The majority of movements in Discretionary Reserves are formulaic, being transfers of Performance Based Fund or Net Direct Expenditure variances at year end.

Heads may also draw down funding during the year to fund an activity. Drawing down from Discretionary Reserves debits the Balance Sheet and credits the Income and Expenditure Account of the unit.

In rare cases, a transfer between reserves of different units may occur (e.g. from a college’s Allocation Unit or College Office to one of the schools). It is not permitted to transfer directly from the Balance Sheet of one unit to the Income and Expenditure Statement of another unit.

Committed Funds are reported as part of the Balance Sheet and only the expected relevant portion should be drawn down at the start of each year. The relevant portion is the portion that is expected to be used during the year, not the full amount. Of course it may be difficult to accurately forecast the level of activity for a year but in principle only the net funds to be utilised during the year should be drawn down.

Income and Expenditure are recorded as part of the normal Net Direct Expenditure accounts, not recorded directly against the Balance Sheet account.

Generally transfers between Committed Funds do not occur as they are committed to a particular purpose.

Formulaic movements in Discretionary Reserves are calculated automatically as part of the regular forecasting of Income and Expenditure, by comparing NFI and NDE against Target.

Non-Formulaic Drawdowns to date (if applicable) are recorded in Actuals, and reported within the forecasting form as part of the quarterly forecasting of Income and Expenditure. Any further Non-Formulaic Drawdowns forecasted by the Finance Manager are entered to the form. Unless there are known plans, it is usually best to assume that there will be no further Non-Formulaic Drawdowns.

Transfers between Balance Sheet Reserves are quite rare. If there are plans for such transfers, they are forecasted via the (new) Balance Sheet Forecasting form at quarter-end.

Committed Funds balances are now forecasted each quarter as part of the quarterly outturn forecasting. This assists in developing the forecast of Income and Expenditure (ie the Committed Funds line in Net Direct Expenditure) and the Balance Sheet forecasting also provides information relevant to the GAAP Adjustment presented to FRAMC.

Balance Sheet Forecasting is performed for each Committed Fund. The (new) Balance Sheet Forecasting form will provide the Opening Balance and the movement to date. FMs will enter forecasted movement for the remaining periods and the form will calculate and display the Closing Balance and the Annual Movement. Normally the aggregate annual movement across all Balance Sheet Committed Funds for a unit provides one side of the double-entry and the Income and Expenditure amount should match, with the opposite sign. The Finance Manager will then enter this amount to the Committed Funds Forecast in the Income and Expenditure account.

Transfers from the Discretionary Reserves of one unit to another should be entered as follows. It is not permitted to transfer directly from the Balance Sheet of one unit to the Income and Expenditure account of another unit.

Dr Y998-99997 Transfers Between Reserves

Cr Y999-99997 Transfers Between Reserves

transfers from unit S998 to S999.

Do not use Q codes.

Normally committed funds drawn down from committed reserves on the balance sheet are fully drawn down in Quarter 1, and the budget should have been phased to match this - with the drawdown occurring in Quarter 1 and the associated expenditure occurring during the year. Where this occurs, there is normally no need to enter accruals.

However, to the extent that activity does not align with the budget phasing, you may need to defer some or all of the income as follows:

Quarterly Deferral of Committed Reserves - Internal

DR 1234-89992

CR 1234-99992

Quarterly Deferral of Committed Reserves - External

DR 1234-89991

CR 1234-98357

Committed funds received are to be analysed between internally and externally committed funds at year end and recorded accordingly. All Committed funds are to be posted at cost centre level rather than school level.

Internally Committed funds

Internally committed funds are to be transferred to the balance sheet using account code 89992 and balance sheet code 99992. When these funds are drawn down the following year, account code 89992 is to be used to credit the funds.

2019 P13

Dr 1234-89992 (Surplus/Deficit Internally Funded)

Cr 1234-99992 (Internally Funded Reserves)

2020 P1

Dr 1234-99992 (Internally Funded Reserves)

Cr 1234-89992 (Reserve Drawdown - Internally Committed)

where 1234 represents the specific local cost centre.

Externally Committed funds

Externally committed funds are to be transferred to the balance sheet using account code 89991 and balance sheet code 98357. When these funds are drawn down the following year, account code 89991 is to be used to credit the funds.   

2019 P13

Dr 1234-89991 (Surplus/Deficit Externally Funded)

Cr 1234-98357 (Externally Funded Reserves)

where 1234 represents the specific local cost centre.

2020 P1

Dr 1234-98357 (Externally Funded Reserves)

Cr 1234-89991 (Surplus/Deficit Externally Funded)

where 1234 represents the specific local cost centre.

All committed funds to be drawn down during the year should be updated within both the University budget and Operational budget for the year on PBCS, with the amount to be drawn down recorded as a carryforward along with a corresponding amount for the expenditure (Pay/Nonpay) for which the funds are intended.

Year End NDE Variance entries are to be posted by FMs; Performance Based Funding are posted by the Management Accountant in FPMA.

Accounting for Y/E Net Direct Expenditure Variances

Entries shown below for favourable NDE variance - these are reversed for an unfavourable variance.

Dr Y999-89988 (NDE Variance )

Cr Y999-99999 (Discretionary Reserves)

where Y999 is the School 'Y' cost centre

Accounting for Y/E Performance Based Funding

Entries shown below for favourable Net Fee Income variance - these are reversed for an unfavourable variance.

School Portion

Dr Y999-89985 (Performance Based Funding - Own)

Cr Y999-99999 (Discretionary Reserves)

where Y999 is the School 'Y' cost centre

College Portion

Dr Y999-89986 Performance Based Funding - College

Cr Y123-99999 Discretionary Reserves

where Y999 is the School 'Y' cost centre and Y123 is the College 'Y' cost centre.

University Portion

Dr Y999-89987 Performance Based Funding - University

Cr Y088-99999 Discretionary Reserves

where Y999 is the School 'Y' cost centre, Y088 is the university cost centre.

The net amount over- or under-recovered at year end should be calculated in the Allocation Unit by viewing the VACSAV account. This should equal the central charge received (account 81507) less the amount recharged out locally (81509). This balance should be transferred to the balance sheet.

If the charge has been over-recovered (i.e. a net negative amount), the double entry is:

Dr Y234-89999 Reserve Drawdown

Cr Y234-99996 Vacancy Savings Reserve.

If the charge has been under-recovered (i.e. a net positive amount), the double entry is:

Dr Y234-99996 Vacancy Savings Reserve.

Cr Y234-89999 Reserve Drawdown.

The calculation of the general NDE Variance versus Target for transferring to account 99999 should be performed after the transfer to the Vacancy Savings Reserve has been made.

This is the ‘main’ or ‘general’ discretionary reserve.

This account is only relevant to the College Office / Allocation Unit.

This is a new account used to identify the portion of the Discretionary Reserves that relate to over- or under-recovery of Vacancy Savings. Each year’s under- or over-recovery is posted, so that the cumulative position shows the cumulative vacancy savings position.

Normally a cumulative over-recovery will be preserved in this account to offset potential future under-recoveries.

In rare circumstances where a Principal wishes to use part of a cumulative over-recovery for another purpose, a single amount should be transferred to 99999 and then utilised in the normal manner in order to facilitate this (ie should not be done as multiple separate occasional drawdowns). This should be notified in advance to the Director/Head of Financial Planning & Management Accounting.

The account is not cleared each year, allowing the cumulative position on Vacancy Savings to be identified within the overall Discretionary Reserves.

Where discretionary reserves are to be distributed to another unit (e.g. from the Allocation Unit to a school), the transfer should be made using this account and then may be drawn down into the Income & Expenditure account of the unit.

The account is not cleared each year, allowing the cumulative net Balance Transfers to be identified within the overall Discretionary Reserves.

For all items, but particularly Committed Funds, it can be diffiult to accurately predict what will happen in the future. Nevertheless, a budget for Committed Funds should be prepared.

• Only the amount of a Committed Fund that will be utilised in a year should be drawn down in that year.
• If a Committed Fund is expected to be spent over 3 years, only 1/3 should be brought into the P&L in year 1.
• If a Committed Fund is associated with commercial activity and the Fund really represents the funds for replacement of the equipment, not the ongoing activity, then none of it should be drawn down in a year where the equipment will not be replaced. The expenditure in the cost centre would typically be funded via recurrent commercial income in the cost centre.

Where (part of) a Committed Fund balance is being drawn down, it is generally best to draw it down in Period 1 or 2 (ie in Qtr 1) and to phase the budget accordingly. This will avoid having to defer income each quarter.

The expenditure funded from these funds is recorded against 'regular' accounts such as NonPay and would typically occur throught the year and the budget be phased throughout the year.