Monitor revenues and expenditures variances continually
Variance analysis helps city leaders understand the difference between expected and actual results. Favorable variances will occur when actual expenditures are lower than expected expenditures and/or when actual revenues are higher than budgeted ones, and vice versa. It is essential to understand what variables (cost, quantities, etc.) are the drivers behind any variance, enabling your team to make necessary changes to manage the budget.
Some questions to guide your thinking
- What is the difference between actual and expected revenue from each source?
- What is the difference between actual and expected expenditure in each program?
- What are the key variables in each revenue source or program?
- How does the change in each variable explain the variance?
Monitoring the budget regularly
Government Finance Officers Association (GFOA) 7 minutes
This best-practice guide highlights how variance analysis is central to regularly conducted budget monitoring processes.