Budget Guidelines
Budget Overview
The budget is a financial plan for the university that quantifies the resource allocation plan for the next
three fiscal years. The budget process begins in early fall of each year to develop the budget for the
following fiscal year as well as projected budgets for the next 2 years. Budgeting at the unit level is a
decentralized process. Each unit is responsible for building its’ own budget. The allocation letter, in
addition to various other data collected at the unit level, is essential to completing this process. Central
administration distributes the allocation letter, which includes the assumptions and the initial allocation
amount. All units' budgets are reviewed and compiled by the Budget and Financial Planning Office. The
result is an overall university budget that is taken to the Board of Trustees for final approval in May.
Budget Assumptions
The assumptions that feed the budget process are: tuition rate increase, financial aid, gift revenue,
overhead rates on sponsored projects, the salary pool, the benefit rate, capital requirements, and the
endowment distribution.
Central Allocation
The colleges and major administrative units receive an annual allocation of funds to support their
operating budgets. The allocation amount is incremented each year based on the assumptions and any
other known factors. The initial allocation letter are sent to the units in the early fall. The units use the
information contained in the allocation letter to build the budgets for the upcoming fiscal year. For most
of the colleges, the majority of the allocated amount is used to support faculty salaries. In addition to the
lump-sum allocation, the colleges also budget for additional revenue sources and expenses based on the
specific activities of their organization. Following each financial review, the allocation letters are revised
to accurately reflect the changes in assumptions and any other items that were agreed upon during the
financial review.
Information to Start Your Budget or Forecast
Before beginning a budget or forecast, it is important to have a knowledge of the organization or business,
including its current financial status. Input from department management, principal investigators, system
support, and faculty who control significant funding from any source (including discretionary funds) is
key. Additional data for financial analysis can be found in financial reports such as operating statements,
funding source detail and financial review reports. Budgets are uploaded into Oracle through Application
Desktop Integrator (ADI).
Budgeting by Funding Source
Each college or administrative unit has a diverse organizational structure. Therefore, the approach to
begin a budget will vary according to these needs. For example, certain funding or expense types may be
the largest part of the budget and dictate the budgeting criteria. Most often, the source of funding will be
the determining factor. The following sections outline issues and guidelines to consider when budgeting
in each funding source.
General Operating Funding
The general operating funding source is used to define a department's operating budget. It includes the
university allocation, summer programs, executive education, INI masters programs, the Heinz College,
the Tepper School, unrestricted contributions, and general institutional funding. All Oracle department
allocation budgets need to agree with the allocation letter. Allocation funding can be base, one time, and
general institutional.
General Operating Budgeting Quick Reference
The following table will assist you in preparing your general operating budget. Please note, you are
required to use specific object codes for the different funding sources.
Chart of Accounts Requirement
Funding Source Description
Funding Allocation Object
Source
Codes
Activity Code
General Unrestricted
000001
Base Allocation
Base Allocation - Adj
One Time Allocation
One Time Allocation - Adj
Base Allocation Adj - Division
General Institutional
General Unrestricted GM
F&A Return Allocation
F&A Return Allocation Adj
000002
000001
000003
000001
000001
000004
000005
000003
000001
N/A
71100
71150
71200
71250
71210
71400, 71450
N/A
71500
71550
Budgeting Process and Requirements
Surplus/ Deficit
Revenue, Expense, Surplus, Deficit Considerations
N/A
= $0 at year end Transfer balances to/from Op Reserve
N/A
N/A
N/A
N/A
N/A
Assigned
N/A
N/A
N/A
= $0 each month Transfer balances to/from Op Reserve
= $0 each month Transfer balances to/from Op Reserve
= $0 each month Transfer balances to/from Op Reserve
= $0 each month Transfer balances to/from Op Reserve
= $0 each month Transfer balances to/from Op Reserve
= $0 each month Budget all funding
= $0 at year end Transfer balances to/from Op Reserve
Budget Guidelines
ALLOCATION REVENUE (new Object Codes are highlighted in yellow)
71100
Base Allocation Revenue
Base allocation revenue is posted montly to reflect the revenue allocated to the
division/department from general university sources. Should be used with funding
source 000002, when budgeting. Allocation revenues and income transfers provide
sources of funding for expenses; the bottom line should be zero.
71150
71200
71250
71400
71450
71500
71550
Base Allocation Adjustments
This object code is used to record changes in the Base Allocation Revenue after the
budgets are finalized. Should be used with funding source 000001, when budgeting.
The base allocation adjustment revenue is posted via journal entry by the budget
office.
One Time Allocation Revenue
One time allocation revenue is posted monthly to reflect the revenue allocated to the
division/department from general university sources as approved annually by the
president/provost. Should be used with funding source 000003, when budgeting.
Allocation revenues and income transfers provide sources of funding for expenses; the
bottom line should be zero.
One Time Allocation Adjustments
The object code is used to record changes in the One Time Allocation Revenue after
the budgets are finalized. Should be used with funding source 000001, when
budgeting. The one time allocation adjustment revenue is posted via journal entry by
the budget office.
General Institutional Allocation
Records the allocation from the Budget Office to fund general institutional expenses.
Should be used with funding source 000004 and activity code assigned by the Budget
Office. This object code is used for the general institutional allocation budgeted as part
of the university budget process.
General Institutional Allocation Adjustments Records the allocation from the Budget Office to fund general institutional expenses.
Should be used with funding source 000004 and an activity code assigned by the
budget office. This object code is used for changes in funding after the budgets are
finalized. The general institutional allocation adjustment revenue is posted via journal
entry by the budget office.
F&A Return Allocation
Records the allocation of F&A (overhead) revenue to certain departments and
colleges based on the funding allocation arrangement agreed upon by university senior
management. Should be used with funding source 000003, when budgeting. This
object code is used for the F&A return budgeted as part of the university budget
process.
F&A Return Allocation Adjustments
Records the allocation of F&A (overhead) revenue to certain departments and
colleges based on the funding allocation arrangement agreed upon by university senior
management. Should be used with funding source 000001, when budgeting. This
object code is used for changes in central funding after the budgets are finalized.
The F&A return allocation adjustment revenue is posted via journal entry by the budget
office.
INCOME TRANSFERS (new object codes are highlighted in yellow)
72250
72260
Income Transfer Capital Projects
Income Transfer Internal Loans
Transfer of funding from an organization to fund capital projects.
Transfers of funding from the Treasurer's Office to an organization to record the
issuance of an internal loan.
IC Tuition and Financial Aid Overview and Budgeting Considerations
Undergraduate tuition, graduate tuition, and educational revenue that are split with central or between
colleges are recorded in the following object codes: 61500 IC Undergraduate Tuition Transfer; 61502 IC
Graduate Tuition Transfer; 62500 IC Educational Programs Revenue; and 67500 Intercampus Other
Income for Portugal transfers. Coordinate all tuition transfers with the organization that is forecasting the
other side of the entry. This will ensure that amounts will agree and balance across the university. When
budgeting semester tuition it should coincide with quarterly accounting deferrals. IC graduate tuition
revenue from central will be booked quarterly to the college and is based on the percentage of the
semester completed. Undergraduate aid should be budgeted to object code 75100 and graduate aid
should be budgeted to object code 75102.
Designated Operating
Designated funding sources include operating reserves, cost sharing, faculty discretionary funds,
internally funded projects, faculty development grants, SURG, affiliate programs, Technology Transfer
projects, unrestricted endowment, and capital reserves. Operating and capital reserves are budgeted based
on expected funding requirements for operations and capital. All other funding sources are budgeted
based on past experience and department knowledge of changes in operations that will have an impact on
the balances.
Designated Operating Budgeting Considerations
Use the income transfer surplus/deficit (72400) code to/from operating reserves, funding source 060000,
to project the transfer of surpluses or deficits from other funding sources where balances are required to
equal $0. Cost Sharing, funding source 063000, are any costs incurred and funded by the university that
can be directly attributed to an existing sponsored project. Expenses are budgeted in grants management
by project, task and cost sharing award. Transfers to fund cost sharing, as well as the expenses, are
budgeted in summary in the general ledger. The university funds the Facilities & Administrative (F&A)
expense in cost sharing. Either the department or the university can fund the direct cost sharing expense.
The budgets for funding sources 061000 through 066999 should be detailed in grants management, if
applicable, and summarized in the general ledger. Actual designated balances will carry over to the next
fiscal year through a financial system generated entry. Therefore, do not budget beginning net assets.
Unrestricted Endowment Overview and Budgeting Considerations
Unrestricted endowment funding sources are 000100-049999. The endowment is similar to a mutual
fund. A gift can buy shares in the endowment and receive a yearly distribution of income based on the
number of shares. Endowment revenue should be budgeted at the beginning of each quarter. Expenses
should be budgeted as they are expected to occur. Do not budget beginning balances. Actual balances
will carry over to the next fiscal year through a financial system generated entry.
Sponsored Projects
Sponsored projects funding sources include: Army, Air Force, Navy, Department of Energy, Industry,
State Government, Affiliate Sponsors, and future funding. Expenditures are tracked by total direct costs
(TDC) and modified total direct costs (MDTC). Total direct costs include all expenditures paid by the
sponsor. MTDC is the TDC less equipment, capital expenditures, charges for tuition remission, rental
costs, scholarships and fellowships, as well as the portion of each sub grant and subcontract in excess of
$25,000. Equipment and subcontracts can skew comparison of costs between schools, departments or
awards and do not add significant incremental overhead burden to the university. The MTDC is
significant because this is the amount to which the university's F&A or overhead rates are applied.
Sponsored Projects Budgeting Considerations
Sponsored projects are budgeted in detail in grants management by project, task and sponsored award and
summarized in the general ledger by funding source. Budgets should be based on awards in hand,
outstanding proposals, past performance, and department knowledge of planned changes that would have
an impact on funding. Subcontract costs and capital expenditures must be budgeted as separate items so
that MTDC can be calculated. Direct sponsored projects revenues should equal direct sponsored project
costs. F&A revenue should equal F&A expense. Utilize the following when preparing sponsored
budgets: Budget Management Spreadsheet (BMS) for actuals, budgets, GL funding sources; future
funding projections; status of current contracts; status of open proposals along with department trends;
timing of revenue recognition; and required cost sharing and funding.
Auxiliary Overview and Budgeting Considerations
Auxiliaries are managed as self-supporting, break-even business units. Revenues are budgeted based on
pricing assumptions for the business. Expenses are budgeted based on the assumptions plus any other
direct costs that relate to the business operations. Since auxiliaries are expected to cover all of their costs,
university overhead is also charged to each unit. Each auxiliary is a unique entity in Oracle with a
Budget Guidelines
balance sheet. Characteristics of an auxiliary statement include the following: capital is charged to the
balance sheet not the operating statement; depreciation expense is charged based on property accounting
standards; loan interest is expensed; loan principle payments are charged to the balance sheet; any surplus
or deficit falls to the bottom line and is carried over to the next fiscal year; and business is evaluated on
cash flow. Auxiliary funding source 050000 uses function 700 for expense transactions.
Recharge Overview and Budgeting Considerations
Recharge centers provide goods, services, or groups of services in support of the university's education
and research mission. These units are responsible for recovering only the direct costs associated with their
operations through established pricing practices. Direct costs include personnel and operating expenses.
The recharge center is expected to build prior year balances into future pricing. Recharge funding source
055000 uses function 740 for expense transactions.
Temporarily Restricted Overview and Budgeting Considerations
Temporarily restricted funding sources include endowment distribution (funding sources 100000-199999)
and contributions (funding sources 200000-299999). The use of these revenues is restricted according to
donor specifications. Endowment revenue growth is budgeted based on the parameters in the
assumptions and revenues are distributed at the beginning of each quarter. Gift revenue budgets are based
on past experience and department knowledge of expected gifts and cash receipt of pledges. The
corresponding expenses are budgeted according to anticipated completion of donor specifications. Do not
budget income transfers or beginning balances. Actual balances will carry over to the next fiscal year
through a financial system generated entry.
Agency Funding Overview and Budgeting Considerations
Agency funding sources are 900000-910000 and are not included on the operating statement. An agency
represents a group outside of the university that uses the university's services and can be funded by the
university or can reimburse the university. Examples include student organizations and clubs. Agencies
have a unique entity 95 and unique object code 85802 to transfer revenue to and from the university.