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									                                           University of Virginia
                                          University Budget Office
                                  2011-12 Budget Development Instructions


Table of Contents
Important Issues for 2011-12 Budget Development .................................................................................... 2
     State General (SG) Budget Reductions ................................................................................................... 2
     Other Budget Reduction Concerns ......................................................................................................... 3
           Equipment Trust Fund (ETF) and Maintenance Reserve. . ............................................................. 3
           Eminent Scholars Match. ................................................................................................................. 3
     New Budget Model................................................................................................................................. 3
     Endowment Distribution/Endowment Fee Assumptions....................................................................... 3
     Expenditure Assumptions....................................................................................................................... 4
           Salaries and Benefits. ....................................................................................................................... 4
           Fringe Benefit Rates. ........................................................................................................................ 4
           Other Than Personnel Services (OTPS). ........................................................................................... 5
     Graduate Financial Support .................................................................................................................... 5
           Graduate Teaching Assistant (GTA) Full-time Equivalents (FTEs). ................................................... 5
2011-12 Budget Submission Requirements .................................................................................................. 6
     Budget Development Calendar .............................................................................................................. 6
     Budget Training ...................................................................................................................................... 6
     Budget Submission Components............................................................................................................ 6
           Budget Submission Narrative .......................................................................................................... 7
           Tuition or Fee Increase Requests. .................................................................................................... 7
           Integrated System (IS) General Ledger (GL) and Grants Accounting (GA) Budget Detail ................ 7
           Planned Expenditures from Selected Fund Sources ........................................................................ 8
           Budget Addenda Request ................................................................................................................ 9
           Reserve Projections ......................................................................................................................... 9
           Annual Renovation and Infrastructure Projects Plan (ARIP) ......................................................... 10
           Budget Checklist............................................................................................................................. 10
Index of Attachments.................................................................................................................................. 10




                                                                             1
Important Issues for 2011-12 Budget Development

State General (SG) Budget Reductions
Budget targets on SG awards have been reduced again for 2011-12 by 2.5 percent for schools and
libraries and 3.0 percent for all other Major Budget Units (MBUs). This target decrease is related to the
reduction that units originally planned for in October 2009. At that time, the University anticipated an
additional $19.3 million reduction in its general fund (GF) tax appropriation from the state and each
MBU planned for a 6.0 percent reduction in SG funds. However, in April 2010, the General Assembly
reduced that cut to only $4.6 million, with the remaining $14.7 million reduction deferred to 2011-12.
That action allowed the University to defer a portion of our internally planned 6.0 percent reduction for
one year; for 2010-11, the reduction in SG targets was 2.5 percent for schools and libraries and 3.0
percent for all other MBUs. The cumulative impact of the 2010-11 and 2011-12 reductions is 5.0
percent for school and libraries and 6.0 percent for all other MBUs.

The good news is that, although Governor McDonnell required each agency to submit 2.0 percent, 4.0
percent, and 6.0 percent GF budget reduction plans for 2011-12, higher education did not receive any
additional reduction beyond that already expected in his proposed budget.

To summarize the impact of reductions since 2007-08:
    In October 2007, the state reduced the University’s GF appropriation by $9.2 million (6.25
      percent), which was passed along to schools and departments as a 1.8 percent mid-year SG
      reduction in fall 2007 and an additional 1.2 percent SG reduction to 2008-09 budgets.

       In October 2008, the state further reduced the University’s GF appropriation by $10.6 million
        (7.0 percent), which was passed along to schools and departments as a 3.0 percent mid-year SG
        reduction in fall 2008.

       In April 2009, the General Assembly approved the Governor’s recommendation for an additional
        $12.4 million (8.0 percent) GF reduction. This resulted in a 3.2 percent SG reduction to 2009-10
        departmental state general budgets.

       In April 2010, the General Assembly approved the Governor’s recommendation for an additional
        $4.6 million (3.6 percent) mid-year GF reduction. This resulted in a 2.5 percent SG reduction to
        2010-11 academic budgets and a 3.0 percent SG reduction to 2010-11 administrative budgets.

       In April 2010, the General Assembly approved the Governor’s recommendation for a $14.7
        million (11.4 percent) GF reduction to the University’s 2011-12 appropriation. This has resulted
        in a 2.5 percent SG reduction to the2011-12 academic budgets and a 3.0 percent SG reduction
        to 2011-12 administrative budgets.

       Cumulatively, over the past five years, the University has incurred a $51.5 million or 32 percent
        reduction in the state GF appropriation, and schools and departments have experienced a 14-15
        percent reduction in their SG budgets.




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Other Budget Reduction Concerns
Equipment Trust Fund (ETF) and Maintenance Reserve. The state’s fiscal crisis has
impacted the status of other state allocations. The 2010-12 Appropriation Act (including recent
amendments introduced by Governor McDonnell) includes an authorization to use debt for the ETF and
maintenance reserve in both years. However, the constraints on the state’s debt capacity due to
reduced state revenues have held up the issuance of debt for ETF and maintenance reserve in 2010-11.
As of January 10, 2011, we still do not have any information regarding when and if the 2010-11
allocation will be released. We hope that we may hear information in the next week as the General
Assembly session begins. We will let all ETF recipients know as soon as we have any word. As a
reminder, any 2010-11 ETF purchases made before notification from the Budget Office that units may
proceed with such purchases will be at the financial risk of the unit making the purchases. We do not
have institutional resources to reimburse these purchases if the state does not release the funds. As of
January 10, 2011, we also do not have any information regarding the 2011-12 status of ETF and
maintenance reserve.


Eminent Scholars Match. The Governor’s introduced budget for 2011-12 does not include any further
reduction to the eminent scholars match. The Budget Office will continue to watch this during the
General Assembly session and will notify schools if it becomes apparent that a reduction will occur. At
this time, units should plan to receive an eminent scholar matching allocation equal to the amount
provided in 2010-11.



New Budget Model
President Teresa Sullivan has identified the implementation of a new budget model for the University as
a top first priority of her administration. Initial work has begun to develop a new, comprehensive
budget model that will encourage stewardship of university resources, be transparent in decision-
making, and provide incentive-based execution. More information will be forthcoming as a steering
committee is identified, a work group is established, and a timeline is developed. Progress updates will
be broadly communicated.



Endowment Distribution/Endowment Fee Assumptions
The endowment spending policy adopted by the Board of Visitors allows the endowment spending
distribution to increase each year by an inflationary factor, as long as the resulting distribution falls
between 4 and 6 percent of the preceding June 30 market value of the endowment. The unprecedented
market volatility between 2006 and 2009 resulted in the measuring falling outside this range, and the
Board chose to re-set the distribution in each of those years.

Some measure of stability has returned to the endowment, and in 2010-11, the spending rate was
increased by an inflationary measure rather than a specific re-set by the Board. The 2010-11 spending
rate increased by 3.8 percent, based on the five-year average of the Higher Education Price Index. The
2010-11 distribution (made in two installments in January 2011 and June 2011) was set at $242.24 per
share, based on shares owned on June 30, 2010.




                                                   3
Through November 2010, the endowment return has been 10.1 percent. (Monthly reports are available
at http://uvm-web.eservices.virginia.edu/public/reports/.) If this performance continues through June
30, 2011, we would expect to see the 2011-12 endowment distribution increase by an inflationary
measure. The 2011-12 distribution will be made in two installments on January 2012 and June 2012.

In addition, a 0.5 percent administrative fee (based on the endowment’s June 30th market value for the
preceding fiscal year) will be assessed to each endowment. One-half of the assessment will be held
centrally, while the other half will be returned as unrestricted funds to the schools and equivalent
divisions that hold the endowment accounts. The 2011-12 fee will reflect the endowment market value
as of June 30, 2011.


Expenditure Assumptions
Salaries and Benefits. The Governor’s budget for 2011-12 has a complex proposal related to Virginia
Retirement System (VRS) and Optional Retirement Plan (ORP) retirement contributions and salary
increases, summarized below. It is critical to note that, at the time these instructions were developed,
this proposal has NOT yet been addressed by the General Assembly and is subject to change. In
summary:

      For employees participating in the VRS: Base salaries would increase by 3.0 percent and
        employees would begin to contribute 5.0 percent towards retirement on July 1, 2011.

      For employees participating in the ORP: No base salary increase, but the University’s retirement
        contribution would be reduced from 10.4 percent to 8.5 percent on July 1, 2011.

      If 2010-11 state revenue surpluses are sufficient, faculty and staff will be eligible for a one-time
         2.0 percent bonus at December 1, 2011.

      For more information, see http://www.hr.virginia.edu/news-events/news/gov-proposal/.

If the proposal is approved, the budgetary impact is still unsure. There would be increased salary costs,
which would be more than offset by a decrease in the University’s retirement contribution. However
other factors, such as rising healthcare costs, will also impact the University’s assessed fringe benefit
rate. Additionally, the state’s proposal also includes returning to the state any savings related to
changing the institutional retirement contribution paid from non-state dollars. If this holds, the overall
financial impact may be closer to zero.

Due to the uncertainty around the proposal and the potential for the overall impact to be close to zero
for departmental budgets, the University Budget Office suggests that non-targeted awards assume no
change in the total of salary and fringe benefits for employees. Targeted awards should budget based
on current compensation; if there are changes, budget adjustments will be processed at a later date.

For 2011-12, please note that the Budget Office has added new “budget only” expenditure type lines for
University staff salary and benefits.


Fringe Benefit Rates. Prior to the recent proposal by Governor McDonnell, it was expected that
faculty and staff fringe benefits rates would increase slightly in 2011-12 due to increased employer
healthcare costs while remaining lower than in 2009-10 due to 2010-11 changes in retirement

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contributions. The rates below are those estimates only and do not include the impact of changes that
may be approved during the 2011 General Assembly session. Final fringe benefits rates will be
communicated by University Human Resources when approved and will be available at
http://www.hr.virginia.edu/other-hr-services/payroll-information/fringe-rates/. New fringe
benefits rates become effective on July 1 each year, so the payroll posted in July for the prior June
will be encumbered at the old rates.

For targeted awards, units should use current fringe benefit rates to build budgets; when the 2011-12
fringe rate is finalized, the University Budget Office will modify state and local targeted budgets to
accommodate the rates. UVA Budget Developers will be notified by email when targets are adjusted.
Non-targeted awards should use the projected 2011-12 rates (projected before any 2011 General
Assembly actions) outlined below.

                                                  2010-11 FB Rates, for    Projected 2011-12 FB Rates,
                                                    Targeted Awards         for Non-Targeted Awards
  Full-time Faculty and University Staff—                27.0%                        29.0%
  Executive
  Full-time Classified Staff, University Staff—           31.3%                        33.5%
  Managerial and Professional, and University
  Staff—Operational and Administrative
  Part-time Faculty and Staff with benefits               27.5%                        29.5%
  Part-time Faculty and Staff without benefits            5.5%                         6.0%
  and Wages


Other Than Personnel Services (OTPS). Accounts charged directly for communication services,
insurance, utilities, and other facilities services should set budgets based on the rates released by Voice
Communications, Risk Management, and Facilities Management available on the Budget Office website.
For auxiliary units, an estimate of the 2011-12 general and administrative cost charge will be distributed
in January and should be incorporated into the budgeted expenditures.

The Microsoft Headcount Fee will be going up from $50 to $53 per headcount employee in 2011-12.
This change is the first cost increase that has been passed along to units since the fee was assessed in
2008-09. Previous cost increases were absorbed by the CIO’s office. Any questions on this fee should be
addressed to Susie McCormick in ITC at lsk@virginia.edu or 924-4826.


Graduate Financial Support
The University Budget Office has been working closely with the Ad-Hoc Graduate Financial Aid
Committee to address concerns with the timing and structure of the institutional allocation of graduate
financial aid. Accordingly, the 2011-12 allocation will reflect a restructuring of the aid allocation in
order to reduce some of the restrictions on spending and will be released at an earlier date.

Graduate Teaching Assistant (GTA) Full-time Equivalents (FTEs). For 2011-12, the allocation
of GTA remission (in-state tuition and all required fees) will be based on the number of GTA FTEs
budgeted in during 2010-11. Units desiring to increase GTA FTEs must submit a request via the
addenda process. The addenda request should include the cost of in-state tuition remission, out-of-
sate tuition adjustment, health insurance, and wages for any additional GTA FTEs.

                                                     5
2011-12 Budget Submission Requirements

Budget Development Calendar (Attachment 1)
The 2011-12 Budget Development Calendar can be found on the University Budget Office’s website and
is included for reference as Attachment 1. Budget submissions must be received by the close of
business on the dates listed. Please note that budget submission deadlines for each vice president/dean
and executive vice president have been incorporated into the calendar to facilitate review and approval
by these offices before budgets are submitted to the University Budget Office.

All budget submissions to the University Budget Office must be sent electronically to
budget@virginia.edu. If you have any questions related to your unit’s 2011-12 budget development or
submission, please refer to the University Budget Office’s “Who Should I Contact?” list to identify the
appropriate individual to whom you should direct your inquiry.


Budget Training
The University Budget Office will be holding separate 2011-12 Budget Development Kick-off meetings
for Academic units and Administrative units. The Budget Development Kick-off for Academic units will
be held on January 10, 2011 from 1-3 p.m. in Newcomb Hall’s Commonwealth Room. The Kick-off for
Administrative units will be held on January 12, 2011 from 1-3 p.m. in Newcomb Hall’s Commonwealth
Room. The focus of the session will be to provide an overview of critical budget-related issues for 2011-
12 and changes in the budget submission process. The session will be targeted towards the chief
budgeting professional in each organization – those who will be making budget decisions and
developing the overall budget. These individuals should attend the session in order to receive guidance
on assumptions and requirements related to the upcoming fiscal year.

Separately, the University Budget Office will identify the primary budget data entry person (the
individual holding the UVA Budget Developer responsibility) in each organization. If the person
identified as the 2011-12 UVA Budget Developer has held this responsibility previously, the Budget
Office will coordinate any needed training refresher. Any individual requiring the UVA Budget Developer
responsibility for the first time must complete an Integrated System Access Form, submit the form to
the Department of Training, and be trained by the Budget Office. The UVA Budget Developer
responsibility should be requested in the Miscellaneous section of the Access Form. The UVA Budget
Developer responsibility will terminate at midnight on April 1, 2011.


Budget Submission Components
The budget submission includes the following components, which are explained in detail below:
     Budget Submission Narrative and Checklist
     Tuition or Fee Increase Request Form
     IS GL and GA Budget Detail
     Budget Addenda Request
     Planned Expenditures from Selected Fund Sources
     Capital Reserve Projection
     Annual Renovation and Infrastructure Projects (ARIP) Plan

All standard forms and templates are available on the Budget Office website.

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Budget Submission Narrative (Attachment 2). Each unit must complete a Budget Submission
Narrative, which documents how each unit’s budget development activities are linked to the strategic
planning and how budget reductions are specifically impacting the operations of the unit. The narrative
provides supporting background information to the financial data submitted and ties together all the
various required elements.

On the Budget Submission Narrative, self-supporting unit must describe their compliance with the Board
of Visitors Capital and Operating Reserves Policy. Self-supporting units must demonstrate (a) operating
reserves equivalent to three months of operating expenses and (b) annual capital expenditures or
contributions to capital reserves of at least 1.5 percent of replacement value of buildings and
equipment.


Tuition or Fee Increase Requests (Attachment 3). The Tuition or Fee Increase Request Form must
be completed to request an increase in tuition, fees, and rates. Before any increase can be evaluated or
approved, the related operating budgets must be submitted for review. If the increase will fund debt
service, an amortization schedule is required before approval. Due to economic conditions, increases
are expected to reflect only the minimum amount needed to meet unavoidable cost increases and
should not include expanded or new services.

For mandatory fee increase requests, units should assume the following number of fee-paying students
in budgeting fee revenue:

        Regular Session Fee       19,800 students
        Special Session Fee        5,600 annual students (of which 4,100 pay the summer health fee)


Integrated System (IS) General Ledger (GL) and Grants Accounting (GA) Budget Detail. All IS
GL and GA activity must be budgeted for SG, local general (LG), state sales and services (SS), state
auxiliary (SA), local auxiliary (LA), state restricted (SR), institutional gifts (DI), institutional endowments
(EI), and institutional Facilities and Administrative cost recoveries (FI) awards. Additionally, beginning in
2011-12, all IS GL and GA activity must be budgeted for local sales and services (LS) and local other (LO)
awards. LS and LO award activity for 2011-12 should not be included in the Planned Expenditures from
Selected Fund Sources form. After observing several operational deficits arise due to unrealized local
sales and services revenues, we will now require budgeting this activity in order to allow the University
Budget Office to develop a better understanding about the revenues and expenditures anticipated. This
review will include reviewing current cash balances, determining how reliant a unit is on these types of
funds and considering what institutional risks may be inherent if the anticipated revenues are not
realized.

The Discoverer report “WEB Target Development Report” will be available to UVA Budget Developers by
January 17, 2011. The Target Development Report will include all targeted awards (SG, LG, SR, DI, EI and
FI). Beginning with the approved July 1, 2010 budget, the report shows each permanent installment
modification approved to date and target adjustments (including the 2011-12 budget reduction). The
result is the 2011-12 target budget for the major budget unit. Vice presidents and unit heads have the
authority to re-distribute target budgets between their units. The total budgets and employee FTEs
entered into the IS Budget Forms for these award types may not exceed the targets provided.


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For SS, SA, LA, LS, and LO awards, total projected expenditures and transfers, net of recoveries and
revenues, must not result in a cash deficit at June 30, 2012. The Budget Office will be reviewing current
cash balances and historical activity for these types of awards to review the reasonableness of a unit’s
assumptions regarding revenues and expenses.

The University Budget Office strongly recommends that units run the following Discoverer reports in
developing their 2011-12 budgets. The University Budget Office runs these reports as part of its review
of unit budget submissions.

    1. “WEB Budget Development Report” – this report will compare 2010-11 budgets with 2011-12
       budgets to ensure that all projects requiring GL and GA budgets are included in the detail for
       submission. Within this workbook, the “GL and GA Budget Comparison” worksheet enables
       users to view both budgets on one report, providing a nice summary of revenues and expenses
       for revenue-generating activities.

    2. “GL_Cash Balance Summary by Org” – the “Operational Cash Balance Summary” worksheet and
       the “Non-Operational Cash Balance Summary” worksheet in this workbook will help users to
       review the current financial status of each revenue project.

    3. “GL_Revenue Reconciliation Reports” – the “Cash Balance by Project” worksheet within this
       workbook will help users to determine the GL object code/award number for budgeting.

    4. “WEB Selected Financial Data” – originally developed for the Planned Expenditures from
       Selected Fund Sources submission, this Discoverer report (tab 6 and tab 8) has been modified to
       include all actual data for a unit and has proven to be invaluable in summarizing activity for a
       unit. In particular, take a look at the “6) Summary-All Award Types” and the “8) Expenditure
       Detail-All Award Types” worksheets.

The detailed budgets for the SG, LG, SS, LS, SA, LA, SR, DI, EI, FI, and LO awards will be entered into the IS
Budget Forms by users with the UVA Budget Developer responsibility. As an alternative method of
inputting the budget, the Budget Office will coordinate a spreadsheet upload process. If you are
interested in uploading spreadsheets automatically, please contact your budget analyst for more details
about the process.

All other expected GL and GA activity will not be budgeted in detail but must be estimated by the
organization using the Planned Expenditures from Selected Fund Sources form described below.


Planned Expenditures from Selected Fund Sources (Attachment 4). The University Budget
Summary includes all expected activity from all institutional fund sources. For resources not budgeted
in detail through the IS GL and GL forms (generally, sponsored grants and contracts, facilities and
administration (F&A) cost recoveries, gifts, endowment distributions, the endowment administrative
fee, and intellectual property), the University Budget Office requires an estimate of the activity for the
current and upcoming fiscal years on the Planned Expenditures from Selected Fund Sources form. All
anticipated activity for an organization must be provided to the University Budget Office either through
the detailed IS budget entry forms or through the Planned Expenditures from Selected Fund Sources
submission.




                                                      8
The Discoverer report “BU.Selected Financial Data” allows the user to obtain actual data for selected
fund sources for the latest full fiscal year for which data is available, and also to obtain year-to-date
actual activity in the current fiscal year. The budget submission will include an estimate for 2011-12 and
a current projection for 2010-11 that reflects any changes from the original estimate. The template will
be distributed separately for this purpose, with each unit’s 2010-11 original budget data pre-filled.

Detailed instructions for using the Discoverer report and completing the Planned Expenditures from
Selected Fund Sources form can be found at Planned Expenditures from Selected Fund Sources
instructions-11-12. Other helpful sources of information concerning available funds include Financial
Reporting and Analysis’ F&A Distribution Reports and Long-Term Pool Market Value Report.


Budget Addenda Request (Attachment 5). Use the Budget Addenda Request Form to submit 2011-
12 addenda proposals. All requests must be prioritized by each school or department to facilitate
review by your vice president. Unavoidable cost increases, including Commonwealth or federal
mandates, must be the top priority of the area submitting the addenda request. Prioritized lists are due
from each senior vice president on April 1, 2011.

The Budget Addenda Request Form should also be used to request a supplemental allocation from the
Higher Education Equipment Trust Fund (ETF). Based on the current delay in spending approval due to
the state’s limited debt capacity, we will most likely defer decisions on ETF until we have assurances
from the state that the underlying debt will be issued and they will reimburse expenditures, but we still
suggest submitting the request at this time to expedite the process when and if funds are made
available. Guidelines regarding qualifying purchases from the Equipment Trust Fund are available at
http://www.virginia.edu/budget/forms.html.

The Budget Addenda Request form also should be used to request allocations from centrally-managed
reserves, including the Commons Area Reserve (limited to Student Affairs), the Arena/Stadium Reserve
(limited to JPJ Arena and Athletics), and Historic Preservation Funds (limited to Facilities Management
and the Architect for the University).


Reserve Projections (Attachment 6). As previously mentioned, self-supporting units (SS, SA, and
LA organizations) must comply with the Board of Visitors Capital and Operating Reserves Policy. The
capital reserve requirement (annual capital expenditures or contributions to capital reserves of at
least 1.5 percent of replacement value of buildings and equipment) should be demonstrated on the
Capital Reserve Projection templates. The templates provide (1) detailed projected renovation and
replacement and expansion reserve budgets for 2011-12 and (2) a summary budget outlining planned
expenditures and reserve balances for the next ten years.

Please note that, as part of its annual budget submission, the Division of Parking and Transportation
should include a projection of planned expenditures and reserve balances for the Parking Assessment
Fund. Similarly, Facilities Management and the Office of the Architect for the University should
coordinate a combined submission of expected reserve balances and proposed expenditures from the
Grounds Improvement Fund.




                                                    9
Annual Renovation and Infrastructure Projects Plan (ARIP) (Attachment 7). The Annual
Renovation and Infrastructure Projects Plan (ARIP) should be submitted by Academic Division units and
the Medical Center. The ARIP summarizes non-general fund cash major maintenance, interior
renovation, fit-out of shell space, and infrastructure projects between $1 million and $5 million
anticipated in the next year. Previously-approved ARIP projects do not need to be re-submitted if the
scope and budget are unchanged. See the Budget Office Website’s Capital Budgeting Reports for
previously-approved projects. A summary of the ARIP will be included in the 2011-12 University Budget
Summary and approved by the Board of Visitors in conjunction with the budget.


Budget Checklist (Attachment 8). This checklist details the components of a complete budget
submission. To ensure all requirements are met, please complete the checklist and return it to the
University Budget Office as part of your budget submission.


Index of Attachments
Attachment 1   Budget Development Calendar
Attachment 2   Budget Submission Narrative
Attachment 3   Tuition or Fee Increase Request Form
Attachment 4   Planned Expenditures from Selected Fund Sources
Attachment 5   Budget Addenda Request Form
Attachment 6   Capital Reserve Projection
Attachment 7   Annual Renovation and Infrastructure Projects Plan (ARIP)
Attachment 8   Budget Checklist




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