Budget Periods and Budget Variances

Budget Periods

Budget periods represent portions of time during which a budget may be spent. Some projects have a single, cumulative budget period that represents the entire duration of the award. Other projects have discrete budget periods, usually a duration of one year, that represent that period’s worth of funding.

When the sponsor requires that the University accounts for each budget period separately, SPA will set up the current budget period as its own activity within the ARC project, and when a new budget period is authorized, a new activity will be set up to track the budget and expenditures related to that period.

For instance, if a project receives three years’ worth of funding, which are then authorized one year at a time, the ARC project will receive three activities, one representing each year’s funding. Administrators must continually monitor project financial statements to ensure expenditures are charged to the appropriate activity and within the timeframe indicated for that budget period.

Unspent funds from one budget period may require a carryover request in order to move them to a subsequent budget period. Similarly, overruns on a specific period may require sponsor approval in order to fund them from a subsequent period’s budget. Administrators should consult with their SPA Project Officer and their SPF Finance and Compliance Manager with questions related to budget period approvals.

Budget Variances

When a sponsor issues a sponsored agreement, there is usually a specific budget to which the University must adhere when incurring expenditures to meet the objectives of the agreement. In many cases, the sponsor has a variance tolerance, or rebudgeting threshold, that allows the University to shift the budget in accordance with the shifting needs and evolution of the project. The variance tolerance may differ by sponsor and by project, so administrators should ensure that expenditures incurred in excess of specific budget line items do not exceed the variance tolerance.

Additionally, if a budget variance requires prior approval, whether because it exceeds a line item’s threshold or because it represents a restricted category of expenditure (e.g., major equipment), prior approval should be sought and obtained in advance of incurring the related expenditure. Administrators should consult with their SPA Project Officer with questions related to budget variance interpretations and approvals.

Guidance

To learn more about budget periods and budget variances, see the University’s Sponsored Projects Handbook and SPA’s webpage on rebudgeting.