the campus. Managers of
Auxiliary Fund FOPPS, however, have found that budgeting at the account
level can be a useful tool for identifying specific revenue streams and
expenditure categories.
Budgeting at the General Budget Level and at the Account Level
$ still needed to be
received by UMC
from Bookstore by
Budget forAccount $ received by UMC fiscal year end in
390062, Revenue from Bookstore order to meet budget
from Bookstore rent. through April 30th. in Account 390062.
Budget for General $ received from ALL $ received from ALL $ still needing to be received by
Budget 390000, all UMC revenue UMC revenue UMC from all revenue sources in
revenue. sources during April. sources through order to meet TOTAL REVENUE
April. budget in General Budget 390000.
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CHAPTER 8: BUDGET THEORY 11/09
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