The Process of Budgeting at Many Institutions of Higher Education Needs to Change
Refinements and Improvements to the Annual Budget Process
Due to the economic challenges many institutions of higher education are facing today, and the need to do more with less, budgeting is clearly a very critical item on the agenda. Addressing the problems associated with the budget process and having people working together towards common goals and results is a top priority. And if Budgeting is a Financial Application, why are 90% of user’s non-financial people?
It is not uncommon for the faculty and staff at an institution of higher education to view the budget process as something that is being “force-fed” from Finance. In order to improve this process, an interface for the faculty and staff should be developed and utilized that “walks them through” the budget process in such a manner that will be simple and yet very powerful. What would be helpful is the flexibility to budget the way they think about their areas of responsibility and allows them to budget on course with the strategic plan of the institution, including full disclosure and documentation of how and why they need what they are asking for in their budget.
Additionally, it is not uncommon for the Finance Department to be under staffed, or be lacking in the resource capabilities to manage all of the complex mechanical aspects of the budget process, as well as being able to readily provide analysis and decision support. The mere process of preparing budget templates, distributing them to the faculty and staff, collecting these spreadsheets, verifying their accuracy, aggregating and consolidating numbers and preparing for the budget review sessions is a cumbersome and manual process for the finance staff. Instead, the budgeting system in-place should alleviate most of those time-consuming mechanics, and allow for the finance staff to focus their time and attention on value-added decision support and analysis.
Budgeting for Special Initiatives and Projects
Because the budget process requires identifying spending for special initiatives or projects that may “cut across” various accounts or even departments, it can become very difficult to track properly for these items in the budget process, and it presents the possibilities for human error; especially when a budget for a project is not approved and someone, presumable someone in Finance, has to accurately “strip” or remove all of the spending out of all of the impacted accounts in the budget process, and then reconsolidate the results.
Having a budget system that can easily create budgets for special initiatives and projects, thereby facilitating an initiative-oriented budget review process would be an ideal process to have in place. This type of system should allow for faculty and staff to submit these initiatives and then have the budget system automatically determine the impact on the account structure. Without this type of budget system, if an initiative is not approved, someone has to go back into each of the associated accounts and try to remember how much that account was attributed to that initiative that was cancelled. This can cause inaccuracies and it will lack an audit trail.
Detailed Budgeting for Position Control
For many institutions of higher education, it is not uncommon to find that over forty percent (40%) of expenses relates to personnel costs (salaries & benefits). However salary and headcount planning are many times disconnected from the rest of the budgeting process. This can lead to confusion, rework, and a lack of fiscal awareness and understanding on the part of the department heads who actually manage the faculty and staff.
To help alleviate this problem, having detailed budgeting for “position control” should be in-place. Salaries and benefits are a special line item in the budgeting process. Therefore, the budget system should be able to handle half of the requirements with respect to “position control” – the budgeting half.
The budget system should allow for faculty and staff to plan headcount down to the individual level and let the “system” handle additions, reductions, raises, FICA, benefits and other.
In addition, timely and accurate reporting is always a challenge, and faculty and staff are heavily reliant on Finance for reports. Producing these reports can be time consuming and prone to error, especially if you are using Excel linked spreadsheets.
What is needed is both budget reporting and monthly management reporting. A good system should have pre-defined report formats, specific reporting, and fully user customized reporting that does not require the user to learn a new report writing environment. It should be user friendly and simple to use, while meeting the institution’s specific needs.