This has been done although the result is a tight round and in some cases we have had to pause ambitions for expansion in some areas.

Transcription

1 paper Subject: Detailed Internal Budget Produced by: Jim Dickinson Chief Executive; Tim Cave Head of Finance To: Finance Committee Date: 20 th August 2015 Action: To approve Paper: Purpose: Under the framework for finance and budgeting, the Union Council annually agrees a set of Estimates that mandate spending priorities for the year ahead. The Board (or Finance Committee on its behalf) then agrees a set of Detailed Internal Budgets that reflect these priorities and that have involved detailed considerations from managers. This paper proposes that DIB for the year ahead. Introduction Under the framework for finance and budgeting, the Union Council annually agrees a set of Estimates that mandate spending priorities for the year ahead. The Board then agrees a set of Detailed Internal Budgets that reflect these priorities and that have involved detailed considerations from managers. The charity budget has been constructed to reflect the internal departmental structure of the Union, which comprises core directorates: Advocacy, Opportunities and Infrastructure. The social enterprises budget has been constructed to reflect the commercial entities within the union and their budgeted contribution. The figures presented in this document are a prudent analysis of income performance targets and financial resources to be committed by the Union to meet its core priorities for the year ahead. Regular updates on progress against this budget will be presented to Union Council and the Trustee Board throughout the year. Alongside this process the Union group, which consists of the main Charity, Students Union Services and Waterfront Ltd, is being restructured- the first stage of which is incorporation of the main Charitable vehicle into a limited liability company as of August 1 st For clarity and simplicity this document does not detail the different charitable vehicles, instead differentiating between charity and commercial budget heads and their budgeted contribution to the union. Mandate Union Council and the Board agreed a set of estimates that contained a deficit budget. The steer was to drive out the deficit, and to do so in way that would: Rule out headcount reduction and pay freezing/reductions Minimise risk in the Commercial Areas This has been done although the result is a tight round and in some cases we have had to pause ambitions for expansion in some areas. Group Financial Context Three factors characterise the financial context to 2009: Strong trading figures in a traditional SU commercial (bars/ents/shops) model Pessimistic budgeting that allowed masking of trading variances Low expenditure on membership services and low block grant from University The key change in the union s fortunes then starts to manifest between 2009 and A continued decline in bar sales began to expose the problems with poor management practice and budgeting, and with no realistic plan to properly tackle the costs model the problems quickly mounted. 1

2 The failure to reorient the business model or change structural costs assumptions in the commercial areas then results in continued decline: In truth the problem was worse than the annual deficits over the past few years suggests- the deficits have been accompanied by a band aid maintenance approach and a failure to keep up with other unions in investment in physical facilities or membership services. We therefore last year instigated a process where we: Reviewed and drove down central costs Reoriented the cost base and drove margins and spend per head in commercial areas Reoriented overall business model in conjunction with University Began to release some reserve for priority areas The bulk of Charitable income comes into the Union in the form of a grant from the University. We are notable for being highly commercially leveraged - in other words the bulk of the union s income comes in from trading activity, which has been in decline. Last year this was broadly held at a consistent level but for two notable differences- the University took over the costs of cleaning and IT support, freeing up resource to invest in student representation and welfare to bring up to the standard of comparator group unions; and the grant was increased to cover the pension deficit contribution the union is required to make into the Students Union Superannuation Scheme. The Financial Policy These estimates reflect wider long term financial goals for the union. These are: To consistently perform to budget, ending the annual cycle of producing year end deficits Ensuring the reserve is healthy and used for the benefit of students Reducing direct expenditure on infrastructure through careful procurement or partnership work Steadily improving investment in services, activities and campaigns for students Financial Developments Within the Charity the process described above of net increasing the grant from the University, driving down central costs and investing in priority areas has largely been successful and the early indication is that in we performed to budget within the Charity; however operational problems in the trading areas in the first term of 14-15, coupled with a challenging trading environment, have resulted in less process in the Social Enterprises and resultant contribution into the Charity which will mean a significant loss in year. As the Union remains heavily leveraged on trading income in comparison to almost all other unions for its charitable spend the need to monitor against and hit budget in commercial areas in is more important than ever. Going forward the issue of grant funding is difficult. Whilst we do not expect the balance between trading income and grant to shift dramatically, the University s previous assumption- that the grant could increase broadly by inflation with the union s trading operations able to also deliver inflationary increases in profit will not hold in a period where we expect trading to be flat at best, are more likely in gradual managed decline. The result is that in order for the Union to stand still the University should be expecting to allocate above inflation increases to the grant to make up for the inability of trading areas to do this. We have made this argument to the University in the context of its operational plan but in the year ahead no above inflation increase has been allocated. 2

3 University Funding The current University Council approved plan for financing the SU assumes that the Union grant will increase by the assumed University inflation rate of 0.233% for the next five years. Given the Union s overall Charity costs run at around 1.8m, with the remainder funded by trading surpluses, the inbuilt assumption is therefore that the trading areas would fund the remaining increase required to Charity funding and/or that the Union would drive out additional efficiencies. An efficiency exercise was carried out across and it is highly unlikely that additional meaningful efficiencies will be possible against existing activity. This budget process has therefore considered actual reductions to student activity including the reduction of Sports Clubs/Teams and removing commitments already made to support student representation in the new UEA code of practice. We have also reached the view that whilst costs are under control, it is unlikely to be possible to drive real terms increases from the trading areas unless we took on new activity or aggressively targeted students with alcohol in a way that would be detrimental to student welfare. The result is that a gap opens up between the funding increase on the grant and the funding required to continue to operate the union against its current range of activity. These figures therefore track the gap assuming that the union s costs accurately track the University s assumed inflation rate Grant inc PDC 580, , , , , ,889 Core Charity Costs 1,804,367 1,846,409 1,889,430 1,933,454 1,978,503 2,024,602 Grant Inc over ,537 27,389 41,564 56,069 70,912 Cost Inc over ,042 85, , , ,235 Gap 28,505 57,674 87, , ,323 These figures do not include a VAT reclaim implication of the refurb of the building of approx. 25k pa. The resultant gap by 2020 is clearly an unsustainable one and presents a joint problem for the Union and University in relation to financing. Effectively we will either need to: Identify any additional areas where the University could take over costs, or Agree an above inflation increase to the grant to meet the gap, or Consider closing services which will directly impact on the University s overall offer to students Basic Assumptions Salaries are in at the current estimated cost (the University pay increase, which we track, has not yet been resolved) Insurance costs are Block Grant now confirmed with no inflationary increase for Commercial Considerations The Union s difficulties with its operational model in relation to student staff last year have been well documented and this budget assumes that these have been overcome. In addition the following conservative assumptions underpin the commercial numbers: Little real terms growth in turnover (despite 500 extra students being on campus in year ahead) That the retail grab n go will do no more than cannibalise sales from the main shop 3

4 That the contribution from the Graduate Bar (Scholars) will be no better than breakeven on direct costs That advertising sales expansion will only result in covering increased costs We have also built in a contingency However we expect: Unio improved contribution reflect an improved position in relation to VAT rules Improved contribution from Ents resulting from variable costs In each case the assumption is conservative and where we do better than conservative we expect to be able to look at: Replacement of equipment/setting aside cash for reserve Improved spending on recurrent costs in commercial areas Note that Unio s improved contribution reflect an improved position in relation to VAT rules. Managing Risk Several of the commercial assumptions are conservative (ie no growth in advertising sales) Contingency lines are built into both non-commercial and commercial areas New finance processes will allow us to see underperformance on a weekly basis; budgets have been phased to allow identification early with the prospect of corrective action on the main budget immediately after the Welcome period Future Considerations In (with some overspill to 15-16) improvements to the Union s physical infrastructure in Union House and some of its capital in Bars/Ents have been delivered via the University s grant for Union House. These have relieved the Union of having to budget for many of these items and so the overall budget for the year ahead should be seen in this context. Discussions in the year ahead with the University over the future funding model should take these issues into account and a longer term financial model for the union should now be developed taking into account likely capital needs going forward. 4

5 Budget The first section lists the main figures, with later sections explaining what is in each area. Note that these have also been phased appropriately across the financial year. Charity Details Salary Costs Activity Costs Net 1. Advocacy & Representation Advice & Housing Unit 131,181 15, ,381 Policy & Campaigns Unit 126,229 23, ,229 Student Leadership Unit 114,293 67, ,593 Overhead 61,563 1,000 62,563 SUBTOTAL 539, Opportunities & Activities Sports Association 39, , ,546 Societies & Student Media 53,614 75, ,114 Opportunities & Activities Overhead 76,296 16,000 92,296 SUBTOTAL 418, Infrastructure Building & Equipment 27, , ,467 Finance 105, , ,727 Strategic Development 211,844 57, ,844 Operations & Administration 124,836 38, ,236 Marketing 39,276 33,000 72,276 SUBTOTAL 1,038,550 CHARITY SUBTOTAL 1,997, Unrestricted Income Basic Block Grant -554,514 PDC Contribution -40,000 Into Grant -38,872 Commercial Contribution -1,378,096 SUBTOTAL -1,997,610 TOTAL

6 Commercial Details Salary Costs Activity Costs Net 5. Commercial Overhead Staffing -67,272 Bank/Cash/Finance -27,194 Depreciation -144,385 Misc -3,500 Contingency -20, ,351 Details Income Costs Net 6. Commercial Contribution Retail 3,379,619 2,822, ,797 Bars 1,553,028 1,118, ,807 Waterfront 1,343,757 1,124, ,225 Unio 359, , ,589 Entertainments 1,145, , ,318 Concrete Ads & Sponsor 0 Sundry 67,500 67,500 Lettings 39,800 40, TOTAL 1,378,096 6

7 1 ADVOCACY In this section you will find costs relating to the union s advocacy function, including centrally run campaigns, full time officers and academic representation. A detailed explanation of what each area covers is given below each subsection. This area supports these functions: We advocate on students behalf, both individually and collectively. Evidence and research from the whole student body a key part of the union s student voice activity More support, training and development for our student representatives Students working with academic and administrators to make suggestions and solve problems Independent, flexible student advice and advocacy service that leads to policy change 1.1 Advice Unit ADVICE & HOUSING UNIT Staff Costs Student Staff Salaries 123,999 7,182 Materials & Printing 1,000 Nightline 2,000 Peer Support Groups 2,000 Subscriptions 3,500 Volunteer Scheme 1,200 Annual Fund Award - 1,040 Annual Fund Expenditure 1,040 Departmental 2,500 Admin & Stationery 3,000 TOTAL 146,381 This area includes the union s professionally staffed Advice Centre, which provides help and advice to students on all issues. In the year ahead the unit will open a new Advice and Housing unit in the Union House gateway; roll out a new volunteer programme in advice, enhance its support to student groups and provide more support to NiteLine, the union s student listening service. This area also manages the Housing function although its financials are listed within the commercial budgets. 1.2 Campaigns and Policy Unit CAMPAIGNS AND POLICY UNIT Staff Costs Student Staff Salaries 117,313 Health Post Income - 15,000 Faculty Convenor Income - 2,400 Health Post Salary 26,316 Representation 10,000 Training & Materials 8,500 Teaching Awards 2,000 Departmental 2,500 TOTAL 149,229 This area provides dedicated support to academic representation, ensuring that school, faculty and institutional representation delivers real change for students. It also houses support for the student officer committee and their campaigns and has a research and policy function, ensuring that the union s arguments for students are evidence and powerful. This year support for Liberation, Equality and Diversity has moved to this department. 7

8 1.3 Student Leadership Unit STUDENT LEADERSHIP UNIT Staff Costs Student Staff Full Time Officers 107,813 6,480 Officer Training 10,000 Democracy & Elections 7,500 Priority Campaigns 4,000 Campaigns & Campaign Groups 6,000 SOC Projects 4,500 Liberation, Equality & Diversity 5,500 NUS Affiliation 18,300 Conferences 9,500 Departmental 2,000 TOTAL 181,593 In this area you will find the costs related to the union s student leadership team, comprising the five sabbatical officers and the wider student officer committee. It includes dedicated budgets for campaigns, elections, training and also include the annual affiliation fee to NUS. There is also a fund for automatic attendance at relevant conferences and events. 8

9 2 OPPORTUNITIES In this section you will find costs relating to the union s student opportunities function, including clubs, societies and student media. A detailed explanation of what each area covers is given below each subsection. This area supports these functions: We provide opportunities for students. Every student taking part in extra curricular, ensuring activities are student led and high quality. Support all student volunteers and staff to use their experience taking part in student opportunities to benefit them in later life An exemplar in relation to safety and risk assessment and facilities geared around the needs of active members Support for the full breadth of student diversity to take part in the most diverse set of activities possible, reducing barriers to involvement and setting and meeting targets related to diversity. 2.1 Sports Association SPORTS ASSOCIATION Salaries 39,646 Income (SAM) - 135,000 Derby Day 9,000 Travel 65,000 Accommodation 7,000 Entry Fees 25,000 Affiliation Fees 13,000 Kit Purchase 5,000 Meals 200 Insurance 15,500 First Aid/Training 7,000 Facility/Storage 35,000 Refs/Umpire Fees 3,200 Training/Coaching 59,000 RYA Accreditation 500 Equip Main/Airfills 16,000 Sports Assoc/Equip Purchase 10,000 Sports Club Grants 17,500 Focus Sports Club Grants 5,000 TOTAL 197,546 This area houses the direct costs for Sports Clubs within the union, including participation in BUCS competitions. In the coming year these costs will be considered alongside wider sports costs in the University with a view to identifying ways to maximise the use of the overall spend. 2.2 Societies and Student Media SOCIETIES & STUDENT MEDIA Salaries 53,614 Societiese Collective 20,000 Give it a go 8,000 Media Collective 35,000 Media Collective Income - 6,000 Postgraduate SU 10,000 International SU 5,000 Academic Societies Collective 1,000 Enterprise 2,500 TOTAL 129,114 In this area there is support for the union s award winning societies, including development of events and participation strategies. There is also support for student media, to be accommodated in a new student media centre 9

10 funded by the University in the refurbished union house. The allocations above are subject to a distribution process based around central union priorities. 2.3 Opportunities Overhead OPPORTUNITIES OVERHEAD Salaries 70,296 1,000 Fairs 3,000 Accreditation 2,000 Minibus Income - 10,000 Minibus Expenses 25,000 Departmental 1,000 TOTAL 92,296 This area provides wider support for student activities, opportunities and events. This includes projects on employability and enterprise, and in the year ahead strategies for international students and postgraduate students will be implemented here. 10

11 3 INFRASTRUCTURE In this area underpinning services that make the union work are housed. This includes costs related to union house, admin, HR, IT and Finance. It also includes the communications function. A large proportion of infrastructure work serves the commercial activity and so is recharged to the commercial companies in terms of rent or service charges. In this area we seek to achieve: Outstanding student led governance High quality management and internal processes A strong partnership with University and others on infrastructure and culture Great stats- No.1 in the National Student Survey for Question 23, and outstanding grade for the Students Union Quality Mark 3.1 Marketing & Communications MARCOMMS Salaries 26,316 12,960 Website 13,000 Welcome Week 10,000 Central Comms 10,000 TOTAL 72, Operations & Administration OPERATIONS Salaries 89,836 Reception & Welcome Team 35,000 Photocopier 19,000 Data Storage 1,500 Staff Days and Xmas 3,500 Uniform 1,000 Stationery 5,000 Post and Franking 500 Telephone 5,000 Subscriptions 400 General Expenses 2,500 TOTAL 163,236 In this area we operate the student reception and welcome team. It also houses all of the union s central admin costs- things like photocopying and telephones all get paid for from here, along with computing and post. The cost of the Head of Operations is also included here. 3.3 Building & Equipment BUILDING & EQUIPMENT Salaries 27,098 Electricity 88,958 Water 20,743 Heat 41,909 Repairs 20,000 Alarms 1,034 Maintenance Contracts 7,625 Purchases under 500 7,100 Repairs and Renewals 2,000 TOTAL 216,467 This area covers the costs of operating union house. 11

12 3.4 Finance Finance Unit Salaries 98,361 7,182 Bank Charges 500 Additional Irrecoverable VAT 23,530 Depreciation ,258 Depreciation 132 2,010 Depreciation 150 5,933 Contingency 20,000 Pension Deficit Contribution 110,862 Software 10,000 Audit 5,500 Insurance 15,591 Departmental 1,000 TOTAL 317,727 The union s Finance function helps the rest of the organisation run effectively. It handles invoicing, accounts and supports managers with data to help them make decisions and manage their operations. The Pension Deficit Contribution is an amount the union has to pay into one of the union s pension schemes to ensure that it is able to meet its commitments to pensioners. The contingency is designed to deal with implementation overruns in Finance and potential staff cost increase resulting from the national pay negotiations. 3.5 Strategic Development Strategic Development (Inc HR) Salaries 185,528 Payroll, HR and Ents Admin 26,316 Staff Training 12,500 Management Development 8,500 Group PHI and Life Ass 12,500 Legal and Professional 10,000 HR Support 6,000 Recruitment and Selection 5,000 Departmental 2,500 TOTAL 268,844 This area contains costs for the Chief Executive and Deputy Chief Executive, as well payroll staff and staff support for the corporate Governance function. It also hosts crucial central costs relating to staff training and development and HR support. Staff training is courses for all staff attached to personal development plans. Management Development is specific training for the Heads of Department/Management Team. Group PHI and Life Ass is a an insurance policy that covers payments if staff are on long term sick and if they die in service. HR Support is the cost of the external HR firm that helps deliver the union s People plan. 12

13 Commercial Details Salary Costs Activity Costs Net 7. Commercial Overhead Staffing -67,272 Bank/Cash/Finance -27,194 Depreciation -144,385 Misc -3,500 Contingency -20, ,351 This area houses the overhead costs for the Commercial areas. The contingency is principally to handle potential staff cost increases and overruns from process change within ticketing and commercial finance. Retail 3,379,619 2,822, ,797 In Retail we are: Assuming very modest growth in turnover in-line with this year (in particular the continued development of the bakery) Increased cost of sales in line with increases in sales and inflationary costs Includes Deputy role that was previously absent Control of staffing costs reflects ratios achieved in latter half of 2015 Bars 1,553,028 1,118, ,807 In Bars we are: Assuming no growth in turnover Control of staffing costs reflects ratios achieved in latter half of 2015 Control of stock in-line with this year s improvements Waterfront 1,343,757 1,124, ,225 In Waterfront we are: Increasing bar prices and focus on speed of service to deliver an extra 750 per week across live and club nights A push to improve hire income by increased visibility in the industry Cost of sales to reflect increase in takings as a matching % of the previous year Better control of purchases and repairs with better planned capex expenditure from depreciation resources Unio 359, , ,589 In Unio we are: Assuming no growth from bakery expansion Taking benefit of not paying VAT on majority of products Control of staffing costs reflects ratios achieved in latter half of 2015 Entertainments 1,145, , ,318 In Ents we are: Reducing production costs and/or correct production landing on expiration of products Control of staffing costs reflects ratios achieved in latter half of 2015 Continued strong performance on student club nights Improved student-led events Concrete Ads & Sponsor 0 13

14 Sundry 67,500 67,500 Lettings 39,800 40, In Ads and Sponsorship we are assuming a flat year with significant potential for growth In Lettings we assuming we can control costs to deliver a breakeven in this areas as per decision of last commercial board 14