Most governments prepare monthly or quarterly budget vs. actual financial reports so that management and elected officials can monitor progress of revenues and expenses vs. the adopted budget. Each government prepares these budget vs. actual financial reports in slightly different formats and various levels of detail depending on their needs. Attached is an example of a good budget vs. actual financial report (click the link to view and download the Excel spreadsheet: "Sample - Budget vs. Actual Financial Report").
For most readers of the report, it is very important to provide narrative to help them understand the most important points. Therefore all significant budget vs. actual variances should be explained in simple language. To prepare these variance explanations, accounting personnel will need to decide:
Below Are 6 Good Rules of Thumb for Providing Variance Explanations:
Here are a few examples of good variance explanations:
Frequently several small variances make up a large variance.
Here is an example of a good explanation in such circumstance:
If there are variances going in the opposite direction (such as Brownfield feasibility study above), include and explain. Keep adding the next largest dollar variance until you have explained about 80% of the line item variance.
The same discipline described above for explaining budget vs. actual variances can be used whenever financial variances need to be explained.
For more specific questions regarding budget variances or your financial reports, please feel free to reach out to Kevin directly – he is available for a free consultation, via phone or email:
Kevin Harper, CPA
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