The Budgetary Cycle - Expenditure & Variance Reports
Expenditure and Variance Reports are monthly or quarterly spreadsheets and summaries that give an up-to-date comparison between Revenue Forecast and funds received, and between appropriations and actual expenditures on a program by program basis (see Sample Expenditure and Variance Reports). The difference between budgeted numbers and actuals is called a variance. A summary report recaps the overall financial position of the First Nation as at specific dates in the fiscal year (generally monthly). Finally, these reports include projections of the year-end financial picture by considering the actuals-to-date and the anticipated revenues and expenditures to year-end.
Where significant variances are identified, adjustments can be made. This may involve adjustments to program Appropriations or instructions to Program Directors to adjust expenditures in order to balance with their allocated resources. Routine adjustments will be recommended by the Financial Controller and approved by the Band Manager.
Expenditure and Variance Reports should be prepared for Band Council review as soon after the cut off date as possible. The reports can be prepared in spreadsheet and graphic formats (see Sample Expenditure and Variance Reports) and usually include an overview of significant variances and recommended actions for Band Council to take. Expenditure and Variance Reports normally include the following elements:
As well the Controller must ensure that the budgeted and actual numbers are reported on a consistent basis to permit a simple and fair presentation of funds committed. The controller must also have up-to-date information on items such as contracts entered into but not paid; because these are legal obligations which reduce financial flexibility in the long-term.
It is the ultimate responsibility of the Chief and Council to monitor all aspects of the financial health of the First Nation. In order to carry out this responsibility, the Band Manager and the Financial Controller must present regular reports in a format that is easy to understand, allowing the Band Council to make the required financial decisions. It is recommended that Expenditure and Variance Reports be presented to Band Council on a monthly basis.
It is also recommended that Expenditure and Variance Reports be formally accepted by Band Council during Council meetings and that any actions directed by Band Council as a result of these reports be recorded in the Council minutes. This will both provide clear direction and create the records needed for the audit. For their deliberations on the Expenditure and Variance Reports, the Band Manager and Financial Controller must be aware of and advise Band Council of any restrictions for reallocating funds and achieving minimum program standards. Where flexibility is permitted between programs, any transfers from one program to another should be approved by Chief and Council.
Expenditure and Variance Reports should be completed by the 15th of the month following the reporting period.