Variance Analysis
Expenditure & Variance Reports
Expenditure and Variance Reports serve as critical financial monitoring tools, providing monthly or quarterly comparisons between budgeted and actual revenues and expenditures. These strategic documents enable Chief and Council/Board to track financial performance, identify variances, and assess organizational financial health. By highlighting areas where spending or revenues deviate from projections, these reports facilitate timely decision-making and corrective actions, ensuring programs remain adequately funded and financial goals stay on track throughout the fiscal year.
Components of Expenditure & Variance Reports
- Revenue Tracking: Comparison of budgeted vs. received revenue, using the Revenue Forecast as a baseline.
- Program Allocations: Tracks allocated funds per program, comparing appropriations to actual expenditures.
- Expenditure Tracking: Detailed reporting of budgeted vs. actual spending per program, with identified variances for each period and on a year-to-date basis.
- Variance Analysis: Highlights variances in revenue and expenditures, noting areas of concern and potential adjustments.
- Year-End Projections: Forecasts for year-end based on actuals-to-date and anticipated future revenues and expenditures, helping leadership to anticipate potential surpluses or deficits.
Variance Report Guidelines
- Recording Financial Transactions: All transactions are recorded according to generally accepted accounting principles to ensure accuracy.
- Monthly Variance Reports: The Senior Financial Officer1 produces monthly variance reports with input from program directors to explain causes of variances, major commitments, and year-end projections.
- Distribution of Reports: Reports are distributed to Program Directors and the CEO/CAO/Band Manager for review and feedback, allowing for detailed program-specific insights.
- Summary and Recommendations: The CEO/CAO/Band Manager prepares a summary of implications, highlighting any adjustments needed and key variances for Chief & Council/Board consideration.
- Chief & Council/Board Review and Action: The Senior Financial Officer and CEO/CAO/Band Manager present reports at regular meetings. Council/Board reviews recommendations and directs necessary actions, such as reallocating funds or adjusting program budgets.
- Adjustments:
- Based on Council/Board’s guidance, adjustments are made. Surpluses can be reallocated to other programs needing funds, while deficits may prompt program cutbacks or reallocation of additional funds.
Timing
- Monthly: Reports are typically prepared monthly, ideally by the 15th of the following month, allowing for prompt review and action.
- Quarterly Minimum: If monthly reports aren’t feasible, quarterly reports are recommended to ensure early identification of budget issues.
Best Practices
- Consistent Reporting: Ensure budgeted and actual figures are reported consistently to provide a clear, fair overview of program funds.
- Transparency in Council/Board Decisions: Council/Board should formally accept Expenditure and Variance Reports during meetings, documenting any directed actions in meeting minutes for accountability.
- Utilize Visual Aids: Graphs and charts can enhance understanding, especially for non-financial staff and members.
Conclusion
Variance Analysis through Expenditure and Variance Reports offers vital insight into the organization’s financial health. By regularly tracking revenue, expenditures, and variances, Band Council/Boards can make informed adjustments to maintain fiscal stability. Effective variance reporting is key to aligning financial activities with community priorities, ensuring funds are used efficiently and responsibly throughout the fiscal year.
