Procedures

Budgeting and Forecasting - Procedures

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1. Purpose and Objectives

The purpose of these procedures is to ensure that the University meets its obligations in terms of the University of Queensland Act 1998 and to provide a framework and guidelines for preparing the annual budget of the University.

2. Definitions, Terms, Acronyms

DVC - Deputy Vice-Chancellor

DVC A - Deputy Vice-Chancellor (Academic)

FBS - Finance and Business Services

FPA – Financial Planning and Analysis

FAIFM – Faculty and Institute Finance Manager

Forecast - is a projection about future performance on the basis of historical data and current condition's data and knowledge

MRF – Management Reporting Framework

Tax Model - is the mechanism used to show the allocation of student load, secondary gain income and corporate overhead to Faculty/Institute level

3. Procedures Scope/Coverage

These procedures relate to both the top level budgeting undertaken by Finance and Business Services as well as the budgeting and forecasting undertaken by Faculties, Institutes and Central areas.

4. Procedures Statement

The University’s annual budget is designed to meet current objectives and priorities on a perpetual basis.

Prudent financial management is required from all levels of the University, from Faculties, Institutes and Central areas if the financial position of the University is to be assured.

The University budget is developed in a legislative environment with particular reference to the University of Queensland Act 1998, Higher Education Support Act 2003 and the Financial Accountability Act 2009.

5. Budget Structure

The University operates under a responsibility structure for daily operational management which is determined along functional lines.

The distribution of the Commonwealth Operating Grant is allocated on an as earned basis to Faculty/major area level (i.e. Faculties, Institutes and DVC portfolio level).

It is the responsibility of the heads of Faculty/major area groups to:

  • Re-distribute this budget to their respective Schools, Centres or other units under their control (where applicable).
  • Manage the expenditure applicable to their budget allocation so that University targets are met within existing resources.

FBS is responsible for collating budgets received from Faculties, Institutes and Central areas and for preparing the final University-wide budget.

Budgets and forecasts are discussed at quarterly review meetings in conjunction with reviewing the Faculty/major area's strategic and operational plans. The Provost will either approve the submitted budget or request that the budget be amended and resubmitted for approval.

These reviews focus on a three-year budget time horizon. While the budget submission is for three years the focus is on the current year's budget submission, while at the same time reviewing, at a high level, the following two years.

6. Budget System

The tool utilised for budget preparation is the Budget and Forecast Workbook (Workbook). The Workbook is an Excel file created in-house to enable users to create and manage their budgets in an efficient and timely manner. Data is entered into the Workbook and then uploaded into UniFi. The data will then be available to be reported via the UQ Reportal the next day.

A new finance officer who requires access to the Workbook is able to download the Workbook from the Budgeting & Forecasting page of the FBS website.

To gain access to load the Workbook into UniFi a finance officer must:

  • Contact their FAIFM or equivalent regarding local Workbook loading policy.
  • Complete the Higher Access-UniFi Application form available from the PPL or the Financial Systems Online Forms page on the FBS website.

Budget and forecast Quick Reference Guides are available from the FBS website.

Training on the Workbook is provided by the Financial Planning and Analysis team through the Staff Development program.

7. Budget Development and Approval

UQ's financial year is based on a calendar year. The University budget is prepared on a cash basis, and is an estimate of revenue and expenditure (comprising only operating expenses not capital expenditure) for all activities of the University.

As part of the budgeting and planning process, Faculty/major areas are required to prepare and submit for review their proposed budget, strategic and operational plans for the coming three financial years. This submission is discussed, negotiated and then signed off by the Provost prior to being consolidated into the total budget for the University for approval by the Finance Committee.

8. Budget Monitoring and Reforecasting

The University devolves financial decision-making to responsibility centres by allocating funds to Faculty/major areas.

There is extensive liaison on funding and budgeting issues between FBS and Faculty/major areas in order to maintain a balance between devolved management and central control.

Monitoring of the financial position against the budget is a continual process. Currently units are required to submit a “revised current year forecast” on a quarterly basis. Two out years of data is provided to enable the trend to be reviewed. If there is no material change from budget this will be per the original budget. If there is expected to be a material change then this will be the updated forecast. It is expected that while there is a formal requirement to submit centrally on a quarterly basis, Faculty/major areas would review their financial positions on a monthly basis.

The purpose of this forecast is to update the financial position of the University based on the latest available information, identifying reasons for variations against the original budget.

Income from student load (CGS, SCC and tuition fees) and Research Block Grants (RTS, JRE, RIBG and SRE) is allocated on an as earned basis. The Tax Model will be rerun on a quarterly basis as more updated information becomes available.

9. Budget Process

Summary

The current “holistic” budgeting approach at UQ, as it affects Faculties, Institutes and Central areas, may be summarised as follows:

  • Estimation of student load income through use of the load model. This model is coordinated through the Planning Office and Financial Planning and Analysis. Faculties and Institutes review and update estimates relevant to them. The model will produce estimates of Commonwealth Government Subsidy (CGS), Student Contribution Charge (SCC) and tuition fees.
  • Estimation of the Research Block Grant component of the Commonwealth Block Grant. This is based on the research performance metrics of research income, publications, research higher degree load and research higher degree completions. The schemes that are estimated include Research Training Scheme (RTS), Joint Research Engagement (JRE), Research Infrastructure Block Grant (RIBG) and Sustainable Research Excellence (SRE).
  • Estimation of the central funding pool. The central funding pool includes: central costs, strategic initiatives, University overheads, institute support and the profit charge.
  • This data is presented by Faculty and Institute in the Tax Model.
  • Bottom up submissions of Faculty/Institute/Central budgets showing the full financial picture of the individual operating unit, including additional revenue and cost streams.
  • Review of bottom up submissions with focus on overall net underlying financial position of the operating area in question.

An overall budget for an individual operating unit (Faculty, Institute or Central area) must include the full financial picture of that operating unit. Approvals to operate a predicted overall operating surplus or deficit occur via budget review meetings, with the position updated via the quarterly forecast review processes.

Any material perturbation in revenue or costs is detected in year via the forecast review process and is managed accordingly, with the focus at the corporate level being that the aggregate operating positions of the Faculties, Institutes and Central areas at least achieve an overall break-even position. This is to ensure that the budgeted overall surplus is achieved and that the contribution to the capital program can be maintained.

Detail

UQ's budget and forecasting process will be outlined in more detail below:

The budget process at UQ consists of the preparation of a three-year budget and quarterly forecasts. This is shown in the diagram below but may be summarised as:

  • Budget - units submit and review their budgets in the last quarter of the preceding year. These are finalised in January to allow for any end of year material differences to be accounted for.
  • Q1 - units submit in April based on actuals Jan - Mar (as at 31/3).
  • Q2 - units submit in July based on actuals Jan - June (as at 30/6).
  • Q3 - units submit in October based on actuals Jan - Sept (as at 30/9). This submission is incorporated with the three-year budget submission.

The major component of UQ's income is student related income. This income is related to student load which in turn is calculated based on enrolments at census date. UQ runs a series of load model calculations to estimate the revenue stream to UQ and to School level. This is shown below.

The budget process aims to illustrate the budget process diagrammatically. The main components as illustrated in this document are:

  • Budget Submission
  • Reports/Commentary
  • Review Meetings
  • FBS Consolidation
  • UQ Executive and Finance Committee

Budget Submission

As mentioned previously the formal budget review meetings are held at Faculty/major area level. However, in order to discuss operations at this level budgets are required to be prepared at a school and operational unit level. Components of the budget can be compiled at the lowest level with knowledge of the local business prior to the release of the allocation documents/models. These include research budgets and to an extent the expenditure profile. However, other components such as student load income and secondary gain income is calculated at UQ level (with local input) and reported to faculty level. While some components can be undertaken at the local level independently to the load model exercise the time involved in these components can be quite lengthy as it often entails a lot of data sourcing with project and budget managers.

Load Model

The model used to calculate a Faculty/major area's share of student income is the load model. The load model is maintained by the Planning Office with FPA playing a consultative and reviewing role. The model is populated with historical data from the data warehouse as well as current student enrolment data. The data is refreshed daily up until the census date when the data is then locked. It is the responsibility of the Faculty/major areas to review the data and update any attrition rates and load estimates. The Commonwealth Supported Places (CSP) income is modelled based on student load to program level based on the relevant cluster in which the student is enrolled. Tuition fee income is modelled based on the student load to program level based on the student's program fee. This data is then linked into the Tax Model.

Tax Model

The Tax Model is the mechanism used to show the allocation of student load and secondary gain income to Faculty/Institute level. The Tax Model also shows the relevant tax attributable to each Faculty/Institute. The Tax Model reports at a Faculty/Institute level but includes calculations to school level. Although the model includes the calculations to school level, how the income is distributed within a Faculty/Institute is a Faculty/Institute decision. The Tax Model incorporates the data from the load model as well as the data sets relating to Research Block Grant metrics which is used to calculate a Faculty/Institute's secondary gain allocation.

Workbook

Once a unit has calculated their revenue and expenditure the tool utilised to input this data is the "Workbook". The Workbook is an Excel file that allows data to be input at an income and expenditure level and validated prior to inputting into the finance system. The Workbook also has functionality to enable a unit to produce a staff plan. This utilises data that has been exported from the HR system (Aurion) to the data warehouse (Reportal).

Once data has been exported from the Workbook into the finance system (UniFi) it is then batch transferred to the Reportal on a nightly basis. This is then able to be reported in UQ's Management Reporting Framework (MRF). Please note, due to the processes mentioned above, reporting via the MRF is not live reporting but reporting on data as per the previous day.

Faculty/major area level review

Once the data is available in the Reportal it is then available for review at the Faculty/major area level. Note, while budgeting and forecasting is prepared in the Workbook the Excel file is a local file and the data is not available for review further up the hierarchy until it has been exported and available in the Reportal. There are multiple levels of review. Firstly, there may be local level reviews/meetings/discussions within the operational unit or school. The second review will be at the Faculty/major area level and may/may not involve formal internal meetings/discussions. This is dependent on the area as approaches differ across UQ. Further, FPA provides budget guidelines including a meeting agenda. Some units choose to request local units to complete the review meeting agenda while others have different approaches to request information regarding a units' operations.

The local reviews may undergo several iterations until the Faculty/major area is satisfied that the numbers represent operations of the Faculty. Any changes during this process are made in the Workbook and uploaded into the finance system for reporting in the Reportal. Once satisfied, the Faculty will then produce the documents as requested in the review meeting guidelines and agenda and submit these to Finance and Business Services for tabling and discussion at the review meetings.

This generally consists of a series of financial reports and commentary. The commentary should provide the executive with a clear overview of the financial operations of the Faculty/major area, any issues facing the unit and proposed action to be taken to resolve/minimise future losses.

Review Meetings

Review meetings are held with each Faculty/major area within the "review meeting" period which is typically a period of 2-3 weeks from the submission date. The review meeting papers are to be submitted to Finance and Business Services by the due date to allow sufficient time to review the papers.

The meeting is generally comprised of the following attendees:

  • Provost (chair)
  • Chief Financial Officer (CFO)
  • Associate Director, FPA
  • Director of Planning
  • Executive Dean/Institute Director/DVC
  • Faculty Executive Manager/Institute Manager/Central Executive Manager
  • Faculty/Institute Finance Manager (FAIFM)

These meetings provide an opportunity for the business unit to discuss their financial position including any strategic priorities for the future. As the UQ budget and forecast is prepared on information provided by business units this provides an opportunity for Finance and Business Services to confirm or modify the UQ result.

At the conclusion of all the budget/forecast meetings the Provost, along with the CFO will review the results and advise one of the following conclusions to the units:

  • The unit's submission is approved and this now forms the new target.
  • The unit's submission is not approved and the unit needs to revise their submission.
  • The unit's submission is not approved but guidance is provided as to a revised target. For example, a unit is forecasting a deficit of $2m in Q1. The Provost advises that the unit needs to aim for a $1m deficit in their Q2 submission.

FBS Consolidation

This is the stage that the UQ budget/forecast is confirmed. This involves considering the bottom up submissions of the business against a top down analysis prepared within FBS.

The top down analysis prepared by FBS is an approach that looks at past trends in combination with known factors from the modelling process and external factors. For example, information provided by DEWWR regarding the funding grants (CSP and RBG) and tuition fee income from the load modelling process.

This step recognises that while there is considerable effort employed by the units in their bottom up submissions the UQ result is not simply the summation of its parts as there are adjustments that need to be applied at a UQ level that are difficult to consider at a unit level.

The output of this stage is the Budget Paper or Quarterly Forecast Paper. This Paper is then submitted to the Senior Management Group (SMG) for discussion. Once approved by the group the paper is then submitted to the Finance Committee for approval.

10. Other References

Budget Guidelines - Detailed guidelines regarding budgeting and forecasting are available on the FBS website in the Financial Planning & Analysis section.

Chart of Accounts - To download the most recent Chart of Accounts please refer to the Quick Resources page of the FBS website.

Custodians
Chief Financial Officer
Mr Andrew Betts
Custodians
Chief Financial Officer
Mr Andrew Betts