The university's office of financial management or office of budget and planning should provide direction, planning and oversight regarding financial policies and procedures, reporting methods, management, accounting systems and audits. The office of financial management helps to set up methods and controls for the university's budget.
A budget helps a university plan for expenses and revenue, but it also helps plan for savings. A budget provides a model of how a business can perform and carry out its overall plan. Budgeting also enables financial operations to be compared and measured against the forecast. A budget should include all funds -- general funds, federal funds, restricted funds -- and other operating budget details. A budget narrative should be included in the budget to explain what each line item includes. For instance, under staffing, a university should include costs for the salaries of faculty and administration, fringe benefits and other expenses. A budget narrative can help point out areas that need re-evaluation, especially if the expense is not justified.
Enrollment trends in colleges and universities play a key role in budget planning. Budget gaps are often created because of an increase or decrease in enrollment at a university. A budget model should include the enrollment size and expenses associated with students, such as average expenses per credit hour.
When planning a budget, the university should explore additional revenue sources, such as state tax support, tuition, grants and fundraising. Diversifying a university's funding base is crucial to success.
The board of the university should review the budget and evaluate both the operating budget and the capital budget. The board should review how the budget aligns with the priorities and mission of the institution. If changes need to be made, then the board should submit recommendations to the office of financial management.
Depending on university guidelines and whether the university is publicly funded, universities should make an effort to let the public understand what their tax dollars are funding in the university. Transparency in a university's budget can be achieved by providing operating budget details on the university's website, in annual reports and in other publications.