THE UNIVERSITY OF MEMPHIS OPERATING PROCEDURE SUBJECT: Budget Procedures PROCEDURE NO.: 2D:01:02A DATE: March 1, 1993 SUPERSEDES PROCEDURE NO.: 2D:01:02A DATED: July 1, 1991 Contents: A. Summary of Content B. Introduction C. Budget Administration D. Re-Budgeting Salary Funds from Regular Positions E. Budget Discounts F. Processing of Budget Revisions G. Approval of Budget Revisions Attachment I - Valid Budget Object Codes/Object Code Pools Table A. Summary of Content Item Section Introduction and Purpose............................ B General Budget Administration....................... C.1,2,3 Overexpenditure/Overobligations..................... C.4,5,6 Carryforwards-General............................... C.4,7 Carryforwards-Equipment............................. C.7 Proper Accounting of Expenditures................... C.5 Budget where Revenue/Expenditure are Equal.......... C.8 Salary Lapse General................................ D.1,4 Salary Lapse from Recoveries........................ D.2 Salary Lapse other than Recoveries.................. D.3 Base Salary Funds................................... D.5,6 Funding of Promotions, Transfers, Reclassifications, etc............................ D.7 Personnel Turnover.................................. D.5 Budget Discount General............................. E.1 Budget Discount - Creating a Discount............... E.2 Budget Discount - Repayment of a Discount........... E.3 Processing of Budget Revisions - General............ F. 1 - 6 Reversing a Budget Revision which has been Processed.................................... F.7 Approval of Budget Revisions - President............ G.1 Approval of Budget Revisions - Vice President or or Provost........................................ G.2 Approval of Budget Revisions - Dean/Director........ G.4 Approval of Budget Revisions - Department Head...... G.4 Object Code Pools and Detailed Object Codes......... Attachment 1 B. Introduction The University of Memphis prepares an annual "Operating Budget" which serves as a guide for financial expenditures for salaries and wages, travel, equipment, and other supplies and operating expenses. The Operating Budget will be strictly adhered to in the administration of fiscal affairs. No official is authorized to make firm commitments or incur obligations unless budget provisions have been approved. This procedure applies only to current funds (Ledgers 1, 2, 3, and 4) and to restricted funds (ledger 5, grants and contracts from outside sponsors) to the extent that those funds are not covered by other procedures. Any exceptional situation to these procedures should be directed to the Office of Financial Planning. C. Budget Administration 1. The University budget is divided into various "accounts" which generally constitute a department or activity. For budget control purposes, each account number is considered separately. Each account number is assigned to one designated responsible individual. Any higher level official in the same organizational line may also approve or disapprove budget actions for an account. 2. Each budget account is divided into different areas for budget control purposes. Funds are budgeted by detailed object codes or by object code pools per Attachment I, but expenditures are always recorded by detailed object classifications. Specific accounts may be subject to different control groupings when approved by the Accounting Office. Adherence to budget limits for each position or control area is required. The Account Administrator is responsible for and will take immediate action to correct any overexpended/overobligated condition. The Office of Financial Planning will be informed and an Administrative Budget Revision will be processed to correct the overexpended/overobligated condition if the condition is not cleared in a timely manner. 3. Any specific requirements or conditions imposed upon the allocation of funds when approved will be followed. 4. A budget administrator may overexpend and/or overobligate an account as defined below by five percent (5%) of the total amount budgeted or $5,000, whichever is less. The budget for the following year will be reduced by the actual amount of such overexpenditures. A carry-forward of unexpended budget amounts into the following fiscal year will also be provided up to 5% or $5,000, whichever is less. The carry-forward of unexpended amounts is subject to availability of funds University wide. The amount subject to this provision is the net of supplies and other operating expenses, travel, and departmental revenues. Not included in the amounts subject to this provision are salaries, staff benefits, and equipment. Certain entire accounts are excluded from this provision; these include service departments, auxiliary enterprises, self-supporting or break- even activities, and other accounts budgeted for a specific fiscal year. 5. Expenditures will be charged to the correct account or activity and to the correct object classification based upon an objective determination of the charge without regard to available budget balances. If necessary, budget revisions will be processed to transfer funds to the proper account or budget control area. 6. Overexpenditures or overobligations of $25.00 or less in an individual personnel position or budget control category do not require a budget revision. 7. Outstanding purchase orders for equipment (costing $500 or more) made at the close of the fiscal year will remain encumbered. The budget for the activity will be increased in the following year by the amount of the encumbrance or the unexpended balance in the equipment budget, whichever is less. The carry-over of any other encumbrances will not be made. 8. In some cases there is direct relationship between expenditures which will be incurred and the amount of revenues to be realized. Budget administrators in these cases are responsible for maintaining the planned relationship or for submitting requests for budget revisions, detailing corrections necessary to the budget. D. Re-Budgeting Salary Funds From Regular Positions 1. "Salary Lapse" is the term applied to salary budgets which are not expended. 2. Beginning July 1, 1993, salary lapse generated as a result of salary charges to sponsored projects (restricted funds) may all be rebudgeted by the department/activity. Priorities on use, in order, must be to provide services for the individual's whose salary was charged off, graduate assistants and research related activities. (Current temporary provisions remain in place through June 30, 1993.) 3. All other salary lapse may be re-budgeted by the department/ activity to achieve the duties of the related position. Of the remainder, 25% may be re-budgeted by the department/activity. 4. Certain accounts and activities will continue to be responsible for their own unused salary budgets. (Included are all Auxiliary Enterprises, service departments, and Centers of Excellence). Budget changes cannot be made between these units and any other units. 5. Base salary funds of positions in any of the University's pay plans will revert to the University's general fund when personnel turnover occurs. 7. Increases for clerical personnel and positions in the Pro- fessional Pay Plan will be funded by the University when the increase results from promotion, involuntary demotion, voluntary demotion, transfer, reclassification, or re-evaluation. Budget increases caused by exceptions to the hiring range will be funded by the division, department, or activity. E. Budget Discounts 1. "Budget Discount" is the term used to request an advance of budgeted funds with the anticipation that the funds will be replaced by salary lapse, salary recoveries, or other funds available to the department/ activity. 2. Discount amounts are budgeted as negative amounts in the following object classifications: 1160 - Budget Discount - Administrative/Professional 1260 - Budget Discount - Academic/Professional 1360 - Budget Discount - Clerical/Supporting These budgets will usually be in one account for each dean/ director. There are no position numbers associated with these budgets, and they will not appear on detailed salary reports which are listed by position, but will appear on monthly FAM 090 and screen #623 in the FRS. As amounts are available to satisfy the budget discount, a budget revision should be processed. Typically, the revision will decrease one or more regular positions, with the offset being to the budget discount account and object code. (Since the budget discount is a negative amount, an "increase" will cause the discount budget to become smaller.) Establishing a budget discount requires the approval of the Provost or area Vice President. 3. The budget administrator who established the budget discount is responsible for either applying unused salary dollars equal to the discount budget or covering the amount in some other way. The following provisions also apply. a. Budget discounts will be established by object classification, but it is the total budget discount which is to be satisfied. b. Unused salaries from sponsored activities may be re-budgeted before the total payroll discount budget is satisfied so long as there appears a good probability that the total discount will be met. c. Amounts may be re-budgeted to other forms of salaries (students, graduate assistants, temporary employees, etc.) or to non-salary object classifications such as equipment, supplies, printing, or travel. These budget changes will be for the current fiscal year only and are subject to any other temporary budget re- strictions. d. All re-budgeting of unused salary must be consistent with sec- tion D.2. e. Budget discounts may be satisfied by reducing non-salary object classifications if desired. F. Processing of Budget Revisions 1. When a change to the current approved budget for an activity is required, a "Request for Budget Revision" should be processed. A revision is not final until approved by the Office of Financial Planning. 2. Instructions concerning preparation of the "Request for Budget Revision" are available from the Office of Financial Planning or The Users Guide for Business and Finance Services. 3. Requests for Budget Revisions should be initiated at the lowest possible level and signed (manually or electronically) in accordance with the approval process in Section G of this procedure. 4. All officials in the normal chain of authority should approve a revision when it requires approval at a higher level. 5. The Office of Financial Planning is responsible for reviewing all budget revisions to insure that the revision contains all of the required approvals, is accomplishing the intent of the revision, and is properly prepared. (Some electronic budget revisions will be reviewed after being processed.) 6. The Vice President for Business and Finance will review all revisions which must be routed to the President for approval. 7. Any higher level official may initiate a revision to reverse the effect of a revision with which he/she does not concur, but which did not require the official's signature on the initial revision request. G. Approval of Budget Revisions 1. President. Revisions involving the following type items require approval of the President. The President's approval may be in the form of a memorandum, contract, or other document which supports the budget revision when it is apparent that the President's signature on the supporting document recognized the need for and amount of the revision. a. The creation of new, regular personnel positions or one-year appointments that will increase the total position count. b. The establishment of a new activity or a major change in the scope of an existing activity. c. The commitment of additional funding in future years. d. Any shift of funds among or between Provost or Vice Presidential areas of responsibility. e. All revisions affecting individual salaries or personnel positions not specifically delegated to other levels. 2. Provost or Vice Presidents. Revisions involving the following type items will require approval of the appropriate Vice President or Provost. a. Permanent shifts to base budgets, within the Provost or Vice President's area. b. Current shifts among or between accounts under different Deans/Directors within the Provost or Vice President's area. c. Increases or shifts in the salary level of professional/ administrative positions (staff) or the upgrade of salary levels in the Classification/Compensation plan, provided they are consistent with the University General Compensation procedure. (Applies to Budget Revisions only, not to personnel actions.) d. Re-budgeting of lapsed salaries, other than professional recoveries from sponsored programs, to achieve the duties of the related position. e. Establishing a budget discount. 3. Deans/Directors. Revisions involving the following type of items will require approval of the appropriate dean/director. a. Revisions shifting current year budgets among or between departments or activities not under the same department head, but within the same dean/director area. b. Revisions to the current year which include travel, equipment, revenue accounts (not "departmental revenue"), and transfers to other Fund groups. c. Providing budgets equal to actual expenditures, where separate budget holding accounts are maintained (such as fee remissions, summer instructors, part-time instructors, and graduate assistants.) d. All shifts within the area involving group salaries for part-time instructors, summer instructors, supplement pay (overload and extra compensation), and graduate assistants. e. Providing increased revenues and expenditures when revenues are at least equal to expenditures and there is a normal direct relationship between revenues and expenditures. f. All re-budgeting of lapsed salaries from professional recoveries on sponsored projects, consistent with the policy on use of lapsed salaries and the re-budgeting of the 25% portion of other salary lapses. 4. Department Heads. Revisions not specifically requiring approval by the President, Provost, Vice President, or Dean/Director may generally be approved by the activity head. The following type revisions may be approved by the department head. a. Current year shifts to, from, and among supplies and expense objects, stores for resale, departmental revenue, longevity, clerical overtime and temporary salaries, and student salaries, for accounts under the same department head. b. Establishing "cost sharing" accounts where the sponsored project budget has already been approved in accordance with other University requirements. Must be approved by the Grants and Contracts Section of the Accounting Office. c. Revisions within restricted accounts permitted by the sponsor. Attachment I VALID BUDGET OBJECT CODES/OBJECT CODE POOLS Salaries - Each position number is considered separately for budget control purposes. (Object Codes 1100 - 1999) Employee Benefits (when applicable) - (Object Codes 2100 - 2199) Object Code Pools - Travel 3000 Printing, Duplicating & Film Processing 4100 Communications and Shipping Cost 4200 Maintenance/Repairs/Service by Others 4300 Professional and Administrative Services 4400 Supplies 4500 Rental and Insurance 4600 Awards and Indemnities 4700 Grants and Subsidies 4800 Other Service and Expense 4900 Equipment 8100 Detail Object Codes will be used for the following for both budget and actual transactions: Utilities and Fuels 5110 - 5190 Motor Vehicle Operations 5210 - 5290 Stores for Resale, Reissue, or Manufacture 6111 - 6120 Department Revenues 7110 - 7710 Land 8211 - 8290 Buildings 8311 - 8312 Improvements other than Buildings 8411 - 8499 Library Holdings 8511 - 8590 Capital Outlay - Transfers 9110 - 9170 Other - Indirect Costs 9211 - 9282