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The prime reason why the University sets budgets is to ensure that it is operating sustainably. In this context sustainability means that in the medium term total planned expenditure by the University should not exceed its expected income, and that a sustainable financial surplus is generated to re-invest in the academic mission of the University.

This is a formal requirement placed on the University by the Office for Students (OfS).

This requirement explicitly allows the University to run deficits (i.e., expenditure is more than income) on some activities or in some years, provided these deficits are counterbalanced by surpluses (expenditure is less than income) on other activities or over other years.

Setting budgets also facilitates the equitable and transparent sharing of financial resources or funds between activities and individual institutions. At a strategic level setting budgets ensures that available resources are used to fund current activities and to invest in new areas of activity.

At an operational level a budget tells you how much money is available, for example a Chest budget for staff or non-staff expenditure for a year, or what an external research sponsor has agreed to fund within a research programme.

Finally, setting budgets provides one method for monitoring actual versus planned activity. As a budget is a financial representation of planned activity, regular comparison of actual income to planned income, and actual expenditure to planned expenditure, will provide a measure to assess the financial sustainability of activities.

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