7.01 Budget Overview

Introduction

1. The Budget Office is responsible for establishing budget and approving budget changes for local and state accounts. Sponsored project account budgets must be developed and maintained in accordance with sponsor guidelines as outlined in the Sponsored Project Agreement, and are monitored by the Sponsored Projects Services.

2. Although budget loads and changes are included in the monthly account reports produced by FRS, budget information is not always processed directly in FRS.
   1. Sponsored project account original budgets and budget changes are entered in the Sponsored Project Information System (SPINS) by sponsored projects accountants and then fed to FRS.

   2. State account original budgets and budget changes are generally entered in the Personal Services Operating System (PSOS) by the Systems Control staff and then fed to FRS.

   3. Original budgets and budget changes for all other accounts are entered directly into FRS from appropriate budget documentation approved by the Budget Office.

   Definitions

3. Budget: A plan of financial information which provides an estimate of proposed revenues or expenditures for a given period.

4. Automatic Budget Reallocation (ABR): A method by which the system automatically transfers budget dollars from predefined budget pools to specific line items within a pool.

5. Automatic Budget Calculation (ABC): A program used to calculate a "budget" figure for deriving the available balance for "cash style" accounts which have a one general ledger (GL) to one subsidiary ledger (SL) relationship.

6. Budget Transfer: A movement of budget authorization from one ten-digit SL account to another ten-digit SL account.

7. Budget Revision: An increase or decrease to the amount budgeted that does not affect another account.

8. Original Budget: An amount initially budgeted to an account.

9. Cash Transfer: A movement of cash from one GL account to another GL account.

10. Permanent Budget Change: A budget revision or transfer that adjusts the budget for the next fiscal year. An example of a permanent budget change is the annualized transfer of funds to cover an increase to an employee's salary.

11. Temporary Budget Change: A budget revision or transfer that only affects the base budget for the current fiscal year. An example of a temporary budget change is the transfer of Personal Services funds to Operations to hire a temporary employee from an outside service, such as Kelly Services, when a regular position is vacant.

    Automatic Budget Reallocation (ABR)

12. Automatic Budget Reallocation (ABR) is a method by which the Financial Records System (FRS) automatically transfers budget dollars from predefined budget pools to specific line items within the pool. This transfer is activated whenever a transaction is posted to a line item within a defined budget pool. The required budget is automatically transferred, or reallocated, to the line item. The purpose of ABR is to provide a means of monitoring budget balances available at significant levels of revenue or expense.

13. The University has established several ABR pools for account use (Figure 1). These pools appear at various object code levels, may only be used for budgetary purposes, and cannot be used to record revenues, expenditures, or encumbrances.

    Figure 1 - ABR Pools
    ABR Object Codes	ABR Pool
    0390	Sales & Service Revenues ABR Pool
    1000	Personal Services ABR Pool
    1100	Salaries ABR Pool
    1300	Wages ABR Pool
    2000	ERE ABR Pool
    3000	Other Direct Costs ABR Pool
    3100	Operations ABR Pool
    5800	Resale Supplies ABR Pool
    6000	Travel ABR Pool
    6100	Travel-In ABR Pool
    6200	Travel-Out ABR Pool
    7000	Capital ABR Pool
    7100	##Hard Cost ABR Sub pool
    7200	Soft Cost ABR Sub pool
    7600	Furniture, Fixtures & Equipment ABR Sub pool
    8000	Student Support ABR Pool
    9997	Expense ABR - Budget Style
    9998	Expense ABR - Cash Style

    ABR Rules

14. Different types of accounts have different budgetary requirements. Therefore, different ABR "rules" have been established in the system. Each rule establishes different levels of budget, using one or more of the budget pools. The rule defines which budget pools are used, and identifies the range of object codes that participate in each pool. Currently there are eight ABR rules in effect. These rules are listed in Figure 2 along with corresponding object code ranges.

    Figure 2 - ABR Rules
    		Object Code Range
    Rule	ABR Pools	Start	Stop	Pool Description
    0	ABR is not in effect
    1	0390 1000 2000 3000	0400 1101 2001 3001 8001	0749 1999 2999 7999 9710	Sales & Service Revenues Personal Services (Salaries & Wages) ERE Other Direct Costs
    2	9998	1101	9710	Master Expense Pool-Cash Style
    3	9997	1101	9710	Master Expense Pool-Budgeted
    4	1000 3100 6000 7000 8000	1101 3101 6001 7001 8001	2999 5999 6999 7999 8999	Personal Services & ERE Operations Travel Capital Student Support
    5	1000 2000 3000	1101 2001 3001 8001	1999 2999 7999 9710	Personal Services (Salaries & Wages) ERE Other Direct Costs
    6	1300 3000	1301 3001	1999 8999	Wages Other Direct Costs
    7	7100	7250 7370 7410 7470	7260 7390 7411 7471	Construction, Renovation, Remodeling Site Clear, Development, Parking, & Landscape Site Utilities Extensions Special Fixed Equipment
    	7200	7210 7270 7320 7420 7440 7480 7520 7920	7240 7281 7330 7421 7441 7481 7540 7930	A/E Fees, Consultant Fees, Design Fees Construction/Renov/Remodeling/Support Svcs - FM FDC Constr Mnmgt Svcs - FM Design/Inspection Construction Manager Other Construction Costs State Risk Management Constr Insurance A/E & C/M Reimbursable & Asbestos Abate Mandatory & Voluntary Transfers
    	7600	7610 7910	7830 7911	Equipment & Library Acquisitions Freight In/Out

    Usage

15. As a general rule, ABR Rule 1 is used for most budgeted local accounts; Rule 2 is used for cash style accounts; Rule 4 may be used for plant fund accounts or sponsored project accounts, depending on the restrictions imposed by the particular sponsor; and Rule 5 is generally used for other restricted accounts and loan accounts. Rule 6 is used for state accounts, certain budgeted local accounts that will be monitored similarly to state accounts, and other budget style accounts in which budgets for salaries and wages are maintained in separate pools to facilitate budget monitoring. Rule 7 is used for Plant Fund Budget style construction project accounts with budgets of $1,000,000 or more (which require ABOR aproval) and consists of construction expense budget pools and specific object code line item budgets. To determine which rule is used for a particular account refer to FRS screen 09X, SL Account Inquiry, or contact your fund accountant. Rule 3 provides for a single budget to be loaded, rather than loading budgets at the category level, and has limited use at this time.

    Budget Collapse - ABR Rules 1, 5, and 6

16. Budget collapse provides for comparison of the original budget to actual expenditures and encumbrances and flexibility within the Other Direct Costs segment of the budget. For example, if additional funds are needed in the Travel-Out category, and those funds are available in the Operations category, the Travel-Out expenditure can be made without requesting a budget change between the two categories.

17. When using ABR rules 1, 5, and 6, a pool is established for Other Direct Costs, object code 3000, which includes Operations, Travel, Capital, and Student Support. When the budget is developed, budgets are loaded for Operations, Travel, Capital, and Student Support. To enable the automatic budget reallocation process to operate at the Other Direct Costs pool level, these budgets are collapsed, or transferred, to the Other Direct Cost ABR Pool. As expenditures or encumbrances post to an account, an equal amount is transferred from the 3000 pool to the detail object code.

    Figure 3 illustrates the budget as originally loaded, before the budget collapse takes place and before any encumbrances or expenditures have been posted to the account. Original budgets have been loaded for Operations, Travel-In, Travel-Out, Capital, and Student Support. The Original budget is used for memo purposes and will not change. Any budget changes or revisions will be reflected in the Revised budget column. EXCEPTION: Budget changes on Sponsored Project accounts will be reflected in both the Original and the Revised column.

    Figure 4 illustrates the effects of the budget collapse. The budgets for Operations, Travel-In, Travel-Out, Capital, and Student Support are collapsed, or transferred into the Other Direct Costs budget pool (3000), representing the total budget for Other Direct Costs.

    Figure 5 illustrates the effects of expenditures and encumbrances on the budget. The automatic budget reallocation (ABR) process is activated, moving budget from the budget pools to the detail line items within the budget pool.

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    Figure 3 - Original and Revised Budget BEFORE the Budget Collapse
    		--------Budget-------
    Sub code	Description	Original	Revised
    3000	Other Direct Costs ABR Pool
    3100	Operations ABR Sub pool	4,000
    6100	Travel-In ABR Sub pool	1,000
    6200	Travel-Out ABR Sub pool	1,000
    7000	Capital ABR Sub pool	2,000
    8000	Student Support ABR Sub pool	2,000
    Other Direct Costs Subtotal		10,000

    Figure 4 - Original and Revised Budget AFTER the Budget Collapse
    		--------Budget-------
    Sub code	Description	Original	Revised
    3000	Other Direct Costs ABR Pool		10,000
    3100	Operations ABR Sub pool	4,000
    6100	Travel-In ABR Sub pool	1,000
    6200	Travel-Out ABR Sub pool	1,000
    7000	Capital ABR Sub pool	2,000
    8000	Student Support ABR Sub pool	2,000
    Other Direct Costs Subtotal		10,000	10,000

    Figure 5 - Automatic Budget Reallocation (ABR) Process
    		--------Budget-------		---------Actual---------		Open	Balance
    Sub code	Description	Original	Revised*	Current Mo	Fiscal  Yr	Comm	Avail
    3000	Other Direct Costs ABR Pool		7,275				7,275
    3100	Operations ABR Sub pool	4,000
    3820	Postage & Mailing		50	50	50
    	Operations Subtotal		50	50	50
    6100	Travel-In ABR Sub pool	1,000
    6120	I/S Lodging		1,100			1,100
    	Travel-In Subtotal		1,100			1,100
    6200	Travel-Out ABR Sub pool	1,000
    7000	Capital ABR Sub pool	2,000
    7620	Data Processing Equipment		1,250	250	1,250
    	Capital Subtotal		1,250	250	1,250
    8000	Student Support ABR Sub pool	2,000
    8110	Scholarships-Tuition & Fees		325	75	325
    	Student Support Subtotal		325	75	325
    Other Direct Costs Subtotal		10,000	10,000	375	1,625	1,100	7,275
    *Revised = Fiscal Year or Project Year + Open Commitments (Encumbrances) + Balance Available

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    Cash Style Accounts - Automatic Budget Calculation (ABC) 

18. "Cash style" accounts (ABR Rule 2) operate like a checking account. Budgets are not loaded and expenditures are only allowed if there is cash available to spend. Cash is a General Ledger (GL) item and is not reflected on Subsidiary Ledger (SL) accounts. Therefore, an Automatic Budget Calculation (ABC) program is run weekly on cash-style accounts to derive a new expenditure budget figure for cash- style accounts.

19. When the ABC program is run, a budget transfer to object code 9998 is created, and revenue budgets are loaded equal to the total amount of revenues received since the last ABC program run, resulting in a revenue budget balance available of zero.

20. The
    9998 budget transfer
    EQUALS revenues (Subsidiary Ledger - object codes 0xxx)
    PLUS transfers-in (General Ledger - account controls 4xxx)
    LESS transfers-out (General Ledger - account controls 5xxx)

    processed since the last ABC program run.

    An adjusted cash balance is reflected monthly in the "Budget Balance Available" column for object code 9998, Total Expenses and Account Total lines on the FBM090, SL Account Statement report to help the account manager determine if funds are available for expenditures. To determine the available cash balance during the month, access FRS screen 018, List 6 Digit GL, enter your General Ledger account number and use the formula in figure 6.

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    Figure 6 - Available Cash Calculation
    Equity in Pooled Cash (1100)	$7,775.45
    LESS:
    Accounts Payable (2100)	0.00
    Encumbrance Summary(96xx)	(2,216.85)
    CASH AVAILABLE	$5,558.60