Managing Revenue Budgets

Oracle ERP Cloud Release 13 - Update 18A

ORACLE WHITE PAPER | MAY 2018
Introduction

Government Accounting, Auditing and Financial Reporting requires governmental organizations to

manage and report to what extent actual revenue compares to estimated revenues in order to maintain
a balanced budget. This whitepaper describes how to achieve this with existing General Ledger and
Budgetary Control functionality delivered in Oracle ERP Cloud.

Oracle ERP Cloud is designed to perform financial reporting in General Ledger, not in the Budgetary
Control module. Budgetary Control is used to control spending in the procure-to-invoice process, not
for revenue-based transactions. Organizations that need to track actual revenue against budgeted
revenue should load the revenue budget amounts into General Ledger. In addition, they should load
the expense budget amounts into General Ledger so they can perform the variance reporting for
revenues and expenses in General Ledger. If organizations desire encumbrances to be included in
the budget vs. actual reporting, they can enable Encumbrance Accounting for the ledger.

Oracle ERP Cloud is designed to control spending against revenue in Budgetary Control. To achieve
this, organizations need to track revenue in General Ledger account(s), extract the balance(s) from
General Ledger, and load them into Budgetary Control as the budget amount for expense account(s).
As expenses are incurred during the procure-to-invoice process, budgetary control checks whether
budget is available for spending.

In both scenarios, it is not necessary to load budget amounts into revenue accounts in Budgetary
Control. Budgetary Control is not an accounting system and does not recognize account types; it
processes all accounts as expenditures. General Ledger can inform users when revenue exceeds
budget or forecast via reports or analytics. Organizations should define Supplemental Rules in their
control budgets to exclude revenue accounts from Budgetary Control.

1 | BUDGETARY CONTROL – MANAGING BUDGET FOR REVENUE ACCOUNTS

Variance Reporting for Revenue Accounts

Oracle ERP Cloud performs variance reporting for revenue accounts in General Ledger, not Budgetary
Control. In fact, all financial reporting should be performed in General Ledger because it stores the
official accounting records. Budgetary Control typically captures balances for expense accounts only;
therefore not all account types are available in Budgetary Control for reporting. There can be
differences in the balances between Budgetary Control and General Ledger due to timing or
accounting differences. Budgetary Control can reserve funds for unposted journals whereas General
Ledger account balances only include posted journals. For organizations that use a contra-revenue
account in Payables invoices for revenue refunds, you should exclude the contra-revenue account
from Budgetary Control and use General Ledger for reporting on the refund or net revenue balance.

Here are the steps to achieve variance reporting for revenue accounts in General Ledger:

1. Load budget amounts for revenue accounts into General Ledger. (Also load budget amounts for
expense accounts for variance reporting on expense accounts.) Budget revenue amounts should be
loaded as negative amounts since they are credit-based accounts. For contra-revenue accounts
and expense accounts, budget amounts should be loaded as positive amounts since they are debit-
based accounts.

GL Budget Spreadsheet Figure 1. Navigator>General Accounting> Dashboard> Task: Create Budgets in Spreadsheet.

2 | BUDGETARY CONTROL – MANAGING BUDGET FOR REVENUE ACCOUNTS

If you budget and report at a summary account level, consider one of these options when loading the
budget to General Ledger. General Ledger requires data to be loaded at the detail account
combination level.
» Nominate an existing detail child value that rolls up to the parent segment value, and load the
budget to that detail child value. Reporting at the parent account level will provide a
meaningful Variance amount.

Parent Account Detail Account Budget Actual Variance

4000 – Park Revenue -1,000,000 -1,105,800 105,800

4100 – Admissions -1,000,000 -915,250 -84,750

4200 – Refunds 75,000 -75,000

4300 - Vendors -265,550 265,550

5000 - Equipment Expense 900,000 801,300 98,700

5100 – Repairs 900,000 500,750 399,250

5200 – Rentals 175,525 -175,525

5300 – Supplies 125,025 -125,025

» Alternatively, for each parent value that you budget against, create a detail child value for
which to store the budget balance. Set the Allow Posting flag to “No” for this account so
actual or encumbrance journal entries cannot post to it. (You can set the Allow Budgeting flag
to any value as it is not currently used in Oracle ERP Cloud.) Reporting at the parent account
level will provide a meaningful Variance amount.

Parent Account Detail Account Budget Actual Variance

4000 - Park Revenue -1,000,000 -1,105,800 105,800

4999 –Budgeted Revenue -1,000,000 -1,000,000

4100 – Admissions -915,250 915,250

4200 – Refunds 75,000 -75,000

4300 - Vendors -265,550 265,550

5000 - Equipment Expense 900,000 801,300 98,700

5999 –Budgeted Expense 900,000 900,000

5100 – Repairs 500,750 -500,750

5200 – Rentals 175,525 -175,525

5300 – Supplies 125,025 -125,025

3 | BUDGETARY CONTROL – MANAGING BUDGET FOR REVENUE ACCOUNTS

 » If you budget annually and your General Ledger calendar is monthly, you can choose to split
up the budget into months in General Ledger, or load the annual amount into the first month of
the year in General Ledger and report on a year-to-date basis every month.

2. Enable Encumbrance Accounting for the ledger if you want budget vs. actual reporting to include
encumbrance balances. (Note: you will need to enter journals to record the initial encumbrance
balance if you have open requisitions or purchase orders at the time you enable Encumbrance
Accounting.)

Enable Encumbrance Accounting Figure 2. Navigator>Setup and Maintenance> Task: Manage Encumbrance Accounting.

3. Exclude revenue accounts from budgetary control.

» If your control budget includes the natural account segment with a tree, just exclude revenue
accounts from the tree.
» If your control budget does not include the natural account segment, or includes the natural
account segment without a tree, define a Supplemental Rule to exclude revenue accounts
from budgetary control (you can also exclude asset, liability and equity accounts if applicable).

4 | BUDGETARY CONTROL – MANAGING BUDGET FOR REVENUE ACCOUNTS

 Exclude Revenue Accounts from Budgetary Control Figure 3. Navigator>Budgetary Control> Task: Manage Control Budget

» Note: if contra-revenue accounts are used in Payables invoices, you should also exclude
contra-revenue accounts from budgetary control. Reporting for these accounts are available
in General Ledger.

4. Currently, please refrain from using Account Monitor in General Ledger to report on budget vs.
actual variance for revenue accounts. The variance calculation does not reflect the desired intent for
the public sector industry. Use Smart View or Financial Reports instead.

Example of Budget vs. Actual Financial Report Figure 4.

5 | BUDGETARY CONTROL – MANAGING BUDGET FOR REVENUE ACCOUNTS

Controlling Spending Against Revenue

Oracle’s best practice recommendation is to control spending against revenue in Budgetary Control.
Here are the steps to achieve this:

1. Capture revenue or net revenue in one or more General Ledger accounts. Retrieve the balance from
General Ledger using Smart View, Trial Balance, OTBI or any of the inquiry and reporting solutions
in General Ledger.

Retrieve GL Account Balance with Smart View Figure 5.

2. In Budgetary Control module, create a new control budget with Absolute control level. Upload the
revenue balance to the new control budget using the task “Enter Budget in Spreadsheet” or use the
Budgetary Control Budget Import FBDI spreadsheet. Enter the amount as the budget for the detail
or parent level expense account(s) that consume the revenue. If your organization only allows
spending a fraction of the revenue, you can calculate the appropriate amount to load as the budget
for expenditures. Upload the spreadsheet with the option “Import Amounts as Entered”.

Load Revenue as Budget for Expense Account in Budgetary Control Figure 6.

6 | BUDGETARY CONTROL – MANAGING BUDGET FOR REVENUE ACCOUNTS

3. When spending occurs during the procure-to-invoice process, Budgetary Control validates whether
budget is available for the expense account.

4. Decide how frequently you need to load the revenue to Budgetary Control to control spending (i.e.
daily, weekly, etc.). Repeat steps 1-3 for the desired frequency.

Note: The control budget definition includes options to allow budget adjustment increases and
decreases. Please set these options appropriately per your organization’s policies.

Oracle Corporation, World Headquarters Worldwide Inquiries

500 Oracle Parkway Phone: +1.650.506.7000
Redwood Shores, CA 94065, USA Fax: +1.650.506.7200

7 | BUDGETARY CONTROL – MANAGING BUDGET FOR REVENUE ACCOUNTS

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Budgetary Control – Managing Budget for Revenue Accounts

May 2018