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BUDGET MANUAL

UNIVERSITY OF SURREY

April 2005

Maintained and updated by the Resource Management Group

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Contents

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Purpose of Financial Management

Financial Management is important to the University as it support the organisation in

achieving its aims & objectives. It is therefore vital that sound financial projections areavailable to inform the strategic planning process and to enable Budget Managers to take

the necessary action to alleviate problems at the earliest opportunity. The better the

financial management at the University the better use we can make of our scarce

resources. Too pessimistic forecasts can mean we lose the opportunity to invest for thefuture; too over optimistic forecasts can mean that we over stretch ourselves and become

more vulnerable to changing market conditions.

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Investment Appraisals

The purpose of investment appraisal is to assist us in the decision making process withinthe University with regard to projects that involve a large financial outlay. This is

particularly so when resources are scarce and when institutions have to establish value for

money.

An Investment appraisal is required in support of any application for funding for a project

that is valued in excess of 10,000. Investment Appraisal techniques provide a means of

evaluating projects against each other, to ensure that, within the limited amount offunding available to the University, the right amount of funds is invested in the right

projects at the right time. A brief investment appraisal manual and a template are

available on the website at web link. Stuart MacGregor in Central Finance should becontacted when an Investment Appraisal needs to be undertaken.

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The University Financial Strategy

A financial strategy for the University forms an essential underpinning to the successful

delivery of its long term academic and other enabling strategies and plans. Theuniversity financial strategy maintains an overall intention to produce a sufficient surplus

from operations over a 7 year cycle (defined by RAE frequency) to enable investment in

future development to fulfil strategic objectives. The sector target is to achieve a surplusof 3% of Income.

In 2003/2004 the University generated a surplus i.e. Income exceeded Expenditure by

2.8m. This money allows us the cash to invest for the future and it provides a buffer forfuture years budgets. In 2003/2004 this surplus of 2.8m equates to a surplus of 1.8%

some way below the 3% target, however our aim is to achieve this 3% surplus over the

long run, therefore in some years we will be below target but hopefully in other years wewill exceed that target.

In broad terms the university financial strategy, seeks to:

Provide sufficient surpluses that can be used to fund capital and other investment

and development

Ensure observance of cash-flow covenants with external lenders

Provide sufficient operating cash-flow to meet both capital programme and

working capital requirements

Maintain sufficient reserves to underpin cash-flow and also to help provide a

contingency to meet the downside effects of the risks coming to fruition

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How the University is Funded

The University is funded via a number of sources. In 2003/2004 the Universitys totalincome of 153 million was made up as follows:-

28% (43m) via Academic Fees & Support Grants

26% (40m) from other Operating Income

24% (37m) came from HEFCE for Teaching & Research

16% (25m) from Research Grants & Contracts

6% (10m) from Endowments, trust inc.& Interest

Other Operating Income

The prime contributor (26%) to the University in terms of Income is from Other

Operating activities, these include:-

Other Services Rendered Activity (OSR)

Income from Residences, Catering & Conferences

Income from subsidiary companies such as SSTL and Surrey University Press

(Bookshop)

Academic Fees & Support Grant Income

The University received 61m in 03/04 in respect of Teaching Income, 18m of thiscame from HEFCE. The remainder has come through tuition fees or income from the

National Health Service (11m) payable both to the European Institute of Health &

Medical Sciences (EIHMS) and the Postgraduate Medical School (PGMS).

Students from the United Kingdom account for 10m of the Universitys total teaching

income; 3m comes from Students from the European Union (excluding UK) & 18mfrom Non European Union Students.

HEFCE Income

Generally a large proportion of the funding for Higher Education establishments comes

from the Higher Education Funding Council for England (HEFCE). In the University ofSurreys case the Income from HEFCE accounts for 24% or 37m of the Universitys

total income. The Sector average is 39%. So although the level of HEFCE income is

very important to the University we are not as dependent upon it as other institutions.

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Each November the Secretary of State for Education announces how much money will be

allocated to HEFCE for the forthcoming Academic Year i.e. (1st August to 31st July). InMarch HEFCE then announce how that grant will be divided between Teaching,

Research & Other.

For 2004/05 HEFCE have been given a total grant of 5,993 million and they have

allocated it in the following way:-

3,826m to Teaching

1,081m to Research

584m Earmarked Capital Funding

486m Special funding

16m for Transfers & Other.

These funds are generally then distributed to institutions by formulaic means which tend

to take account of the volume and mix of individual institutions in terms of teaching &research.

HEFCE Teaching Funds

Institutions receive teaching funds in the form of HEFCE grant and tuition fees payable

by the student or by Government on behalf of the student (see section on Academic Fees

& Support Grants). This combined total i.e. Teaching Grant & Tuition fees is referred toas the Teaching Resource

There are four main stages in calculating the main element of HEFCE teaching funds foreach institution.

Stage 1- A standard resource for each institution is calculated, this is a notional

calculation of what the institution would get if teaching grant was calculated afresh eachyear. This notional allocation is based on each institutions profile of students and takes

into account:-

the number of students

subject-related factors

student-related factors

institution-related factors

Stage 2 The assumed resource for the institution is then calculated, this is based on the

teaching grant paid last year adjusted for inflation and any assumptions HEFCE make

about student tuition fee income

Stage 3 The standard resource is then compared with the assumed resource and a

percentage difference is calculated.

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Stage 4 If this difference is no more than 5% either way then the HEFCE grant will be

carried forward from one year to the next. If the difference is outside the 5% band thenthe grant and or the student numbers will need to be adjusted so that they move within the

tolerance band

Outside of the funding method for teaching HEFCE allocate funding each year to

recognise the additional costs of recruiting and supporting students from disadvantaged

and non-traditional backgrounds or students who have disabilities. For 2004/05 273m isallocated for this purpose.

This funding is allocated using a method that reflects levels of relative educational

disadvantages in census wards. It is calculated pro-rata to 04/05 weighted FTEs wherethe weighting reflects the broad institutional mix of students from difference census

wards as well as a London cost weighting.

HEFCE Research Funds

HEFCE provides funding to support the research infrastructure. This means that themoney received from HEFCE should be used to contribute towards the salaries of

permanent academic staff; premises; libraries and central computing costs. Any income

that is received from the Research Councils should therefore be used to fund the directproject costs and contribute to indirect project costs.

The Income from HEFCE for Research is distributed selectively based on the quality

shown by institutions in terms of their research, reference is made to national &international standards. The Quality of the Research is measured in a periodic Research

Assessment Exercise (RAE). Only establishments that achieve ratings of 4, 5 & 5* willreceive such funding. However, those with ratings of 3a & 3b may receive some fundingfrom HEFCE under the Capability heading (see below for more details).

Research funding from HEFCE is allocated under two main headings

Quality- related research (QR) which makes reference to both the quality and

volume of research activity

Capability funding this supports research in emerging subject areas where the

research base is currently not as strong as in more established subjects.

HEFCE Special Funding

HEFCE recognise that not all widening participation, learning & teaching, research and

related activities can be adequately supported through formula funding. So each year

they allocate an amount for new initiatives that meet HEFCEs strategic aims.

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HEFCE Earmarked Capital Funding

This is additional funding provided by the Government via HEFCE to address past under-

investment in the sector. The two major programmes are the Science Research

Investment Fund (SRIF) and project capital for learning, teaching and IT.

Research Grants & Contract Services Income

In 2003/2004 the University received 39m in total in respect of Research Income:-

14m of which came from HEFCE

7m from the Research Councils

1m from UK Based Charities

5m from the European Commission

12m from Other Grants & Contracts (including commercial contracts with

industry)

The Transparent Approach to Costing (TRAC) and Full Economic Costing (fEC)

As a result of the governments 1998 Comprehensive Spending Review, the HE sector

was asked by the Treasury (the Transparency Review) to implement a costing

methodology (TRAC) which provided the costs of HEIs Teaching, Research, and Otheractivities.

HEIs continue to annually report these costs to HEFCE at institutional level showing the

publicly funded and non-publicly funded elements.

The aggregated results from the sector gave cause for concern that research was

particularly under funded, and non-sustainable in the long term.It was decided that the dual support system of research funding should be overhauled and

that university research should become more self-sustaining which required that the full

economic costs (fEC) of research contracts should be calculated by each institution.

fEC is an extension of the TRAC methodology and has a timetabled implementation over

the next five years.

It is envisaged that after full sector-wide adoption of TRAC/fEC, universities will bein a financially stronger position to compete in the world market for research

contracts.

Endowments, Trust & Interest Income

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10 million of the Universitys total income in 2003/2004 came from either Endowments,

Trusts or Interest receivable. In terms of Endowments, the University generates the

majority of its income through the ownership of the Science Research Park. The Parkgenerates a surplus of approximately 4m per annum.

Other Endowments are received through either Donations or Bequests. The Unis AnnualFund which is run by the Alumni & Development Office and established in 2003 is a

primary source of Donation income. The fund aims to provide financial support to

students in need and additional income for the University to used to enhance studentfacilities. 170,000 was received by the Annual fund in 2003/04.

A further source of income for the University is the interest that is receivable on the

Universitys Investments, these can be overnight bank deposits or longer term deposits.

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How Is the Money Spent

In 2003/2004 the University spent 151m of the 154m it received in Income. The

majority of this expenditure was on staff costs (83m). The University employs in excessof 2,000 individuals.

7m was spent on funding the Depreciation on Assets that the University owns such as

the Land; the Buildings and the Equipment. A further 55m was spent on other operatingexpenses and 6m was spent on Interest payable both loan and bank

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The Resource Allocation Methodology

The Resource Allocation Methodology has been designed as a way to ensure that all the

Income received from HEFCE is apportioned to the Schools and that the costs associated

with the support services of the University such as Finance & Registry are borne by theSchools (infrastructure charge).

Under the University Resource Allocation Methodology, income flows to the Unit which

is responsible for generating it and from this income the Unit must cover its own costs,make a contribution to its School costs and also make a contribution towards:-

those costs which are incurred by the University on behalf on the revenue-

generating units

Strategic Fund which is used to finance new initiatives.

For most income streams, it is a simple matter to identify the Unit which is responsiblefor generating income (eg research grants and contracts.) For other income streams, eg

the HEFCE Teaching and Research Grants, the University has devised a methodology for

distributing the funding (which is very similar to the method used by HEFCE to

determine the Universitys grants).

Some of the Universitys costs are incurred centrally on behalf of the Schools (eg the

University Library). These costs (the infrastructure costs) are allocated to one or more offour cost pools (Space, Staffing, Teaching and Finance) primarily on the basis of what

drives the cost. Thus the costs of the University Registry will be allocated to the

Teaching Cost Pool. The total costs in each cost pool are apportioned to the revenue-generating units on the basis of their level of activity in that cost pool, eg costs in the

Teaching Cost Pool are apportioned on the basis of student ftes.The University also requires each revenue-generating unit to contribute a fixedpercentage of its total income to the Strategic Fund, which is used to fund or pump-prime

new, primarily academic, initiatives.

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The Tax Status of the University

The University has been granted Charitable status for its primary purpose (i.e. the

advancement of education through teaching & research). This means that the Unis is

exempt for VAT purposes i.e. it cannot charge VAT on its income, but this also meansthat it cannot reclaim any VAT on its purchases (input tax) the effect being that the

budget takes the gross cost of an item not the net. The University however is not subject

to Corporation tax on its primary activities.

On the Universitys non-primary activities i.e. commercial activities such as Consultancy

and Other Services Rendered the University is subject to the rules on VAT meaning thatit can charge VAT on its income and reclaim the input VAT. We are also liable for

Corporation tax.

Where the activities of the University are mixed i.e. partly primary and partly non-

primary, a % of the VAT on purchases can be reclaimed as it is covered through thepartial exemption calculation. With these mixed activities the budget head will still see

the gross cost of the expenditure hit his/her budget. The amount of VAT that isreclaimable goes to the Centre and is used to offset part of the infrastructure charge.

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Accountability both Internal & External

The University is accountable to both Internal & External Departments/Bodies and

Requirements:-

HEFCE

The University has to comply with the financial memorandum (see below) and submit

documentation to HEFCE including a strategic university plan; a corporate plan including

an annual monitoring statement & a 5 year financial forecast. In addition the University

has to provide mid year financial returns; the audit committee annual report and a internalaudit annual report.

Both the audited accounts and external auditors management letter along with the annualaudit return also need to be returned

Financial Memorandum Requirements

Under the Financial Memorandum, we have to demonstrate to HEFCE that:-

Public funds received have been used for the purposes intended

Sound arrangements are in place in terms of risk management, control and

governance

the institution will remain solvent and that it is forecast to remain solvent

the institution has complied with borrowing requirements

value for money has been pursued

The Financial Memorandum also requires that the financial statements should conform to

the Statement Of Recommended Practice for University financial reporting (see below)

A full statement of the responsibilities of the Court of the University is included in the

Annual Reports and Financial Statements. The Financial Memorandum requires that theaccounts should be signed on behalf of the University by the designated officer (i.e. the

Vice Chancellor) and by the Chairman or one other member of the University Court as

determined by the Court.

The Financial Memorandum requires the University to assess and recover the full costs ofresearch contracts, Accommodation Services and other trading activities or services

provided to external parties. This established the principle that there should be no cross-subsidisation from funds provided for teaching and related activities. Where it is

appropriate in particular cases for the University to provide some of its own resources

towards the cost of such activities the University should be aware of the extent of thefunding provided.

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Higher Education Statistics Agency

A comprehensive Financial Statistics Return must be submitted to the Higher Education

Statistics Agency (HESA) within five months of the year-end. HESA has beenestablished to undertake data collection and analysis about higher education in order to

make possible a consistent information provision about higher education throughout the

UK, and to enable the University and the Funding Council to meet their obligations underrelevant legislation. The formal responsibility for the provision of this information to

Ministers rests with the Funding Council. HEFCE have agreed to engage HESA as their

agent for this purpose. In addition to data from the Financial Statements the HESA returnincludes a breakdown by academic subject area of research income, staff costs and other

expenditure. As well as the HESA Finance return, HESA also collects information from

institutions on Students and Staff, therefore data on these areas should be consistent

across the three sets of statistics

Accounting Standards

The Accounts of the University have to be constructed in accordance with the Statement

of Recommended Practice (SORP) Accounting in UK Universities which has been

approved by the Accounting Standards Board and which was originally issued by theCommittee of Vice-Chancellors and Principals in 1989. This therefore mean that the

University is subject to an external audit. The Universitys current auditors are Ernst &

Young

The Statement of Recommended Practice divides University income into two broad

categories - "Unrestricted (or General) Income and Restricted Income. Theaccounting treatment of income requires that it should be dealt with under the accrualsconcept and be matched with associated expenditure (see below).

Fundamental Accounting Principles

As the Universitys accounts have to adhere to the Statement of Recommended Practice

this in turn means the University has to comply with the four fundamental accountingprinciples shown below:-

Going Concern

Accounts should be prepared on the basis that the business will continue to operate unless

the entity is being liquidated or has ceased trading.

Consistency

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The accounting treatment of particular items should be the same from period to period; if

changed, the difference should be revealed. Hence the need for a Fixed Asset policy thatstates (in the University of Surreys case) that all items purchased over 10k will be

capitalised and depreciated over the assets economic useful life.

Matching

Wherever possible revenue and associated costs (or vice versa) should be accounted forwithin the same accounting period, subject to accounting for any losses as soon as they

are identified and quantified. Hence the need to raise accruals to defer income into the

next financial year if the course the income relates to has not yet been run.

Prudence

Provision should be made for all potential costs whereas, as indicated, profits should not

be accounted for until realised or when the realisation can be assessed with reasonable

certainty. This means that a far more conservative approach is adopted towardsaccounting for profit than is the case for costs. Hence the opportunity to accrue early

retirements costs if the individuals have signed the agreement by the 31st July but they

dont actually leave until the following financial year

Internal Audit Requirements

Budget Managers are required by Internal Audit to ensure that the following is carried

out:-

Run the weekly transaction reports and check transactions according to the advice

issued by the Planning Department web link. These reports should be signed by

the checker and stored for 12 months.

Payroll Costs Report this report should be run on a monthly basis and checked

to ensure that all anomalies are investigated, it should be signed and then stored

for 12 months. See web linkfor details of how to run it

Schools only:

P50 R, G & C Project Statements - These report are intended to allow the financial

monitoring of Research Projects, they are aimed at School Finance Managers,

Finance Administrators and Principal Investigators. The main difference between

this report and other financial reports is that the numbers are project to date,

rather than year to date. These statements should be run regularly and checked

and then stored for 12 months. See web link for details of how to run them

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University Committees

Council

The University Council comprises a number of ex officio, appointed, elected and co-

opted lay and academic persons, the majority of whom are non-executive. TheUniversity Council as governing body is responsible for the Universitys system of

internal control and for reviewing its effectiveness. Such a system is designed to manage

rather than eliminate the risk of failure to achieve business objectives and can onlyprovide reasonable and not absolute assurance against material misstatement or loss. The

University has agreed a Risk Management Policy which has been approved by Council

and its risk register is regularly reviewed and updated.

Finance Committee

To advise Council on financial policy and to keep the University's financial

position under review.

To scrutinise the Annual Accounts of the University and of other bodies which

require to be approved by the Council. [Note the Audit Committee scrutinises the

Annual Accounts from a compliance with Accounting Standards perspective and

gives assurance to Finance Committee and Council on this aspect]

To consider the University financial forecasts and capital programme proposed by

the Executive Board and to make recommendations to the Council thereon

To exercise the Council's powers relating to the borrowing and investment of

money laid down in Statutes 16(7) and 16(8), subject to a limit of GBP55m,

above which powers revert to Council. To report to Council annually on the Universitys total borrowings, and to make

recommendations when appropriate on the level of future borrowings.

The Committee may delegate some or all of these powers to a sub-committee a

majority of whose members are lay members provided it requires the sub-committee to report to it on the exercise of these powers at its next regular

meeting

To exercise the Council's powers relating to the determination of University fees

and charges as laid down in Statute 16(11).

To receive reports from the Executive Board in order to review the use of the

University's assets and their management and the return that the University

obtains from these. To approve financial regulations and related standing orders of the University.

To exercise its powers on behalf of the University laid down in the Deed of the

Battersea Trust.

To recommend to the Council statements of the financial responsibilities of staff

and of members of committees and of the Council

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To receive the Annual Accounts of and an annual financial report and forecast

from the Students' Union and the Union Club.

To consider the Financial memorandum with the Students Union and to make

recommendations to Council on revisions.

To approve the funding requirements for capital programmes on the

recommendation of the Executive Board. To exercise the Councils powers as Trustee of the Foundation Fund in all matters

which are not specifically delegated to the Research Park Executive or othercommittee. The Committee may sub-delegate some or all of these powers to a

sub-committee which shall be subject to the special quorum requirement.

To approve the University's insurance arrangements.

To receive reports from the Research Park Executive on the development and

operation of the Research Park.

To act as the vacation and emergency committee of the Council.

To carry out such other functions as are delegated to it by the Council and to

consider such other matters as may be referred to it by the Chairman of Council orthe Vice-Chancellor.

Executive Board

The Executive Board is an advisory body which assists the Vice-Chancellor in

discharging his executive authority under the Statutes for the management of theUniversity. It currently comprises all Heads of Schools in addition to Senior University

Administration staff. It is responsible for:-

advising on all matters relating to University strategy and for makingrecommendations on these as appropriate to the Vice-Chancellor and thence to

Council, for its approval.

advising the Vice-Chancellor on all decisions and actions necessary for the

conduct of the University and for the achievement of the objectives of the

approved strategy.

providing advice to the Vice-Chancellor on:

(i) the Universitys strategic and academic plans and operating statement,

covering all of the Universitys activities, for approval by Senate and

Council;

(ii) guidelines for the annual planning process and for reviewing the outcomes

of that process for all academic and non-academic units; setting academic,operational and financial targets as appropriate; making budget proposals

and determining budgetary allocations;(iii) the approval of the plans of all of the Universitys entities in the context of

the University plans approved by Senate and Council;

(iv) the academic and resource implications of all new academic initiatives,including new course proposals, in the context of the Universitys and

Schools academic and financial plans;

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(v) the progress of all of the entities within the University in achieving the

objectives of their approved plans both on an annual and medium term

basis;(vi) actions to be taken where progress diverges from plans;

(vii) matters put to it by its sub-groups/committees or by University entities

which wish to take actions not included in their latest approved plan;(viii) all major capital projects in the context of the Universitys strategic and

academic financial plans.

Planning Committee

The purpose of the Planning Committee is to ensure that the University plans effectively

for its future and allocates its resources consistently with those plans. In order to achieve

this it will:-

prepare and keep under review the Universitys overall strategic plan andassociated financial strategy and forecasts

consider and recommend for approval by the Executive Board the

developmental/operational plans put forward annually by the Schools, academicservices departments and central support departments

make recommendations to the Executive Board on the deployment of the

Universitys strategic resources

make recommendations to the Executive Board on the construction of the annual

budget and the forward financial forecast for the University for the coming year

guide and develop the processes by which the University produces strategic,

developmental and operational plans and its annual budget

make recommendations on the operation of and changes required to the

Universitys Resource Allocation Methodology.

Estates Committee

To formulate and review periodically the University's key policies and strategy in

relation to its estate and buildings and to make recommendations to the ExecutiveBoard thereon

on behalf of the Executive Board, to oversee and monitor the effective

implementation of those policies through agreed action plans to make recommendations to the Executive Board and the Finance Committee on

the prioritisation of expenditure in the University estate

to set performance standards for the operation, maintenance and energy utilisation

of buildings and building services on the estate

to arrange for such consultation, to commission studies and other exercises and to

establish such groups as may be necessary in pursuit of its objectives

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to communicate with, and to have regard to the business of other bodies,

including the committees of the Senate, so as to ensure that matters within the

purview of the Committee are properly identified and progressed.

Minor Works

The Minor Works Fund is a relatively small funding (approx. 300k) source for Estates

& Buildings projects with an estimated value of up to 50,000 that fit with the

University's Strategic Plan but which can not or should not be funded by individualSchools or Departments. Applications for this funding, including outline descriptions of

the proposed projects, should be submitted by the School / Departmental Manager to the

Office of the Deputy Vice Chancellor, and awards will be made via the Estates ExecutiveCommittee on a quarterly basis. Projects if approved will normally be managed by the

Estates & Buildings Department.

Resource Management Group

The purpose of the Resources Management Group is to attend to the management of theUniversitys resources within the current operational year. In order to achieve this it will:-

receive periodic reports of financial and non-financial performance of academic

and non-academic units for the purposes of assessing out-turn

consider and approve in-year changes to expenditure and income budgets by

academic and non-academic units

advise the Planning Committee and the Executive Board, as appropriate, on any

actions which they need to take in order to deliver the planned academicobjectives and financial results for the current year and subsequently

to consider and make recommendations on fee and related issues

to approve the framework for the setting of general fee levels and fees for

individual programmes, and to monitor its operation and effectiveness.

The group comprises of Prof. Turner (Chair), Tony Knapp, Greg Melly & Bob Gunn.

The group is serviced by Sarah Heighes.

Process Improvement Committee

The purpose of the Process Improvement Committee is to create an integrated, prioritised

and managed approach to improvement and change across the University by:-

acting as a steering group to co-ordinate and support change initiatives including

those relating to Customer Relationship Management [CRM], Value For Money

[VFM] and IT systems, and those derived from outcomes of the RiskManagement Initiative

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providing a methodology for running and supporting process reviews, including

programme management tools and associated training, working within Charter

Mark and EFQM criteria as appropriate

advising the Executive Board on the inclusion of processes in a co-ordinated

annual University Improvement Programme

evaluating existing processes and proposed improvements against appropriatebenchmarking information

agreeing objectives, targets and milestones for each process review together with

arrangements for the management of the project and for the appointment of

external facilitators or consultants

receiving regular reports on the progress of each project and post implementation

reports.

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Financial Responsibilities

Council has ultimate responsibility for the finances of the University. The Vice

Chancellor is deemed to be the Designated Accounting Officer as a result he therefore

has to sign the HEFCE return.

The Vice Chancellor is supported by various University Committees :- Finance; Audit;

Supervisory Board; Executive Board; Planning Committee; Resource ManagementGroup; Estates Executive Committee; Process Improvement Committee (see above for

more information)

At the next level down the Director of Finance has financial responsibility for the

University affairs. However financial management is devolved at the University thereby

meaning that Schools are responsible for their own finances subject to adhering to the

financial plan that has been agreed through the Academic planning round. If the School

needs to go outside of that budget then they need to gain authority from the ResourceManagement Group.

Schools Financial Responsibilities

All Schools have a Finance Manager. Schools are responsible for preparing budgets andmonitoring and controlling their Income and Expenditure. Schools raise their own

purchase order and sales invoices (except for RG&C and some tuition fees) on Oracle

financials. Schools also prepare costings (RC11s) for research grant applications.

Departments Financial Responsibilities

Some Central Service or Administration Departments have a desginated Finance Officer.

For those Departments that do not, the finances are either managed by the Department

Head him/her self or by another employee in conjunction with the Department Head.

These Departments are also able to call on the Management Accounts team withinCentral Finance for help or assistance. Departments are responsible for monitoring and

controlling their Income and Expenditure

Central Finance

Central Finance are responsible for the following functions:-

Accounting Section this section is responsible for preparing the annual

accounts, financial forecasts and controlling the University cashflow position.Within the Accounting Section sits the Management Accounts team. They are

responsible for reviewing and preparing the budgets for the Central Support and

Administration Departments in association with the Department themselves. In

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addition this team are responsible for preparing the management accounts for the

Trading areas:- Residences, Conferences, Catering & UniSport

Cashiers Office This Department deals with all Cash Office counter

transactions such as payment of tuition/accommodation fees. They issue parking

permits, travel cards, controlled stationery. In addition they issue student loancheques and bursary payments

Procurement & Payments The Departments aim is to create a professional

procurement environment that supports the University as customers, providesexcellence, improves the buyer/supplier relationship and demonstrates best value

for money.

Payroll & Pensions The payroll section is responsible for ensuring that all

employees are correctly paid and ensuring that the relevant amounts are paid over

to the Inland Revenue.

Accounts Receivable This section is responsible for checking and posting sales

invoices raised by Schools & Departments. Accounts receivable are also

responsible for chasing debtors

Finance System Support Team This team is responsible for implementing and

developing the new Finance System - Agresso.

Vat Officer The Vat Officer is responsible for ensuring that the University

correctly accounts for Value Added Tax. He is also responsible for preparing the

Universitys VAT return and calculating was is due to be paid over to Her

Majestys Customs & Excise.

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Budgetary Planning

Central Support & Administration Services Planning (CSAS)

The planning round for the Central Support and Administration in an annual cycle,

normally beginning in September with a workshop where the Schools are invited to

attend to make suggestions as to where they believe the priorities are for CSASdepartments. Excel workbooks are then distributed to CSAS departments at the beginning

of October to enable the plans to be drawn up. The completed plans are then returned in

late November. The outcomes from the CSAS planning round are the agreed

departmental budgets for year one and plans for years two to four, this provides theInfrastructure cost, which is then fed into the Academic Planning as it forms the basis of

the Infrastructure Charge to the Schools.

Academic Planning

The Academic Planning round is also an annual cycle that starts in February. Althoughthe CSAS workshop will be held in October to which the Schools are invited to make

suggestions as to what they believe the priorities should be for the CSAS departments.

Like the Schools a planning workbooks is completed for each cost centre within aSchool. Schools plan for the next financial year and the following three years, the figures

for the next financial year once approved are then uploaded into the Finance system and

will form the basis of the budgets shown on the P12 reports.

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Monitoring Your Budget

A budget is not an allocation of cash, but an expression of authority to commit the

University up to a net expenditure ceiling in pursuit of an approved plan. Such authority

to commit the University is not irrevocable.

Budget holders should control their net expenditure so that it matches their budget for the

year. An overspend should be avoided because it means that expenditure exceedsavailable resources. An underspend is not necessarily desirable because it represents

resources wasted and plans unfulfilled.

To ensure that plans are fulfilled and that the allocated resources are used to optimum

effect, budget holders must exercise close Financial Control over their areas of

responsibility. This is facilitated by careful Monitoring of the financial position.

Subsequent sections explain how the preparation of a financial forecast for the year, the

construction of a budget profile, the incorporation of that budget profile into theUniversity's management reports and the budget holder's close and regular scrutiny of the

monthly management reports are all essential tools in the required financial control andmonitoring.

Where a department contains a multiplicity of cost centres and activity codes, financialmonitoring is best achieved when the Head of Department/School Manager allocates

budgets to those cost centres and activity codes to reflect agreed plans. Those to whom

responsibility has been delegated for running particular areas of activity or specificprojects should have access to Management Reports for their areas of responsibility and

such reports should include reference to the Budget as well as to the actual expenditure.

For this reason Heads of Departments/School Managers should, where appropriate,distribute their Budgets down to the level at which projects or activities are beingreported.

A budget should be managed in conjunction with the financial regulations web link.

The main tool for monitoring ones budget is the P12 report produced by Central

Finance. (See P12 section for further detail)

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Chart of Accounts

The current coding structure has five parts to it. The first is the company code, this is a

two character numeric code. 01 is mostly used as this denotes the University, companiessuch as Surrey University Press (Bookshop) have their own company code.

The second part of the code is the costcentre this is a 5 character numeric code. A costcentre identifies where the charge should be made, i.e. the department or unit to which

income or expenditure should be charged and which area has spent or earned the money.

The third aspect is the activity code this is a six character code which is a mix of letters

and numbers. Activity codes provide the ability to split income/expenditure down to

project level.

We then have a fourth aspect which is a four digit natural account code. This denotes thewhat is being coded, i.e. income or expenditure and the nature of the income (e.g. fees) or

what the money has been spent on (e.g. salaries, rent, rates etc.).

The final aspect of the code is that last two character alpha code called the funding

source, this should be used to denote where the money has come from i.e. HEFCE or EUFunding.

Example 01.31201.RC1234.3408.AE

Requests for new cost centres and activity codes should be sent to Sarah Eade in the

Central Finance Department.

In order to raise a transaction against a cost centre you must be an authorised signatory on

that cost centre. To update the list of authorised signatories please contact Sarah Postles

in the Central Finance Department.

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Frequently Asked Questions on Coding under construction

Internal Sales

Sales within Schools or other Departments should be completed via an Internal

Requisition (IR) and should be coded to the Funding Source AE as these transactions

are eliminated on consolidation.

Accounting for Conferences

When UniS organises a conference on behalf of another organisation, only UniS's agreed

commission/profit share should be included in UniS's accounts, not the gross income and

expenditure of the conference. This is important not only for the year end accounts, but

also for the monthly P12s.

You should therefore ensure that the gross income and expenditure relating to non-UniS

conferences is removed at month end. Once the conference accounts are finalised, the netsurplus should be shown as income. Until that time, the difference between total income

and total expenditure should be coded to the Balance Sheet using the accrued or deferred

income codes. There is no need to debit and credit each individual income and expensecode, as long as the total for the P12 line is nil.

Internal Requisitions

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Reports Available for Budget Monitoring

P12 Reports

The P12 series of reports are the Universitys main financial monitoring tool. The P12report is called such because it used to be page 12 of a monthly reporting pack. The

reports show on-screen monthly snapshots of Income & Expenditure compared to Plan

(Budget). Available for Schools & Administration Departments at four different

organisational levels:-

P12 A All Schools, / All School-Level Admin Grouping

P12 S - One per School / School-Level Admin Grouping

P12 D - One per Department (Or AOU)P12 CC - One per Cost Centre.

P12 M One per School, with a sheet per Cost Centre.

Users can drill-down within a P12 line to see further levels of detail within the General

Ledger, grouped by Activity codes and Natural Account codes. The plan figures showingin the P12 reports come from those figures that are approved during the Planning rounds.

HEFCE income lines. Actuals showing on the P12 are set to equal the Plan figure,

there is no actual transaction in the financial ledger. Hence there will be no

variances showing on this line

HEFCE Teaching Allocation line 012

The total HEFCE teaching allocation is determined by HEFCE and is shared between the

Schools via the Resource Allocation Methodology.

HEFCE Research Allocation line 017

The total HEFCE Research allocation like the teaching grant is shared between the

Schools via the Resource Allocation Methodology. The total Research grant for the

University is also determined again by HEFCE and is based on the Universitys ratings

in the most recent Research Assessment exercise.

HEFCE Other Grants line 042

At present this budget represents the School or Departments share of the HEFCE Human

Resources grant. All future Non Teaching or Research Grants will be apportioned here.

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Tuition Fee Income (H/EU) & (O/S) line 052 & line 54

Schools plan for their tuition fee income in terms of number of students and type of

students i.e. whether they are home, overseas, full-time or part-time. The actual shows

the portion of the invoices raised that applies to the year to date period. Invoices are

profiled equally across the financial year if set up by Registry within Oracle Financials.Invoices not created by Registry are raised by the School, so Schools need to bear this in

mind when profiling the budget for tuition fee income. These P12 lines picks up the

following natural account codes 1100 to 1117 plus 1120.

NHS Contracts line 062

This line represents Income received from the National Health Service the primary

recipients of which are EIHMS and PGMS, this income is picked up by the P12 on the

basis of the Funding Source used i.e. FH - NHS

Research Grants & Contracts Activity line 120 & line 290

All transactions on activity codes beginning with R will appear on either the RG&C

Income or RG&C Expenditure lines of the P12, thus, Research Staff costs do not appear

on Line 155 Establishment Staffing instead they will appear on line 290 ResearchGrants and Contract Costs. Income is calculated for every project at the end of each

month. It is created from Expenditure on the ledger plus Overheads and Direct Cost

Recoveries (DCRs) apportioned on the same basis as Overhead and DCR informationfrom the project budget, which is contained in the Research Project Management System

(RPMS). Calculated income accruals are added to invoiced values in order to display the

calculated income (Income Earned).The basis of this income calculation depends on the type of research contract. For mostcontracts it is based upon expenditure plus a defined level of contribution.

RG&C Income is calculated in this way for Management Information monitoring

purposes, as the actual amount invoiced to sponsors (i.e the actual income appearing onthe ledger), is not very meaningful, and it is more accurate to record the Income Earned,

i.e. the amount that would have been invoiced had it been carried out monthly and based

on expenditure.

Other Services Rendered Activity line 130 & line 310

This relates to all the Income & Costs associated with the provision of services toexternal bodies, including the supply of non-teaching goods and consultancy. Such

activities should be assigned an activity code beginning with a Q. Income from OtherServices Rendered should be shown to the extent of the completion of the contract or

service concerned. This is generally equivalent to the sum of the relevant expenditure

incurred during the year and any related contributions towards overhead costs. Again

staff costs coded to an OSR activity will be shown on the Other Services RenderedCosts line rather than Establishment Staffing

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Short Course Activity line 140 & line 330

This relates to the Income and Costs associated with the provision of short teaching

courses i.e. those that are non credit-bearing. Such activities should be assigned an

activity code beginning with a S. Again like with OSR and Research the staff costsassociated with Short Courses will appear under the Short Course Costs line on the P12

report and not the Establishment Staffing line.

Bench Fees Earned & Support Grants line 060

Equal to spend on Bench Fee and Support Grant Activity Codes (Normally E*****) -where there are sufficient funds.

Service Teaching Activity line 080

Under the resource allocation methodology, teaching resource (Composition Fees and, if

appropriate, HEFCE Teaching Grant) are allocated to the Cost Centre which owns thecourse upon which students are registered. From this income, the Cost Centre must pay

the total costs of teaching the course. Some of this teaching will be provided by staff

employed in the Cost Centre but other teaching may be provided by staff in other CostCentres service teaching.

The Cost Centres receiving and providing the teaching are responsible for agreeing astudent FTE and financial value of the service teaching being provided and for ensuring

that the financial transfer is made.

The P12 has two lines for Service Teaching one for Income and one for Expenditure.This activity relates to the use Schools make of each other in terms of teaching. For

example the School of Engineering may use lecturers from the School of Management to

teach on their Mechanical Engineering with Business Management Degree. The Schoolreceiving the service i.e. Engineering have to pay Management based on the number of

students attending the course. The School of Management will receive the income from

Engineering but on top of that they will receive a premium of 25% for providing theservice. Conversely the School receiving the service will also receive a rebate of 25%.

Service Teaching only happens between Schools, it does not take place within Schools.

Endowment & Deferred Grant Income line 070

Some sources of Income are treated as Deferred grants this means that the Income is onlyreleased to the Income & Expenditure account as the expenditure is incurred. The

remaining Income will sit on the Balance Sheet as a Creditor and can then be carried

forward from one financial year to another without the need for an accrual.

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Grants or donations received for the purpose of funding the acquisition or construction of

land or buildings are also treated as deferred capital grants. The receipts are treated as

long term funding and not income. These deferred grants are released to income over theexpected useful life of the buildings in line with the depreciation policy.

Specific Endowments are those endowments where the use of the capital and income, oronly the income, is for a specific purpose or activity so designated by the donor and

which may be used only for that purpose or activity.

Each month prior to month end Central Finance run a download on all the activity code

where the second character is an N. A journal is then processed to release Income to

the I&E account to match the expenditure incurred. The journal also does a quick check

to ensure that the amount of income received originally from the donor has not beenexceeded. The associated expenditure will appear on the relevant line of the P12 i.e.

Staff Costs or NSR. Therefore the profiling for this budget should match the profile of

the associated expenditure.

External Studentship Activity line 075 & line 185

Schools receive money from external bodies to fund student scholarships, in these

situations the university simply acts as a middle man because as the School receives the

money it then passes it over to the student, therefore the sum of the income receivedshould match the sum of the expenditure paid

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Other Direct Income line 100

All other income received by Schools/Departments not covered by one of the other

Income headings will appear under this P12 line

Support from All Central Sources line 091

The Strategic Fund is funded partly through income received from the Foundation Fund

group and partly through the Income received from Schools via what was the Recycled

Academic Funds charge now called the Strategic Funds Charge. Applications to the

Strategic Fund can be made during the Planning round or in-year via ARE 1s or SRE 1sto the Resource Management Group. Income from this source is generally transferred on

the basis of expenditure incurred. This is why it is important to create a separate activity

code for this type of expenditure and then let Finance know so that they can download the

level of expenditure each month and then transfer the relevant amount of income

Correct re Income At Risk line 400

During the planning rounds Schools are asked to estimate how much of their income they

believe is at risk, this is then entered as an Income at Risk budget. In order to ensure thatthe overall bottom line remains unchanged an expenditure line is reduced by the same

amount. During the year if it is thought that the School is going to meet its income target

then this is removed and the hold back on expenditure is released

Salary Costs Establishment line 155

The budgets for this line of the P12 is driven by the information held on the EMMA

system. Each month Finance download the budget information from the EMMA system

and upload it into Oracle Financials. Therefore highlighting the importance of keepingthe information stored on EMMA up-to-date. Inaccurate data can cause a distortion of

the Balance of Resource Allowance which is monitored by the centre. Please see section

on EMMA for more information. Actual amounts are in the range 2000 to 2498.

Staff Costs Non Contracted line 160

Expenditure on this line primarily relates to staffing costs for individuals who do not havea contract of employment with the University. Any expenditure on the natural account

range 2500-2999 will be charged to this P12 line. Primarily this should include staff

employed through Kellys and some types of Associate staff. Consultants and similarshould not be charged to a natural account code beginning 25%%, but to a code such as

3214.

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Non Staff Recurrent line 170

The non-staff line of the P12 relates to the routine running costs of the cost centre e.g.

Telephones; photocopying etc. It includes all expenditure made by a School orDepartment that is not picked up on any of the other P12 lines.

Equipment Expenditure line 230

This line of the P12 represents all Equipment Purchases under 10,000 i.e. those items

where the natural account code begins with a 31 excluding Equipment Maintenance,Equipment Hire, Computer Software, Computer Consumables, Computer Maintenance &

Computer Software Maintenance all of which appear on the Non Staff Recurrent line.

Any piece of equipment over 10k is capitalised in accordance with the University's

Accounting policy and then depreciated, hence the expenditure will not appear on thisline.

Depreciation line 430

Depreciation is charged on items purchased that conform to our Fixed Asset policy,generally the item has to be tangible and has to exceed 10,000 in value. Depending on

the recommended useful life of that asset, the P&L (cost centre report) is then charged a

portion of that assets cost each year for a number of years. For example if a car waspurchased for 15,000, this item would be capitalised which means that the cost of it will

sit on the Balance Sheet as an Asset and then each year a portion will be charged to the

P&L account as depreciation. In this case the University deems Motor Vehicles to have auseful life of 5 years, so 3,000 will be charged to the P&L each year for five years.

Any items that were bought and capitalised prior to the implementation of Oracle

Financials were treated differently in that the School or Department concerned werecharged the full cost i.e. 15k in the year of purchase. The centre then took that 15k

into a reserve behind the scenes and made the correct accounting adjustments to ensure

that we were conforming to the accounting laws.

Inventory

Any assets over 500 need to be recorded on the University inventory primarily for

Insurance purposes. For further information please contact Lisa Daly in the Central

Finance Department

Internal Studentships line 175

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Expenditure relating to bursaries/tuition fees paid to students by the School/Departments

itself should appear on this line

Contribution to School Costs line 245

This line is meant to reflect the charge of the School admin unit which is not incomegenerating across all the various costcentres. The idea being at the School level this

charge will net out to zero.

Infrastructure Charge line 250

Actuals showing on the P12 are set to equal the Plan figure. The infrastructure charge isthe mechanism by which the School pay for the cost of the Central Support and

Administration Services (CSAS) i.e. Finance, Human Resources, Registry. This is not to

say that the total Infrastructure charge equates to the total costs of the Administration of

the University because certain expenditure within the CSAS areas are not a fair charge tothe Schools.

Strategic Funds Charge line 390

Actuals showing on the P12 are set to equal the Plan figure. This charge is paid for bythe Schools and goes towards providing a fund that Schools/Departments can bid from,

see Support from Strategic Fund for more details

Capital Spend Allowance line 420

This is simply a memorandum item that shows the value of all the fixed assets over10,000 that a School/Department has purchased in the year.

RG & C memo box : This shows the RG&C contribution in monetary

and percentage terms for the year to date actual and full year plan

EMMA Balance box : This shows the EMMA Balance of Resource (BRA). Apositive number is good as it shows that the value of all the posts is less than the Planned

amount. Conversely a negative amounts shows that there are too many posts, albeit that

some of these posts may be vacant. However if these posts were filled for the whole of

the year then the School/Department will be overspent by the value of the BRA.

Variances showing on P12 reports must be explained to Central Finance and

Resource Management Group if appropriate. Central Service Departments are

expected to review their P12s on a monthly basis and send an explanation of the

variances to the Central Finance Department who then consolidate the review and

report to the Resource Management Group.

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A Consolidated monthly monitoring report is prepared by Colin Shepherd and

presented to Executive Board & Finance committee.

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Variances & Profiling

Variances will arise on the P12 report if the year to date plan or budget doesn't match the

year to date actual income or expenditure.

The P12 series of reports warn when spend lines are going over budget: The triangle

symbol slightly overspent; Square (amber) significantly overspent; Circle (red)

more than full year plan

Schools and Departments once the budgets have been approved should split them down

to activity and natural account code if applicable. They should then provide a profile forthat budget which will be uploaded into the Finance System. Some P12 lines lend

themselves to equal twelfths, these are:-

HEFCE Teaching Allocation

HEFCE Research Allocation

HEFCE Other Grants

Income at Risk

Establishment Staffing Budgets these automatically come from EMMA

Infrastructure Charge

Strategic Funds Charge

Schools/Departments should assign an appropriate budget profile other than twelfths forthe remaining lines:-

Tuition Fee Income

NHS Contracts

Research Grants & Contract Income

Research Grants & Contract Expenditure

Other Services Rendered Income

Other Services Rendered Expenditure

Short Course Income

Short Course Expenditure

Bench Fees Earned & Support Grants

Service Teaching Provided Income

Service Teaching Received Costs

Endowment & Deferred Grant Income

Other Direct Income

Support from the Strategic Fund

Staff Costs Non Contracted

Non Staff Recurrent

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Equipment Expenditure

Depreciation

Internal Studentship Expenditure

Contribution to School Costs

Capital Spend Allowance

Why Profiling is important

The purpose of a budget profile is to show the expected pattern of income and

expenditure for a particular cost centre, activity or account code over a period of time so

that it can be compared with the actual pattern over the same time period. A properly

profiled budget is an important aid to proper financial control since it will highlightunplanned events as soon as they occur, allowing remedial action to be taken. The profile

is essentially the forecast for the year constructed on a month-by-month basis.

Furthermore, the profiles for each individual budget will be incorporated into the reports

at a more senior level in the hierarchy, making the summary management information

more meaningful. If profiling were not carried out, exceptions would not be highlighteduntil the year end when it is too late to act, and monitoring during the financial year

would be less effective.

A budget profile may be thought of as a series of milestones towards a selected

destination. It is not necessary, each month, to have reached the milestone precisely, so

long as it can be demonstrated that the destination remains the same and that it will be

reached within the agreed time scale. A budget profile is constructed as a numerical routeplan representing the Head of Department's best estimate of the monthly income and

expenditure expected to arise.

It is therefore apparent that to be fully effective, profiles need to be carefully considered

as soon as the budget is decided. Departments with no expectation of generating any

income should still construct a profile. In such cases the profile will record the monthlypattern in which the departmental budget is likely to be spent.

Assistance in preparing budget profiles may be obtained from the Management

Accounting section of the Finance Department. It should be emphasised, however, that

budget holders themselves are responsible for their budget profiles because in-depthknowledge of the Department's plans is the prerequisite for the construction of an

accurate budget profile.

In certain cases, it is possible to adopt a default profile, but, before doing so, budget

holders must be fully satisfied as to its appropriateness, as it will be the budget holderwho must at regular intervals explain significant variances from that profile.

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Profiles generally should be set at the beginning of the year, they should not be changed

in year unless it is clear that the original profile was inaccurate. Profiles should not

therefore be adjusted to offset a variance resulting from delays in activity, as such delaysneed to be visible and explained.

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Why Accruals are important

Monthly accruals should be done to ensure that Income and Expenditure is matched in

line with one of the fundamental accounting policies Matching. This is especially

important when the income or expenditure straddles more than one financial year.Schools/Departments should raise these accruals on the general ledger. On the balance

sheet side the Schools/Departments should use their own costcentre followed by 6

naughts for the activity code and then the appropriate balance sheet account code i.e.7453 Accrued Income. Each month these journals should be reversed and re-entered if

appropriate. At year end the accruals should be reversed into July and actioned if still

appropriate using one of the year-end accrual forms.

When Accruals Should Be Actioned In Favour Of Profiling & Vice

Versa

Accruals should always be done if any of the activity showing on the P12 report

relates to the next financial year.

Monthly accruals however should be done as a matter of course in the following areas:-

OSR & Short Courses

Monthly accruals rather than profiling should be used for OSR and Short Courses. If a

School or Department has received money in advance of the work being carried out then

all of that Income should be deferred by way of an accrual. If some of the work has beencarried out but all the income has been received then the P12 should only show enoughIncome to match the expenditure plus a % of the contribution level.

The overriding premise for both OSR and Short Courses should be that the Incomereflected on the P12s should be matched with the expenditure incurred. The profile

should not be adjusted in-year to take account of income being received at a different

time to the expenditure being incurred.

Other Direct Income

The classification for Conferences has recently changed from Short Courses to OtherDirect Income as per the HESA classification. For Conferences where the University

receives non of the surplus and are simply acting as an agent then this activity should not

be charged to the Income & Expenditure account, it should therefore remain as a Creditoron the Balance Sheet. For advice on coding for this please refer to Colin Shepherd within

the Finance Department.

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If the University does get a share of the surplus then the whole of the activity should flow

through the Universitys accounts, but monthly accruals should be raised to match

Income and Expenditure with only the surplus falling to the bottom line.

In no instances should Schools or Departments simply accrue to budget.

When there is uncertainty about how to address a variance the following principle should

be borne in mind. A variances should show if the variance is true i.e. it is know that

Tuition Fee income will be behind plan at year-end or that something is not being donei.e. invoicing for work hasnt been completed or project work is behind plan.

School Surplus/Deficit

Year end surpluses are credited to the Schools reserves, year end deficits are deducted

from the Schools reserves. In the following years any positive reserves can only be spent

if that expenditure is included within the school plan

Department Surplus/Deficits

Unlike the Schools the deficits incurred by Departments are debited to the Central Adminreserve. Some Departments that do make surpluses are allowed to keep these in their

own reserves but this is at the discretion of the Director of Finance

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Changes to Budgets In-Year

Schools must complete an SRE 1 (Schools) and submit this to RMG if they wish to

increase or decrease their budgets relating to income or staff. If the change doesntinvolve either of these P12 lines then the Schools must still submit an SRE 1 but this will

go to Sarah Heighes who will change the budget in the Finance system and then on to

Oliver Adams who will change the Schools planning workbook.

Departments must complete an ARE 1 form if they wish to vire money between any P12

line. However both Schools and Departments must complete an SRE 1 or ARE 1 if theywish to change their overall Surplus/Deficit. In the case of the Schools the SRE 1s

should go to RMG for authorisation , for the Admin areas the ARE 1s should go to the

EMMA group first and then on to RMG if the effect on the bottom line exceeds 5k

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Reserve Accounting

Prior to the introduction of statements of Recommended Accounting Practice (SORPS)

Universities used reserve accounting with a number of under spends capable of beingcarried forward into the next for financial year if unspent at the previous year-end. This

led to some serious overspends in a small number of Universities given that these did not

have adequate planning and budgeting regimes in place to properly account for the shift

in resources between financial years.

Current Regime

The University has currently in place an incentive regime which allows part of the

unspent balances within Schools in any one year to be partly carried forward. The basis

of this scheme is that:

Schools in surplus are allowed to c/f spend up to 40% of their unspent budgets

with 40% going into the Strategic Fund (SF) and the remaining 20% falling intothe Schools reserves

Schools in deficit are allowed to c/f spend up to 20% of their unspent budgets

with 20% going into the SF and the balance of 60% being used to reduce what are

likely to be their negative reserves.

Although this scheme has been reasonably successful it still enables a degree of perverse

incentivisation to remain in the system. Faced with the possibility of receiving a benefit

of 40% or 20% rather than 100% schools will still be incentivised to spend at the

financial year end possibly on inappropriate spend such as unnecessary equipmentpurchases although these may end up being capitalised.

Proposed Regime

RMG has discussed the need to remove these perverse incentives on a number ofoccasions and subject to overall affordability in any one year has agreed the following

based on the results from the current financial year 2004/05, therefore for expenditure in

2005/06.

All schools would be allowed to automatically c/f up to 100k of an under spend

from the previous year provided that the School is financially on track for thecurrent year

Under spends in the range 100k to 500k would need justified proposals to

Planning Committee setting out what the school intends to spend and how this

plan ties in with the academic strategy for the school. It is envisaged that these

discussions would take place at the RMG September review meetings.

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It might be necessary to have a fast track regime to approve some of the spend

prior the previous years actuals being confirmed. The balance of spend would

then be confirmed when the actuals are known in mid November.The regime could apply to schools that were in surplus and in deficit.

Some carry forwards for those Schools which have negative reserve balances may bemoderated. This regime does not apply to the support services where any requests for c/f

of under spends will remain as now and will be subject to EMMA group and RMG

approval.

Other Management Information Systems

As well as the P12 suite of reports the University has a number of other Management

Information Systems available

EMMA Establishment Manpower Management System

The EMMA system is an in-house system that manages all established posts within the

University. Every individual who has a contract of employment with the University

should have a post within the EMMA system. Any changes made to the contract of thatindividual require a similar change to the Post within the EMMA system. The intention

being that the EMMA system can be used as a means to forecast the Universitys staffing

budget at cost centre level. In order to ensure that the sum of the post budgets withinEMMA agree to the Staffing budget that a costcentre has approval to spend, the Balance

of Resource Allowance is created. This allowance can be either positive or negative,

although negative balances are closely monitored by the centre, as this can mean that ifall the posts within the system are recruited to then the costcentre will be overspent by thevalue of that negative allowance at year end. For more information on the EMMA

system please go to the EMMA User Guide web link

RPMS under construction

Peoplesoft under construction

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Glossary

Assumed Resource HEFCE grant for teaching plus assumed income from tuition fees

Block Grant The funding provided by HEFCE to an institution for teaching, research

& related activities. This does not include special funding

FEC Full Economic Costing

FTE Full-time equivalent. Full-time students count as 1 FTE. Students on their

sandwich course count as 0.5FTE

HEFCE Higher Education Funding Council for England

HEI Higher Education Institution

Out-turn The actual income and expenditure for a particular year of account

QR Funding Quality-related research funding. It is allocated to research quality andthe amount of research carried out

Research Assessment Exercise (RAE) An exercise carried out periodically todetermine the quality of research in UK HEIs. The results are used by the higher

education funding bodies for England, Scotland, Wales & Northern Ireland to allocate

QR funding. The next one is in 2008

Research Councils There are six Research Councils. They are government-funded

through the Office of Science & Technology to support research in their fields of interest,in both their own establishments and in higher education institutions.

Special Initiatives Funds for specific activities for a limited period not linked to

formula funding allocations

Standard Resource A notional calculation of what an institution would get if teaching

grant was calculated each year. It is proportional to each institutions FTEs weighted bothby price group & by any student and institutional premiums which may apply

Tuition Fees Fees paid to a university or college for a student to attend a course