Chapter 8 Managing the Cost of Fund

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					                                 UNIVERSITY OF COLORADO AT BOULDER
                              DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                                          BUDGET THEORY


                        TABLE OF CONTENTS - CHAPTER 8

CHAPTER 8 – BUDGET THEORY ..................................................................... 2
I.    OVERVIEW .......................................................................................... 2
II.   BUDGET RELATED TERMS AND DEFINITIONS ...................................... 2
III.  THE BUDGET CYCLE ............................................................................ 4
   A. Overview............................................................................................... 4
   B. Working With the Budget throughout the Budget Cycle ............................... 5
IV.   BUDGET PLANNING SCHEDULE AT CU-BOULDER ................................. 6
V.    METHODS OF BUDGETING ................................................................... 8
   A. Incremental Budgeting ............................................................................ 9
   B. Zero-Base Budgeting .............................................................................. 9
VI.   BUDGETING PRACTICES BY FUND ....................................................... 9
   A. Ledger .................................................................................................. 9
   B. Developing and Recording the Budget for the New FY ............................... 10
   C. Budget Management and Adjustment throughout the Fiscal Year ................ 12
   D. Summary of Budgeting Practices by Fund ................................................ 14
VII. 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
VIII. BUDGET RESOURCES......................................................................... 20




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BUDGET THEORY: CHAPTER 8                                                                                   12/10
                          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 1 through June 30. 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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CHAPTER 8: BUDGET THEORY                                                              12/10
                        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 30.
     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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BUDGET THEORY: CHAPTER 8                                                           12/10
                           UNIVERSITY OF COLORADO AT BOULDER
                        DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                                  BUDGET THEORY

       administered by Sponsored Projects Accounting), and projects in the Plant Fund
       (Fund 71, normally administered by Facilities Management). Continuing budgets
       may also be used in auxililary Funds 20 and 29 although temporary budgets are
       also allowed.

       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 Finance 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 illustrates cycle.




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CHAPTER 8: BUDGET THEORY                                                              12/10
                        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 departmental finance role, 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 a 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 and anticipated revenues, expenses and transfers.

        2. Implementation
           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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BUDGET THEORY: CHAPTER 8                                                            12/10
                         UNIVERSITY OF COLORADO AT BOULDER
                      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.

         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.

             Although reports are made available to all who possess a fiscal role on a
             FOPPS, 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 within 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
      involves a number of steps that are repeated on an annual basis at approximately
      the same time each year. The following exhibits on the next two pages provide
      tables describing the important elements of the budget planning schedule for the
      General Fund and for cash funds.



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CHAPTER 8: BUDGET THEORY                                                           12/10
                            UNIVERSITY OF COLORADO AT BOULDER
                         DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                                     BUDGET THEORY

                                      .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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BUDGET THEORY: CHAPTER 8                                                                             12/10
                              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



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


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CHAPTER 8: BUDGET THEORY                                                                                12/10
                         UNIVERSITY OF COLORADO AT BOULDER
                      DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                                BUDGET THEORY

      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
             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.



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BUDGET THEORY: CHAPTER 8                                                              12/10
                        UNIVERSITY OF COLORADO AT BOULDER
                     DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                                BUDGET THEORY

        2. Auxiliary/Self-funded Fund (Funds 20, 26, 28, 29)
           The FOPPS in these funds use temporary budget ledgers, although Funds
           20 and 29 may use continuing budget ledgers. The B_INI_TEMP ledger is
           used to record the beginning FY budget for each FOPPS except Funds 20
           & 29 that employ a continuing budget use B_INI_CONT. The B_CUR_TEMP
           ledger is used to record subsequent budget adjustments although Fund 20
           & 29 continuing budget-based FOPPS may also use B_CUR_CONT.
             Fund   Available Budget Ledger
              20    Continuing &/or Temporary
              26    Temporary Only
              28    Temporary Only
              29    Continuing &/or Temporary


        3. Grant and Contract Fund (Funds 30, 31)
           FOPPS in this fund are budgeted through the Finance System by SPA.
           Sponsored project budgets are established for the duration of the project,
           which often span more than one fiscal year. Therefore, continuing budget
           ledgers typically are used in 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 although an official
           date has not yet been set.

        5. Plant Fund (Funds 71, 72, 73, 78)
           Construction activities occur in Fund 71 and 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, it is usually temporary.

     B. Developing and Recording the Budget for the New FY
        PBA 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 1 and appear on the Finance
        System month-end statements for July. 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.


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CHAPTER 8: BUDGET THEORY                                                           12/10
                       UNIVERSITY OF COLORADO AT BOULDER
                    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                             BUDGET THEORY

        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 budgets within General Fund FOPPS including:
                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               Cash Carry Forward
                                               B_INI_CONT                   B_INI_TEMP
                                               Rollforward of Continuing    Budget Balance Available
                                                Budget from prior year        from 6/30 of prior year




        2. Auxiliary Fund
           Each year the budgets for Auxiliary Fund 26 & 28 FOPPS are developed
           “from scratch” at the departmental level and Funds 20 & 29 may use the


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BUDGET THEORY: CHAPTER 8                                                                   12/10
                        UNIVERSITY OF COLORADO AT BOULDER
                     DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                              BUDGET THEORY

           “from scratch” method or a continuing budget method. 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 or B_INI_CONT ledger. Subsequent budget adjustments
           are made in the B_CUR_TEMP (or B_CUR_CONT for continuing
           budget-based Funds 20 & 29 FOPPS). Initial budgets and all budget
           adjustments that are booked in temporary ledgers for Auxiliary Fund
           FOPPS remain in place only for the duration of the fiscal year in which
           they were recorded. Fund 20 & 29 continuing budget-based FOPPS will be
           carried forward in a manner similar to the General Fund.

        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.
        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


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CHAPTER 8: BUDGET THEORY                                                        12/10
                       UNIVERSITY OF COLORADO AT BOULDER
                    DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                              BUDGET THEORY

           must be balanced so that the bottom line of the budget, in its entirety, does
           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 that management expects 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 may continue past the end of the FY.
           Facilities Management 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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                                UNIVERSITY OF COLORADO AT BOULDER
                             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
General 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 & departments      year is recorded as the Cash
                      to record budget          Carry Forward for the new
                      adjustments through-      fiscal year in account 460000,
                      out the fiscal year.      Operating Expense.
                                               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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                                   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. Fund 20 & 29         FOPPS and sends it                    adjusted on the BJE.
 Fund 26,              may use continuing           electronically to PBA for            A balanced BJE is not
  Non-exempt            budgets in which case        upload into Finance System.           required.
 Fund 28, ISC          B_INI_CONT ledger is
 Fund 29 Non-          used.
  enterprises          B_CUR_TEMP is used
                        by PBA & departments
                        to record budget
                        adjustments through-
                        out the FY. Continuing
                        budget-based Fund 20
                        & 29 may also use
                        B_CUR_CONT ledger
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 30/31 are managed by SPA using Finance System Project Module
 Fund 31, State        Departments never write a BJE to Fund 30 or Fund 31.
  Grants,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, use                                           A balanced BJE is not
                        B_CUR_TEMP ledger.                                                 required.
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 & sends electronically          Transfers Out.
 Fund 73              B_CUR_TEMP is used           to PBA for review and upload
                        by PBA and                   to Finance System.
                        departments to record       FOPPS is budgeted based
                        budget adjustments           upon an amortization or a
                        throughout the FY            debt service schedule.



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                        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, 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 if appropriate, 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                                                             12/10
                                  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 pass approval?                            Print a file copy of the BJE if needed.
                   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.
     Offline Process             Online Process




  If not resolved,
  delete the BJE.
     Online Process




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                       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 Finance System.

        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. The Finance System is used by SPA to create and manage budgets for
              FOPPS in funds 30 and 31. These are based on approved project
              budgets and subsequent amendments.

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CHAPTER 8: BUDGET THEORY                                                       12/10
                            UNIVERSITY OF COLORADO AT BOULDER
                         DEPARTMENTAL FINANCIAL MANAGEMENT GUIDE


                                  BUDGET THEORY

     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. At a minimum, FOPPS in Funds that require budgets (10, 11, 20, 26,
        28, 29, 71, 72, 78), must be budgeted 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.
           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
                                                                                                    negative – $Actual to Date




           Budget for Operating    Actual $ spent at Operating   Budget Balance Available to
           Expense General         Expense General Budget        spend at the Operating
           Budget, 460000.         level (Total $ spent in ALL   Expense General Budget
                                   Operating Expense Accounts    Level for operating expenses
                                   through December.)            for the rest of the fiscal year.


        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


                                                                                                         19
BUDGET THEORY: CHAPTER 8                                                                               12/10
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.

                                                                                          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 for Account      $ received by UMC      fiscal year end in
                                                                                                     390062, Revenue         from Bookstore         order to meet budget
                                                                                                     from Bookstore rent.    through Nov. 30        in Account 390062.




                                                                                         Budget for General     $ received from ALL    $ received from ALL     $ still needed to be received by
                                                                                         Budget 390000, all     UMC ID revenue         UMC ID revenue          UMC from all ID revenue sources in
                                                                                         revenue.               sources during Nov.    sources through Nov.    order to meet TOTAL REVENUE
                                                                                                                                                               budget in General Budget 390000.




                                                                              VIII. BUDGET RESOURCES
                                                                                   Your Area Accountant is available to answer questions about your departmental
                                                                                   budgets. In addition, the Office of Planning, Budget, and Analysis is a prime
                                                                                   resource for questions about budgets and the budgeting process, including Budget
                                                                                   Office Policies.




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                                                                              CHAPTER 8: BUDGET THEORY                                                                                              12/10

				
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