A FAVORABLE REVENUE VARIANCE EXISTS BECAUSE MORE HAS BEEN EARNED THAN WAS BUDGETED. THIS REPORT MUST BE PREPARED ON THE ACCRUAL BASIS TO PROVIDE USEFUL AND VALID INFORMATION.

revenue columns. The budgeted revenues column entries are obtained from the AAA's budget. The variance column is completed by subtracting budgeted revenues from actual revenues. A positive variance indicates that revenues were higher than budgeted; a negative variance indicates that revenues were lower than budgeted.

(2) Expense Variance Report*

The expense variance report compares line item (resource code) expenditures for the quarter to budgeted expenditures for the quarter. The variance column compares actual and accrual expenditure to budgeted expenditures for the report period. Exhibit XV-8 shows a sample expense variance report.

These reports are prepared using the subsidiary expense ledger cards (to prepare the administrative and direct service components) and the subgrant and contract subsidiary expense ledger cards (to prepare the subgrantee and contractor components). Follow these steps:

Pull all subsidiary expense ledger cards and subgrant and contract subsidiary ledger cards relevant to the desired report level.

Sort the ledger cards by major general ledger expense category (e.g., personnel).

Compute total expenses during the accounting period for each major general ledger expense category.

Record amounts under cash expenses column (1) and calculate a total at the bottom of the cash expense column.

At this point the report must be converted to the accrual basis. This is accomplished through the use of column 2. The list of accounts payable and the list of accrued expenses obtained from the accounts payable file or register and the resources on order journal provide the data for this column. (See Exhibit XIII-6.) Negative adjustments to column 1 figures are indicated by parentheses around the amount. Positive adjustments to accounts payable and accrued expenses also are written in column 2 as additions to column 1 without parentheses. Column 3, accrued expense, is arrived at by adding accounts payable and accrued expenses (column 2) with actual (cash) expenditures (column 1). Column 4, budgeted expenses, is completed by using data from the applicable operating budgets of the corresponding expense report titles. (There are operating budgets for each fund, functional cost center and possibly for each location.) Column 5, budget variances, is completed by comparing column 3, actual expenses, against column 4, budgeted expenses.

See Chapter VIII for a discussion of variance analysis.

(3) Quarterly Cash Flow Statement

The quarterly cash flow statement has the same format as the monthly statement presented in Exhibit XV-5; however, it aggregates cash flow information for the quarter. It is prepared the same as the monthly statement by consolidating information about cash flow for the prior three months.

(4) Statement of Changes In Fund Balance

The statement of changes in fund balance describes the net increase or decrease to the equity accounts. This statement indicates the AAA's net worth and indicates what portion of the net worth is from unrestricted and restricted funds. It is a useful indicator of how much discretion the AAA has in shifting funds from one activity to another to support overall operations. Exhibit XV-9 displays this report. The equity account (fund balance) from the last report provides the opening fund balance for the current report. The excess revenues over expenses (or vice versa), obtained from the financial statement worksheet, provides the increases shown to the previous fund balance and produce the fund balance for the current report.