University Business Policies and Procedures Manual

7000
BUDGETS AND FUND BALANCES
Effective Date: July 1, 2006
Subject to Change Without Notice 

Authorized by UNM Regents' Policy 7.20 "Budgets and Fund Balances"

1. General

This policy applies to budget management and use of fund balances for Current Unrestricted funds with special emphasis on Instruction & General funds. Budgeting involves all segments of the University and is a continuous process designed to ensure the best use of available funding. Budget management requires short-term and long-range planning, and involves setting up program priorities, requesting funding, allocating available funds to various programs and projects, preparing and maintaining the budget, and reporting on the use of funds and intended use of any unexpended funds.

2. Reporting and Review of Current Unrestricted Fund Balances

Board of Regents' Policy 7.20 requires that each department responsible for Current Unrestricted funds submit a budget use report to their dean or director at the end of each fiscal year. The budget review and fund balance report can be completed using Banner or Hyperion and should include beginning balances, new revenue, expenditures, transfers, and ending balances for the fiscal year just ended. The report for Instruction & General funds will also include the ending fund balances as a percentage of the budget for each department. Departments should attach a written analysis comparing actual expenditures to budget and plans for using any unexpended funds. These reports will be submitted to the cognizant dean or director by September 1st. Deans and directors will review the reports and submit them to the cognizant vice president by September 15th. Vice presidents will review the reports and submit them to the Office of Budget, Planning, and Analysis by October 1st. The Office of Budget, Planning, and Analysis will submit a comprehensive report on annual savings and fund balances to the Board of Regents at their November meeting. This information will be reported University-wide for Instruction & General, Student Social and Cultural Development, Research, Public Service, Financial Aid, Auxiliary Enterprises, Athletics, and Independent Operations. 

3. Partial Allocation of I & G Annual Savings  

It is critical to the fiscal integrity of the University that adequate central reserves be available to address unexpected and/or critical needs of the University. The State of New Mexico considers central reserves ranging from 3% to 5% of the University's Instruction & General budget to be a prudent amount for the University to maintain. In order to ensure adequate central reserves are available for unexpected and/or critical needs, the Board of Regents will review unexpended funds at the end of each fiscal year to determine if some portion of annual savings in Instruction & General fund balances should be transferred to the central fund. Annual savings are defined as the difference between revenues and expenditures for the year just ended and do not include prior year carry forwards.  The portion transferred will not normally exceed 25% of annual savings for the previous fiscal year and will be done only when necessary for the fiscal health of the University, which in turn benefits all aspects of the University.  Departments should reserve 25% of annual savings until after the allocation decision is made by the Board of Regents at its November meeting.

The University understands the need for both short-term and long-range planning and therefore will only look to annual savings and will not deduct from fund balances departments have built in previous years to address long-range programmatic needs. This process provides an incentive for budgetary units to build balances for future use, while also recognizing that cost savings throughout the University need to be available to address institutional priorities. An exception to this allocation may be granted if a department submits a plan for use of its annual savings such as faculty start-up or capital expenditures to the cognizant vice president for approval. If approved by the cognizant vice president, the plan must then be submitted to the Board of Regents for final approval.

In years when the Regents decide it is necessary to allocate some portion of annual savings to the University's central fund, the required amount will be calculated at the vice president level. Vice presidents will have the opportunity to work with deans and directors to review departmental requests for exemption from the allocation and present a proposal to the Executive Vice President for Administration as to which accounts should be used to generate the necessary allocation. The Executive Vice President for Administration will make the final decision on the sources of allocation. 

4. Deficit Balances

4.1. Deficit Balances Existing On or Before June 30, 2005

Every department with a negative fund balance that existed on or before June 30, 2005, was required to submit a deficit reduction proposal for phased reduction of the deficit by March 31, 2006, for review and approval by the cognizant vice president. After approval, the vice president sent the proposal to the Office of Budget, Planning, and Analysis for monitoring. Until the deficit is eliminated, each department must submit follow-up annual reports to their dean or director by September 1st showing the progress being made to reduce the deficit and discussing any variances from the original deficit reduction proposal. Deans and directors will review the reports and submit them to their vice president by September 15th. Vice presidents will review the reports and submit them to the Office of Budget, Planning, and Analysis by October 1st. If a department is unable to meet its original deficit reduction proposal, it must submit a revised proposal for review and approval by the cognizant vice president with a copy to the Office of Budget, Planning, and Analysis.

4.2 Year-End Deficits

If a department anticipates a year-end deficit, the department head must notify his or her dean or director of the estimated deficit as soon as he or she is aware of the projected deficit. The dean or director must identify funds to cover the deficit or the department's next fiscal year budget will be reduced by an amount sufficient to cover the prior year's deficit. The department head must also submit a plan for resolving the causes of the deficit. Exemption from this process requires written approval from the cognizant vice president with a copy to the Office of Budget, Planning, and Analysis.

5. Responsible Fiscal Management

The University has limited funds and departments heads are responsible for ensuring the most effective, efficient use of those funds. Budgets are valuable tools for measuring performance because they reflect planned activities. Department heads should review their budgets regularly to identify positive and negative variances between expected expenditures and actual costs. These variances will help the department head determine if goals and objectives are being met and/or if unanticipated events are negatively impacting the department's ability to meet it goals and objectives.

Comments may be sent to UBPPM@UNM.edu
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