Carry Forward Rules

1.This document sets out the University's rules in relation to carry-forward of budget surpluses/deficits.

2.There is some confusion as to what exactly comprises an over/underspend and what comprises accrued expenditure or income. For clarity, these are defined below:

Accrued expenditure:

Where expenditure has been committed ie goods or services delivered prior to year-end but the invoice is not yet received, an accrual of expenditure is made in the accounts.

Advance income:

Where income is received in one financial year but wholly or partially relates to a subsequent financial year, the accounts are adjusted to reduce the income for the first year to allow income to be reflected to the subsequent year.

Prepayments:

Where expenditure is incurred in one financial year but wholly or partially relates to a subsequent financial year, the accounts are adjusted to exclude expenditure from the first year. A good example is a maintenance contract which covers a period of 01/06/05 - 31/05/06 (so 11 months of the expenditure relates to the financial year 2005/06 and is termed a prepayment).

These are accounting adjustments which affect the values of expenditure or income in the year and are reflected as values in our year end financial statements and are automatically carried forward to the next financial year.

Under/overspend:

This is the difference between expenditure (or income) recorded, after adjustments for accrued expenditure or advance income, and the budget. It is not reflected in our accounts.

3.Central Departments

(a) The rule applies to all areas except those budgets in Appendix A where no carry-forward of unspent budgets will be allowed and is:

(i) Underspend of salary budgets will not be carried forward, but may be used to offset combined non-pay and income net overspends;

(ii) Overspend of salary budgets, over/underspend of non-pay budgets and over/under achievement of income budgets will be added together. If the net result is an underspend, 75% of that net figure may be carried forward. If the net figure is an overspend, any salary budget underspend may be set against it (reducing it to zero but not creating an underspend carry-forward). If the resultant figure is still an overspend, 100% of that overspend will be carried forward;

(iii) Any provision for potential bad debts will be charged to the campus in the financial year to which it relates with any release of such a provision re-credited in the preceding financial year. Write offs of bad debts will be charged to the campus if they exceed the provision brought forward;

(iv) The calculation of over/underspend will be after taking account of year-end accruals and prepayments relating to expenditure. Any advance income will be automatically carried forward to the next year provided central finance is informed of its existance. Such accruals, prepayments and advance income must pass inspection by our external auditors;

(v) The values used in calculation will be derived from the University's audited accounts;

(vi) Results of calculations will be advised on 01 December by the Deputy Director of Finance;

(vii) Managers must not make any commitment to expenditure from contemplated carry-forward until formally advised of the amount available;

(viii) This rule is subject to an overall University imperative when the overall University total of carry-forward would generate a deficit in the year;

(ix) The Director of Finance's decision is final.

Carried-forward balances will be held as an earmarked part of the University's General Reserves and released for non-pay expenditure on the authorisation of the designated budget holder.

Sample Calculations

(i)	Budget	Actual
	£	£
Staff budgets	1000	950
Materials	500	440
Carry forward calculation
Materials		60
Carry forward at 75%		45

(ii)
Staff budgets	1000	1020
Non-pay expenditure	900	850
Income	500	490
Carry forward calculation
Staff budgets		(20)
Non-pay expenditure		50
Income		(10)
		20
Carry forward at 75%		15

(iii)
Staff budgets	1000	1000
Non-pay expenditure	900	950
Income	1500	1520
Carry forward calculation
Staff budgets		Nil
Non-pay expenditure		(50)
Income		20
		(30)
Carry forward at 100%		(30)

(iv)
Staff budgets	1000	900
Non-pay expenditure	900	990
Income	1500	1520
Carry forward calculation
Non-pay expenditure		(90)
Income		20
		(70)
Less:Staff budget to maximum		70
Carry forward at 100%		Nil

4. Campuses

(i) Campuses are charged with generating a return which, after meeting residual central costs, will provide the University with a return of 3% on total turnover. This return will be held as part of the University's reserves.

(ii) Over-achievement of required return by a campus will be shared as 25% to University's general reserve, 75% campus - specific revenue reserve. Where a campus has a deficit budget, 100 % of overachievement (up to breakeven) will be retained in the earmarked reserve.

(iii) Under-achievement of required return will be met firstly from any specific campus revenue reserve and secondly from any previously accumulated 25%'s for the University. Any remaining balance will be carried forward to the subsequent year, to be recovered then.

(iv) In the first full year of operation , it was not possible to budget for a surplus of turnover in each campus. For this reason, the budgeted surplus or deficit figure will be used

instead of the 3% return on turnover.

(c) Sample Calculations

	£'000
Campus turnover	85,000
Central turnover	15,000

University turnover	100,000

Return required	3,000

Return budgeted as
Campus A	750
Campus B	750
Campus C deficit	(500)
Campus D	2,000
	3,000

Year 1 Outturn
Campus A	750
Campus B	790
Campus C deficit	(328)
Campus D	1,800
	3,012

Treated as:

	University	Reserves	Campus	Total
	General	Earmarked	Reserves	Reserves
	£'000	£'000	£'000	£'000
Campus A	750	-	-	750
Campus B	750	10	30	790
Campus C	(500)	172	-	(328)
Campus D	2,000	-	(200)	1,800
	3,000	182	(179)	3,012

Year 2 Outturn	Budget	Outturn
	£'000	£'000
Campus A	750	762
Campus B	750	770
Campus C	-	100
Campus D	1,500	1,600
	3,000	3,232

Treated as:

	University	Reserves	Campus	Total
	General	Earmarked	Reserves	Reserves
	£'000	£'000	£'000	£'000
Campus A	750	3	9	762
Campus B	750	5	15	770
Campus C	-	25	75	100
Campus D	1,500	25	75	1,600
	3,000	58	174	3,232
Reseves at
end 1999/00	6,000	240	4	6,244

Being:	University	Reserves	Campus	Total
	General	Earmarked	Reserves	Reserves
	£'000	£'000	£'000	£'000
Campus A	1,500	3	9	1,512
Campus B	1,500	15	45	1,560
Campus C	(500)	197	75	(228)
Campus D	3,500	25	(125)	3,400
	6,000	240	4	6,244

APPENDIX A

Budgets to be excluded from carry-forward rules

Pay
Staff development central	Pension increases

Non-Pay
Deprciation - HEFCE	Rates	Debt charges
Commercial rents (building and contents)	Reimbursed rent	Insurance
Contribution to long-term maintenance	UCAS	Audit fees
Portfolio review	Legal fees	Bank charges
Subscriptions and professional expenses	Residences	Interest payable
Catering	Student Union grant

Income
LRB pension increases	HEFCE debt charges reimbursement
HEFCE rents reimbursement	Release of HEFCE capital grant
Rents	Research contribution	Donations
Interest receivable	Profit on disposal of assets
Revaluation reserve transfer