Budget Overview

About

Budget Flexibility pertains to the administration of the State Budget and does not affect non-state budgets.

During the 1991 and several subsequent sessions of the General Assembly, additional latitude was granted to the University that enables UNCG to (1) transfer budget in ways that was not previously available without Office of State Budget & Management (OSBM) approval, (2) administer personnel classifications and properly set compensation for campus personnel and (3) purchase items at higher dollar limits without State Purchasing & Contract approval. This legislative action has been referred to as Budget Flexibility and the Board of Governors must designate a UNC institution as a “Special Responsibility Constituent Institution” (SRCI) before the institution may benefit from the legislation.

The Board of Governors established policies that specify how an institution may be designated as a Special Responsibility Constituent Institution. Further, the Board adopted broad budgetary, carryforward, personnel administration, purchasing and reporting policies.

Also, the legislation and Board of Governors require certain reporting on the institution’s use of budget flexibility. This reporting includes an annual fiscal year report that summarizes budget flexibility revisions, a fiscal year plan for the use of lapsed salaries, and a plan for funds carried forward from one year to the next.

Terminoligy

• Flexibility
  The authority granted by statute that allows a SRCI to utilize any funds in its state budget in any legal manner to pay costs of the programs and activities carried out by the SRCI subject to the guidelines promulgated by the Board of Governors.
• Lapsed Salaries
  Budgeted amounts for faculty, administrative, and staff positions that are not expended by filling the positions on a temporary (terminal) or permanent basis. The amount of the salary that is lapsed is the monthly amount unused over time. Lapsed salaries may be the result of unfilled positions or filling positions on a temporary basis at salary rates less than the budgeted amount.
• Special Responsibility Constituent Institution (SRCI)
  A designation granted to a UNC school by the Board of Governors that allows the institution to take advantage of Budget Flexibility Legislation.

Background

Prior to Fiscal Year 1989-90:

• Budgets were not fully funded
  • Allotment Requests were cut by the Office of State Budget and Management (OSBM)
  • Reversions (unspent appropriations reverted to the State) ranged from 2% to 6% of budgeted appropriation
• All revisions to move budget from one purpose/object of expenditure to another required approval of OSBM
  • Example: budget move form office supplies to Educational supplies required OSBM approval
• The establishment or abolishment of positions required OSBM approval
• Overhead Receipts (recovery of indirect costs from contract and grants) were subject to the same rules as State funds

Budget Flexibility Legislation was enacted in the 1991 Session of the General Assembly

• Allowed the Board of Governors (BOG) to designate campuses to which additional management authority and discretion would be delegated. These campuses are designated Special Responsibility Constituent Institutions (SRCI).
  • General Administration (now known as the Office of the President) set criteria for: Management Staffing Standards, Internal Controls and Safeguards
  • Budgeting and Accounting – possess capable staff and system of budgeting, accounting, and internal controls.
  • Personnel – possess capacity to evaluate jobs, classify positions, set compensation, and manage positions.
  • Purchasing – properly purchase equipment, supplies, and other goods and services up to $25,000.
  • Maintain financial records in a manner that there are no significant exceptions or audit findings.
• Established a Required Reversion equal to 5-year average of historical reversion.
• Allowed a Carryforward of up to 2.5% of unspent appropriation budget after Required Reversion.
• Allowed movement of budget between any purpose / object to another.
• Allowed the creation or abolishment of positions.
• Increased the purchasing benchmark from $10,000 to $25,000 for purchases to be handled on campus.
• Imposed requirement for each SRCI to prepare an annual report on budget flexibility.

Subsequent Legislation (1997-1999):

• Eliminated the Required Reversion (which gave each SRCI a fully funded budget).
• Allowed SRCIs to increase their purchasing benchmark (UNCG’s current benchmark is $150,000).
• Moved Overhead Receipts out of a State Budget code and eliminated a required transfer to the University’s State operating budget.

Additional Oversight by the Board of Governors (2000):

• Each Chancellor must prepare a plan for the uses of appropriations carried forward from the previous fiscal year and anticipated lapsed salary funds for the current fiscal year by July 15 of each year.
• Chancellors may designate authority for approving departmental plans for expenditures authorized under budget flexibility, but not below the level of appropriate Vice Chancellor or Provost.
• The Chancellors shall review an annual internal audit report on expenditures authorized under budget flexibility.

Major Impacts

The major impacts of Budget Flexibility allow UNCG to:

• move its budget between objects not previously allowed without the Office of State Budget and Management (OSBM) approval using the Budget Flexibility Request form,
• purchase items with a higher threshold without the State Purchasing Office approval,
• carryforward unspent appropriations (with institutional limits) from one year to the next.

UNCG not only utilizes Budget Flexibility at the department level, but also at the Institutional level when the Chancellor approves an annual Reversion Plan. The Reversion Plan projects unspent resources (typically certain lapsed salaries and benefits, but may also include overrealized receipts) and matches these resources to unbudgeted institutional needs (this may include items such as utilities, worker’s compensation and unemployment expenses, overtime and mandated institutional reversions).

In order to generate adequate funds to satisfy these needs, in addition to the Board’s rules, UNCG has implemented additional rules concerning budget flexibility. These primarily restrict for direct departmental uses the use of lapsed SPA salaries and benefits on vacant SPA and EPA positions.

In consultation with the Provost and Vice Chancellors, the Chancellor approves all uses of funds carried forward from one year to the next upon the Provost or applicable Vice Chancellor’s request and justification. UNCG’s practice has been to use these funds for special initiatives and not for general needs. A statutory maximum of 2.5% of appropriations may be carried forward from one year to the next. Extenuating budget circumstances at the State level may preclude the institution from carrying forward these funds into the new year.

Guiding Principles, Policies, and Guidelines

Following are the guiding principles, policies, and guidelines under Budget Flexibility is administered at UNCG:

• Budgets are administered in a somewhat decentralized manner
• A budget plan referred to as the “Reversion Plan” is put in place near the beginning of each fiscal year planning for:
  • Estimated over or under realization tuition and other receipts
  • Estimated unbudgeted Requirements needs (e.g. Worker’s Compensation)
  • A contingency set aside for centralized decisions by the Chancellor
  • Estimated historical sources of funds used to cover these items
• Departments have full use of budget flexibility (with the exception of lapsed benefits and SPA salaries) during the year, subject to the internal hierarchy of approvals
  • Approval of Flexibility Revisions is required from the appropriate Provost or Vice Chancellor for the Division
  • Budgetary review and approval by the Director of Financial Planning & Budgets (and the Associate Vice Chancellor for Finance if the transfer is a permanent use of salaries or a temporary transfer in excess of $5,000) for identification of financial problems and institutional concerns
• From time to time the policy may change regarding Divisions’ use of lapsed SPA salaries. Usually 100% of these salaries support the Reversion Plan. However, for Fiscal years 2001 and 2002, one half of estimated SPA lapsed salaries were allocated back to the division where the funds were generated and could be used for one-time needs.
• Flexibility Budget Revisions may be Permanent or Temporary. In either case, an explanation or justification must be provided as to what will be accomplished that otherwise would not be done and how it will benefit the students or other aspects of the University. In addition, the specific category or purpose of the management initiative must be specified (as identified in the Annual Report on Budget Flexibility):
  • Strengthen Undergraduate Instruction and graduation rates
  • Strengthen Graduate instruction and research
  • Expand Library collections and improve library services
  • Upgrade classroom laboratories, including replacing equipment
  • Enhance physical facilities (other than classrooms and laboratories)
  • Expand computing, information resources and telecommunication capabilities
  • Strengthen student support services
  • Improve administrative infrastructure
  • Enhance financial aid programs
  • Strengthen targeted program areas
• The carryforward of funds at the end of the year is at the Institutional level, not the departmental level. The unspent budget at the end of the fiscal is available (unless restricted due to extraordinary budgetary circumstances at the state level) for the Chancellor to allocate for the next fiscal year. However, the Provost and Vice Chancellors may make requests for carryforward when there are extenuating circumstances, particularly as they relate to major purchases. These requests require justification and submission well in advance of the close of the fiscal year.

About

Overhead receipts reimburse the University for Facilities and Administrative (F&A) costs, which include: laboratory and office space; utilities; administrative services (e.g., purchasing, accounting, research, administration, personnel security); custodial services; and building, grounds, and street maintenance. In other words, they include all those things essential to support sponsored research, which cannot be broken down and directly charged to a specific grant or contract. F&A cost percentages are currently set for a three-year period based on actual cost records audited and approved by the Federal Government. Although the rates may be revised where the sponsor administratively limits F&A cost recovery, they are not subject to arbitrary adjustment either by the University or the sponsor.

Unless prohibited by the funding agency, all requests for extra mural funding must include F&A costs. UNCG is currently on a modified total direct cost base for the F&A cost calculation.

Overhead receipts are currently included in institutional trust funds. Legislation was enacted in 1989 to gradually reduce the transfer to the State Operating Budget over a period of years until 1996-97 when it reached zero. At that point, overhead receipts were shifted to institutional trust funds.

The University adopted an overhead receipts allocation policy in 1985. The allocation policy is based on prior year revenues. The allocation of revenue according to the policy is as follows:

• Approximately 20 percent is made available to the department generating the contracts and grants. Of this sum, half will be made available to the principal investigator.
• The remainder (80 percent) is allocated by the Chancellor upon recommendation by the Provost, normally to support the teaching and research aims of the University.

Internally, the budgeting process is initiated early enough to allow a review of the proposed allocations. Projections of F&A cost receipts are made in April, and instructions for preparation of budget requests are distributed. After receipt of the proposed allocation requests, the Chancellor makes allocation decisions in June and the departmental budgets are established in the Financial Records System. Unspent funds remain in the account where they were originally allocated unless redirected by the Provost or Chancellor.

About

The State Operating Budget is the largest component of the University’s operating funds. It is established by the State Legislature and is predominantly funded from revenues collected from the State’s taxpayers and student tuition payments. The state operating budget consists of two components, a continuation budget and an expansion budget which are described below.

Continuation Budget

The “Continuation Budget,” sometimes referred to as the “Base Budget,” is the permanent continuing budget for the ongoing operation of the primary functions and mission of the University. It is established by the General Assembly on a biennial basis. It is a line-item detail budget supported primarily from appropriations from the State of North Carolina and tuition charges to students. The state-operating budget for the University is enrollment-driven, dependent on the number of full-time equivalent undergraduate and graduate students and the related student credit hours. One FTE is based on 12 semester hours of work for undergraduates and 9 semester hours of work for graduate students.

This budget supports the functions of: instruction, libraries, general academic support, student services, institutional support, and physical plant operations.

There is a formal process for establishing the continuation budget on a biennial basis. Instructions are prepared by the Office of State Budget and Management. UNC Office of the President (OP) then tailors instructions specifically for the university system. These instructions set forth what is to be included and what inflationary and other changes to the base budget that may be requested. Normally, the instructions are received in March and the completed package is due in September, approximately nine months before the beginning of the biennium for which the budget is being requested. UNC OP prepares a summary of the requests for the entire university system. The Office of State Budget Planning and Management reviews the requests and makes adjustments to realign and to remove or reduce items included in the requests. The continuation budget request is submitted to the “Long Session” of the General Assembly by the Governor in January of every odd numbered year. The General Assembly enacts legislation to establish the continuation budget for the biennium, usually in June, July, or August.

The continuation budget established for the biennium can be adjusted for the second year of the biennium when the General Assembly meets for its “Short Session” in the following April through July. There may be budget changes in both the long session and the short session of the General Assembly.

Since the continuation budget is somewhat fixed and stable, internal allocation decisions are made in advance of receiving the final approved budget from the legislature. The process for making the internal allocations of the continuation budget to departments is initiated in February of each year. Departmental budgets are finalized by May and set up in the financial system to allow purchases to be made as early in the new fiscal year as possible. Allocation adjustments as a result of budget cuts by the legislature or the Governor are reflected in departmental budgets at the point the cuts are final.

Detail line-item budgets are established and controlled at the department level. The allocations to individual departments are made by the Provost, Vice Chancellors, and Deans for their respective areas of responsibility on an annual basis. The department heads make expenditure decisions and are held accountable for managing their budgets.

Salary Increases are legislated by the General Assembly. There are separate processes for the administration of salary increases based upon employee categories. Faculty and certain administrators are Exempt from the state Personnel Act (EPA) and the process for the related salary increases is set by UNC OP. Other employees are Subject to the state Personnel Act (SPA) and the process for salary increases is set by the Office of State Personnel. Both EPA and SPA salary increases become part of the continuing budget.

Expansion Budget

The expansion budget, sometimes referred to as the “change budget,” is that part of the state operating budget for new programs and changes in programs directly related to the institutional mission. These changes include adjustments in funding resulting from enrollment changes, basic program support, and miscellaneous items such as library acquisitions, computing, safety equipment, preventive maintenance funds, etc. The expansion budget becomes part of the continuation budget for the next biennium to the extent that the items are considered ongoing.

There is a formal process for requesting the expansion budget on a biennial basis. Instructions are received from OP in May that prescribes the format and nature of allowable requests and the amount of funding that can be requested. The Chancellor makes the internal allocation decisions for the divisions. The Provost and Vice Chancellors, together with department heads, deans and directors, develop the requests for each division based upon the allocations and priorities established by the Chancellor. The completed package is submitted to OP in September, approximately nine months before the beginning of the biennium. OP prepares a summary of the requests for the entire university system. The Office of State Budget Planning and Management review the requests. The expansion budget request is submitted to the “Long Session” of the General Assembly by the Governor in January. The General Assembly enacts legislation to establish the expansion budget for the biennium, usually in June, July, or August.

Once the General Assembly enacts legislation for the expansion budget, the Board of Governors then makes allocations to the individual institutions in the UNC System. Instructions are received from OP for the preparation of line-item detail budgets within a very tight timeframe, sometimes forty-eight hours or less. The Chancellor makes internal allocation decisions for each division consistent with the strategic operating plans. The Provost and Vice Chancellors then make divisional decisions in accordance with the allocations and general priorities established by the Chancellor.

The expansion budget is also addressed in the second year of the biennium when the General Assembly meets for its “Short Session” in the following April through July.

Rules and Policies of Major Importance

• There can be no deficit spending, overall or by specific category.
• The creation and elimination of positions require approval of the Provost or Vice Chancellor via a budget flexibility revision.
• Prior approval of the Provost or Vice Chancellor is required for transfers between purposes/function, transfer between Personnel Lines and OTP, and changes in the level of budgeted revenues and expenditures via budget flexibility revision. Permanent positions are separately budgeted and cannot be overdrawn in total, or in terms of annual rate, FTE, or hourly rate.

About

The Student Activities Fee encompasses the programs and activities that can be grouped into four areas: Cultural Activities and Performing Arts, Student Organizations and Programs, Student Recreation, and Student Facilities Maintenance and Operation.

Athletics Fee

The purpose of the Athletics Fee is to support the overall operation of a Division I intercollegiate athletics program. The program includes the seventeen sports listed below:

• Baseball (Men’s)
• Basketball (Men’s, Women’s)
• Cross Country, Indoor Track & Outdoor Track (Men’s, Women’s)
• Golf (Men’s, Women’s)
• Soccer (Men’s, Women’s)
• Tennis (Men’s, Women’s)
• Softball (Women’s)
• Volleyball (Women’s)

Health Services Fee

The Health Services Fee provides support to two critical student service operations-the Student Health Center and the Counseling and Testing Center. Both the Student Health Center and the Counseling and Testing Center offer comprehensive primary and preventive health care to UNCG students within the context of this University community.

Student Facilities Fee

For a number of years, the University has moved toward improving the quality of the overall physical environment on the campus and the level and quality of services provided for the students enrolled. Since state appropriations are not available, a student facilities fee is used to provide the necessary funding for the self-liquidating capital projects. Important facilities being funded in this manner include the Soccer Stadium, Student Recreation Center, and Elliott University Center’s addition and renovation.

Educational and Technology Fee

By directive from The Board of Governors, an Educational and Technology Fee was established to replace computer and academic course fees. This fee is used to provide staffing, supplies, and equipment for computer labs for students and to provide funding for departments for those courses that are equipment and materials intensive.

Instructions relative to requesting changes in student fee rates are normally received from UNC General Administration as early as April. Therefore, the internal decision making process must take place prior to submitting requests for rate changes to General Administration. The process is normally initiated in September and includes meetings with the student committee on fees. In order to determine the fee rates, the level of revenues and expenditures must be projected and evaluated for the various fee alternatives. Programmatic issues must also be considered prior to finalizing the request for changes in student fee rates. Student fees must be approved by the UNCG Board of Trustees prior to submission to UNC OP for approval by the Board of Governors.

After making decisions relative to changes in student fee rates, the Chancellor makes decisions for the total amount of fee revenues to be allocated to the Provost and Vice Chancellors responsible for the various programs supported from student fees. The Provost and Vice Chancellors then allocate fee revenues to the individual fee programs. Detail expenditure budgets and estimates of other revenue are prepared and the approved budgets are established in the Financial Records System (FRS).

Unlike the State Operating Budget, which is a line-item detail budget with some restrictions relative to transfers among personnel and non-personnel lines, there are fewer constraints relative to student fees. (Other than the Educational and Technology Fee, which is included in the State Operating Budget.) However, a number of rules still apply. There can be no deficit spending. Creation of new positions requires prior approval of the Vice Chancellor. Prior approval of the Vice Chancellor for Business Affairs is required for increases in the budgeted level of revenues and related expenditures and for the use of fund balances.

Processes such as personnel and purchasing apply to all University resources, not just state appropriated resources.

About

Unrestricted Gifts & Investment Income (UGII) funds are an important source of funding for many campus activities. They can be used for any legitimate purpose as authorized by the Chancellor. At The University of North Carolina at Greensboro (UNCG) these funds are provided primarily by the following:

• The Alumni Annual Giving Campaign;
• Gifts and other funds provided by foundations, etc. (i.e., the UNCG Excellence Foundation, the Human Environmental Services Foundation, and other unrestricted endowment funds);
• Investment Income.

Allocations of UGII funds are made in two parts:

• Part I pertains to ongoing operational matters (i.e., Alumni Scholars, Founders’ Day, etc.);
• Part II pertains to items that are of strategic importance to moving the University forward. These may be special projects and may have duration of a single year or multiple years with a defined ending date. Strategic proposals that require continuing operating support are considered, but those not requiring such support are more likely to be funded. (Normally, UGII monies are not used to make up for normal operating shortages.)

UGII funds are the most flexible of the available resources. Accordingly, the budget allocation decisions for this source of funding can be deferred until decisions are made for those funding sources with greater constraints. However, the budgeting process must start early enough to allow appropriate identification and review of items of significant importance to moving the University forward. The formal process is normally initiated in March with the projection of available UGII funds and the preparation of division requests and justifications for UGII allocations. The allocation decisions are made by June in order for the funds to be moved and budgets to be established in the Financial Records System to allow purchases to be made as early in the new fiscal year as possible.

Unlike the State Operating Budget, which is a line-item detail budget with restrictions relative to transfers among personnel and non-personnel lines, there are few constraints. The major rule is that there can be no deficit spending and the funds must be expended for the purposes originally designated in the allocation.

Processes such as personnel and purchasing apply to all University resources, not just state appropriated resources.