How to Budget Expense
When entering data into the Planning budget system, expense items (e.g., Salaries, Current Expense, Capital Transactions) should be entered as positive numbers, while contra-expense items (e.g., Expense Credits) should be entered as negative numbers. The numerical signage in Planning data entry is the same as in BEN Financials. Planning data entry results are viewable through online Planning reports and through Smart View ad hoc queries via the Excel add-on.
See the RCM Template 1A for salary object codes and resulting employee benefits implications. Forecasting and budgeting in Planning at the following sub-category levels via applicable object codes allows for granularity in expense tracking (prior actuals, current year performance, future projections) and comparison to the Input Assumptions full-time equivalency (FTE) data.
- Academic Salaries:
- Standing Faculty
- Associated Faculty
- Academic Support Staff
- Post-Doctoral Affiliates
- Graduate Student Trainees
- Non-Academic Salaries:
- Professional Staff
- Support Staff
- Unionized Staff
Salary Pool Adjustments and Reclassification Requests: Use salary reserve object codes (518x) to identify set-asides of up to 0.5% of the pool for staff salary adjustments and reclassification requests. The salary reserve object codes are subject to full-time employee benefits rates in Planning, and no actuals are posted to these object codes in BEN.
UPHS or other entity salaries: Schools or centers with faculty or staff who are paid in part by the Health System or other related entities can budget that portion of those employees’ salary in the appropriate receivable object code (12xx and 15xx). These amounts appear in the Cash Effect – Other Activity category on RCM reports rather than in the Compensation category.
Input Assumptions: Salary projections in Planning should correlate with faculty and staff FTE projections entered into the Input Assumptions data entry form. Historical FTE data is viewable through the Input Assumptions report in Planning and through Smart View ad hoc queries via the Excel add-on. Large schools and centers should project vacancy assumptions based on position turnover history.
The Planning system calculates and populates Employee Benefits data based on projections entered into salary object codes.
Dependent Tuition: Federal government rules prohibit charging dependent tuition to federal grants (Fund-599999 in Planning) and service centers (Fund-000011). When salaries are entered into Planning in these two funds, Planning will initially populate the associated dependent tuition (Obj-5196) in those funds. During the overnight process, the dependent tuition will move to the org’s Fund-000000 and Prog-7493 (for service centers) or Prog-7494 (for federal grants). Note: The program code treatment of dependent tuition actuals in BEN is the same as in Planning, but the org selection differs. Planning maintains the dependent tuition in the org in which it was entered, whereas actuals in BEN are always posted to the surrogate org of the school or center. The dependent tuition associated with salaries booked to all other funds, including non-federal grants, remains in those funds in both Planning and BEN.
See the RCM Template 1A for current expense object codes available for forecasting and budgeting in Planning. Current expense projections should be made in the appropriate categories (e.g., Travel & Entertainment, Supplies & Minor Expense, Rentals & Leases, etc.).
Capital funding transfers in Planning should be consistent with the capital plan submitted to FRES. Use Obj-4812 for capital funding transfers from capital gift funds (65xxxx) and Obj-4821 for capital funding transfers from all other funds. Century bond proceeds should be projected in Planning as Obj-2782 (the loan) and Obj-4821 (the transfer of the loan into the project).
The capital construction fund-000010 is budgeted centrally; school and center budgets in Planning should not include activity for this fund, such as planned borrowing in Obj-2780.
Debt service projections in Planning should reflect values displayed on the amortization schedules issued by the Treasurer’s Office, as well as projected debt service for capital projects that are not yet closed out or are in the planning stage. Most principal payments are on internal capital loans and should be projected in Planning in Obj-2783. Some schools and centers may have equipment loans outstanding for which principal payments should be budgeted in Obj-2784. Payments on special loans, such as the century bond loans, should be budgeted in Obj-2785. Interest payments for all loans should be budgeted in Obj-5604.
If construction projects incur interim financing, project the appropriate interest amounts in Planning in Obj-5604 in Fund-000000. Interest is accrued monthly throughout the fiscal year until a capital project is deemed to be substantially complete and then booked in the appropriate center in July of the following fiscal year. Treasurer’s Office schedules display interest accrued to-date. The minimum interim interest rate is 2.0%, which is the rate that has been assessed for many years. If short-term rates rise sufficiently, the interim interest rate will be increased to 25 basis points above the 90-day Treasury bill rate.
Capital projects with surpluses will accrue interest at a rate of 25 basis points below the 90-date T-bill rate (assuming T-bill rates are above 25 basis points). The interest should be projected in Planning in Obj-4780.
Be careful to budget Student Aid in the appropriate object codes, so that the component of Student Aid that will be counted as contra-revenue, the component of Student Aid that will be counted as Compensation, and the component of Student Aid that will be counted as Current Expense all appear in the appropriate categories. The aid for each term is distributed using the following methodology:
For traditional undergraduates, a financial aid discount rate is assessed against the home school and teaching school portions of the distributed tuition to fund the undergraduate financial aid pool. Compute the traditional undergraduate student aid distribution by multiplying the undergraduate financial aid discount rate by a school or center’s traditional undergraduate tuition; this value should be entered in Obj-4181 in Planning.
For non-traditional undergraduates (LPS and Nursing Accelerated), the centrally incurred aid is distributed to the home and teaching schools in Obj-4183. The effective rate may be more or less than that for traditional undergraduates, based on the actuals.
For graduate and professional students, student aid is determined by the home school and the expense is retained by the home school. In Planning, graduate and professional student aid should be entered into one of the following object codes based on the type of student and whether service is required as a condition of the aid award:
- Obj-4172: PhD Students, no service required
- Obj-4173: PhD Students, service required
- Obj-4174: Other degree students, no service required
- Obj-4175: Other degree students, service required
- Obj-4176: Non-degree students, no service required
- Obj-4177: Non-degree students, service required
Stipends should be forecast and budgeted in the appropriate service or non-service payroll object codes.
The use of the Expense Credit Object Codes (550x) should be limited to service centers or to those specific organizations (e.g., General Counsel) that have a single office that is part of both the University and the Health System. In all other instances, an expense incurred by one organization on behalf of another organization should not be reimbursed using expense credits. Instead, both the debit side and the credit side of the reimbursement should use the appropriate current expense object code so as not to overstate total expense across the University.
In cases in which resources are simply being transferred from one school or center to another, or from one org within a center to another, and no reimbursement is involved, use a Resource Transfer (revenue) object code.
Preliminary allocated cost and space charges for the upcoming fiscal year are distributed in October with the Budget Call memo, and final charges are distributed in March with the guarantee letters. The upcoming year budget in Planning should reflect the distributed allocated cost and space charges (either prelim or final depending on the time of year). The allocated cost and space charges for the out-year budgets can be computed using the stated parameter growth rates for each allocated cost and space charge category, using the upcoming fiscal year charges as the starting point.
Out-year budget projections in Planning should also reflect planned space changes (increases or decreases in occupied space in existing buildings, new construction, etc.). It is best to contact the University Budget Office and Facilities and Real Estate Services to obtain a building-specific estimate for out-year space charges.
For information on how allocated costs and space charges are calculated, see How Allocated Cost and Space Charges Are Calculated at the University of Pennsylvania.