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Provost's Office
> Administrative Info: Financial > Budget
Overview > Fund Type: Operating Budget The following links contain more detailed information about the most important budget allocations and other FUND types available in the Academic Affairs Executive Area, and their respective operational procedures. Operating Budget Operating Budget Definition and Use The General Operating Budget is the annual allocation that pays for the core campus mission and activities; money from several different FUND types are grouped together to comprise the Operating Budget. Each FUND type remains separate , but expenditures, such as faculty and support staff salaries and the general operations costs, are distributed among the FUNDs. Decision Process for Allocation of Operating Budget
The campus’ procedure for designating annual Operating Budgets follows a version of "incremental budgeting". Decisions are made to add to or subtract from each Executive Area’s historically derived Operating Budget total amount (the BASE). This BASE budget amount is the net sum of all the past accumulations of permanent allocation decisions, cost of living and merit additions, programmatic budget moves, or budget reductions. The entire annual Operating Budget comes to each unit as an allocation intended to be spent over a full fiscal year, with the full amount usually known in advance of the start of the fiscal year. The annual procedure is managed by the campus Budget Office on behalf of the Chancellor; the process can be different every year, depending on prospects for a healthy or retracting state economy. To start the process, the current total BASE Operating Budget is identified for each Executive Area as the starting amount. During this campus-wide process the Chancellor can designate either additional allocations to or deductions from this current BASE figure; the process is usually linked with campus strategic planning. Other one-time allocations or deductions might also be made as part of this budget process. The annual budget procedure can begin in the fall of the year preceding, and extend all winter and spring, up to (and sometimes well past) the July 1 beginning of the fiscal year in question. FUND Sources for Operating Budget Once the campus operating budget decisions have been made, and one prepares for the new fiscal year's budget management, the Budget Office assigns any of three main FUND types to make up the BASE operating budget. These include:
Other Financial Management Information In the Academic Affairs Executive Area each Dean (Director or Vice Chancellor) of a Major Budgetary Unit (MBU) who is allocated a BASE Operating Budget is responsible for devising procedures to manage budgets during the fiscal year. They are free to follow a variety of budgeting practices, from highly centralized to greatly decentralized. Procedurally, the financial administrative staff and chair/head of academic departments within Schools and Colleges follow the instructions of their respective Dean for handling their Operating Budget allocation. Revenue Based Funds: Source and Use This money is obtained by charging fees for services, or fees (mandatory or non-mandatory) to students. Each revenue-based activity is separately described, and has a specific fee amount or schedule associated with it. A single "fund manager" is assigned responsibility for the operation. Policy Basis The Trustees of the University of Massachusetts, unique among state agencies, are authorized by a 1963 piece of legislation to approve the creation of fees charged to pay for certain "self-sufficient" operations, and to delegate the management of funds so collected to the campus. Revenue-based funds are a unique FUND type, meaning they cannot be mixed with other FUND types. A small administrative overhead is charged (usually 4 – 7% on expenditures) to comply with the law and to support central services costs (Bursar’s, Controller’s, Procurement Office, etc.) needed by revenue operations. Use of Revenue in the Academic Areas Revenue-based funds exist to support a Fine Arts Center operation, various scientific laboratory services, some services of the registrars’ offices, instructional technology and media services, international exchanges, continuing education curriculum, and any other activities not already supported by the General Operating Budget (described above) which fulfills the campus’ missions. Management of Revenue-based Cost Centers Each activity supported by fees must be described as a separate "little business" managed by a fund manager, with a fee structure and a revenue plan. The University Trustees review the statement of purpose, fee structure and budget plan in an annual budget process. Support staff associated with the activity must collect and deposit cash, process expenditures, and prepare reports as needed. The campus Budget Office manages the procedures to create and monitor revenue-based funds, including their annual budget review process. This process extends each year from early November through February in order to prepare for the February and later meetings of the Board of Trustees when fee approvals are considered. Procedure for Creating a New Fee Operation Academic administrators wishing to create new revenue-based fund activities talk first with their respective deans or Unit directors, and school/college business managers. The financial staff in the Provost’s Office is also available to provide consultation on the creation of fee structures and revenue plans, and has a Handbook designed for interested academic administrators. The campus Budget Office supplies the request forms necessary, and maintains a web site with more general information. The Trustees prefer to review new requests for revenue operations only during the annual revenue budget process, once a year. More information can be obtained on this FUND type from the web Home Page of the campus Budget Office (http://www.umass.edu/af/budget/) . Trustees policies for revenue-based funds can be found in the Policy for Management of University Funds (Trustees Documents T92-031, 6/3/92, revised 6/8/94). Excerpts can be found in the campus Accounting Manual. Grants and Contracts: Source and Use These are the awards of money for specific activities of a faculty or staff member, in response to grants proposals submitted to off-campus funding agencies. These can include federal and state government agencies, foundations, industries and business companies. Research is a primary mission of the Amherst campus, and grants and contracts are a primary source of support for academic research. Specific Use and Management Information Money from the award of Grants and Contracts is dedicated solely to the specific purpose approved by the organization which provided the funds, based on a proposal from a single responsible person, called a Principal Investigator (PI). The granting agency usually requires reports both about the success of the funded activity and about expenditures. The funds will be available only for a specified period of time; all funds not expended are normally returned to the agency. Grants and contracts are not only a general FUND type grouping, but each separate grant or contract is also a unique FUND. Money from a specific grant cannot be mixed with any other grant or FUND type. Overhead Charge It is typical for an overhead charge to be levied on grants and contracts. Request Proposals typically include two parts: (a) direct cost budget describing the actual research activity, and (b) a calculation of the indirect cost budget, using the overhead percentage rate allowed to be charged by the campus. Typically, the overhead rate on state agency funds, money from Foundations, and from industry is 10%. The overhead rate on federal agency grants is a campus rate negotiated every two years with a lead federal agency. The Vice Chancellor for Research makes all decisions on exceptions to these rate charges. On the Amherst campus, this indirect cost budget, once collected, becomes its own FUND type, and is called Research Trust Funds (see below). It is typical for an overhead charge to be levied on grants and contracts. Request Proposals typically include two parts:
Procedure for Obtaining Grants The grant process on the Amherst campus is supported by two offices in the Research and Economic Development Executive Area. The Research Affairs Office supports faculty and others seeking grant source information and technical help, making available on the web a detailed instruction manual for general use. The Office of Grants and Contracts Administration (OGCA) (http://www.umass.edu/research/ogca/) is the office which handles the actual proposal and pre-award procedure for the campus. The official internal processing form (IPF) can be obtained from this Office, along with other procedural information. Once an award is made, the campus Controller’s Office staff handle the creation of grant accounts and approval of expenditures, as well as the official final financial reports to granting agencies. Faculty members who obtain grants should consult with their local department administrators and support staff about any local grant support resources or local procedures required as part of the proposal process, including obtaining signatures on any forms. Research Trust Funds (RTF): Source and Use (See above Grants and Contracts, indirect cost budget) Money earned by levying an overhead percentage rate on grant or contract expenditures is called, on the Amherst campus, Research Trust Funds (RTF). The RTF is earned monthly as expenditures are made in the grant. The money is automatically deposited in separate RTF account numbers, each with an assigned responsible person. Policy Research Trust Funds are tracked as a separate FUND type in order to comply with Massachusetts legislation requiring that they be spent in the support of research. (See policy in campus Accounting Manual) Distribution of RTF Earned The current Amherst campus policy for distribution of these grant overhead earnings specifies that 70% of all earnings will be returned to the central campus administration; these become part of the resources for the campus annual Operating Budget (see above, Operating Budget). The remaining 30% earned on each grant or contract is automatically distributed in the following fashion: 10% is returned to the PI for the grant or contract; 10% is returned to the department of the PI; 10% is returned to the dean (or Director or Vice Chancellor) where the PI and department is located. (Exceptions to this standard distribution must be mutually agreed to by all parties involved.) Gifts: Source and Use Donations are made either to the Amherst campus as a whole, or gifts may be restricted to specific departments or purposes by alumni and friends of the University. This FUND type may be categorized as "restricted" in the sense that a donor usually specifies the recipient department or activity to be funded. Within those donor boundaries, however, expenditures can be made for almost any item consistent with the University’s mission and state ethics legislation. Procedure The Development Office (http://www.umass.edu/development/) (part of the University Advancement Executive Area) provides support to academic departments to help raise gift money. This Office conducts the campus’ capital (development) campaigns. Each College and School and Library is assigned a Development Officer. Faculty, department heads and chairs, deans, and other senior administrators also play a significant role in fund raising. Gifts are sought for both endowments and for cash not invested through an endowment. Each academic department on campus, and some other offices, usually has a single restricted gift fund used for the deposit of (non-endowment) cash. Interest on Endowments and the University Foundation Endowments are usually managed by a separate organization outside of the University, called the University Foundation. Policies are issued by the UMASS Foundation about the amounts of a donation required for various categories of endowments, including various types of endowed chairs for faculty members. Donated funds are deposited with the UMASS Foundation for investment. An overhead charge is levied to cover Foundation costs. The annual interest earnings from the financial investment of endowed funds is made available to the campus recipient in several ways. Information on current procedures can be obtained from the campus’ Controller’s Office or the University Foundation.
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