13.0 - Monthly Budgeting

SUBJECT:	Monthly Budgeting During Budget Construction
SOURCE:	Auxiliary Accounting, Financial Management Services
DATE ISSUED:	December 2004
DATE OF LAST REVISION:	May2013
ASOP NO:	13.0
RATIONALE:	All reporting auxiliary and service center organizations are required to establish operating budgets per University Policy FIN-BUD-11-10. Monthly budgeting may be used additionally to more precisely match budgeted revenues and expenses to their fiscal period.
ASOP:	Monthly budgeting is the process of allocating the current budget across specific fiscal periods (monthly buckets) to align the budget with the expected activity for each fiscal period. The following are several advantages to monthly budgeting: Translate annual budget into monthly buckets to reflect potential fluctuations in activity. Reinforces accountability. Assists in the allocation of the organization’s Total Cash by determining how much will be required monthly to support operations and how much will be available to set aside for R&R activities. Reporting auxiliary and service centers can input a monthly budget by the completion of the Campus-determined budget construction period each fiscal year. In order for a budget to be in a monthly format, an organization may budget items into the monthly buckets screen. If not entered monthly, then the assumption is that the current budget (CB) will be spread evenly. Note: If the monthly buckets are not used during the Budget Construction process, then the budget can still be altered (if necessary) afterwards via the Budget Adjustment document in KFS. The determination of how an organization should budget a particular object code should primarily be determined by the timing of the activity itself. If the anticipated activity is expected to be fairly even over the twelve months, then the entry into the monthly buckets will not be necessary. If, however, the amount is uneven or seasonal in nature throughout the fiscal year whereby the amounts are anticipated to vary greatly from month-to-month, then using the monthly buckets would be required. Examples of uneven or seasonal items that may require monthly budgets are: Revenue object codes tied to times when students/faculty are beginning an academic semester (i.e. late August, early January). For example, students’ permit sales at Parking Operations that are recognized evenly over the semester, but are significantly lower in the summer. Hourly (see Compensation Level Budgeting below) salary object codes comparing busy season to slow season. Purchases for Resale Contractual Services (i.e. short-term maintenance contract that lasts three month) Physical Plant Services (i.e. scheduled major repairs) Examples of even or non-seasonal items that could be parsed automatically into monthly buckets by the system: Rent Expense Staff Parking Permits (12-month recognition of revenue) Professional Salaries (12-month) Depreciation Expense Network Fees (bundle of expenses) One tool that can be used to assist with the depreciation budgeting process is the “Forecast Depreciation Report.” This report can be used during budget construction to forecast depreciation for the upcoming fiscal year (based on the assets in the system at the time the report is run). The report is a useful tool to identify depreciable assets by type, useful life, and how much remaining depreciation remains for budgeting purposes. Please contact capassets@iu.edu if you have further questions regarding specific depreciation questions for your organization. Interest Expense: Some organizations have interest expense on their Income Statement from financing activities. This expense can be budgeted monthly with some additional information even if the interest payments are not made every month. Example: An organization has a revenue bond administered by the Office of the Treasurer that makes semi-annual payments (but only one of those payments actually pays towards principal on June 1^st ) each year. Since the principal is only paid once per year, the July-May interest amount that will actually post to the General Ledger (and hence should be budgeted for) will always be the same. June’s interest amount will be slightly different given the principal payment. The amortization table for the bond series can be used to identify the total interest paid for the fiscal year and the number of months between payments. For example, the June 1^st interest payment was to be $48,000 and there were six months between payments, your amount to budget in object code 4400 each month would be $8,000. A standard template for budgeting bond interest is available. Please contact your auxiliary consultant at auxacct@iu.edu for further information on budgeting Interest Expense. Compensation Level Budgeting: Please note that if any compensation is budgeted monthly, then all compensation object codes must be budgeted monthly due to system limitations. Further questions regarding the budgeting of Compensation should be directed to your Campus Budget Office.
DEFINITIONS:	Budget Adjustment Document is a Kuali Financial System (KFS) document that allows organizations to reallocate items in their base, current and monthly budgets. Budget Construction is the window of time (normally from March – May) when next fiscal year’s budget can be uploaded into IU’s financial system. Current Budget (KFS Balance Type ‘CB’) is a copy of the base budget at July 1 that can be modified to reflect non-recurring items for the current fiscal year. Even (or Non-Seasonal) refers to income and expense items that remain stable on a monthly basis. Monthly Budget (KFS Balance Type ‘MB’) is created when the current budget is manually allocated across fiscal periods to match expected monthly activity. Uneven (or Seasonal) refers to income and expense items that can fluctuate greatly on a monthly basis.
CROSS REFERENCE:	FIN-BUD-II-10 - Budget Requirements
RESPONSIBLE ORGANIZATION:	Auxiliary Accounting, Financial Management Services