Monday Matters
Welcome to another Monday. I hope that you had a good Fourth of July and were able to get some rest from the long weekend. In addition to offering us a time to celebrate our nation, the start of July also means the beginning of a new fiscal year. This year the Business Office and the Office of Information Technology have teamed up to make the start of a new fiscal year worth a celebration. The focus of this week's column is our new College budgeting system.
I'm going to divide this column into two sections. First I want to give an overview of the main ideas that led to the formation of the new budgeting system. This should be of interest to all of us. The second section is for department heads, office managers, and administrative assistants who will be working with the budget. I will put the details in this section so those who do not work directly with budgets can skip this part and be spared.
It's Our Money
By now you have probably heard about value-centered management, or VCM. This is the new management philosophy that the University has adopted. VCM embraces the idea that individual units, such as the College of Education, can decide how to spend the revenue that they generate. At the same time, VCM states that every unit must be fiscally responsible and not put excess strain on general University resources. In other words, each unit has fiscal independence and fiscal responsibility. Tuition dollars that are generated through our College courses will flow into the College. That's the good news. At the same time, the College must now explicitly pay for many of the services that we have traditionally received automatically from the University.
A management philosophy like VCM has several major benefits. Placing financial responsibility at the local level encourages good stewardship. One result is that each unit must make the tough decisions that often accompany difficult financial times. We can no longer assume that services will always be there for us or that we can offer expensive programs without worrying about the bottom line. Yet we are the masters of our destiny. VCM encourages us to be entrepreneurial. It follows that we must search for those programs that are in highest demand by our prospective students, the consumers of our industry. When we can offer services and programs more efficiently, we will be rewarded with more revenue. That means more resources to create a better work environment and to finance innovations that could push us to a better standing in the educational community and within our disciplines.
The College budget has been redesigned with the same principles of VCM that have been adopted by the University. Each unit within the College, both academic departments and nonacademic offices, has been given a monetary allocation and been asked to create a budget based on that allocation. Each department and all offices are being asked to work within the confines of their budgets. That is, all of the money that was allocated to the College at the start of the fiscal year has been appropriated to departments and offices. There is no "pool" of money hidden away for discretionary allocation.
Now it is up to units within the College to manage their budgets. If offices can work more efficiently, they will reap the rewards. Our system is designed to reward efficiency by allowing units to retain cost savings. Furthermore, departments and offices are encouraged to find ways to generate revenue. Although some of this revenue will be "taxed" by the College as a way to support infrastructure enhancements, most revenue generated by a unit will stay with that unit. I am hoping that the opportunity to retain and use savings and revenues will promote both efficiency and creative entrepreneurial activities.
The mantra here is simple: local budgets, local responsibility, and local rewards. Whether the system works that way depends on you. Efficiencies and enhancements are not the sole responsibility of budget manager in your department or office. The day-to-day decisions you make can have an effect on your entire unit. You can positively influence the work place by conserving and becoming entrepreneurial.
If we are going to expect local responsibility for budgets it is only fair that we provide the tools to give offices up-to-date information about budgets. Beginning immediately each office budget can now be viewed online by budget manager in your office. Later this week the Business Office staff will begin entering new fiscal year expenditures as they are made so that members of your department or office can regularly check financial status. You will not have to wait for entries to be made in the University system, nor will you have to wade through data warehouse to check your budget status. Obviously we must continue to process information through the University system, so the Business Office staff is assuming extra duties to make sure that you are better informed about your budget. The next time you see Steve Mattison or a member of his staff, please thank them for the work they will be doing to add this feature to the College. While you are at it, thank David Michaels for building the system that will make this all possible. David has already promised that in the near future there will be new features for viewing individual income and expense entries and for making projections based on revenues and expenditures.
Details, Details, and More Details
For those of you who are administering the budgets in your offices, let me explain the budget system in more detail. First, if you responded to the email about budget passwords you should already have the password for accessing your budget. To access your budget, go to the business office web page at:
http://www.ed.sc.edu/Business.asp
Click on "COE Budgets" and then your department or office name. You will be prompted for a username and password. At this point, you do not need a username. Leave the username blank and fill in the password. That's it. You can now view your current spreadsheet.
The spreadsheet has four columns, although we are planning on adding some more columns with future enhancements (e.g. a budget projection column). For now, let's take a look at the four existing columns. The first column shows your expense budget for the new fiscal year. These values should match the appropriation you gave to each budget category. The second column is where your actual expenses will be recorded. New fiscal year expenditures will be entered this week and will be kept current thereafter. When expenses are recorded, the balance in the fourth column will be reduced accordingly so that you can view the allocation that remains in this category in your budget.
The third column in your budget takes a bit more explaining. This is the income column of the spreadsheet. Initial income entries reflect your base appropriation. Additional income will be reflected as you generate this income. Income categories could include your unit's portion of salary savings when individuals work on grants, revenues from teaching an extended graduate campus course, or income from other entrepreneurial programs that you may run. If you built your base budget on an assumption of generating some income, this information was used to permit you to create an expense column that is larger than your base appropriation. Your projected income will not appear on your initial spreadsheet, but will appear when you actually generate that income.
The available funds row on the very bottom of the spreadsheet is literally just that. This is your income, including your initial base allocation, minus your actual expenditures. We have not yet begun charging expenses to your budget, but the first expense that you will soon see appear will be a charge for each salary in your unit. Obviously until this figure is charged to your budget your available funds will be quite large compared to your actual non-salary operating budget
This illustrates one very important difference between our internal budgeting system and the university budgeting system. In the university system, salary is only charged as an expense after the employee is paid. That is, individual salaries appear as a series of expenses throughout the year. In contrast, the College system lumps all expenses and anticipated expenses (known within the University system as "commitments") and charges these as an up-front expense. For example, if you have a full-time staff member at a specified annual salary, then we will soon be charging this annual salary to your budget. As another example, when you submit a travel authorization form the approved expenditures will be immediately charged as expenses, rather than as commitments. If the individual who makes this travel does not use all of the money that was initially charged as an expense, then when the travel reimbursement voucher is submitted your expense column will be adjusted. The basic idea here is that in order for you to have a better indicator of your department or office budget, we will charge all expenses both real and anticipated. This is a conservative method of budgeting but one that is very important for keeping our budget balanced in tough fiscal times.
As with all of the new systems being implemented, there are bound to be glitches along the way. Some of these will be due to learning curves and others will simply be my inability to anticipate the special circumstances in each unit. Instead of delaying until we work out all the kinks, I'm plunging ahead with the belief that this is the best way to discover those problems and create a system that will be robust and most useful. Please keep me informed of problems that you have along the way as well as suggestions for improvement. Thank you in advance for your patience and understanding as we move to a system of local budgeting that gives you the freedom to dictate your destiny.
Until next week,
Mike