Budget Management Representation Office TRAINING LAF 2009 Johan Pans
Objectives At the end of the training, the participant will be able to: 1. Elaborate the budget of the Representation’s office: 1. 2. Manage the use of specific accounting codes linked to the budget lines 3. 2. Explain the budget structure, understand the contents of the categories and budget lines Elaborate the bugdet of the representations office with the tools provided Read and Analyse the budget follow-up 1. Read and interpret the report in order to take necessary actions 3. Elaborate forecast and budget revision, writing of narrative in transparant way 4. Manage Service Level Agreements 1. 2. Integrate the figures of the SLA in the Representation’s budget 3. 5. Elaborate Service Level Agreement Introduce the SLA figures in the accounting Treat in the accounting the expenses of volunteers and special activities Training LAF 2009 2
Content Brussels Leuven Antwerpen Brugge Gent Training LAF 2009 3
Content 1. General framework 2. Elaboration of the budget of Representation’s office 3. Analysis of budget follow-up 4. Elaborate forecast and budget revision, writing of narrative in transparant way 5. Service Level Agreement 6. Special topics 1. Special activities 2. Volunteers Training LAF 2009 4
1 General framework Representation's budget Procedures cycle BTC Procedure 7. 5. 1. 1 Preparation RR Budget Together with draft of CAP: draft budget Y+1 Negotiations based on consolidated budgetary means at BTC's disposition 31 January Y+1: Approbation budget Y+1 Procedure 7. 4. 1. 2 Preparation RR Forecast 15 September Y Procedure 7. 5. 1. 5 Revision budget RR DGD Procedure 7. 5. 1. 6 Preparation consolidated budget RR & HQ 31 March Y: Draft budget Y+1 30 September Y: Final version Y+1 2 versions: Internal version & DGD version 15 September Y Training LAF 2009 5
1 General framework Funding of Management Fees Main allocation - Article 5 - Projects - 54 10 5402 * Budgeted turnover > 150 mio € : 20 mio € Budgeted turnover < 150 mio € : 19 mio € Other allocations (article 6 & 9) 12% on project operational costs International Services (article 7) Defined per convention Training LAF 2009 *Yearly indexed 6
Financement Training LAF 2009 7
1 General Framework Internal budget 2009 Training LAF 2009 8
1 General Framework Figures 2008 Training LAF 2009 9
2 Elaboration of Representation’s budget Structure of the budget of the representation Tools: Excel template Budget follow-up report Y-1 Training LAF 2009 Work instruction Template for narrative 10
2 Elaboration of Representation’s budget Budget structure of Representation's budget Category Budget line Accounting code Training LAF 2009 11
2 Elaboration of Representation’s budget Budget structure of Representation's budget Budget line Category Accounting code 03 Operationel Expenses 03_06 – Office Supplies 612600 – IT Supplies Training LAF 2009 12
2 Elaboration of Representation’s budget Budget structure of Representation's budget 3 categories: 1. Investments/Fixed assets 2. Staff 3. Functioning costs Training LAF 2009 13
2 Elaboration of Representation’s budget Budget structure of Representation's budget 1 on 1 link between budget line and accounting code, except for: 02_02 Local Staff 03_05 Missions 03_07 Training LAF 2009 14
2 Elaboration of Representation’s budget Budget structure of Representation's budget Advantages of this system: Passive, easy to use: default value filled in automatically based on accounting code introduced in financial journal Very little extra work in order to elaborate budget follow-up Budget reporting possible based on hardcoded links between budget lines and accounting codes, except for missions, local staff and training Training LAF 2009 15
2 Elaboration of Representation’s budget Budget structure of Representation's budget Disadvantages of this system: Only a grouping of accounting codes based on nature of expenses Ineffective use of tools already present (analytical axis) Passive, no budget charge according to destination of charge Restricted budget system, since nature of expense (accounting) = destination of expense (budget line) Training LAF 2009 16
2 Elaboration of Representation’s budget Tools Work instruction: sent yearly with budget template, modified yearly in function of new accounting/budget procedures or frequent errors committed in accounting/budgeting Excel template: completed with last information (i. e. actuals of June) if available Budget follow-up report Y-1 : Budget execution Y-1 in order to have a realistic overview Template for narrative part: introduced again after a one year trial without narrative (information was supposed to be included in Country Action Plan) Detailed historical information in Navirep Training LAF 2009 17
2 Elaboration of Representation’s budget Figures of the budget proposals Acuals of the past: Recurrent functioning costs, e. g. electricity, gas, water, office supplies, telephone, … Contracts and commitments: Office Rent, Rental charges, Internet, … Financial impact of specific activities: Missions, Regional trainings organized in representation, local staff training exceeding the granted budget, specific marketing actions (SPOC, 10 year BTC…) Training LAF 2009 18
2 Elaboration of Representation’s budget Figures of the budget proposals Budget: same principle as for accounting: 'Cash based'-accounting. Budgeting based on disbursements planned over the year based on functioning, commitments, contracts and specific activities Examples: 1 st year of new rental contract for offices for 3 year: Yearly due: 24. 000 EUR, as from 01/07/09 up to 30/06/2012 Payment: up front by Quarter, first payment done the 25 th june 2009 To budget in: 2009: 18. 000 EUR 2010: 24. 000 EUR 2011: 24. 000 EUR 2012: 6. 000 EUR Training LAF 2009 19
2 Elaboration of Representation’s budget 01 Investments: budgeting Unit price </= 250 EUR or Unit price > 250 EUR but economic life cycle </= 1 Y: 03 Operational expenses, NOT investment 03_06 Office supplies 612600 – IT Supplies 03_10 Other operational expenses 612900 – Small equipment Examples: memory sticks, mobile phones </= 250 EUR, chairs, small furniture, yearly renewable antivirus licences, … To register on ‘Extra Inventory List’ Training LAF 2009 20
2 Elaboration of Representation’s budget 01 Investments: budgeting Unit price > 250 EUR and economic life cycle > 1 Y: Investment: 01_01 – Vehicles 01_02 - Furniture, Installations, Machines and Equipment 01_03 - IT Equipment 01_04 - Leasehold improvement Training LAF 2009 21
2 Elaboration of Representation’s budget 01 Investments: budgeting 1. Budget the complete acquisition cost, inclusive of all taxes, installation and transportation costs, … 2. Do not integrate the writing off of acquisitions of Y in the budget Y+1 3. Start early enough with the acquisition procedure (tender), no report of budget Y possible to budget Y+1: commitment is insufficient, since we work with Cash-based accounting: date of payment = transaction encoded on budget of the date of payment 4. Training LAF 2009 22
2 Elaboration of Representation’s budget 01 Investments: budgeting 1. Ordering of 3 PC’s on 12/12/2009. Delivery on 14/12/2009, invoice date 16/12/2009 and payment on 20/12/2009: 2. Charged on budget 2009 3. Ordering of 3 PC’s on 20/12/2009. Delivery on 28/12/2009, invoice date 06/01/2010 and payment on 20/01/2010: 4. Charged on budget 2010 5. Ordering of 3 PC’s on 12/12/2009. Delivery on 20/12/2009, invoice date 23/12/2009 and payment on 03/01/2010: 6. Charged on budget 2010 Training LAF 2009 23
2 Elaboration of Representation’s budget 01 Investments: budgeting Gains on disposals of investments = raise in ‘cash’ means on Representations account, but = not automatically increase of Investment budget of RR. To be checked case by case with HQ Training LAF 2009 24
2 Elaboration of Representation’s budget 01 Investments: budgeting Example: Budgeting of new car: Car in inventory: completely written off. New car: estimated acquisition cost: 25. 000 EUR Estimated sales price for vehicle written of: 5. 000 EUR To budget: estimated acquisition cost – Estimated sales price for vehicle written off: 20. 000 EUR If initially 25. 000 EUR was budgeted because sales price was unknown, budget becomes not 30. 000 EUR, but 20. 000 EUR Training LAF 2009 25
2 Elaboration of Representation’s budget 02 Staff: 02_01 Payroll HQ The budget elaborated by the Representation does not have to take in account the staff which is directly paid by HQ: International staff having a working contract NOT with the Representation, but with BTC HQ: Expatriet contract Resident Representative (a. i. ) International Program Officer MAF Budgeting and accounting is entirely managed by HQ Training LAF 2009 26
2 Elaboration of Representation’s budget 02 Staff: 02_02 Local Staff New for budget 2010 elaboration: Every figure of local staff salary + contractual costs per function has to be fully detailed by every contractual remunaration element: Gross salary Tax on revenues Social Security Insurances as defined in employemnt contract Contractual participation in transportation fees, Bonus … Possibility of changes in chart of accounting codes in 2009 Training LAF 2009 27
2 Elaboration of Representation’s budget 02 Staff: 02_02 Local Staff Training LAF 2009 28
2 Elaboration of Representation’s budget 02 Staff: 02_02 Local Staff Accounting codes: 615101 - Local staff representation 615102 - Taxes staff representation 615103 - Social security 615105 - Other staff expenses 1. In combination with budget lines : 1. 02_02_0 X 2. And analytical axis A 06 BTC Staff Member ID. 3. To be used for the elements of remuneration as mentioned in labour 4. contract, by individual. If not in the contract, not in 61510 X Training LAF 2009 29
2 Elaboration of Representation’s budget 02 Staff: 02_02 Local Staff Training LAF 2009 30
Budget structure of Representation's budget 03_01 – Housing 610100 - Rental charges linked to rental contracts. Practically, it concerns the repartition of common charges. NO revenues generated by SLA for renting office space to project. Training LAF 2009 31
Budget structure of Representation's budget 03_02 – Electricity, water, gas, …& Reparation and maintenance 611200 - R & M office Included security guards, gardening, cleaning, garbage disposal, … performed by subcontractors If done by staff member (payroll Representation): 02_02 Local Staff Training LAF 2009 32
Budget structure of Representation's budget 03_03 - Vehicles operational expenses 640100 - Driving Taxes All taxes for to get the vehicle on the road (licence plate, …) Not to be included: toll, parking charges, … To be encoded on: 613500 Missions – Transport 613300 Transportation costs Training LAF 2009 33
Budget structure of Representation's budget 03_05 – Missions 2109_INT – International missions 2109_LOC – Local Missions Training LAF 2009 34
Budget structure of Representation's budget 03_05 Missions: 21: activity: Missions 09: Year 2109_LOC: local field missions, done by Representation staff or RR 2109_FORM: International or regional training missions (e. g. Laf training, Seminar Process management, …) for Representation staff (not RR!) 2109_INT: International missions by RR (or mandate) e. g. RR-week, Preparation of ICP 2109_001: backstopping mission, support by HQ staff member on management fees HQ Training LAF 2009 35
Budget structure of Representation's budget Faulty values used in 2008: 02_01 02_02_02_03 02_02_04 02_02_05 02_04 03_03 03_06 03_07 03_10 2106_008 2107_082 2107_083 2107_167 2107_169 2107_203 2107_209 2107_210 2107_324 2107_FORM 2107_INT 2107_LOC 2108_ALL A_MG_22_A A_R 0_22_A Training LAF 2009 36
Budget structure of Representation's budget Faulty values used up to Q 1 2009: 2108_FORM 2108_INT 2108_LOC Not possible: Cash based accounting: although mission 2008, if disbursed in 2009, then it is charged on budget 2009 (thus meaning 2009_XXX) Training LAF 2009 37
Budget structure of Representation's budget 03_06 – Office Supplies 612500 - Office supplies and printed material: paper, blank media, ballpoint pens, … 612501 - Supplies for printers and copiers: Ink cartridges, toners for printers and copiers 612600 - IT supplies: memory sticks, keyboards, mice, Printers < 250 EUR, antivirus with acquisition price > 250 EUR but one year licence only, printers </= 250 EUR 613332 - Canteen expenses: Drinks & food for the personnel at the office or for the reception of visitors, for meetings in BTC office Training LAF 2009 38
Budget structure of Representation's budget 03_07 - Formation 615104 - Training expenses local staff: Inscription fees for local staff with employment contract with Representation BTC. If budget insufficient, additional request has to be done towards Human Resources, based on carreer/competence plan. E. g. course over several years. 2109_FORM – Training missions: Budget fixed by HQ based on proposals elaborated by HQ departments Training LAF 2009 39
Budget structure of Representation's budget Accounting codes to be used for mission expenses: 2109_INT - 2109_FORM - 2109_LOC – (22013 SVCD) 613500 - Missions - Transport (avion, …) 613501 - Missions – Assurances 613510 - Missions - frais d'Hotel (613520 - Mission frais représentation) 613530 - Missions-Indemnités (per diem) 613560 - Missions - Formalités adm. 613570 - Missions - Varia Training LAF 2009 40
Budget structure of Representation's budget 03_08 - Consultancy & Outsourcing 613241 - Consultants and subcontractors Only intellectual services: notary costs, jury selection, fiduciary, juridical advice gardening, security, trash disposal, office cleaning, repair & maintenance of air conditioning, … must be budgeted 03_02 - Utilities and Maintenance Training LAF 2009 41
Budget structure of Representation's budget 03_10 - Other operational expenses 613300 - Transportation expenses: transportation costs not linked to missions (toll, parking charges, …) 613340 - Seminar expenses: Booking of global invoices for the organisation of seminars by 1 vendor (catering, rent of material, room rental, …) 619100 – Cost Sharing Funds: Income/reallocations as mentioned in Service Level Agreement Training LAF 2009 42
Budget structure of Representation's budget Interpretation of budget follow-up report in preparation of the budget revision/forecast: Rules The total budget granted to a budget category (investment, payroll and operating expenses) may not be exceeded. The budget of a budget line however may be exceeded, but only on the following conditions: A budget line within a given category may be exceeded providing that the total budget for the relevant category is not exceeded. The overshooting is less than 20% of the budget line. A pertinent explanation can be given. (Cfr. Narrative) Training LAF 2009 43
Budget structure of Representation's budget Auto-Evaluation: Exhaustivity of data: All accountings of all cash registers and bank account sent to HQ? All open amounts/advances are applied? Accuracy of data: All transactions encoded are encoded on the appropriate budget (cost center)? Every Q, review with Res. Rep regarding RR budget with list of attention points (monthly as from September to December) Training LAF 2009 44
Budget structure of Representation's budget 1. Sent accounting to HQ respecting deadlines! Too much delay = erroneous and inefficient analysis 2. Complete narrative part with key figures and keywords. No or insufficient info = supplementary questions by HQ 3. Provide realistic forecast based on: 1. Expenses validated in accounting up to date of analysis 2. Commitments and contracts, to be disbursed during the remaining period of budget exercice: Rent, staff, … 3. Investments planified to disburse during the remaining period of budget exercice 4. Training LAF 2009 45
Budget structure of Representation's budget 1. Amounts non-disbursed = inefficient usage of granted means 2. = Budget not used 3. needing extra possible = Not reallocated to other cost centers funding, no transfer of budget 4. 5. BUDGET NOT USED = BUDGET LOST 6. Therefor important to provide realistic forecast, no buffer zone in budgets! In case of exception circonstances, contact Fin. Off RR HQ Training LAF 2009 46
5 Service Level Agreement Definition Legally binding formal or informal negotiated agreement between two parties (customer and service provider) concerning Quality, responsabilities, guaranties, penalties, … of the services or prestations concerned: Service Level Training LAF 2009 47
5 Service Level Agreement at BTC 1. Contract between 2 entities (Mostly between Representation and a project, also possible between projects) 2. Represented by its mandated (Resrep, Project director, …) 3. For the delivery of: 1. Infrastructure services 2. Labour services: 1. General services 2. Technical support (SLA between projects) Training LAF 2009 48
5 Service Level Agreement at BTC - General Service delivery/Technical support or Infrastructure for which the beneficiary normally should have contracted proper staff or third party suppliers. - Not for services (and costs linked to services) supplied by default by the represenation towards projects executed for the Belgian government (LAF-support, RR JLCM, PO …) except for IS projects Training LAF 2009 49
5 Service Level Agreement at BTC - Support (directly and indirectly) provided by the representation towards projects carried out for the Belgian Governement (LAF, PO, RR, …): Financed on the Management Fees BTC (see general framework) - For IS: to be taken into account in the Service Level Agreement, because not to be financed by the Belgian Governement, but by the Donor of the IS Project. Training LAF 2009 50
5 Service Level Agreement Why SLA? Economies of scale Easy start-up, few administrative formalities to fulfill Enhanced value of know-how already present in house, gaining efficiency from local and international staff members Flexibility between the parties More flexibility in matters of contract durations, cancellation, . . . Training LAF 2009 51
5 Service Level Agreement General Services Support by local staff members in terms of: Finance (accounting, cashier, payments, …) Administrative (secretarial work, reception desk, …) Logistic (purchase, fleet management, …) ICT Support Human resources (contracts, …) Others Training LAF 2009 52
5 Service Level Agreement Infrastructure Office space m² Rental charges (insurances, common charges, . . . ) Utilities and maintenance (Cleaning products, maintenance contract, …) Water, gas & electricity Investments in leasehold improvement, (Office split, airco, generators, . . . Training LAF 2009 53
5 Service Level Agreement Infrastructure Telecommunication (telephone, internet, fax, …) ICT equipment (PC, printer, …) Office equipment (Copier, network printer, refrigirator, … Car Functioning cost car (maintenance, insurance, gasoline, …) Office supplies (paper, cdr’s, canteen expenses, . . . ) Others Training LAF 2009 54
5 Service Level Agreement Examples 1. Staff member of representation allocates time for predetermined tasks like accounting, assistant, logistic, driver tasks 2. TA Budget Support project rents office space available at Representation 3. Accordingly he/she uses other services purchased/paid by the representation (Internet & phone connection, electricity, gas, water, network printer, …) Training LAF 2009 55
5 Service Level Agreement Charges and revenues generated by SLA between representation and project: Project: General means expense to be encoded on 609200 via payments by HQ received afterwards Representation: decrease of charges, to be encoded depending on the type of service: General service Infrastructure Training LAF 2009 56
5 Service Level Agreement Charges and revenues generated by SLA General services: Category 2 Staff: Staff Payroll HQ: Budget line 02_01 Accounting code 629998 Réalllocation Art 5 -Art 7 -Art 9 Budgeted and encoded by HQ, no action to be undertaken by Representation Training LAF 2009 57
5 Service Level Agreement Charges and revenues generated by SLA General services: Category 2 Staff: Local staff: Budget line 02_02_0 X (Function linked to budget line e. g. , 02_02_02 LAF) Accounting code 619000 Répartition article 5, 6 & 7 To be budgeted by Representation in its budget proposal, encoded by HQ Training LAF 2009 58
5 Service Level Agreement Charges and revenues generated by SLA Infrastructure services: Budget line 03_10 Accounting code 619100 Cost Sharing Funds To be budgeted by Representation in its budget proposal, encoded by HQ Training LAF 2009 59
5 Service Level Agreement Charges and revenues generated by SLA Never to decrease charges based on nature of expenses! 610000 Office Rent (1) 25. 000 Training LAF 2009 612300 Internet (2) (1) 180 (2) 180 (3) 180 216 (4) 60
5 Service Level Agreement Charges and revenues generated by SLA New as from 2009: All Service Level Agreements will be encoded and validated by HQ To do: Send over all SLA’s currently in use to johan. pans@btcctb. org Exercice: Elaborate SLA between Representation and IS Project where AT will be occupying a desk at the representation, and budget the amounts in the budget proposal. Training LAF 2009 61
6 Special topics 6 a Representation’s budget and special activities Examples: Regional training, seminar 10 years BTC Extraordinary activity based on (separately) approved budget by Management Commitee Accounting and budget instructions elaborated and communicated by HQ Training LAF 2009 62
6 Special topics 6 a Representation’s budget and special activities Example: Regional Training SEN Processs Management Training LAF 2009 63
6 Special topics 6 a Representation’s budget and special activities Example: 10 years BTC 2 possible Scenarios: 1. Increase of representation budget for the organisation of the special activity or 2. Encoding of the charges of the special activity on HQ department Marketing, cost center 162 M which will be coordinating the activities and guarantee a follow-up Training LAF 2009 64
6 Special topics 6 a Representation’s budget and special activities Example: 10 years BTC Scenario 1: Representation receives modified budget and encodes all expenses on it’s budget (A 02 Cost center 21 XXXREPXXX) with specific budget line 220 XX (to identify the special activity) communicated by HQ: Training LAF 2009 65
6 Special topics 6 a Representation’s budget and special activities Example: 10 years BTC Scenario 2: Budget is managed by department HQ Marketing: Encoding of expenses on their budget (A 02 Cost center 162 M) with specific budget line 220 XX (to identify the special activity) communicated by HQ: Training LAF 2009 66
6 Special topics 6 b Representation’s budget and Volunteers managed by/at the representation: NO budgetary impact, thus: Nothing to budget for the volunteer Charges/expenses/investments for the volunteer are to be encoded with specific analytical values: A 02 Cost center: 21 XXXREPXXX A 03 Budget line: 22013 SVCD A 06 BTC Staff member ID: 10 XXX (Volunteer Staff member ID) Reallocation transaction lowering charges encoded by HQ (- 3. 000 EUR on accounting code 619100 Cost sharing funds with A 03 Budget line: 22013 SVCD) Training LAF 2009 67
6 Special topics 6 b Representation’s budget and Volunteers Cfr Workshop SVCD Training LAF 2009 68
7 Q&A Training LAF 2009 69
The END! Thank you Training LAF 2009 70
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