Wednesday, April 5, 2006

UTS AuditoriumFirst Session – 9:00 - 10:00

Second Session – 10:30 - 11:30

Carryforward Estimates for “A” Funds

Surplus funds that are retained by the unit at the end of the fiscal year and included in the following year’s budget

What is Carryforward?

Surplus funds are generated when the SOURCES for a unit exceed the USES during the fiscal year

How Does a Unit Generate Carryforward?

Carryforward = MONEY

Carryforward is analogous to retained earnings in corporate income statements

Retained earnings are money available for use

So why have money?Transactions demandPrecautionary demandSpeculative demand

Object codes 31533 & 31534

What is My Unit’s Carryforward?

How Do I Calculate My Carryforward?

1. Start with the prior year’s carryforward amount (31533 & 31534)

2. Add final BUDGETS for remaining allocations (3’s)

3. Add ACTUAL revenues (4’s)

4. Add ACTUAL transfers from (81XXX)

5. Subtract ACTUAL transfers to (86XXX)

6. Subtract ACTUAL expenditures (5’s)

7. Add ACTUAL IITs (6’s)

8. Balance = New year’s carryforward amount

The balance should equal the YTD fund balance PLUS the allocation budgets (All the 3’s)

What Are My Unit’s Sources?

Tuition & Fees (Academic Units) 401XX

Other Revenue4XXXX

State Appropriations31500/31525/31526

NET of other 3’s Non-recurring - 363XX/368XX and 36400/36500

Permanent - 373XX/378XX and 37400/37500

NET of Transfers81XXX and 86XXXTax In and Tax Out81150/81160 and 86150/86160

Carryforward31533/31534

What Are My Unit’s Uses?

Expenditures

5XXXX

Contra-Expenditures

6XXXX

How Does Carryforward Occur?SOURCES exceed USES

Examples:Tuition and fee receipts are higher than budgetTransfers in more than anticipatedExpenditures 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

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

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) – unrestrictedF, G, H, J, K, L and S (most) – restricted

Non-Current Funds:Loan, Endowment, Agency, Plant

What About the Other Funds?

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

What About the Other Campuses?

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

Why Would “Too Much” Carryforward Be Bad?

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

What is “Too much” Carryforward?

There is not one answer for that because it is specific to each unit with carryforward

Every unit operates differently

Every unit has a different level of budget and mix of funds

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

So Why Are We Completing a Carryforward Estimate?

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

The percentage of carryforward to total “A” fund budget at January 31, 2006

USC Columbia – TOTAL – 11.59%

Academic Units – 12.68%

Service Units – 11.11%

Of the total amount of “A” fund carryforward

Academic Units have 61% of the total

Service Units have 39% of the total

What is Carolina’s “A” Fund Carryforward Position?

The difference in the unit projections and actual carryforward was just over $15M

- a swing of over 32%

How Well Did Units Estimate Carryforward Last Year?

The source of carryforward not well understood

The estimate was a new request – units unsure of its purpose and use

Are units deliberately understating revenue and overstating expenditures?

Why Were the Estimates Off Last Year?

Carryforward Template

How Do We Make Our Estimates Better?

General Ledger as of March 31, 2006General Ledger as of March 31, 2005FY2004/2005 General Ledger FINAL

Academic Units – Tuition report for Spring 2006 and Summer I 2005

Fall/Spring reviewDiscussion with dean and/or department head

What Do I Need to Complete This Template?

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?

For academic units, there will be an assessment of utility costs prior to June 30 to cover the utilities shortfall

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?

What Are Some Things to Consider?

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

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

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

What is the Impact of Summer I?

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

Carryforward Calendar – FY2007 Budget Development

After FY2007 budget is approved and loaded, the Budget Office will complete a FY2006 variance analysis for each unit using the Fall and Spring Review template

Budget Office will develop training sessions for Business Managers to complete a three year budget projection

Three year projection is intended to tie to strategic planning – the Blueprint for Excellence

CFO, Provost, and VPRHS will review

So What Happens After This?

QUESTIONS