Best practices and expectations for budget management
Unit leaders must be accountable for the finances of all sub-units reporting to their organization to ensure that they have strong budget management and cost containment measures in place. These will be critical as we move forward to ensure that the savings needed can be achieved.
Over the next year, central campus will implement stricter budget and financial monitoring to identify areas of concern earlier than in the past. The following is a list of best practices around budget management and cost containment that was collected from colleagues across campus representing both academic and administrative units. This will be updated as more suggestions are submitted.
If you have any questions or would like to be put in contact with a unit that has implemented these practices, please contact Jessica Lewis at email@example.com.
- Budgeting Practices
- > Develop guiding principles that align with the strategic priorities of the unit and the campus as a whole. Have a clear and transparent governance structure.
> Ensure consistent unit-level policies and planning assumptions exist that are transparent and understood by all decision makers. This would include budget and administrative policies regarding salary savings, backfills, salary reallocations, space allocations, capital projects, equipment replacement, etc.
> Internal budget proposal/review cycle. Outside of the campus budget process, set up your own internal process that occurs first. This supports a true leadership evaluation of needs and potential trade-offs. By the time you have your budget meeting with campus leadership you have a good idea where you stand and what your priorities will be for the next fiscal year.
> Multi-year forecast. It is important to have a long-term forecast in addition to your more detailed current year budget for planning purposes. Include key assumptions associated with your strategic plan and/or primary revenue and expense drivers.
> Metrics. Use relevant data, when appropriate, to inform budget decisions.
> Pause programming if funding has changed. If you do not receive funding needed to continue programs you can pause until funding is identified. This could lead to repositioning staff, repurposing facilities, and recalibrating expectations.
> Strategically manage commitments by extending the payouts over multiple years, as appropriate.
> Develop a cash flow analysis for multi-year commitments or projects to ensure that you are setting aside the appropriate funds annually to support the long-term plan. A similar approach can be used for large purchases, equipment renewal, and inventory management.
> Understand all funds available and their attributes. Unrestricted vs. restricted, on-going vs. one-time or limited-term, where the funds come from and therefore who you are accountable to in spending them.
> Include all costs in estimates. In addition to salaries, you need to include benefits, GAEL, OP assessment, equipment needs, and basic operating costs to get the full cost of hiring or other changes. Educate managers on the true costs.
> Infrastructure support. Making sure to include support systems (such as business services, IET needs, etc.) and space planning early in the process when adding/changing/redistributing staffing or making a budget request.
- Budget Monitoring
- > Evaluate the budget process. Explore different or updated approaches to budgeting, which may highlight opportunities to align funding with strategic objectives (i.e.; zero-based budgeting, performance-based budgeting, unit-level funding formulas).
> Clarify and support sub-unit level accountability and budget knowledge. Consult with each sub-unit (Department, program, etc.) head and hold them financially accountable to explain expenses annually. This could be combined with an expectation that they periodically build the expenses and revenues from “zero”. This may be difficult, but it is a healthy exercise to work through for organizations that traditionally use incremental based budgets.
> Utilize common management reports that are concise and complete, but backed up with sufficient detail such that the budget manager can answer specific questions on where cost estimates (or actuals) come from.
> Conduct regular meetings with chairs/directors/FEC leadership/CAOs where financial issues are discussed to create a culture of communication, transparency, and addressing small issues early, before they grow into bigger issues.
> Review budget to actuals on a regular basis to identify if a sub-unit is trending toward a deficit or has unanticipated expenses or savings. Depending on the size of the organization, reviews should occur monthly or quarterly. If needed, reviews should result in action, adjust activities or funding to ensure that deficits do not occur.
> Deficits should not occur, but if they do they should be closely managed and retired in a reasonable time period. Programs or sub-units with deficits should be required to develop a deficit reduction plan, such plans should be approved and monitored by unit leadership, and program or sub-unit leaders should be held accountable to implementing the plan.
- Workload Management
- > Eliminate silos across departments. Share information and processes to increase efficiency and improve employee morale.
> Allow flexibility to allow you to adapt in a changing environment and respond to new directives.
> Explore and prioritize process changes that increase efficiency and eliminate redundancies. Resource: Lean Six Sigma
> Workflow management and ticketing systems utilize software that allows you to obtain approvals at each workflow step without involving any paper forms routing across various departments and/or manage priorities through a ticketing system. This works well for administrative functions including, but not limited to, Information Technology, Financial Services, Human Resources, and Marketing/Communications. This important data collection tool allows units to manage work-flow and make resource decisions based upon “ticketed” data. Utilizing the data collected from work tickets allows you to distribute work load appropriately and in many instances create cost savings. Some examples currently used on campus include Perfect Forms, Service Now, and DocuSign.
> Support training and professional development to ensure all account managers, supervisors, CAOs are trained, current and compliant with fiscal policies and systems. Staff should be aware of training and resources available to support their knowledge in this area.
> Reduce or strategically manage overtime, where appropriate, so that it is only used when necessary. Evaluate the trade-off of overtime vs. new hires in your operation, in some cases reasonable overtime may be more cost effective. Consult with your HR Business Partner to ensure you understand overtime policies and limitations.
- Position Management and Planning
- > Conduct an attrition analysis to project multi-year cost savings opportunities.
> Delay recruitment of vacant positions to generate one-time savings.
> Carefully review the responsibilities of vacant positions and consider whether the duties can be allocated to another individual and/or eliminated. Consider piloting duties to others for a temporary period to determine feasibility.
> Review all planned hiring at the Dean or Vice Chancellor Office level to ensure that funding is available and the position is critical. This may also provide opportunities to identify positions that could support functions across sub-units.
> Ensure communication within unit between financial and human resources/academic personnel staff. Every HR action has a financial consequence so it is important to make sure everyone is informed, as appropriate, on HR actions and how they will impact the budget.
- Centralized and Standardized Services
Examples of services that have been centralized in various units across campus:
> Academic advising centralized in the Dean’s office. Provides academic advising for all undergraduate students in the college.
> Academic personnel centralized in the Dean’s office with departments only managing appointments of academics. Alternatively, some units have the Dean’s Office academic personnel analyst review draft merit packages and advise the departments on corrections before they are officially moved forward for Dean’s office review. This has saved time for the faculty (who do not have to sign multiple times), the departments, and the Dean’s Office.
> Curricular management/support centralized within the Dean’s office with collaboration from department chairs on teaching assignments.
> Facilities and safety services are centralized in a Facilities and Safety unit within the Dean’s office. This helps to standardize lab safety practices, coordinate with EH&S, and have a point of contact for Facilities Management and DCM.
> HR, payroll processing, and consultation for eight units was consolidated in the Academic Unit Shared Services Center (AUSS-C) through a unit-driven collaboration.
> IT services are centralized, housed in the Dean’s office, and divided into three sections under one director: application development/curricular support, project management, and operations (network admin and tech/desktop support). Central ticketing systems are often used for help desk issues. Another example of centralized IT services is a Student Service Desk to centralize desktop support (free up professional IT staff to focus on instruction and research).
> Purchasing and Travel central shared service model that processes over 20K transactions a year with 6.0 FTEs. Use internal “electronic forms” (using Service Now infrastructure with workflows/ approvals) for reimbursement and travel.
- Unit Review Processes
Conduct center reviews internally every three years where centers submit their mission, goals, financial management strategy and reporting, and a SWOT analysis to the Dean’s Office. Centers are also reviewed every 5 years by the ACCD. Each report to the ACCD includes the Center’s own report and a review by external experts.
Implement process reviews. Use benchmarking data for other comparable peers (i.e.; institutions, departments) related to staffing ratios by function, costs, and process time. Review organizational spans, layers, and portfolios (Are the number of organizational levels and staffing patterns consistent with comparable size organizations? What is the staff to supervisor ratio? Are we properly leveraging positions and people? Should we increase the span of control for key team members to eliminate or reduce redundancies?). Complete an analysis of salary expenditures by function and department to determine if the spending aligns with strategic objectives, how growth compares to other peers, and if there is frequent staff turnover, which may indicate lost productivity or higher costs of replacement. Evaluate processes: identify process redundancies and opportunities for automation or new technology; and look for non-value added steps, such as delays, rework, and rejects.
Review and prioritize programs, including the related support costs. Explore programs with declining demand and/or increasing costs. Determine the sustainability of the program and whether the resources allocated are commensurate to the outcomes. If the program is prioritized, explore processes to increase demand or address costs.
Conduct a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis for programs or units within strategic planning to guide and focus resources.
- Other Cost Containment Tips
- Purchasing. Ensure that purchases are necessary, reasonable, and that standard procurement processes and contracts are utilized. Explore opportunities to leverage campus or system-wide contracts and bulk purchasing opportunities that could significantly lower costs. Supply Chain Management is a critical partner and resource for procurement and travel.
Reduce non-essential travel and strategically plan and approval travel and professional development. Pre-planning travel and professional development opportunities allows units to ensure they stay on budget and may result in lower costs. If limiting conference travel, make sure that other less costly professional development opportunities are encouraged (i.e. internal UC/UC Davis training opportunities, online training, webinars, etc.) and that limited opportunities are equitably distributed. Some professional development organizations provide free/reduced costs or travel reimbursement for presenters, encourage staff with a project to share to apply to present.
Reduce and/or closely review meals and entertainment. Limit the number or eliminate working meals, etc. Individual units can have more restricted meal limits than campus policy.
Review your equipment management and budgeting practices. Consider delaying the replacement cycle of equipment to the extent possible. Also ensure that you are budgeting appropriately for lifecycle equipment replacement and evaluating reserves for this purpose. A replacement delay without an equipment replacement plan could result in a future challenge.