SUBJECT: Budget Control
It is widely recognized that budget control is essential for effective financial management of any organization. In view of this, it is the purpose of this policy to provide clear and specific responsibility for proper budget management and control among the institutions governed by the Tennessee Board of Regents.
I. Definition of Budgeting
Budgeting is the process whereby the plans of an institution are translated into an itemized, authorized, and systematic plan of operation, expressed in dollars, for a given period. Budgets are the blueprints for the orderly execution of program plans; they serve as control mechanisms to match anticipated and actual revenues and expenditures.
It is the control mechanism aspect of budgeting that is the focus of this policy.
II. Submission of Budgets
It is recognized that a budget is a plan and that circumstances may necessitate revisions or changes to the original plan from time to time. In view of this, institutions are to submit detailed budgets to the Tennessee Board of Regents for approval three times for each fiscal year. The three submissions are described briefly as follows:
A. Proposed Budget - This is the original budget prepared in the spring that is for the fiscal year to begin July 1. It is normally submitted to the Tennessee Board of Regents for approval at the June Board meeting.
B. Revised Budget - This budget is a revision of the proposed budget and is normally referred to as the "October Revised Budget". It is prepared as of October 31 after actual fall enrollments and other estimated costs and closing balances are known and is normally submitted to the Tennessee Board of Regents for approval at the December Board meeting.
C. Spring Estimated Budget - This budget is the final budget submitted for the current year operations. It is submitted in the spring at the same time as the Proposed Budget for the coming year. This is the final approved budget for the institutions and therefore contains the control totals against which final year-end amounts are compared.
It should be noted that the approval of a budget does not waive statutory, policy, or other restrictions for expending funds.
III. Operating Budgets
A. Level of Budget Control - Institutional budget control amounts are approved for the major educational and general functional classifications of Instruction, Research, Public Service, Academic Support, Student Services, Institutional Support, Operation and Maintenance of Plant, and Scholarships and Fellowships where applicable. Auxiliary Enterprises are controlled on a profit or break-even basis. Additionally, control amounts are approved for educational and general transfers, both mandatory and non-mandatory. Funds transferred to other funds whether mandatory or non-mandatory are restricted in the other funds for the designated purpose. All discretionary allocations of the fund balance must be approved. Once approved the institution may not exceed those functional control limits established by the Board without prior approval of the Chancellor.
B. Budget Revisions
1. Revisions Within Functional Area - Institutions may make budget revisions within a given functional area at the campus level. The revisions should be properly documented and approved by the president or his or her designee, or the technology center director.
2. Revisions Between Functions - Budget revisions from one functional area to another must receive prior approval of the Chancellor if proposed at other than the three regular budget submission times. The request for revision should be submitted by the president in writing with a detailed explanation. The technology center director must receive the approval of the president of the lead institution prior to submission to the Chancellor.
3. Revision of Overall Expenditure Total - Budget revisions to one or more educational and general functional areas that increase the overall educational and general budget must receive prior approval of the Chancellor if proposed at other than the three regular submission times. The request for revision should be submitted in accordance with item 2 above and should include the source of funding for the proposed revision.
IV. Plant Fund Budgets
A. Unexpended Funds
1. General - The purpose of the Unexpended Plant Fund is to account for the unexpended resources derived from various sources to finance the acquisition of long-term plant assets and the associated liabilities. These funds will be used for capital projects such as major additions and/or renovations to physical facilities. Institutions may request approval for transfer of funds to the Unexpended Plant Fund from unrestricted current funds during the regular budgetary process or special request to the Chancellor. All funds added or transferred into the Unexpended Plant Fund will be controlled by specific project. Commitments or expenditures for any capital project shall be in conformance with all applicable state laws and requirements of the State Building Commission. All project budget revisions and the utilization of reallocated project balances shall be approved by the Chancellor or designee.
2. Extraordinary Maintenance - Within the Unexpended Plant Fund, each institution shall establish an account for extraordinary maintenance to be used for unusual or unanticipated maintenance needs. The annual budget shall include a minimum transfer for extraordinary maintenance as specified in the annual budget instructions of the Chancellor. All projects in the extraordinary maintenance account shall be approved by the Chancellor or designee.
B. Renewals and Replacements - The resources set aside for renewals and replacements, as distinguished from additions and improvements to plant, are accounted for in this fund group. Guidelines for additions to this fund will be communicated through the annual budget instructions of the Chancellor.
C. Retirement of Indebtedness - The purpose of this fund is to account for the accumulation of resources for interest and principal payments and other debt service charges relating to plant fund indebtedness. Additions to this fund are to be set up in separate debt service accounts. All transfers from debt service accounts must be approved by the Chancellor.
V. Guideline and Position Controls
Aside from functional budget control, institutions are required to comply with certain other controls. A schedule of these controls will be distributed with the budget guidelines each year.
Position control is a part of the personnel budget process. The number of authorized permanent positions at each institution is controlled within unrestricted education and general accounts and auxiliaries. Controls exist on the total number of positions at the institution and on the classification of those positions (administrative, faculty/academic, professional, clerical/support). Positions are reported to the Board office each year in the proposed and revised budgeting processes, and at additional times as requested by the Board office during the legislative session. Authorized permanent positions for each institution are approved at the June and December Board meetings. Changes may be requested by special request to the Chancellor in the interim between budget periods.
VI. Legislative Controls
Each budget year will normally have unique guidelines and requirements depending on legislative or executive branch requirements. A schedule of these requirements will be prepared each budget cycle. It is the responsibility of the institution to insure that all budget guidelines for a given fiscal year are incorporated into the budget and are carried out operationally.
VII. Budget Control
Each institution shall develop appropriate controls and procedures and insure that established control limits are not exceeded. Summary management reports should be prepared for top level administrators to evaluate the current financial status of the institution.
VIII. Follow-up by Board Staff
At the end of each fiscal year, the Board staff will review the annual financial report of each institution. Actual year-end amounts will be compared to the Spring Estimated Budget or the Spring Estimated Budget as officially revised, which is the final approved budget for the year.
Functional expenditure totals will be analyzed for adherence to the approved control levels. The financial information will also be examined for compliance with all budget guidelines and/or Board policies in effect for the fiscal year just completed. The Chancellor shall report any institutional deficiencies or non-compliance with budget controls and guidelines to the Board.
Source: TBR Meetings: September 30, 1983; December 8, 2006