SECTION B: Budgeting. I. Legislative Budget Request

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1 SECTION B: Budgeting I. Legislative Budget Request The College prepares a legislative budget request (currently on a biennial basis) as a plan of operation for the legislative funding period. This biennial budget request is the formal College financial document and plan which, after approval by the State Board of Trustees, is presented to the Commission for Higher Education, the State Budget Agency, and ultimately to the Indiana General Assembly. The end result of this request is the authorized budget legislation approved by the Indiana General Assembly. This legislation becomes the basis for our internal budget process. The biennial budget document(s) is entitled "Legislative Request for Operating and Capital Funds." The College traditionally prepares separate capital and operating budget documents. However, the process for review and approval are similar. The legislative budget document contains general narrative addressed to the mission and goals of the College. A general history and description of the College are included to assist readers in further understanding the budget request. The legislative request for capital funding needs addresses new construction, land acquisition, facility repair and rehabilitation, and major equipment acquisition. An introductory summary statement provides information concerning each capital request which is prioritized according to College-wide goals and needs. Data by project is included with pertinent information concerning need, relationship to long-range (ten year) facility plans, other capital improvement projects, impact on space usage, expected contribution to educational services, and cost computations. The legislative request for operating funds addresses the expenditure estimates by major object and functional categories along with estimated sources of income supporting the educational services of the College. Numerous schedules are prepared to provide expenditure and revenue data by different functions and object categories. The cost information study, financial report and current year budget are used to prepare the requested schedules. The biennial budget format is dictated by instructions from the Indiana Commission for Higher Education. The format and presentation of data may be expected to vary to comply with their instructions, as well as to accommodate College management in formulating budget documentation to best present the needs and objectives of the College.

2 II. Internal Budget A. Annual Internal Budget The College Internal Budget is prepared on an annual basis. The Internal Budget is a planning document used to insure the optimum allocation of College resources for instructional programs and support services. The process reflects the consummated legislative budget request in regard to state appropriations and legislative intent relative to student fee increases and wage and salary adjustments. Current budget development procedures utilize a modified base plus concept. Non-recurring expenditure budget adjustments (prior year carry forward, College-wide accounts, etc.) are excluded from the base year. Increases are provided for added cost arising from expansion, salaries and wages, employee benefits, utilities, leases, and supplies and equipment. Increases are also provided for program improvement or special areas of services which are consistent with the overall College plan considering the established goals and mission. The budget build up, as well as the final budget composite, provides for expenditures by general object category. Current general expenditure object categories include salaries/wages, staff benefits, general supplies and expense, utilities, facility leases, and capital equipment. Data are solicited from regional management on all relevant budget matters. This includes concurrence with approved personnel staffing schedules, fringe benefit programs, exchange of information concerning changes in unavoidable expenses, as well as plans for plant expansion and special program improvement needs. The data is reviewed to assure compliance with established internal goals and external legislative intent. The expenditure budget must not exceed the established revenue budget which incorporates revenue from student fees, state appropriations and miscellaneous sources. The appropriations amount is the result of legislative action, while forecasted fees are derived from prior year enrollment and the State Board of Trustees approved fee schedules. After the annual budget document is reviewed by College management, it is presented to the State Board of Trustees for approval. After final approval the budget detail by location is accumulated by the regional business office and College Central Office staff for input to the College accounting records system. The budget detail for the new fiscal year is balanced/reconciled to the approved total budget. The new budget detail is reflected in the reports generated by the College accounting system for the month of July.

3 II. Internal Budget B. Operational Fund Expenditure Budget -- General Instructions 1. General Guidelines and Instructions a. Salaries and Wages -- The full-time salary budgets must agree by positions classification with the Compensation Analysis which lists individual positions by function including name, job class number, title and salary. The Compensation Analysis must be returned to the Budget Department with the new salaries. The Budget Department staff will update this analysis and maintain it throughout the fiscal year. Any position changes to this analysis, which agree with the allocation table, must be processed by utilizing the Position Request form (PRF) procedure. Positions may be deleted in order to transfer salaried fringe dollars to the supplies and expense budget by processing a PRF. Non-instructional part-time salaries must be in the original budget in the part-time salary category. b. Fringe Benefits -- The recommended budget for fringe benefits must be utilized until a Position Request form is submitted to delete, add, or restructure positions. c. Utilities, Facility Leases -- Utilities and facility leases have been budgeted based upon actual expenditures and the regional projections. The recommended budget for these categories must be utilized. Adjustments will be made to the budget during the fiscal year and at year-end to match actual expenditures in these budget categories. d. Supplies and Expense and Other Leases -- A minimum recurring base level of expenditures must be determined for these expenditure categories. A comparison should be completed for actual expenditures for the past several years and exclude any "one-time" expenses. Do not under-budget recurring expenditure needs in the Supplies and Expense and Other Leases categories. e. Maintenance Level Budget -- If the budget allocation does not meet the minimum level of operation as projected, then it must be indicated on the General Operational Fund Expenditure Budget form (Exhibit A) by showing 'Other' income to support the budget base. All regional budget category amounts will be reviewed to assure they have been prepared in accordance with the guidelines. Meetings will be held by the Central Office and regional staff during August to review any budget problems and to prepare any required plan of action.

4 f. Budget Adjustments -- All Budget Transfer Requests (BTR's) completed by Central Office will be made to specific accounts to assure budget integrity. The regional reserve account by subcode will only be used for enrollment adjustments and other adjustments not specifically identified with a project. This procedure will assure the budgetary funds are included in the proper accounts. 2. Salaries and Wages Position allocation/budgeting control provides the College the ability to know, at any given time, the budgetary dollars committed to personnel services for filled and vacant full-time positions. Every full-time position is defined, approved and budgetary dollars allocated. The three salary categories used are exempt (salaried), non-exempt (hourly), and instructional. Within these three categories an employee can either be full-time or temporary/part-time. For non-instructional areas, all exempt and non-exempt, full-time employees' July 1 salary must be line-item budgeted in the account that they are paid from. Exempt and non-exempt, part-time temporary budgets may be entered as a line item or as a pooled (Automatic Budget Reallocation) relationship. Instructional full-time budgets (include summer appointments) must be line-item budgeted in the account from which they are paid. Part-time/temporary instructional budgets may be pooled in instructional divisions. The original part-time instructional budgets should be at least the amount of the previous year, assuming a zero enrollment growth factor, unless documentation is provided. Adjustments may be made throughout the year for increases or decreases in enrollment growth. The following method is used to determine the salary budget: a. The Compensation Analysis is distributed by the Budget Department. It is verified by the regional staff and utilized to determine all approved, filled and vacant positions. b. All positions not approved (allocation exceeded) are not included in the base. c. Vacant or unfilled positions are budgeted based on the maximum hire-in rate of the current salary range for the job classification. d. Any nine-month instructional staff member who has a summer extended contract is identified. The summer appointment amount is to be included in the full-time salary budget base.

5 e. Any restricted or auxiliary dollars supporting the salary and wages of approved positions should be deducted from the salary and wage base for the operations fund. The full-time position/budget control base should include only the approved positions (filled and vacant) which are funded by the operations fund. This base should be the actual full-time salary and wage commitment of the College operations fund. The original established full-time salary and wage base will change only as a result of an approved PRF being processed during the year. When the PRF is approved, a BTR will be processed by the Budgeting Department. Any changes from the March 31 budget base must be explained and documented. Every position included in the salary budget data distributed with the budget allocation will be reconciled. The above procedure should provide the Region with more control over actual full-time salary and wage commitments. The adjusted salary and wage budget base should always approximate the actual salary and wage commitment. 3. Fringe Benefits The fringe benefits base is determined based on actual filled positions and approved vacant positions. The recommended budget should be the original budget unless there is documentation indicating significant changes. If new positions are added or deleted during the year, or if a position is reclassified resulting in additional or decreased fringe benefits, a budget adjustment to the fringe benefits' category must be completed. This procedure is done as part of the PRF process. The fringe benefit budget is adjusted to match expenditures at fiscal year end. 4. General Supplies and Expenses Several categories within the supplies and expense object category should be line-item budgeted. Following are the categories which must be line-item budgeted. Subcodes Duplicating Custodial Services Publicity Custodial Services

6 Telephone Postage Maintenance and Repair Supplies Fee Remission Printing Security Services Grounds Maintenance All other categories may be pooled at the departmental level or line-item budgeted; the degree of budget detail is a regional option. 5. Utilities and Facility Leases Utility and facility lease expenses may either be line-item budgeted, or a budget pool (Automatic Budget Reallocation) may be used. The amount requested and approved in the recommended budget buildup should be the amount utilized in the original budget. The utility budget will be adjusted to match expenditures at fiscal year end. 6. Fee Remission The budget allocation includes the fee remission-staff benefit allocation for employee, employee/spouse, and dependents taking courses at Ivy Tech. The budget amount for staff fee remission should be included in the fringe benefit original budget base. 7. Special Allocations During the fiscal year, budgetary adjustments are completed from College-wide budgetary accounts for special requests and any other justified extraordinary expenses. When approval is granted for an increase, a budget adjustment is processed by the Budget Department after communication with the regional business office regarding the use of proper accounts. III. College-Wide Budget/Finance Accounts Several budgetary expenditure and revenue accounts are established at the College-wide level and administered by Central Office staff. These accounts may be established to serve all locations for the following reasons: 1. The expenditures are for the benefit of the College and cannot be attributed to any specific location, i.e., insurance/risk programs.

7 2. There is no rational basis on which to establish original budgets by specific location. 3. The specific need for budgetary funds cannot be determined at the time the original budget is established. The following College-wide accounts are being utilized: A. Unemployment Compensation Unemployment compensation expenditures are budgeted in a College-wide reserve account. At the end of September, December, March, and June an analysis is completed for actual expenditures by location. Budget Transfer Requests are processed to move budgetary funds from the College-wide reserve to the specific locations in the amount of actual expenditures. As of year-end closing, the expenditures for unemployment compensation should equal the budget allocation. B. Indirect Cost Recovery During the year, indirect cost recovery accounts may be established in the operations fund for approved projects funded by outside agencies and reported in the Sponsored Program area. No original College-wide revenue budget is established for indirect cost recovery. However, each calendar quarter, a BTR is processed to increase the regional expenditure reserve account and the appropriate indirect cost recovery revenue accounts. All adjustments are based on the amount of actual collections in the indirect cost recovery revenue accounts. At year-end closing the revenue budget should equal the actual collections in the indirect cost recovery accounts. Corresponding adjustments will be made to the expenditure budget. C. Apprenticeship Support At the beginning of each fiscal year a budgetary reserve is established for College-wide apprenticeship support. An expenditure account has been established at each location in the operations fund with the title of "Instructional Staff - Support Apprentice Programs." The Sponsored Program staff prepares an analysis of apprenticeship expenditures. Appropriate charges to the operations and apprenticeship fund is completed by a journal voucher:

8 DR. Instructional Staff - Operations support of Apprentice Program CR. Revenue A budget transfer will be processed to move budgetary allocations from the College-wide reserve to the regional expenditure accounts. The amount of the BTR's for the operations fund will match the accounting entry prepared by Sponsored Programs. D. Enrollment Growth Each academic semester as of the official count date, comparisons are made between the actual student fee assessments and the current year budget. If the actual student fee assessments (as adjusted by a collection factor) are either over or under the current year budgets, a budget adjustment is required. The following budgetary entries are made if the adjustment is positive: DR. Regional Student Fee Revenue CR. Regional Expenditure Reserve Account If the budgetary adjustment is negative, the following entries are processed: DR. Regional Expenditure Reserve Accounts CR. Regional Student Fee Revenue An accounting entry to the expense allocation and estimated revenue accounts must be processed to match the net change reflected in the budget expense and revenue accounts. If enrollment growth dollars are allocated to Ivy Tech by the General Assembly as part of the legislative biennial budget, they are included in a College-wide account for enrollment growth. Distribution of the budgetary funds is determined on the basis of actual student fee assessments. E. Plant Expansion Plant expansion funds are requested from the State legislature for operating costs associated with opening new facilities. The operating costs may include utility expense, custodial/maintenance services, and lease or rental agreements. The funds are granted by specific facility and are included in the operating budget but are determined in conjunction with the capital budget. The amount of plant expansion funds granted by the General Assembly is budgeted in a Collegewide account. The funds are initially allocated by facility or location, but budgetary funds are transferred to the regional institutes only after approval by Central Office staff. Only the actual

9 amount necessary to operate expanded facilities which are approved by Central Office staff will be funded. F. Insurance All insurance/risk programs other than employee fringe benefit plans are coordinated and administered by Central Office staff. Expenditures are not allocated to a specific location. All payments are processed against the Central Office insurance accounts for the College in total. G. Contingency Reserve A College-wide contingency budgetary reserve is established at the beginning of each fiscal year. The contingency budgetary funds may be transferred to a location for an emergency or specified need. The use of budgetary funds from the contingency reserve must be approved by the President. H. Regional Reserves College-wide regional reserves may be established for specified purposes, i.e., to fund special request, quality improvement, or program improvement. The funding of the regional reserves is accomplished by reallocation of budgetary resources. IV. Budget Transfer Request The Budget Transfer Request is used in adjusting, correcting, or entering budgetary data at the beginning and during the fiscal year. Expense budgetary funds are transferred from one account to another by debiting the account which receives the funds and crediting the account from which the funds are coming. The reverse is true in revenue accounts. The section of the Budget Transfer Request titled "Reason for Transfer" must be completed for clarity, control and future audit reference. A. Next Year's Original Budget Next year's original budgets may be entered by the regional business office staff utilizing the `Next Year (029)' feature on Screen 010. This feature may be utilized until the new year file is opened for use. The next year budget data will automatically be transferred to the `original budget' in the new year.

10 B. Original Budget Original budgets may be entered utilizing the `Original (020)' feature on Screen 010 by the Central Office staff only. Regional staff cannot utilize the original budget feature. C. Transfers Transfers may be processed by appropriate staff at all locations during the fiscal year for specified accounts. Transfers may be completed by utilizing the `transfer (022)' feature on Screen 010. Salary and fringe benefits related to a deletion, addition, or restructure of a full-time position must be processed on a BTR through the Central Office Budgeting Department. A PRF will not be processed for a position unless a completed BTR is attached. Utilities and facility lease budgetary accounts cannot be changed unless approved by the Central Office staff. All utility and facility lease BTR's will be initiated by Central Office budgeting staff if they are part of plant improvement or expansion. Revenue budgets may only be entered by the Central Office budgeting staff since it has the effect of increasing the overall College budget. V. Pooled Budget Accounts Pooled accounts allow for budgetary funds to be established in one account from which many expenditure accounts may then draw against this account. When an expenditure occurs, the budgetary dollars will automatically draw down from the pooled account to cover the charge. No expenditures should be processed against any pooled budget account. VI. Position Budgeting A. Definition Every full-time classified position is approved by the Executive Vice President for Regional Operations. With the approval of the position, budgeting dollars are committed to the funding of the salary and accompanying staff benefits. Position budgeting provides the College the ability to know at any given time the budgeting dollars committed to personnel services for filled and vacant positions. Each location's position control list will reflect the existence of all approved positions.

11 B. Procedures 1. All restructuring or changes to existing full-time positions, or new full-time positions must be submitted on a PRF, which must be accompanied by a Budget Transfer Request form (M-36). When final approval has been completed, position allocations will be updated and the budget transfer will be processed by the Budget Department. The Region will be notified by Employee Relations of approval. New employees may be entered on the payroll system only after final approval of the new or restructured positions. 2. All requests for new positions or restructuring of existing positions funded by sponsored or restricted funds must also be processed on a PRF. 3. Part-Time/Temporary positions will not require a PRF. These types of positions have an allocation of A Region may have as many part-time/temporary positions as needed as long as regional budgetary resources are available. 4. When a full-time position is to be eliminated, the first page of a PRF, the Verification of Available Funds form and a BTR must be processed. Such notification will allow for updating the position control list. Any long-term vacant position should be deleted from the position control list and budgetary funds should be de-obligated. 5. At the end of each month, a position control listing and full-time employee report is produced and distributed to each Executive Director of Finance, Director of Regional Employee Relations and appropriate Central Office staff for reconciliation. Cross reference: COPM Personnel Procedures