Monday, April 16, 2007 West Quad Learning Center (Green Dorm)

1. Monday, April 16, 2007 West Quad Learning Center (Green Dorm) Carryforward Estimates for “A” Funds

2. What is Carryforward? Surplus funds that are retained by the unit at the end of the fiscal year and included in the following year’s budget

3. How Does a Unit Generate Carryforward? Surplus funds are generated when the SOURCES for a unit exceed the USES during the fiscal year

4. What is My Unit’s Carryforward? Object codes 31533 & 31534

5. How Do I Calculate My Carryforward? • Start with the prior year’s carryforward amount (31533 & 31534) • Add final BUDGETS for remaining allocations (3’s) • Add ACTUAL revenues (4’s) • Add ACTUAL transfers from (81XXX) • Subtract ACTUAL transfers to (86XXX) • Subtract ACTUAL expenditures (5’s) • Add ACTUAL IITs (6’s) • Balance = New year’s carryforward amount • The balance should equal the YTD fund balance PLUS the allocation budgets (All the 3’s)

6. What Are My Unit’s Sources? Tuition & Fees (Academic Units) 401XX • Other Revenue • 4XXXX • State Appropriations • 31500/31525/31526 • NET of other 3’s • Non-recurring - 363XX/368XX and 36400/36500 • Permanent - 373XX/378XX and 37400/37500 NET of Transfers • 81XXX and 86XXX • Tax In and Tax Out • 81150 and 86150 • Carryforward • 31533/31534

7. What Are My Unit’s Uses? • Expenditures 5XXXX Contra-Expenditures 6XXXX

8. How Does Carryforward Occur? • SOURCES exceed USES • Examples: • Tuition and fee receipts are higher than budget • Transfers in more than anticipated • Expenditures are lower than budget Salary lag • IIT’s are higher than expected • Planned project/initiative is implemented late • Expenditures move to grant funds • The reverse is true too – if USES exceed SOURCES, then a unit would have a NEGATIVE carryforward

9. Is Carryforward Recurring or Non-recurring? • This is the million dollar question! • By definition – carryforward is non-recurring! • BUT – if your unit’s regular actual expenditures are less than regular actual revenues – there is a recurring component to your carryforward • Under the DECENTRALIZED budget method we operate under, the Budget Office cannot tell you what your recurring carryforward is – the unit’s have to determine this given the many differences under which they operate

10. What About the Other Funds? Do the other alphabet funds have carryforward? Yes – it is the fund balance – booked by an OB to object 32000 Current Funds: B, C, D, E, R and S (some) – unrestricted F, G, H, J, K, L and S (most) – restricted Non-Current Funds: Loan, Endowment, Agency, Plant

11. What About the Other Campuses? Do the USC Senior, Regional and School of Medicine campuses have “A” fund carryforward? Yes – it is the campus fund balance All campuses except for one have “A” fund balance less than 10% of their “A” fund budget

12. Is Carryforward Bad? • NO! • Having carryforward allows us to plan expenditures • Discourages end-of-year spending under a “use-it-or-lose it” mentality • BUT • Too much carryforward MIGHT be bad • Too little carryforward – a deficit – definitely is bad

13. Why all the concern about carryforward? • Public Perception – Tuition caps, reduced state allocation, reduced philanthropy • Financial Management Problem – Understating revenue, overstating expenditures • Misalignment of resources to needs • Inability to express commitments on carryforward dollars • Use of carryforward funds for recurring expenditures

14. What is the appropriate amount of carryforward? • There is not one answer for that because it is specific to each unit • Every unit operates differently • Every unit has a different level of budget and mix of funds

15. So Why Are We Completing a Carryforward Estimate? • Carryforward is a component of the University budget and is reported to the Board of Trustees in total during the budget development process • Estimating carryforward is one step towards better budget forecasting for the next year and in future years • Units at USC need to manage carryforward

16. What is Carryforward Management? At the unit level, the administration is looking for clearly defined and expected commitments of these funds Better budget planning on the front end yields less variance which yields less unforecasted changes in carryforward balances

17. What is Carolina’s “A” Fund Carryforward Position? The percentage of carryforward to total “A” fund budget at February 28, 2007 USC Columbia – TOTAL – 12.22% Of the total amount of “A” fund carryforward Academic Units have 55% of the total Service Units have 45% of the total

18. How Well Did Units Estimate Carryforward Last Year? Last year the unit projection to actual was out $8.7M – a variance of 16% This is an improvement over the prior year where the difference in the unit projections and actual carryforward was over $15M – a variance of 32%

19. Why Were the Estimates Off Last Year? • The source of carryforward not well understood • Units may be unsure of the purpose and use of the carryforward estimate • Are units deliberately understating revenue and overstating expenditures?

20. How Do We Make Our Estimates Better? Carryforward Template

21. What Do I Need to Complete This Template? General Ledger as of March 31, 2007 General Ledger as of March 31, 2006 FY2005/2006 General Ledger FINAL Academic Units – Tuition report for Spring 2007 and Summer I 2006 Fall/Spring review Discussion with dean and/or department head

22. What Are Some Things to Consider? • Do I have one-time expenditures before June 30? • Are there any year-end specific transfers that effect my unit? • Does any unit owe me revenue or transfers (3’s or 8’s) or do I need to complete any IIT’s? • Do I need to transfer funds to a “W” account? • Are there current commitments that will not be liquidated by June 30 that will be expended in the next year? • Is Summer I expected to have the same enrollment as last year?

23. What is the Impact of Summer I? • Unlike the academic year, the fiscal year encompasses the student terms beginning with Summer II, then Fall, then Spring, Maymester, and ends with Summer I • Summer School revenue is booked just prior to the close of the fiscal year, however, because this happens every year, it is a rolling process – the unit will always have five semesters worth of tuition each year • The budget is there from the beginning of the year • The adjustments from budget to actual for the summer terms are minor as the tuition receipts tend to follow the prior year collections, but include the tuition increase from the prior year

24. What is the Impact of Summer I? • The booking of Summer I revenue and the payment of Summer I expenditures by June 30 adheres to the accounting principle of matching revenues to expenditures in the same period • The majority of expenditures associated with Summer I are expended by June 30 and during the post-close process • If payroll documents are submitted as requested, June 30 is the final pay date for faculty for Summer I • Carryforward is not calculated until after the fourth post-close of the accounting system to be sure that entries from the prior year are captured

25. What is the Impact of Summer I? • Summer I is treated now like all the academic terms in that under the budget methodology the net E&G revenue is allocated to the department • Prior to the implementation of VCM, academic units received all their Summer revenues – but did not receive Fall and Spring which went to the general fund • Summer should not be thought of as being different – in fact the treatment of the other terms changed to be more like Summer was previously handled

26. Carryforward Calendar – FY2008 Budget Development March Carryforward removed from base line-item budget for all units April All units estimate carryforward Mid-April Carryforward estimate rolled up for senior administration May Vice President’s budget hearings with President June Carryforward estimate rolled up in Board of Trustees Budget Document July As weekly post-close runs, carryforward estimate updated by Budget Office Early August Carryforward workbooks sent to all units Mid-August Carryforward BD’s due to Budget Office

27. So What Happens After This? “A” Fund line-item budget entry begins today, continues through May 4 In late May, the Budget Office will send out a new template for a three year projection for ALL FUNDS After FY2008 budget is approved and loaded, the Budget Office will complete a FY2007 variance analysis for each unit using the Fall and Spring Review template

28. QUESTIONS