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Budgetary Control for Non-Accountants

Budgetary Control for Non-Accountants

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Budgetary Control for Non-Accountants

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  1. Budgetary Control for Non-Accountants Allison Taylor & Paul Cropper

  2. Objectives • To understand the process of budget preparation, monitoring and control • To understand and identify the information needed to prepare, monitor and control budgets effectively • To identify the action that should be taken to keep budgets under control • To identify important issues and common problems with budgets

  3. What is a budget? • Working definition: ‘A future plan which sets out a business’s financial targets’ (Jones:2002)

  4. What is a budget? • Formal definition: ‘A quantitative statement, for a defined period of time, which may include planned revenues, expenses, assets, liabilities, and cash flows. A budget provides a focus for the organisation, aids the coordination of activities, and facilitates control.’ (CIMA:2002)

  5. Financial Background • 2011-12 Income £140m, Expenditure £118m (12th largest surplus in England) • 2012-13 expected Income £143m, Expenditure £126m • 2013-14 budgeted Income £139m, Expenditure £128m • Boost the local economy by an estimated £300m • Devolved budgets • 1,239 accounts & 1,971 cost centres (currently active) • 7 Schools, 11 Service departments and a Consortium • Agresso finance system in place for over 10 years • No borrowing

  6. Why prepare budgets? • To co-ordinate the activities of different Schools and Services towards a single plan • To communicate targets to Deans/Directors responsible for achieving them (2 way process) • To establish a system of control by having a plan against which actual results can be compared (BAFFs) • To compel planning

  7. Purpose of budget preparation, monitoring and control • Helps us to plan for the coming months • Helps us to decide between competing activities • Ensures that informed decisions are made • Enables us to recognise when our plans are going adrift during the year • Ensures that returns to the Funding Councils are accurate • Communicates our financial decisions to senior staff, council and committee members

  8. Budget control cycle

  9. Practice at Huddersfield The annual budget planning function utilises a University-wide Devolved Revenue model to allocate funds to schools, services and strategic provision

  10. How is the money distributed? The DevRev model is simple, straightforward and transparent. All qualifying income is top-sliced to give the strategic provision [SP] and the remainder is split between schools and infrastructure.

  11. How much is distributed in 2013-14?

  12. Allocations to Schools 2013/14 (£m)

  13. Allocations to Services in 2013/14 (£m)

  14. Strategic Provision Capital items (e.g. depreciation, capital grants released, etc…) Building rental costs Interest receivable / payable Student Union grant 1st year of new world class professorial posts Economic contingency reserve ‘Matched’ funding to encourage new projects

  15. Budgeting Practice at Huddersfield Schools & Services establish budgets based on funding from: • DevRev • Non-DevRev that is not matched funding • Matched income (Grants matched by costs, etc…) • Capital expenditure grants • Specific projects eg Research, OIGA, HEIF

  16. Practice at Huddersfield The annual budget cycle runs from 1stAugust to 31st July and covers 5 distinct stages: • BASE BUDGET • POST-HESES RECONCILIATION • MID-YEAR REVIEW • FINANCIAL FORECAST • DEVREV RECONCILIATION

  17. Finance system The budget operating function is contained within the finance system, Agresso, which allows budget holders and financial services staff to update, maintain and monitor the operating budget throughout the financial year

  18. The budget monitoring and control process Monitoring takes place within Agresso: • Authorising expenditure against budgets (funds checking) • Comparison of actual expenditure against budget (profiling)

  19. Variance analysis • Definition of a variance • Compare actual to budget • Further investigation will be required • Establish reason for variance • Take action • Plan to meet new priorities

  20. Exercise for monitoring budgets Agresso & Excelerator

  21. Action • Is the variance controllable? • Is it avoidable? • Is it recurring? • Can compensating savings be made within my budget? • Will it generate extra income? • Can my colleagues help? • Are there any contingencies or reserves?

  22. How can budgetary control be improved? • Dedicating sufficient time to the task • Considering both past and future events • Accounting for both sides of a transaction (New income matched by new expenditure) • Neither over-cautious nor over-optimistic (Showing projected income/expenditure that’s likely to arise) • Consulting widely • Identifying all costs (e.g. On-costs on staffing) • Working closely with Financial Services staff • Attending training courses or seek out knowledge

  23. Summary • Information available from Agresso and Excelerator • Guidance on the Financial Services web pages • Support available from Financial Services • Other courses e.g. Agresso budgeting