These formal estimates prepared by the Director of Finance should enable the University to:

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1 E.1 BUDGETING E.1.1 Resource Allocation The overall Strategic Aims and Objectives are established by the Senior Management Team and approved by the Management Board and Council following a recommendation from the Finance Committee. This strategy will include the overall financial policy and how resources are to be allocated against central policy, service departments and academic cost centres. The Finance Committee recommendation will be made following a test and challenge of the key assumptions underpinning the Senior Management Team Strategy. The overall Strategic Direction of the University is set prior to the start of the detailed planning and budgeting process. In this way, it is clear to all involved what the key priorities are and how these will influence decisions made by the Senior Management Team on bids for additional resources. The detail of how these key strategic objectives are to be delivered is derived from the Business Planning Process for both academic and professional service cost centres. Each cost centre will determine its own Business Plan within the overall strategic framework. These plans will contain pay costs and non-pay costs alongside detailed performance targets that provide, for example, student numbers and the volume of research. E.1.2 Annual Estimate of Income and Expenditure The summation of these business plans once accepted by the Senior Management Team and approved by the Management Board will form the basis of the Financial Forecasts required by HEFCW as part of the University s Strategic Plan. These formal estimates prepared by the Director of Finance should enable the University to: Identify trends in the overall financial position Assess the financial effect of adopting particular strategies Safeguard long-term financial viability by highlighting any weakness at an early stage Demonstrate to interested parties that the Institution is financially sound. E.1.3 Capital Plan The Finance Committee is responsible for reviewing the capital programmes prepared by the Director of Estates & Facilities Management and the Director of Finance for approval by the Management Board. The Capital Plan should be considered by the Management Board and the Finance Committee at the same time as the Financial Forecasts and is subject to quarterly reviews by the Finance Committee.

2 E.1.4 The Planning Cycle The key planning milestones are published each year. The stages and timescales involved in the process have been agreed by all the sections and individuals involved across campus. This chart will enable the Financial Planning and Support Section of the Finance Department to monitor whether milestones have been achieved by the given dates and determine who is responsible for any delays. The broad time table is as follows: November review of current year s projected expenditure/income against budget set for the year. Monitor performance against the targets set in Business Plans, particularly with regard to student numbers. February/April preparation of Ten-Year Business Plans for all Colleges and Professional Services Units. March/April receipt of grant notification from HEFCW. May/June submission of ten-year budgets to the Senior Management Team. Notify Heads of Cost Centres of decisions with regard to their Business Plan bids for additional resources. June submission of ten-year financial forecast to the Senior Management Team, the Management Board and Finance Committee. Submission of ten -year forecast to Council for approval and inclusion with the University s strategic Plan to HEFCW. July/August/September programmed review of existing baseline activity for areas decided by the Senior Management Team. E.1.5 Business Planning for Academic Cost Centres Academic cost centres will be required to produce a ten-year Business Plan. This plan will contain performance objectives with regard to the delivery of key strategic objectives, for example, the level of research income and overheads or the number of overseas students the cost centre will admit. Against these, the cost centre will bid for the level of additional resources necessary to deliver the targets. The plan, therefore, takes the form of a contract between cost centre and the Senior Management Team that will be reviewed on a quarterly basis. Decisions on whether to allow increased resources in later years will be dependent upon the achievement of performance targets in those preceding. An example staff establishment and Business Plan format is available from the Finance Department. In addition, the guidance notes for Heads of Academic Cost Centres on the preparation of Business Plans and a summary of staff contact details for the Financial Planning and Support Unit within the Finance Department are also available. Summaries of the performance targets and resources allocated will be presented to the Senior Management Team, the Management Board and the Finance Committee. The robustness of the targets will be submitted to a rigorous test and challenge process by these groups. These will then provide the detailed information required for the University s Financial Forecasts submitted to HEFCW.

3 Budgets for all expenditure will be set within the Business Plan. This includes staff and nonpay budgets including those for the purchase of equipment. E.1.6 Monitoring of Staff Budgets Staff costs will be derived from a fully costed staff establishment. To facilitate the monitoring of this budget all established posts will be given a unique reference number so the appointment of staff to vacant existing posts as opposed to new bids for additional staff resources is clear. All bids for new posts must be included in Business Plans and will be approved by the Senior Management Team through to Council via the budget-setting process. These posts will be added to the baseline staff establishment of the cost centre if approved. Applications for the recruitment of vacant posts will be via the Lumesse online system while the renewal of existing posts will be processed, using the L6666 form available online. All requests must be approved by the head of the academic cost centre. Under-spending against pay-budgets is controlled centrally and may not be used to fund additional non-pay expenditure without specific agreement from the Financial Planning Section. E.1.7 Monitoring of Non-pay Expenditure Budgets As expenditure budgets are now set by the Head of the Academic Cost Centre in Business Plans overspending against non-pay budgets is not permitted. To facilitate improved financial planning the carry forward of budget underspends is also not permitted. The Business Plans are set over ten years and reviewed on an annual basis, changes in the level of annual spending over the planning period can be taken account of within this cycle. If, at the end of the financial year, the total net expenditure on non-pay, staff costs and reserves exceeds the revised budgets included in the College Business Plan, sanctions will be applied in the next financial year. For academic colleges the required contribution level will have to be exceeded by the value of the overspend. E.1.8 Unexpended Balances on Academic Cost Centre Reserves Unexpended balances consist of general income earned by cost centres and held in academic reserves (formerly known as other D accounts.) The University s policy is to encourage cost centres to raise general income by allowing flexibility in how such income may be used. However, the University has to protect against a surge of spending from such balances, which would have a negative impact on the University s financial position in any one year.

4 Cost centres must, therefore, set a budget within their Business Plan for any planned net spend from these reserves. E.1.9 Self-financing Activity Budgets for self-financing activity are approved and monitored in the same way as other expenditure and income. They are dealt with in a separate section of the Business Plan. The only difference being that monitoring will take place at the level of net contribution from self-financing activity so there is increased scope for virement between expenditure and income headings. E.1.10 Business Planning for Professional Services All Professional services will be required to provide ten-year plans which, when approved, set a limit to expenditure in any one year. Carry-forward of under-spending on non-pay budgets from one financial year to the next is not permitted. The setting and monitoring of expenditure budgets will follow the same approval process and timescale as for the academic cost centre detailed above. Staff costs will be built up from a fully-costed staff establishment. Bids for additional posts will be approved via the Business Planning budget setting process. Applications for the recruitment of vacant posts will be via the Lumesse online system while the renewal of existing posts will be processed, using the L6666 form available online. Overspending against budgets is not permitted. If at the end of the financial year the total net expenditure on non-pay and staff costs exceeds the revised budgets for the Directorate sanctions will be applied in the next financial year. Unless the Director can identify staff savings equivalent in value to the over-spend, the total non-pay budget for the Directorate will be reduced by the amount of the over-spend. E.1.11 Apportionment of Central Support Service Costs The net cost of all central support departments, both budgeted and actual, will be apportioned out using appropriate cost drivers, for example, student or staff ftes s, across academic cost centres. E.1.12 Utilisation of Contingency Funds Periodically, there will be exceptional instances, unforeseen at the time of formulating the annual budget, when consideration will need to be given to the approval of additional resource items. The Vice-Chancellor has the authority to determine the funding source, including contingency funds, for all exceptional funding requests. Approval will be given where it is deemed that they are worthy of support and cannot be met from existing budgets.

5 Where a head of cost centre consider that a request for additional funding is justified, they must provide the following information on the appropriate form (see Section F), in order that due consideration can be given: Reason and nature for the exceptional request Why this item was not included in the cost centre plan Reason as to why the funds requested cannot be met from the existing budget As required for requests for replacement posts, all bids for additional funds must be signed by the head of cost centre. Generally, it is anticipated that requests would only be for additional funds in the year of account, any on-going commitment being built into the Cost Centre Business Plan. All decisions will be reported as part of the University s quarterly budget monitoring to the Senior Management Team. E.1.13 Duties and Responsibilities of Heads of Cost Centres Heads of Cost Centres are responsible to the Vice-Chancellor for the control of all financial matters delegated to their cost centre in the pursuit and delivery of their aims and objectives. They are required to ensure that all Financial Regulations and Procedures are adhered to within their cost centre. Heads of Cost Centres have overall responsibility for all funds held by the Cost Centre and will be required to authorise all requests for the issue of new financial codes (see form in Section F) Heads of Cost Centres are required to ensure that income received for specific purposes, such as those designated by a grant making body or donor (i.e. restricted income), is only applied for the specific purpose. Overheads earned from research grants and contracts together with other services rendered and any surpluses generated, are not deemed to be restricted income. Within the Business Planning budget setting process this income will be treated as other general income such as teaching income from fees and HEFCW grant. All such general income will be fully and directly attributed to the academic cost centre. This income will be balanced against the level of expenditure, including bids for additional resources, to produce an appropriate level of contribution for that cost centre. This will be an important criterion for the Senior Management Team when making decisions around the approval of bids for additional resources or deciding which existing baseline activity should come under financial scrutiny in the programme of reviews. Heads of Cost Centres are required to plan for all funds in their department as part of producing a Business Plan for Cost Centre. Expenditure should remain within budget. To ensure effective financial planning and control is exercised at a strategic level in the University, actual income in addition to that included in the Business Plan cannot be

6 automatically vired to expenditure headings. The Head of Cost Centre must, via written request, seek the virement of such funds. E.1.14 Duties of Budget Holders Although the overall responsibility for all budgets/funds held in a cost centre lies with the Head of Cost Centre, the Head may delegate the day-to-day management of budgets/funds to other members of staff in their department. The responsibilities of such staff as budget holders are to: Ensure compliance with the University s Financial Regulations and Procedures Manage the budget in a prudent manner and ensure that value for money is achieved Monitor actual income and expenditure on a regular basis against budget statements and ensure that budgets are not exceeded Actively seek advice from the Finance Department in the management of their budgets E.1.15 Access to financial information Reports are available from the intranet site that can provide all financial transactions on codes and also will provide the payment (defrayment) date information for any payments made from the finance system. It is possible to enable these reports to be run by more than one person per project code, allowing several staff access to this information (providing permissions have been agreed). The report is extractable to Excel (or a similar package) to facilitate further analysis. WEFO regulations (clause 19) now make a clear statement on retention of records. Although there are various statements about number of years there is also an explicit sub-clause stating You should ensure that the audit trails and documentation are retained indefinitely until informed in writing that the retention period has expired. Project teams, college administrative staff and PS departments holding relevant documentation should be planning appropriately. Documents should be held in commonly-accepted data carriers. Any nonstandard tools or special software needs WEFO approval. E.1.16 Raising Invoices Tuition Fees Fees for courses of one year or more require the approval of the Senior Management Team. The Director of Finance is responsible for presenting a list of recommended fees in respect of the following academic session to SMT each year. The list must take account of all new courses commencing in the following academic session.