Budgetary Limits on Spending

Category: Governance
Number: GOV-090-035
Audience: All University employees
Issued: August 16, 2004
Revised: March 11, 2014
Owner(s): VP (Administration)
Approved by: Board of Governors
Contact: Associate Vice-President (Finance) - 306-585-4171

Introduction

The University uses fund accounting for budgeting and recording revenues and expenditures. This policy outlines rules and sets limits for spending in each fund. It applies to all financial accounts including operating accounts, research accounts, special project accounts, capital accounts, trust accounts and Accountable Professional Expense Accounts (APEA’s).

Policy

No financial account should incur expenditures or commitments in excess of the budget (including any carryforward from the prior year) or funding received or confirmed as receivable. Exceptions may be considered as outlined under Processes.

Transactions must be recorded in the financial accounts in the University’s fiscal year ended April 30 in which they occur. In addition, research account transactions must be recorded in the financial accounts in the granting agencies’ fiscal year ended March 31.

Consequences for Noncompliance

If a financial account incurs expenditures or commitments in excess of the budget without prior approval, the Fund Manager may be subject to disciplinary action and/or be required to personally reimburse the University for the over-expenditure, and the account will have a negative carryforward.

Processes

Operating Fund Accounts

Academic and administrative units operate within their annual budget allocations.  Occasionally it may be necessary to overspend or over-commit prior to the April 30 fiscal year end to facilitate multi-year operational planning. In those cases, signing authorities on operating funds are permitted to overspend their allocated budget to a maximum of the lesser of 5% of the annual budget or $100,000.

The Director, Budget Services in Financial Services is notified in writing of planned over-expenditures within this limit. Requests to incur an over-expenditure must be accompanied by a plan to repay the over-expenditure within an agreed upon time frame. Over-expenditures are limited to one year and not to be repeated in successive years. Over-expenditures greater than this amount require prior approval of the Vice-President (Administration).

Unspent operating budgets will be carried forward to the following year according to policy GOV-090-015 Operating Budget Surpluses.

Research Accounts

Research accounts should not incur expenditure commitments in excess of the funding received or confirmed as receivable.
Refer to RCH-030-010 Budgetary Limits on Spending Research Funds for the policy on research accounts.

Special Project Accounts

Special project accounts should not incur expenditure commitments in excess of the funding received or confirmed as receivable. Fund Managers who expect a special project account to become overspent must contact the Financial Analyst, Research/Special Projects in Financial Services in advance of incurring an over-expenditure.

Capital Fund Accounts

Capital fund accounts are created to track costs of items or projects that are capital in nature as well as any related grants, cost recoveries and debt. Capital fund accounts are also created to record the cost and accumulated depreciation of capital assets. 

The University receives an annual Capital Grant from the Provincial Government which is allocated through the University’s annual budget setting process.  The Capital Grant is allocated to debt repayment, teaching equipment, sustaining capital and other one-time capital expenditures.

The sustaining capital portion of the Capital Grant is allocated to Facilities Management. Facilities Management reallocates the sustaining capital funds as required to individual capital projects based upon a capital spending plan approved by the Board of Governors (Board). Facilities Management has the discretion to reallocate sustaining capital funds from one individual capital project to another. Overspending of the total sustaining capital amount is not permitted unless approved in advance by the Vice-President (Administration). At year end, any unspent sustaining capital funds remain with Facilities Management for use in sustaining capital projects for the next fiscal year.

Large capital projects in excess of $500,000 require Board approval. Overspending on these projects is not permitted without approval from the Board.
The teaching equipment and any other one-time capital expenditure allocations are made to Faculties and Administrative Units. Overspending is not permitted on these accounts.

Spending is not permitted from capital fund accounts created to record capital assets and accumulated depreciation.

Trust Fund / Endowment Accounts

Trust funds are created for endowments for scholarships to exist in perpetuity. The endowed balance of such accounts cannot be spent. A portion of the annual investment income of the trust funds is available to be spent on annual scholarships. That amount is calculated as 4% of the three year moving average of the individual trust funds and is not to be exceeded.

The 4% figure is reviewed annually to ensure that the investment income has been adequate to pay the 4% amount plus add sufficiently to the endowed principal of the trusts to maintain their purchasing power after the effects of inflation.

Accountable Professional Expense Accounts (APEA’s)

No expenditures in excess of budget available are permitted from APEA’s. Transactions are recorded in the financial accounts in the fiscal year ended April 30 in which they occur. Unexpended balances as at April 30 may be carried over to future years in accordance with policy EMP-060-005 Accountable Professional Expense Accounts (APEA’s).

Should an over-expenditure occur in an APEA, the Financial Analyst, Fixed Assets/APEA will contact the APEA holder to determine whether they plan to send the University a cheque for the over-expenditure or if it will be addressed through payroll deduction.

Ancillary Fund Accounts

Ancillary administrative units prepare and submit annual budgets which are approved by the Board of Governors. The budgets indicate gross revenues, gross expenditures and profit or loss. Ancillary units are expected to operate within their annual budgeted profit or loss targets. Due to the business/retail nature of Ancillary operations, when revenue generation exceeds budgeted plans it is recognized that corresponding proportional expenses may exceed budgeted expenditures.

An Ancillary budget variance is calculated as the difference between the budgeted profit or loss and the actual profit or loss.

Ancillary administrative units report variances to their Vice-President through the respective Associate Vice-President.

Unfavourable variances in excess of $100,000 require approval by the Vice-President (Administration). Supporting documentation is provided to the Vice-President (Administration) by Managers of Ancillary units identifying:

  • reasons the variance was not anticipated,
  • activities and actions being implemented to mitigate the variance where possible,
  • activities and actions being implemented to avoid future similar variances, and
  • a plan to recover such shortfalls.

Where necessary, unfavourable variances, at least in the short term, will be drawn against the Ancillary Fund Balance. Anticipated favourable variances in excess of $100,000 are to be reported to the Vice-President (Administration). Favourable variances will be placed into the Ancillary Fund Balance.

Equipment purchases in excess of $100,000 require the approval of the Vice-President (Administration).

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