Questionnaire findings
The majority of respondents (85%) had implemented their budgeting/management accounting system less than 15 years ago, with 18% implementing within the last 5 years (Question G1). Question G2 found that Agresso/Coda was the most popular software (used by 36%), but many also used spreadsheets (26%). The significant use of spreadsheets is consistent with survey results elsewhere (Research Foundation, 2012; iGov, 2013).
Whilst some operate automatic budgetary controls, only 18% of respondents indicated that their system employed ‘funds checking’ to prevent further expenditure beyond the total budget which might give the impression of accuracy. Another 32% said the facility was available but not used (Question G3).
Access to reports and data can assist with effectively constructing and monitoring budgets and forecasts. 74% of respondents said that individuals were able to drill down to successive levels of
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detail to investigate figures. However, only 26% of university respondents indicated that managers and budget holders regularly used the facility, with a further 57% stating that there was mixed usage of the facility (Question G4). This perhaps indicates a low priority given to financial analysis by managers and budget holders.
The sharing of budget and resource allocation figures across an institution was quite variable. Some institutions freely permitted users of the finance system to look at detailed budget figures throughout the organisation using ‘read-only’ functionality whilst others operated data control mechanisms to prevent institution-wide access.
Table 5.24 Sharing of budgets and resource allocation figures
Respondents Percentage Respondents Percentage
Yes 31 40% 30 38%
No 32 42% 33 41%
Informally 14 18% 17 21%
Total 77 100% 80 100%
Resource allocation Budgets
There was almost an equal split between those who shared budget and resource figures and those who did not. Others indicated that there were informal mechanisms to share information. In some cases access may be limited due to competition between areas for resources and therefore a reluctance to share details of the budget may arise in case it results in arguments over whether one area is over-funded compared to another.
Questions G6 and G7 asked respondents to indicate the significant changes made in budgeting and forecasting practices in the last two years at their institutions and likely changes within the next two years. The results are summarised below.
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Table 5.25 Significant changes made in budgeting and forecasting practices in the last two years Responses Percentage
Changes to processes including re-timetabling 20 25%
New software implemented 10 13%
More liaising with senior staff and budget holders 10 13% Changes to resource allocation or contribution models 9 11% Revised targets and changed targeting setting process 7 9%
More attention to student number modelling 4 5%
Move to Zero-Based Budgeting 3 4%
Changes to reporting 3 4%
More transparency 2 3%
Rolling forecasts 2 3%
Greater linkage to strategic plan 2 3%
New staff 2 3%
Use of TRAC data for cost/budget allocation 1 1%
Greater focus on reforecasting the budget in-year 1 1%
More sensitivity analysis 1 1%
Greater use of external benchmarking 1 1%
Enhanced budget training 1 1%
(N = 57)
Table 5.26 Likely changes within the next two years
Budget Forecasting Budget & forecasting
Total % of respondents
Improve data quality 5 7 45 57 69%
More scenario planning 7 11 33 51 61%
Training of staff (finance & non-finance areas) 10 2 33 45 54%
Simplification and standardisation processes 6 3 35 44 53%
Reduce reliance on spreadsheet software 5 5 22 32 39%
Develop formal planning/budgeting workflow processes 7 0 23 30 36%
Better timetabling of processes 7 1 22 30 36%
Change budget reporting processes 13 1 15 29 35%
Reduce the time spent 13 0 16 29 35%
Incentives linked to budgets and forecasts 14 1 14 29 35%
Involve more decision-makers in the budgeting process 6 8 13 27 33%
Reduce in detail and greater focus on key business drivers 2 3 22 27 33%
Automate process flows associated with budgeting 5 3 18 26 31%
Use of benchmarking or external data 5 2 14 21 25%
Change or introduce new accounting software 4 2 14 20 24%
Frequency of budgeting and forecasting updates 3 4 9 16 19%
Introducing rolling budgets 4 5 6 15 18%
Involve less decision-makers in the budgeting process 2 1 5 8 10%
Centralisaion of finance staff 0 1 4 5 6%
Other (KPIs, planning software, student number planning) 2 1 1 4 5%
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The responses demonstrate that despite some extensive changes to date more were planned in order to meet the institution’s needs. Changes that had already been incurred were commonly related to processes, software or interaction with budget holders. Movements toward the use of different budget methods were rarely mentioned. Those changes that were planned were predominately improvements to data quality, increased scenario modelling in an uncertain environment, increased training and further alterations to processes.
Furthermore, many indicated that the time spent on detailed budgeting, resource allocation, forecasting and scenario planning had increased over recent years (Question G8).
Table 5.27 Change in time spent on processes
Decreased significantly Increased significantly
Scale 1 2 3 4 5 6 7 8 9 10 Total Mean Std dev
Respondents 0 0 2 3 14 17 24 16 4 1 81 6.57 1.40 Percentage 0% 0% 2% 4% 17% 21% 30% 20% 5% 1% 100% Scale 1 2 3 4 5 6 7 8 9 10 Total Respondents 0 0 0 2 14 23 22 13 5 1 80 6.61 1.27 Percentage 0% 0% 0% 3% 18% 29% 28% 16% 6% 1% 100% Scale 1 2 3 4 5 6 7 8 9 10 Total Respondents 0 0 0 0 13 14 23 21 7 2 80 7.01 1.30 Percentage 0% 0% 0% 0% 16% 18% 29% 26% 9% 3% 100% Scale 1 2 3 4 5 6 7 8 9 10 Total Respondents 0 0 0 1 13 14 27 18 6 2 81 6.91 1.30 Percentage 0% 0% 0% 1% 16% 17% 33% 22% 7% 2% 100% Scenario planning and ‘what-if’ analysis No change Detailed line- item budgeting Resource allocation and capacity planning Forecasting financial results
This again appears to be a reflection of the changing environment, increased uncertainty, and possibly the size and complexity of the institution. More time was being spent on a range of activities, and financial forecasting in particular.
There were signs of an increasing use of Business Intelligence software designed to retrieve, analyse, transform and report data for decision support purposes, with 33% (27 respondents) stating that they had already implemented such software and another 22% (18 respondents) indicating that they proposed to do so (Question G9). Demonstrating the adoption of a more sophisticated and integrated approach. A sector survey indicated that the most commonly used software packages were: Business Objects, Qlikview and Tableau (HEIDI, 2015). An integrated approach could potentially improve budgeting and forecasting accuracy.
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Finally, Questions G10 and G11 asked respondents to detail the most significant budget or forecasting problems which their institution needed to address and how they might solve them, as summarised below.
Table 5.28 Significant budgeting and forecasting problems
Responses
Percentage of respondents
Student number and income forecasts 23 34%
Need to improve budget processes 11 16%
Managing costs 8 12%
IT system limitations 6 9%
Taking ownership for budgets 5 7%
Improved knowledge/practice of resource allocation and budgets 5 7%
Excessive prudence/optimism 5 7%
Linking the budget to the institution's strategy 4 6%
Dealing with cuts in funding 4 6%
Accurancy of budgets/forecasts and final period variances 4 6%
Sensitivity analysis and scenario planning 4 6%
Too much reliance on spreadsheets 3 4%
Need to move from top-down to bottom-up budgeting 2 3%
More involvement of staff outside of the Finance department 2 3%
Frequency of reforecasting 2 3%
Weak coding structure 2 3%
Pay cost planning model 2 3%
Adapting to change 2 3%
More responsive to change 1 1%
Reducing non-value added activities 1 1%
Too much focus on the detail 1 1%
Addressing financial targets 1 1%
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Table 5.29 Potential solutions
Responses
Percentage of respondents Improved processes - Including standardising and automating 17 33%
Improved IT / New software 13 25%
Improved Finance Business Partnering and more engagement 7 13%
Running training courses and development of staff 7 13%
Working to improve fee forecasting 7 13%
More challenging and review of the forecast numbers 6 12%
Greater market intelligence 5 10%
Staff recruitment and continuity of expertise 5 10%
Development of new resource/contribution models 3 6%
Development of new scenario/planning models 3 6%
Improved leadership 3 6%
Highlighting the impact of inaccurate forecasting 2 4%
Benchmarking 1 2%
Incentives 1 2%
Discussion on the importance of planning 1 2%
Updating the chart of accounts 1 2%
Two key problems appeared to be the accurate forecasting of student numbers, including the related fee income (to improve budgeting and forecasting of this major funding stream), and the need to improve and streamline processes (to reduce costs). Potential solutions to these difficulties ranged from actively attempting to improve processes (which sometimes meant automating and streamlining practices so as to reduce staff input), the implementation of new IT solutions, improved business partnering throughout the institution, and engaging in understanding and improving student number forecasts.
Of the 23 institutions that identified student number and income forecasts as a significant difficulty, 16 were post-1992 universities, five pre-1992 and two were Colleges of Higher Education. Finance officers at eight of these institutions were interviewed (six post-1992 and two pre-1992). All commented that they had recently experienced student recruitment difficulties and had in some cases changed their budgeting processes as a consequence in order to react to a shortfall in funding in a timelier manner.
The responses to this section of the questionnaire indicate that institutions have been modifying budgeting and forecasting practices during a period of change in their operating environment. Furthermore, these modifications were expected to continue. However, there appeared to be few instances of radical change.
158 Key points
Sophisticated ERP systems and spreadsheet software are both employed, but systems are not used to their full capability.
Universities are going through a period of change to their budgeting/management accounting systems and processes, but not changing methods.
A significant issue is accurately forecasting student numbers and tuition fee income, as identified in earlier discussion on the accuracy of budgeting.
Interview findings
Most interviewees indicated that the finance system was used for budgeting and either the finance system or spreadsheets for medium term forecasting. However, there were some signs of institutions either implementing or making greater use of dedicated software to assist them with budgeting and forecasting. Others were looking to improve the presentation of data and user- friendliness of the finance system. One commented that they would like staff to use the finance system in the same way as they felt confident in using Excel and Word (NU20).
Those making extensive use of spreadsheets generally viewed the process as labour intensive and prone to error. However, the functionality of Excel was considered to have advantages over more complex database systems, but not in all circumstances. An interviewee explained that: “A lack of integrated systems is causing problems. There are a lot of bespoke standalone systems which don’t talk to each other and can generate conflicting data. We become reliant on one or two people to run each system” (OU19). Data inconsistencies, particularly in relation to student and staff numbers, caused difficulties for achieving accurate budgeting and forecasting.
In terms of the sophistication of finance systems, few employed ‘funds checking’ to prevent further expenditure once the budget had been exceeded despite the availability of this function. One interviewee explained that: “We don’t need the system to prevent over-spends. It causes more problems than it’s worth and there can be a number of legitimate reasons why we might want to allow an overspend” (OU11). This view might change if surpluses and cash flow come under greater pressure in the future.
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The use of business partnering was increasingly seen as a means for establishing good working relationships. Many of the interviewees saw such arrangements as key in order to achieve accurate budgeting and forecasting. An example offered of the importance of the fit between finance and HR partners was the construction of robust data for staffing expenditure from which accurate forecasts could be derived (NU3). Another stated that “communication with faculties is key” (NU6).
The interaction between finance, planning and academic areas was generally viewed as very important, as explained in the Operating and Financial Review to the 2013-14 Financial Statements of the University of Portsmouth: “During 2013/14 we significantly enhanced our approach to Strategic and Financial Planning. By strengthening the integration between academic and financial planning” (p.20). The benefits claimed from doing so included a greater focus on delivering strategic ambitions, deploying resources more effectively, more effective capital investment and more explicit monitoring of planned and actual investment. This institution generated relatively low operating surpluses of 3% on income in 2012/13 and 2013/14, but increased this to nearly 8% in 2014/15. It was explained that: “Student numbers exceeded our budget targets for both home/EU full-time undergraduate and international students, contributing to the excellent reported surplus for 2014/15” (Operating and Financial Review to the 2014-15 Financial Statements of the University of Portsmouth, p.9).
The importance of developing a culture of effective working relationships was emphasised by another: “It’s a cliché, but Finance’s role should be that of a facilitator rather than a gate-keeper” (NU20). A similar point was made by Stella Atherstone (Head of Finance at the University of London): “It is now recognised that we are there to support departments, not to police them” (Gosling, 2016, p.68).
Those institutions that had established good working relationships between the central finance department and other areas appeared to have greater confidence in the accuracy of their budgets and forecasts, and felt more able to justify when and why inaccuracies might arise. These interviewees generally considered themselves as having an increased understanding of the institution’s activities and used the word ‘trust’ in some instances to describe their faith in a budget holder’s ability to establish realistic financial projections.
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Interviewee comments overall follow the theme identified earlier of a preference for simplicity over complexity. Although sophisticated financial software had been adopted its capabilities were rarely used in full and spreadsheets were still widely used for various purposes. Changes in budgeting and forecasting practices are on-going, including the implementation of business partnering, but these changes tend not to be radical amendments to current methods. The issue of aligning student number planning and tuition fee income forecasting remains an unresolved problem for many.