Budgeting Revenue
Be sure to use a minus sign when entering most revenue numbers, as well as Resource Transfers In. Do not use a minus sign for Transfers Out, which or other contra-revenue items In general, revenue amounts are shown as positive amounts on most summary Planning reports (which also show amounts in thousands), but they appear as entered on detailed Planning reports and in BEN.
Budgeting Tuition
Budget tuition in the appropriate object codes. For documentation regarding the tuition distribution process, please see https://apps.srfs.upenn.edu:44306/TDPennProcess/index.htm
All tuition is distributed through the tuition distribution system and is based on the home school of the student, the teaching school of the course, the number of courses taken, and the amount collected. No tuition revenue is recorded directly in the schools’ accounts without going through the tuition distribution system. It should be noted that the tuition distribution system distributes only tuition, not fees or other charges.
In general, tuition for each term is distributed using the following methodology:
20% to the University subvention pool (note: this is not assessed on PhD tuition)
20% to the home school(s) of the student (25% of PhD tuition)
60% to the teaching school(s) of the course (75% of PhD tuition)
Budgeting Investment Income
At the beginning of each budget cycle, the Budget Office pre-populates your AIF income based on updated market values and parameters. We strongly recommend that you do not attempt to change these amounts.
The endowment income lines are calculated using Penn’s two-factor spending rule formula for the Associated Investments Fund (AIF), which bases 70% of the upcoming year’s spending on the current year’s projected spendable income plus an inflation factor and 30% on the market value at the close of the previous year times the target spending rate. Although the target spending rate is now 5% for both financial aid and non-financial aid endowments, the reliance on previous year’s income means it will be a while before the effective payout rates of these two groups of funds converge.
If you receive gifts to true endowment after the lines are prepopulated, or anticipate new gifts in the future, use Form S1 in Planning where you can record new payments on gifts. Enter each anticipated gift as a credit in the appropriate year: for simplicity we assume income will be generated in Planning for half the first year, and all of any subsequent years. You can budget this in the endowment fund itself (assuming it’s already been created and therefore added to Planning) or you can use one of the surrogate endowment funds to budget these gifts; use Fund-479998 for funds subject to overhead; and Fund-479997 (student aid) and Fund-479999 (non-student aid) for funds not subject to overhead.
If you are planning to reinvest income or to invest operating surpluses in quasi endowment and/or to liquidate quasi endowment, you can use the same Form S1 to show the planned buy-in or liquidation in the appropriate year. A reinvestment should be shown as a debit in object code 1710 while a liquidation should be shown as a credit. The Budget Office will share large planned liquidations with Finance to enable them to do necessary cash flow planning. Remember that for liquidations, you need to notify the Vice President for Finance and Treasurer three months in advance for withdrawals of $1M or more, and one month in advance for withdrawals of less than $1M.
For more information on using form S1, see the video at https://www.youtube.com/watch?v=0e8n15hZsv8
Investment Income transfers (typically from an endowment fund to an unrestricted fund, when it is clear the donor restrictions will be met) are not populated automatically in Planning, and now count as transfers, not as investment income. If you have arranged for these transfers with the Treasurer’s Office and want to budget them, please make sure to budget object code 4709 on both sides, so that they net to 0 in your school or center.
Budgeting for Investment Overhead Income
In general, you should not have to make any entries for these lines. The Planing budget application will calculate the Investment Overhead for funds that are coded by the Treasurer as subject to overhead (including income generated from Gifts to Endowment) when you budget the income and will place the total as a debit in object code 4792. The calculation assumes a 20% overhead rate unless you have made arrangements with the Treasurer for a different rate. Each night, the process adds up the 4792 in the school or center and multiplies it by -1 to become credit to object code 4793 in the School’s surrogate org in Fund 000000, Program 0000 and CREF 0000.
Budgeting Gift Income
You should include in this category, gifts for net asset class (NAC) 0 and 1 only and use object code 4400. Do not budget gift income for gifts to true endowment, which occur in NAC 2; however, do show them in the gifts to endowment Planning assumption in Form S1 as discussed in the investment income section. Also, keep in mind that you cannot distinguish between NAC 0 and NAC 1 in Planning.
For operating gifts, if you anticipate the restrictions for the gift will be met in the year the gift is received, then budget the gifts in an unrestricted fund such as an 01xx05 fund. However, if you do not anticipate the restriction will be met in that year, you should show the gifts coming into the operating gifts fund. If you do not know the fund #, then use Fund 649998 for gifts subject to overhead and 649999 for gifts not subject to overhead. Your five-year budget should include the spending of these gifts when it is anticipated that the restrictions will be met, and budgeting them by fund is a good way to document your plans to meet the donor’s restrictions.
For capital gifts, the income should be budgeted in a 65xxxx fund. Use Fund 659999 if you do not know the fund #. Use the program for the capital project associated with this fund; if you don’t know the program, use program 8999.
Gift overhead is calculated automatically by Planning with a 20% overhead rate (unless you have made other arrangements with the Treasurer) for operating gift funds subject to overhead (including the surrogate fund 649998). The overhead is debited to object code 4402 in the gift fund when you budget the income and then credited to object code 4405 in the 000000 Fund in the surrogate org of the School or Center and program 0000 and CREF xx-0000 overnight. Do not manually change your gift overhead.
Gift income transfers (typically from an operating gift fund to an unrestricted fund, when it is clear the donor restrictions were or will be met) are not populated automatically in Planning and now count as transfers and not as gift income. If you have arranged for these transfers with the Treasurer’s Office and you want to budget them. please make sure to budget object code 4409 on both sides, so that they net to 0 in your school or center.
Budgeting Grant and Contract Income
For the operating budget, all of your grant revenue in the Sponsored Program Funds should be budgeted in either the 599998 (non-federal grants) or 599999 (federal grants) funds. Individual grant funds are not included in Planning for performance reasons.
The total revenue from the sponsor should be budgeted in object code 4600, with overhead leaving the grant budgeted in object code 5282. The School share of this overhead recovery (88.5%) should be shown in object code 5510 in the 000000 Fund in the surrogate org of the School. Sometimes non-governmental sponsors will allow Schools to charge overhead costs directly to the grants such as facilities costs and department/administrative expenses; in those cases Schools can charge those expenses to the grants using object codes 5295 through 5298 and recover 100% of those amounts in the 000000 Fund in object code 5511.
When estimating your future grant revenue, you might want to look at your awards for the last few years, and your expected awards for the future. These are shown in your input assumptions in Planning. Actual awards from PennERA are shown in fund 599998 (non-federal) or 599999 (federal) with the org, program, and cref from the award.
Budgeting Transfers
Use General Resource Transfers (object codes 4820 and 4825) only in situations where you are giving general support or receiving general support from another Center or department within a Center. General Resource Transfers should not be related to the receipt or giving of specific goods or services, in which case you should debit or credit the appropriate current expense object code (with an offsetting entry for the other side of the transaction). Use the cell text fields in Planning to document the purpose of the transfer and the other center or department involved. When budgeting a transfer in use object code 4820, while transfers out should be budgeted using object code 4825.
There are some other types of transfers you should budget in specific situations. Year-end transfers to or from the central resource pools should be budgeted using the Final Year End Adjustment object code (object code 4840) while transfers to and from your University Bank Fund should use the University bank transfer object code (4839). Finally, transfers to and from other related entities (such as the Health System) should be budgeted using either object code 4823 or 4824, with 4823 used for operating transfers and 4824 for non-operating.
Investment income transfers (object 4709) and gift income transfers (object 4410) do not necessarily need to be budgeted since they will normally net to 0 within your school or center. However, you may choose to budget them so that individual funds will be correct, and you should budget them (and explain who else is involved and why) when they do not net within your school or center.