POLICY 05:01:02

BUDGET CONTROL

This policy is consistent with Tennessee Board of Regents 4:01:00:01.

Purpose

As a public entity, Pellissippi State Community College is responsible for the prudent
management of resources entrusted to its care by Tennesseans. Ensuring that budgets developed
by Pellissippi and considered by the Board are prepared in accordance with sound budget
principles is fundamental to good stewardship of System financial resources. The budget
principles included in this policy are intended to respond to the expectations of various
stakeholders relating to the generation and expenditure of funds. All System and institutional
officials responsible for budgeting processes are directed to adhere not only to the specific
requirements of this policy, but to also act within the spirit of this policy and in a manner that
evidences forthrightness and engenders public trust.

Policy/Guideline

Guiding Principles
1. Budgeting is the process whereby the plans of an institution are translated into an
  itemized, authorized, and systematic plan of operation, expressed in dollars, for a
  given period. Budgets are the blueprints for the orderly execution of program
  plans; they serve as control mechanisms to match anticipated and actual revenues
  and expenditures. It is widely recognized that budget control is essential for
  effective financial management of any organization.
2. Working within the institution’s shared governance process, each Chief Executive
  Officer has the responsibility and full authority to propose a budget to the
  Chancellor and Board. The Chief Executive Officer will ensure that the process
  for budget development is open, provides for accountability, includes appropriate
  constituencies in budget planning, and incorporates clear guidelines and adequate
  training for those involved.
3. In the development and submission of budgets, each Chief Executive Officer shall
  adhere to the following principles.
  1. Budgetary needs should be prioritized relative to the institution’s core
    mission and consistent with its strategic plan, with resources aligned
    accordingly. In situations where resources are constrained or limited,
    resources should be redistributed as needed to ensure that limited
    resources meet the highest priority needs of the institution.
  2. Budgets must respect generational neutrality. In general, this to say that
    the cost of educating the current generation of students should be borne by
    the current generation and not be deferred to future generations.
  3. The Budget must be balanced:
    1. In total, such that all planned expenditures do not exceed expected
      revenues and use of reserves or other non-recurring funds; and
    2. On a recurring basis, such that planned ongoing (recurring)
      expenditures do not exceed expected recurring revenues. Use of
      non-recurring revenues and/or funds to meet recurring
      expenditures is discouraged; however, it is acknowledged that
      special circumstances may arise when it is in the best interest of
      the institution to do so. In the event non-recurring revenues and/or
      funds are budgeted to meet recurring expenses, this must be
      specifically disclosed to the Board as part of the budget
      consideration process, including justification and the institution’s
      plan for achieving recurring balance.
  4. A degree of fiscal conservatism must be incorporated in the budget to
    reduce the risk of year-end deficits by:
    1. Ensuring all costs are fully recognized and budgeted. Use of
      anticipated savings as a funding source (e.g., lapsed salaries) for
      recurring expenses is discouraged. If anticipated savings are used
      to fund recurring expenses, this must be specifically disclosed to
      the Board as part of the budget consideration process;
    2. Using financially conservative, yet reasonable, revenue estimates
      in light of existing conditions. Estimates of revenues derived from
      students must be based on analysis of historic enrollment patterns,
      modified for any recent observable patterns. The basis for student
      derived revenue estimates must be communicated to the Board as
      part of the budget consideration process; and
    3. Maintaining appropriate contingency funds for revenue shortfalls
      and emergencies for both Education & General and Auxiliary
      operations, consistent with relevant TBR policies and guidelines.
  5. Related to the principle on generational neutrality and to ensure the long
    term viability of the institution, sufficient provision must be made in both
    Education & General and Auxiliary budgets to annually fund:
    1. Maintenance and facilities renewals to the physical plant and
      grounds; and
    2. Acquisition, repair and replacement of teaching equipment,
      computers, and other equipment.
  6. Opportunities for cost savings arising from shared services and resources
    between departments and organizations within an institution and among
    other institutions should be aggressively pursued.
Operational Provisions
1. Accountability for the effective management of the budget rests with the
  institution’s Chief Executive Officer, who ensures that proper controls and budget
  management policies are established.
2. Guidelines and procedures may be developed that further direct and clarify
  application of the above principles in the budget development and administration
  process. The Chancellor is authorized to issue directives on these matters
  consistent with the provisions of this policy.

Procedures

Submission of Budgets
1. It is recognized that a budget is a plan and that circumstances may necessitate
  revisions or changes to the original plan from time to time. In view of this,
  institutions are to submit detailed budgets to the Tennessee Board of Regents for
  approval three times for each fiscal year. The three submissions are described
  briefly as follows:
  1. Proposed Budget – This is the original budget prepared in the spring that is
    for the fiscal year to begin July 1. It is normally submitted to the
    Tennessee Board of Regents for approval at the June Board meeting.
  2. Revised Budget – This budget is a revision of the proposed budget and is
    normally referred to as the “October Revised Budget”. It is submitted by
    the campuses in October after actual fall enrollments and other estimated
    costs and closing balances are known and is normally presented to the
    Tennessee Board of Regents for approval at the December Board meeting.
  3. Spring Estimated Budget – This budget is the final budget submitted for
    the current year operations. It is submitted in the spring at the same time
    as the Proposed Budget for the coming year. This is the final approved
    budget for the institutions and therefore contains the control totals against
    which final year-end amounts are compared.
2. It should be noted that the approval of a budget does not waive statutory, policy,
  or other restrictions for expending funds.
Operating Budgets
1. Level of Budget Control
  1. Institutional budget control amounts are approved for educational and
    general total expenditures as well as the major educational and general
    functional classifications of Instruction, Research, Public Service,
    Academic Support, Student Services, Institutional Support, Operation and
    Maintenance of Plant, and Scholarships and Fellowships where applicable.
  2. Auxiliary Enterprises are controlled on a profit or break-even basis.
  3. Additionally, control amounts are approved for educational and general
    transfers, both mandatory and non-mandatory. Funds transferred to other
    funds whether mandatory or non-mandatory are restricted in the other
    funds for the designated purpose. This restriction, however, does not
    prevent subsequent reallocations or transfers to other funds.
  4. All discretionary allocations of the fund balance must be approved.
  5. Once approved, the institution may not exceed the educational and general
    total expenditure control limits established by the Board without prior
    approval of the Chancellor.
2. Budget Revisions
  1. Revisions within Functional Area
    1. Institutions may make budget revisions within a given functional
      area at the campus level.
    2. The revisions should be properly documented and approved by the
      president, or designee.
  2. Revisions between Functions
    1. Budget revisions from one functional area to another that exceed
      1% of total expenditures must receive prior approval of the
      Chancellor if proposed at other than the three regular budget
      submission times.
    2. The request for revision should be submitted by the president in
      writing with a detailed explanation.
  3. Revision of Overall Expenditure Total
    1. Budget revisions to one or more educational and general functional
      areas that increase the overall educational and general expenditure
      budget must receive prior approval of the Chancellor if proposed at
      other than the three regular submission times.
    2. The request for revision should be submitted by the president in
      writing with detailed explanation and should include the source of
      funding for the proposed revision.
Plant Fund Budgets
1. Unexpended Funds
  1. General
    1. The purpose of the Unexpended Plant Fund is to account for the
      unexpended resources derived from various sources to finance the
      acquisition of long-term plant assets and the associated liabilities.
    2. These funds will be used for capital projects such as major
      additions and/or renovations to physical facilities.
    3. Institutions may request approval for transfer of funds to the
      Unexpended Plant Fund during the regular budgetary process or
      special request to the Chancellor.
    4. All funds added or transferred into the Unexpended Plant Fund
      will be controlled by specific project.
    5. Expenditures in the Unexpended Plant Fund will be budgeted and
      controlled by specific project.
    6. Commitments or expenditures for any capital project shall be in
      conformance with all applicable state laws and requirements of the
      State Building Commission.
    7. All project budget revisions and the utilization of reallocated
      project balances shall be approved by the Chancellor or designee,
      if proposed at other than the three regular budget submission times.
  2. Extraordinary Maintenance
    1. Within the Unexpended Plant Fund, each institution shall establish
      an account for extraordinary maintenance to be used for unusual or
      unanticipated maintenance needs.
    2. The annual budget shall include a minimum balance in the
      extraordinary maintenance account. This minimum shall be the
      greater of 0.1% of plant funds or $100,000 at community colleges.
    3. All projects in the extraordinary maintenance account shall be
      approved by the Chancellor or designee.
2. Renewals and Replacements
  1. The resources set aside for renewals and replacements, as distinguished
    from additions and improvements to plant, are accounted for in this fund
    group.
  2. Institutions which have the responsibility to replace auxiliary equipment
    must transfer at least 5% of auxiliary gross margin to the renewal and
    replacement fund.
  3. Expenditures in the Renewal and Replacement fund will be budgeted at
    the individual fund level (i.e. Instructional Equipment, IT Equipment,
    Motor Vehicle Replacement, etc.) but controlled at the total Renewal and
    Replacement fund level.
3. Retirement of Indebtedness
  1. The purpose of this fund is to account for the accumulation of resources
    for interest and principal payments and other debt service charges relating
    to plant fund indebtedness.
  2. Additions to this fund are to be set up in separate debt service accounts.
Guideline and Position Controls
1. 1. A schedule of these controls will be distributed with the budget guidelines
    each year.
Position control is a part of the personnel budget process.
1. The number of authorized permanent positions at each institution is
  controlled within unrestricted educational and general accounts and
  auxiliaries.
2. Controls exist on the total number of positions at the institution.
3. Positions are reported to the Board office each year in the proposed and
  revised budgeting processes, and at additional times as requested by the
  Board office during the legislative session.
4. Authorized permanent positions for each institution are approved at the
  June and December Board meetings.
5. Changes may be requested by special request to the Chancellor in the
  interim between budget periods.

Legislative Controls
1. Each budget year will normally have unique guidelines and requirements
  depending on legislative or executive branch requirements.
  1. A schedule of these requirements will be prepared each budget cycle.
  2. It is the responsibility of the institution to ensure that all budget guidelines
    for a given fiscal year are incorporated into the budget and are carried out
    operationally.
Budget Control
1. Each institution shall develop appropriate controls and procedures and ensure that
  established control limits are not exceeded.
2. Summary management reports should be prepared for top level administrators to
  evaluate the current financial status of the institution.
Follow-up by Board Staff
1. At the end of each fiscal year, the Board staff will review the annual financial
  report of each institution.
2. Actual year-end amounts will be compared to the Spring Estimated Budget or the
  Spring Estimated Budget as officially revised, which is the final approved budget
  for the year.
3. Educational and general expenditure totals and plant fund expenditures will be
  analyzed for adherence to the approved control levels.
4. The financial information will also be examined for compliance with all budget
  guidelines and/or Board policies in effect for the fiscal year just completed.
5. The Chancellor shall report any material institutional deficiencies or non-compliance with budget controls and guidelines to the Board.

Sources:
TBR Policy 4:01:00:01; T.C.A. § 49-8-203

Approved by TBR: September 26, 2014
Revised by TBR: December 13, 2018
Reviewed/Recommended: President’s Council, August 28, 2023
Approved: President L. Anthony Wise, Jr., August 28, 2023