Budget and Cost Analysis

Effective Date: 07/01/95

Procedure Statement 1: Administration of State Budget


General

Continuous program planning is necessary in order to appropriately administer each program or function within the financial resources available and/or budgeted for its operation. Accordingly, department heads are expected to administer the accounts under their supervision in such a manner as to keep expenditures within the budget established for their operation.


Planning and Control

To discharge this administrative responsibility, it is necessary for department heads to plan departmental programs and control accounts in such a manner as to be sure that current budgets at all times represent their financial plans for the various programs. Expenditures should be anticipated and curtailed where appropriate. Program goals in most cases can be met by realignment of budgets provided adequate planning has been done and adequate controls maintained.


Business Manual

Familiarity with University policies and procedures is essential if University financial and administrative systems are to be important tools to help meet program goals. The Business Manual is a compilation of most administrative policies and procedures which the department head and staff will need on a day-to-day basis.


Budget and Expenditure Report - State Funds

A primary aid in planning and administering each program is provided by issuance of a monthly Departmental Budget and Expenditure Report. These reports provide updated financial status report on each department and are distributed to department heads through the campus mail, generally by the twelfth day of the following month. An explanation and description of the purpose and use of the Budget and Expenditure Report - State Funds is given in the Business Manual Accounting Section.


Timeliness

Although Budget and Expenditure Reports will be as up-to-date as possible, they will undoubtedly not reflect all expenditures or outstanding obligations as of the report closing date. There will always be some processing lag. Encumbrances are not made for open order purchases from commercial vendors, Student Stores, Scientific and General Storerooms, intra-state travel, or requests for reimbursement (such as departmental invoices covering copier charges, postage, telephone, etc.). Therefore, it is necessary to consider such outstanding obligations in determining the actual financial status of any particular account. The department head must assure that unencumbered commitments of this type are adequately controlled so as not to overdraw an account.


Report Review

Reports should be promptly reviewed and actively used in the financial management process for each department. "Free budget balances" should be continuously evaluated in regard to such things as expenditure trends, new or continuing requirements, as well as operating requirements for the remainder of the fiscal period. Prompt action should be taken where necessary to request budget revisions or to curtail program costs.


Budget Revisions

Budget revisions should be based upon the financial plan and cost trends for the current fiscal period. Budget Control Level object codes and East Carolina University expenditure object codes are shown in the Appendix Statement on Object Codes for Budgets and Expenditures. To the extent possible, budget revisions should reflect all necessary reallocations of resources that are foreseen through the end of the current budget period. Revisions solely for the purpose of temporarily coping with near term problems, such as a $25 account overdraft in the supply category, when more funds will probably be needed for other anticipated expenditures, should be avoided whenever possible.


Avoiding Overdrafts and Retroactive Adjustments

It is also imperative that accounts not be overdrawn with a view towards straightening matters out later. This imposes an unnecessary administrative burden on all concerned, involving retroactive adjustments and/or budget revisions after the fact, rather than before the fact as should be the case where adequate planning and control is exercised.


Limited Resources Solution

By planning ahead, the number of budget revisions can be minimized and the administrative task reduced for everyone involved. Even more important, careful financial planning will indicate whether a reallocation of budget resources is a feasible approach for coping with unfavorable cost trends, unforeseen requirements, etc. Where budget resources in all categories are already substantially committed to known requirements, a budget revision can only serve to defer but not resolve a financial problem. In such cases, reduction of the program scope and effort or the location of additional state or non-state funds may be the only viable solutions.