Cost Center Management Responsibility Procedure – 62.07.01
College Policy Number/Title:
Cost centers are designed to group expenses for the budget of an operational department of the college or a specific college activity. Within a department, there may be multiple cost centers for a manager who handles multiple types of services to assist in tracking and monitoring significant costs. For example, the human resources department may have one cost center for the operational expenses of the office and an additional cost center to track and monitor expenses related to recruitment.
Cost center numbers are determined using guidance from The National Center for Higher Education Management Systems, which identifies functions and where those functions are nationally accounted for in financial reports. The major functions within the college are instruction (1), public service (3), academic support services (4), student support (5), instructional support (6), plant operations and maintenance (7), and scholarship and fellowships (8). There are also several funds within the college: operating fund (10), continuing education (11), miscellaneous programs (13), restricted (20), agency (40), auxiliary (60), and plant funds (70, 72).
Cost center managers are fiscally responsible for the transactions charged to the center. Managers are responsible for developing the annual cost center budget of revenues and expenses for the upcoming year in conjunction with the president or their area vice president. The president or area vice presidents oversee their budgets and those of their managers. Additionally, when acting as a cost center manager, the president or area vice presidents are subject to the same responsibilities as cost center managers.
Cost center managers are responsible for properly coding revenue and expenses on accounting documents as detailed in the chart of accounts. They must abide by all procurement procedures. They are required to monitor and review the monthly financial reports that detail expenses and revenues to verify the accuracy of the data contained in the reports. Discrepancies are to be brought to the attention of the finance office, promptly, to assist in proper accounting of revenues and expenses by functional area.
Throughout the year, managers are responsible for the operations of their departments using the fiscal allocations within their cost centers. They are required to follow written policies and procedures of the college and exercise fiscal responsibility when spending college funds. Expenses should be necessary, reasonable, fully documented, and coded to the appropriated expense category within the managers’ budgets.
If a cost center manager will be away from campus, signature authority may be delegated to another individual in the area. If this occurs, notification must be given to the finance office. Delegation of signature authority does not relieve the cost center manager of the ultimate responsibility for the cost center. If over expenditures of a cost center are made during this period, the cost center manager will be held accountable.
If cost center managers feel that funds in their budget are not sufficient to carry out the operations of the area, they need to address the issue with the president or their area vice president before any over expenditure is made. If during the course of the year the cost center manager exceeds budget, either the manager's signature authority limit will be reduced, or the president or area vice president will be required to sign for all purchases.
When cost center managers are requested to implement new projects for which they will need additional funds, they must obtain a budget transfer into the appropriate budget before the expenditure is made. If this transfer does not occur, the cost center managers will be expected to cover the funds out of their budget.
Areas that are required to produce revenue to cover expenses must monitor cost center expenses closely. If during the course of the year actual revenues are not adequate for the area to break even, the cost center manager will be expected to reduce expenditures to ensure that a deficit will not be incurred in the area.
The president or area vice presidents of the area will review circumstances where cost center managers overspend their budgets. In these cases, cost center managers may be subject to a disciplinary action such as being ineligible for merit increases or being subject to a conditional contract.
All new cost center administrators are required to contact the finance office within one month of their appointment to receive individualized training on purchasing procedures and budget management.
The Finance Office
The finance office oversees and follows up on budget issues as they affect the financial status of the college as a whole. The office also monitors college expenditures for appropriateness and reasonableness, and conducts formal financial training sessions for cost center managers through professional development.
Within Cost Center Object Codes - Budget transfers within the cost center can be done throughout the year as reallocations become necessary due to unanticipated situations or changes in operations.
Between Cost Centers within the Same Functional Code - Transfers between cost centers within the same functions can be done with the authority of the manager of the cost centers or the president or area vice president. Justifications for the changes are required, and the director of finance or designee must properly approve the transfer of funds before the expenditure is made.
Between Cost Centers not in the Same Functional Code - Budget transfers between functions are not allowed because of functional expenditure limits set by law.
Effective Date: 09/10/21
President's Office Use: VPAF