Fringe accountability for general use funds
Historically, all employer fringe benefit costs were paid centrally by the Provost’s Office. Beginning in FY 2005, a policy of fringe accountability was implemented at the area of responsibility (ARSP) level which allowed the Units to benefit from under-spending their fringe budget and to assign accountability for over-spending when the Year-End Settle-Up Process is done. Fringe accountability was implemented for general use funds (KU funds 003 and 099) only. (All other funds, such as special revenue funds and the various differential tuition funds already provided accountability.)
To implement fringe accountability, a fringe base needed to be set for each ARSP. The fringe base was established by studying previous year fringe spending and trends. The expenditure of fringes for Fiscal Years 2000, 2001 and 2002 was analyzed (averaged after allowing for variations in fringe rates); Actual fringe expenditures for FY 2003 were also considered. From this expenditure pattern, a “theoretical” FY 2004 fringe base was constructed by setting the base as the higher of the three-year average or FY 2003 actuals, taking into account changes in fringe rates from FY 2003 to FY 2004 and adding COLA/merit to the salary base.
FY 2004 was a test year in which the accountability aspects of fringe management was simulated and monitored closely by Budgeteers and the Budget Office. Fringe accountability at the ARSP level has been in place since the FY 2005 budget year.
Guidelines for changes to the fringe base follow:
Conditions under which additional fringe allocations are provided automatically:
- New positions provided by the Provost’s Office. For instance,
- New positions approved as a Provost Commitment
- Other Provost Commitments
- Changes in the basic fringe rate. For instance
- Health Insurance
- If the health insurance rate goes up by 3%, the portion of your GU fringe budget dedicated for health insurance will be increased by 3%.
- The year-to-year adjustment in subsequent years has been factored into the fringe base.
- Other fringe rates – which may vary from year-to-year
- Health Insurance
- Temporary commitments funded by the Provost
- Bridging commitments
- Instructional back-stop
Conditions under which additional fringe allocations could be considered:
- A change in the mix of Health Insurance costs – more staff requiring family coverage rather than employee only.
- Annual cost for family coverage is $10,385 per 1.00 FTE
- Annual cost for single coverage is $7,050 per FTE
Conditions under which additional fringe costs should be absorbed by the unit:
- Unit-initiated changes in categories from low cost fringe to higher cost fringe
- Increase in KPERS enrolment
- GTA or Student Hourly to either University Support Staff or Unclassified
- OOE to either University Support Staff or Unclassified
- Phased Retirement Agreements – which incur a higher than average fringe rate.
- Faculty on reduced phased agreements incur an employer expense for retirement based on their full-time equivalent rate (17% for a half-time appointment compared to 8.5% for 100%).
- Health Insurance contributions for faculty on phased retirement agreements are made as if the employee were appointed full-time.
- Salary expenditures exceeding 100% of the salary budget.
- Salary over-runs due to permanent commitments that are not base-funded
Year-End Settle-Up Process
A process whereby each ARSP’s prior year expenditures from general use funds are compared to budget allocations, and funds are added or subtracted from the current year.
Funds 003 and 099 are consolidated and segregated into three categories: Salary, Fringe, and OOE.
Except for extraordinary circumstances, any unspent GU funds from 003 or 099 can be carried forward to the next year – and any over-spent amounts will need to be covered with funding from the next year. The carry forward calculation is made by analyzing the GU salaries, OOE and fringe expenditures compared to the allocation total as adjusted for budget transfers. The net amount of unspent funds will be returned to the dean/vice provost who has oversight responsibility for the cost centers. The practice among the various deans and vice provosts “to settle up” under-spending or over-spending at the departmental level varies. Therefore, individual departments need to make prior arrangements within the administrative structure for carry forward of unspent amounts.
For other General Use funds:
09x – Differential tuition balances are carried forward to the unit which earned the monies. The carry forward for these funds is based on the amount carried into the prior year carry; plus cash receipts in the prior year; minus expenditures made in the prior year.
Restricted Use Funds: Carry forwards are routinely made as part of the process to close the previous year and open the next year. Ordinarily, intervention by the Budget Office is not necessary. The carry forward for these funds is based on the amount carried into the prior year carry; plus cash receipts in the prior year; minus expenditures made in the prior year.