Budgeting

1. Budgeting A Class by Academic Planning and Budget November 14, 2006

2. Why are we here? • Overview of the Planning Process • Basic terminology • Revenue budgeting • Expense budgeting • Budget constraints • Other factors to consider when preparing a budget • Practical application through the use of group exercises and case studies • Demonstration of Campus Budgeting Information Gateway (C-BIG) • Test of understanding Academic Planning and Budget

3. Why bother to Budget? • Which of the four images do you think we should adopt for Budgeting? Academic Planning and Budget

4. Why bother to Budget? • Which of the four images do you think we should adopt for Budgeting? • Which one would Charles Dickens have chosen? Academic Planning and Budget

5. UC Budget Calendar Campus Revenue Data to OP Salary Increases Effective Budget Bill Signed Regents Adopt UC Budget Governor Announces State Budget Governor's Revised Budget Budget Bill Sent to Governor Legislative Hearings Academic Planning and Budget

6. What Shapes the UC Budget Request • The Higher Education Compact Agreement negotiated with the Governor in 2004 promises the University: • a 3% increase in the base budget • Enrollment growth funding of $37.9 million, reflecting an increase of 5,000 student FTE in 2005-06. • An additional 1% increase to the State General Fund base beginning in 2008-09 for ongoing building maintenance, instructional equipment, instructional technology, and libraries. • Undergraduate student fee increases of 8% in each of the next two years and graduate academic student fee increases of 10% annually for two years. • $305 million from Proposition 55 GO bonds for capital outlay • In return the University is agreeing to accountability measures for improving access to undergraduate education, improving segmental cooperation and K-12 education. Academic Planning and Budget

7. What determines the State’s Ability to Honor the Partnership? Tax Revenue Academic Planning and Budget

8. UCLA’s Budget and Planning Calendar Chancellor’s Budget Allocation Letters Call Letter for Next Year’s Planning Cycle Faculty Appointment Discussions Financial Reviews with APB Units’ Strategic Plan submittal Management Meetings with EVC Decision Retreat with Chancellor Units’ Budget submittal Academic Planning and Budget

9. What is The Role of Academic Planning and Budget? • To support the Chancellor and Executive Vice Chancellor in Academic/Strategic Planning. • Advises the Chancellor and Executive Vice Chancellor on the allocation and utilization of campus funds. • Interacts with the Office of the President to maximize the campus’ financial position. Academic Planning and Budget

10. Why Plan? Which result do you prefer? A B Academic Planning and Budget

11. Planning example Academic Planning and Budget

12. What is Planning? • At its simplest it’s deciding where the organization should be in the future, and how it’s going to get there. • So, what do we need to know in order to undertake this “simple” activity? • What’s the mission of the organization? • What are its goals and objectives? • What’s the environment within which it exists? • What are the strengths and weaknesses of the organization? • What are the organizations’ opportunities and threats? • What are the detailed operational plans needed to achieve the goals and objectives? Academic Planning and Budget

13. Why are budgets always associated with plans? • What is a budget? • Without a budget how can managers know whether they can implement their plan? • Without financial, and other, benchmarks how can managers know whether they are achieving their goals and objectives? Academic Planning and Budget

14. The Operating Budget • In order to develop the operating budget we need to understand the plan. • What are the goals and objectives? • What is the environment within which the organization exists? • What are the organization’s SWOTs? • What are the detailed operational plans needed to achieve the goals and objectives? • Should we just solve problems? • Should we do new things, and should the new things be additive or replace some of the current activities? • What helps us answer many of the questions posed above? Academic Planning and Budget

15. Capital Budgeting • UCLA’s first structure. Can anyone guess where it is? Academic Planning and Budget

16. Why have a capital budget? • Capital Items • Cost a lot and require considerable planning and management focus • Last a long time • Are usually paid for by issuing debt which is repaid over an extended period of time • Who pays for capital projects at UCLA? • The State • Donors • Campus Units Academic Planning and Budget

17. What are some of the Budget Terms that need to be understood? • Permanent, Carryforward, and Temporary Budgets • How do these terms influence financial decisions? • Zero-based Budgeting • Incremental Budgeting • Top-down • Bottom Up • Balanced Budget • Appropriation • Block Budget Academic Planning and Budget

18. What are UCLA’s Sources of Revenue? • Regental funds • Student fees • Contracts and grants • Sales and services • Gifts and endowments • Copies of All-funds Financial Report. Academic Planning and Budget

19. Regental funds • State funds • UC General funds • Indirect cost recovery funds • Patent income • STIP • Endowment administrative fee Academic Planning and Budget

20. Student fees • Registration fee • Education fee • Self-supporting degree programs • Professional school differential fees • Course materials fees • Campus-based fees • Summer session fees Academic Planning and Budget

21. Contracts and Grants • Direct costs of research activities • Indirect costs Academic Planning and Budget

22. Sales, Services and Auxiliaries • Hospital • Vivaria • Housing • Athletics • Parking • Mail & messenger • Communications services Academic Planning and Budget

23. Fund Raising • Gifts • Endowments held by the Regents • Endowments held by the UCLA Foundation • Examples of uses: • capital, • endowed chairs, • scholarships, • discretionary funds • Article on UCLA’s Fund Raising Academic Planning and Budget

24. Class Exercise Academic Planning and Budget

25. What Forecasting terms do we need to understand? Academic Planning and Budget

26. What Forecasting terms do we need to understand? • Straight-Line • Same as Last Year plus/minus inflation/cuts • Regression Analysis • Best Guess Academic Planning and Budget

27. What Concepts do we Need to Understand? • The Approval Process • Fiduciary Responsibility • Full Costing • Direct Costs • Indirect Costs • Revenue Projections • Rate Setting/Pricing • Volume Academic Planning and Budget

28. Individual Exercise(Revenue Budgeting) Academic Planning and Budget

29. What Concepts do we Need to Understand? • Expense Budgeting • Program Costs • Appropriateness of Costs • Individual Exercise: DNA Isolation Budget • Unexpended Funds • Budget Monitoring and Adjusting Academic Planning and Budget

30. DemonstrationCampus Budget Information Gateway(C-BIG) • Competitiveness Task Force and the September 2003 Chancellor’s Retreat identified improvement in campus budget processes as a high priority. • APB established a Steering Committee named the Campus Budget Implementation Group (C-BIG). • Seven companies submitted proposals; only one company, Hyperion Solutions Corp., was able to meet the requirements of the RFP. • The new system is web-based and dependent only on a web browser. • Allows the Chancellor to approve each organization’s annual budget in an orderly and timely basis. • Quarterly variance reports will be produced for management review. Academic Planning and Budget

31. Why Plan and Develop Budgets? • You have a choice to make! Academic Planning and Budget

32. Academic Planning and Budget