| Budget |
The approved financial plan for the year. The Budget is approved by the Governing Authority, usually at the June meeting preceding the start of the financial year in October. While units prepare a Five Year Financial Plan, it is only the first year that is formally approved to become the Budget for that year. The additional years indicate the trajectory of the unit and provide very significant context for assurance that the plan is sustainable, but are not themselves subject to formal approval. However an unsustainable plan may prevent approval of a plan for the year, requiring further work until the plan is sustainable. |
| University Budget |
The financial plan presented to the Governing Authority is a plan for the entire university, and represents income and expenditure of hundreds of millions of euro. It is composed of plans for each unit (approx 100 units) and for the institution itself. The Governing Authority's role is governance and so, although the plan has been through an extensive and detailed process, the Proposed Budget is at a summary rather than detailed level for each unit. The Budget approved by the Governing Authority is referred to as the University Budget and is regarded as being fixed for the year. The University Budget must be broken down to further detail (the Operational Budget) at cost centre and detailed account level and there is some flexibility in adjusting the detail during the year. Typically the University Budget is approved at the end of June, and Heads of unit are notified of the formal approval shortly thereafter. |
| Operational Budget |
The approved University Budget must be broken down from unit level (ie from an overall plan for a school or support unit) to cost centre level. Much of this work will already have been done in preparing the budget submission. The detailed budget is referred to as the Operational Budget. The Operational Budget must agree to the University Budget, but the Head of Unit may approve adjustments during the year in consultation with the Finance Manager, for example moving budget between cost centres. The individual elements of the Operational Budget cannot be regarded as independent of, or overriding, the formally approved University Budget. For example, where there is an overspend or income shortfall in one cost centre, it is not appropriate to spend up to budget level in all other cost centres. This would result in the unit exceeding it's University Budget. Regular review of the University Budget is important and the Quarterly Outturns process is the formal mechanism for doing so. In this process Finance Managers prepare a full-year Forecast which is compared against the University Budget. Finance Managers provide Heads with a Management Pack of reports and usually meet with Heads to discuss the current and forecasted position. |
| Target (or Budget Target) |
The Target represents the standard financial plan for a unit under UCD's Financial Model. Effectively it represents a default financial plan for the unit, based on the current Budget. The Target setting process is set out in the FAQs. Each unit will prepare their financial plan and it will be compared against the Target. A plan may be acceptable even if there are variances against the Target provided that they are sustainable, for example that they balance out over time or that there are sufficient Reserves to fund the variances. The Target is only relevant during the planning cycle. Once the Budget is approved, the Target no longer has relevance - from this point onwards, comparisons are made against the approved Budget, not against a Target that led to the approved Budget. Therefore the Target is not shown on Outturn or Management Pack reports. |
| Static Target |
Performance Based Funding utilises a formula to adjust the Target for a unit. At the start of the planning cycle the Target is calculated and the same Target is used for each of the 5 years of the planning cycle. These are referred to as Static Targets. In reality, over the 5 years of the plan, Net Fee Income performance is likely to vary from the current level and each year a new Target will be calculated per the UCD Financial Model. |
| Dynamic Target |
Rather than using the Static Target throughout the 5 year planning horizon, the PBCS system adjusts the Target from Year 2 onwards dynamically, per the UCD Financial Model, based on the preceding year's plan. This replicates what will happen in reality if the plan is achieved. A School's net position - as measured by Reserves at the end of the period - will be exactly the same whether a plan is compared against a Static Target or a Dynamic Target. With Static Targets the Transfers To/From Reserves will be larger, whereas with Dynamic Targets some of the transfers are dynamically incorporated into the Targets. A worked example illustrates this. |
| Submission (or Budget Submission) |
The plan that is prepared by a unit is referred to as the Budget Submission. The plan is entered on the Planning and Budgeting system (PBCS) by the Finance Manager based on discussions with the unit Head. The Budget Submission Pack reports the details of the submission and is available to the Head < via the reports location - TBC >. The financial plan is supported by 2 detailed plans - the Staff Plan and the Student and Fee Income Plan. |
| Staff Plan |
A detailed post-by-post plan is prepared as part of the financial planning process. Approval of the Budget by the Governing Authority extends to the supporting Staff Plans. The financial plan, and the supporting staff plan, are prepared for a five year period and sustainability over the five years is a critical part of the review and approval process. Staffing decisions can have large and multi-annual (perhaps over a very long timeframe) impact, so strict controls are applied to ensure that the approved Staff Plan is complied with. In exceptional circumstances, and supported by appropriate justification, posts outside of the Staff Plan may be approved via the Authorised Variation mechanism. |
| Student and Fee Income Plan |
A detailed Student and Fee Income plan is prepared and entered onto PBCS by the Finance Manager. The plan is driven by planned changes in Registrations to Majors and assumptions that translate the registrations into planned FTEs and Fee Income for the School. A separate strand of the planning process covers this activity here. |
| Authorised Variation |
An Authorised Variation to the approved Staff Plan may be granted in exceptional circumstances, and must be supported by appropriate justification. Finance Managers complete an Authorised Variation Request form and submit it for consideration by central UCD Finance Office staff. |
| Financial Model Adjustments |
One of the principles of UCD's Financial Model is that speculative increases in fee income may not be the basis of increases in expenditure. Performance Based Funding flows to a unit when increases are actually achieved, not in advance - this is known as the Lag Concept. Therefore the current Budget or the current actual level of fee income (whichever is higher) is the maximum level at which the Fee Income Budget will be approved. The Fee Income Plan should be prepared and submitted on the basis of the expected level of fee income, even if this is higher than current levels. A Financial Model Adjustment will be applied in the Proposed Budget to reduce this to the maximum permitted level. The planned expenditure may be reduced proportionately, or if there are sufficient Reserves, a proportional Transfer from Reserves may be incorporated into the Proposed Budget. Regardless of the planned Net Fee Income position, the planned Net Direct Expenditure may not match the Target. A Financial Model Adjustment will be applied so that the Proposed Budget matches the Target. If the planned Net Direct Expenditure is above Target, then a Transfer From Reserves will be applied; of the planned Net Direct Expenditure is below Target, then a Transfer To Reserves will be applied. Thus the two Financial Model Adjustments that may be applied in formulating the Proposed Budget are a) Fee Income Adjustment to apply the Lag concept b) Require Transfers To / From Reserves. |
| Proposed Budget |
The submitted plan represents the financial outcomes expected by the Head. Financial Model Adjustments are applied to ensure that the plan applies with UCD's Financial Model. These adjustments are applied by central UCD Finance Office, via the Planning and Budgeting system. They are not a judgement that the plan is too optimistic. It is entirely legitimate for a Head (where there is good supporting evidence) to plan for a higher level of fee income than approved to date, or to plan for expenditure higher than Target where the unit has the Reserves to support that level of expenditure. Thus the adjustments are a technique used to ensure compliance with UCD's Financial Model, which incorporates an appropriate element of conservatism, rather than an indication that something has gone wrong in the planning process. The first year of the submitted plan, adjusted to comply with UCD's financial model, is put forward as the Proposed Budget for endorsement by UMT and then the Finance, Remuneration and Asset Management Committee of the Governing Authority, before approval by the Governing Authority. |
| Adjustments Cost Centre ( or 'Q' cost centre) |
As explained above, the University Budget is broken down to a lower level of detail which is described as the Operational Budget. The sum of the detailed Operational Budgets must equal the overall University Budget for a unit. Adjustments to the Operational Budget may be made during the year by the Head of Unit in consultation with the Finance Manager. Usually these adjustments are nuetral overall, for example when moving budgets between 2 cost centres. There may also be changes to budgets that are neutral overall, but represent variances from the University Budget. For example, if additional income is to be received and spent, the Head may wish to increase the Direct Income budget and also the NonPay budget. The overall Net Direct Expenditure Operational Budget would match the University Budget, but there would be opposite variances for both Direct Income and NonPay. Rather than permit variances between the University Budget and the Operational Budget, we post adjustments to a special cost centre so that the University Budget and Operational Budget always remain synchronised. This cost centre is known as the Adjustments cost centre. The code for the cost centre will be the same as the unit code, but starting with a 'Q' rather than an 'S' and so the cost centre is sometimes called the 'Q' cost centre for the unit. No other types of budget or expenditure may be used with this cost cente, it is just used for adjustments. A worked example illustrates the use of the Adjustments cost centre. |
| Lag concept |
A principal of UCD's Financial Model is that fee income budgets lag fee income growth, rather than precede it. We do not commit expenditure on the basis of aspirational levels of fee income, we require that fee income growth is achieved before committing expenditure. The lag concept prioritises prudence in our planning, but where reserves are held by a school, the reserves can be utilised to fund increases in expenditure above those set by our financial model, provided that the plan is sustainable. |