Policy Manual - Operating & Capital Budgets
FINANCIAL AFFAIRS
Section 701 Operating & Capital Budgets
Effective: 1/23/89
Last Revised: 1/25/99; 03/10/08
Responsible Office: Chief Financial Officer and Treasurer
In accordance with the laws of the State of Maine, "The Board of Trustees, in consultation with the Chancellor, shall be the governing and planning body of the University System and in addition shall have responsibility for preparing and approving the operating and capital budgets of the University System ..." In accordance with the Board of Trustees Bylaws, "The Board of Trustees shall, in consultation with the Chancellor, be responsible for the preparation and approval of all operating and capital budgets, together with University System requests for appropriations, bond issues, and statutory changes, and for their presentation to executive or legislative branches of Maine government in accordance with the provisions of the Maine statutes."
One of the principal "authorities" that is widely delegated throughout the System is the right to commit University System dollars, either directly through the approval of a specific purchase or indirectly by appointment authority or other commitments. The commitment of University operating funds, however, is made within the limits of a budget approved by the Board of Trustees for each University or for the System Office.
Compensation comprises a significant portion of the expense operating budget with the remainder covering costs in areas such as purchased services, supplies, utilities, library materials, and maintenance. The capital budget is made up of funds allocated for property acquisitions, major equipment purchases and construction projects (new facilities and renovations to existing facilities.)
Operating Budgets
The University System has two principal categories of operating budgets - (1) Educational and General (E&G) budgets are prepared for educational activities which are supported by the state appropriation, by student tuition, and by other miscellaneous unrestricted revenue. (2) Auxiliary Enterprise budgets are prepared for activities such as bookstores, residence halls, and dining services. Auxiliary Enterprises are self-supporting – i.e., supported entirely by fees charged to users. Any year-end surpluses or deficits in auxiliary enterprise operations are carried forward to the next year in appropriate reserve accounts for the purpose of supporting the auxiliary operation.
The Board of Trustees annually approves the overall E&G and Auxiliary Enterprise budgets as well as rates for tuition, fees, room, and board.
In addition to the E&G and Auxiliary Enterprise Operating budgets, Universities have restricted budgets for grants, contracts and gifts. Since many restricted budgets, such as grants and contracts, are for time periods that may span multiple fiscal years, these budgets are “project based” rather than annual. The terms of the donor restriction along with the available balance govern expenditures, rather than an annual budget.
Capital Budgets
The University System's capital budget consists of funding allocated to property acquisition, major equipment purchase and installation, or for construction projects costing $50,000 or more. Individual projects with a total project cost of $500,000 or more which will result in the construction of a new facility or the capital renewal/alteration/renovation of an existing facility, or the purchase and installation of equipment, require advance approval by the Board of Trustees for both the project and the source of funding. Projects in the Capital budget will include a brief description of the project, a justification for the project, identification of the funding source and an estimate of annual operating costs for the project after it is completed.
While a capital project is active, periodic project status reports will be provided to the Board of Trustees on the project status. Any change to an approved capital project which, either, individually or when aggregated with other approved and proposed changes on the same capital project, materially alters the scope/design/funding or the total project cost shall be approved by the Chancellor and reported to the Board.
Funding for the capital budget may come from a single source or a combination of two or more sources. The more common sources of funds for the capital budget are: State revenue or general obligation bonds; State appropriations; federal grants or contracts; University bonds or internal borrowing; private fund raising, student fees or the allocation or reallocation of University funds. As the auxiliary enterprise is supported entirely by fees charged to users, any auxiliary enterprise capital budget item funded by bonds or other loans must be repaid as a part of the auxiliary enterprise operating budget.
Campuses may borrow against their reserves at a prudent level. Additionally, internal loans may be available when the System has debt capacity and the campus has borrowing capacity.
Related documents:
UMS Board of Trustees Policies:
Section 703 Tuition
Section 704 Student Fees
Section 801 Acquisition of Real Property
Administrative Practice Letters:
Section IV-A: Accessibility of University Programs, Services and Facilities
Section III-A: Institutionally Designated Account Guidelines
Section VIII-B: Restricted Account Guidelines
Delegation of Board of Trustee Authority to the Finance/Facilities Committee Matrix