Glossary

Expenditure that reduces the real level of fee income earned by the university.

Fee Scholarships. Fee Commission and Transfers of Fee Income to Partners are the common examples.

At year end the Net Fee Income variance is shared between the school (40%), college (10%) and university (50%).

At year end the Net Direct Expenditure variance against Target is retained by the school (100%).

A unit's share of Net Fee Income and Net Direct Expenditure variances are transferred to a Discretionary Reserve of the school. The Discretionary Reserve is under the control of the Head of School and is available to invest or to supplement recurrent expenditure. 

While Discretionary Reserves may be used at the discretion of the Head of School, subject to complying with the agreed Five Year Plan, there may be reserves where there is no discretion over how the reserve may be used. These are referred to as Committed Reserves. These reserves may be subject to legal restrictions - e.g. imposed by an external funder - or may just reflect internal decisions of the school.

The university's 50% share of additional Net Fee Income is calculated under the Performance Based Funding mechanism whereby schools receive extra resources by earning extra fee income. The university share is put into the University Performance Based Fund from where it is used to support various activities of schools, colleges, support units and the university itself. In the coming years the principal use of the Performance Based Fund will be to fund Central Pool Posts, thereby improving the Staff/Student ratio.

The approved financial plan for the year.

The Budget is approved by the Governing Authority, usually at the June meeting preceding the start of the financial year in October.

While units prepare a Five Year Financial Plan, it is only the first year that is formally approved to become the Budget for that year.

The additional years indicate the trajectory of the unit and provide very significant context for assurance that the plan is sustainable, but are not themselves subject to formal approval. However an unsustainable plan may prevent approval of a plan for the year, requiring further work until the plan is sustainable.

The financial plan presented to the Governing Authority is a plan for the entire university, and represents income and expenditure of hundreds of millions of euro. It is composed of plans for each unit (approx 100 units) and for the institution itself. 

The Governing Authority's role is governance and so, although the plan has been through an extensive and detailed process, the Proposed Budget is at a summary rather than detailed level for each unit.

The Budget approved by the Governing Authority is referred to as the University Budget and is regarded as being fixed for the year. The University Budget must be broken down to further detail (the Operational Budget) at cost centre and detailed account level and there is some flexibility in adjusting the detail during the year.

Typically the University Budget is approved at the end of June, and Heads of unit are notified of the formal approval shortly thereafter.

The approved University Budget must be broken down from unit level (ie from an overall plan for a school or support unit) to cost centre level. Much of this work will already have been done in preparing the budget submission. The detailed budget is referred to as the Operational Budget.

The Operational Budget must agree to the University Budget, but the Head of Unit may approve adjustments during the year in consultation with the Finance Manager, for example moving budget between cost centres.

The individual elements of the Operational Budget cannot be regarded as independent of, or overriding, the formally approved University Budget. For example, where there is an overspend or income shortfall in one cost centre, it is not appropriate to spend up to budget level in all other cost centres. This would result in the unit exceeding it's University Budget.

Regular review of the University Budget is important and the Quarterly Outturns process is the formal mechanism for doing so. In this process Finance Managers prepare a full-year Forecast which is compared against the University Budget. Finance Managers provide Heads with a Management Pack of reports and meet with Heads to discuss the current and forecasted position.

Target

(or Budget Target)

The Target is set formulaically for units. The primary driver of the Target is the previous year's Target.

Targets are also normally adjusted to reflect pay rate increases in Year 1 of the plan. Planning is therefore expressed in constant, Year 1, costs.

In addition, Targets for Schools may be adjusted to reflect expected Net Fee Income performance, with both the Net Fee Income and the Net Direct Expenditure Targets adjusted in proportion with the university financial model. Because the adjustment is formulaic, the School ends up in the same position (ie with the same Reserves) whether the Target is adjusted or not.

The Initial Budget Pack includes a report setting out the calculation of the Target and the Finance Managers are available to explain any element of the Target.

Static Target

Performance Based Funding utilises a formula to adjust the Target for a unit.

At the start of the planning cycle the Target is calculated and the same Target is used for each of the 5 years of the planning cycle. These are referred to as Static Targets.

In reality, over the 5 years of the plan, Net Fee Income performance is likely to vary from the current level and each year a new Target will be calculated per the UCD Financial Model.

Dynamic Target

Rather than using the Static Target throughout the 5 year planning horizon, the PBCS system adjusts the Target from Year 2 onwards dynamically, per the UCD Financial Model, based on the preceding year's plan. This replicates what will happen in reality if the plan is achieved.

A School's net position - as measured by Reserves at the end of the period - will be exactly the same whether a plan is compared against a Static Target or a Dynamic Target. With Static Targets the Transfers To/From Reserves will be larger, whereas with Dynamic Targets some of the transfers are dynamically incorporated into the Targets. A worked example illustrates this.

Submission

(or Budget Submission)

The plan that is prepared by a unit is referred to as the Budget Submission. The plan is entered on the Planning and Budgeting system (PBCS) by the Finance Manager based on discussions with the unit Head. The Budget Submission Pack reports the details of the submission and is available to the Head via the (opens in a new window)Finance Documents menu on InfoHub.

The financial plan is supported by 2 detailed plans - the Staff Plan and the Student and Fee Income Plan.

Staff Plan

A detailed post-by-post plan is prepared as part of the financial planning process. Approval of the Budget by the Governing Authority extends to the supporting Staff Plans.

The financial plan, and the supporting staff plan, are prepared for a five year period and sustainability over the five years is a critical part of the review and approval process. Staffing decisions can have large and multi-annual (perhaps over a very long timeframe) impact, so strict controls are applied to ensure that the approved Staff Plan is complied with.

In exceptional circumstances, and supported by appropriate justification, posts outside of the Staff Plan may be approved via the Authorised Variation mechanism.

Student and Fee Income Plan

A detailed Student and Fee Income plan is prepared and entered onto PBCS by the Finance Manager. The plan is driven by planned changes in Registrations to Majors and assumptions that translate the registrations into planned FTEs and Fee Income for the School. A separate strand of the planning process covers this activity here.

Authorised Variation

An Authorised Variation to the approved Staff Plan may be granted in exceptional circumstances, and must be supported by appropriate justification. Finance Managers complete an Authorised Variation Request form and submit it for consideration by central UCD Finance Office staff.

Adjustments Cost Centre

( or 'Q' cost centre)

As explained above, the University Budget is broken down to a lower level of detail which is described as the Operational Budget. The sum of the detailed Operational Budgets must equal the overall University Budget for a unit.

Adjustments to the Operational Budget may be made during the year by the Head of Unit in consultation with the Finance Manager. Usually these adjustments are nuetral overall, for example when moving budgets between 2 cost centres.

There may also be changes to budgets that are neutral overall, but represent variances from the University Budget. For example, if additional income is to be received and spent, the Head may wish to increase the Direct Income budget and also the NonPay budget. The overall Net Direct Expenditure Operational Budget would match the University Budget, but there would be opposite variances for both Direct Income and NonPay.

Rather than permit variances between the University Budget and the Operational Budget, we post adjustments to a special cost centre so that the University Budget and Operational Budget always remain synchronised. This cost centre is known as the Adjustments cost centre. The code for the cost centre will be the same as the unit code, but starting with a 'Q' rather than an 'S' and so the cost centre is sometimes called the 'Q' cost centre for the unit.

No other types of budget or expenditure may be used with this cost cente, it is just used for adjustments.

 A worked example illustrates the use of the Adjustments cost centre.