20 Questions - Canadian Institute of Chartered Accountants

Monitoring and Learning
19. How does the board monitor budgeted and
actual results?
The Chief Financial Officer or Treasurer should regularly compare the actual
financial results to the budgets and provide reports to the board. This is particularly
important when things don’t come in on budget and it is necessary to decide
how to deal with any shortfall or surplus. The frequency of reporting will usually
be monthly or quarterly – more often if funds are tight.
Budget/actual reports should ideally provide year-to-date amounts for the
current and previous years, and the outlook for the current year. They should
also show the variances (differences) between the amounts in dollars and as a
percentage. Variances are of three basic types, each of which calls for a different
response:
One-time variances occur when something doesn’t turn out as expected. For
example: a project costs more than budgeted because some costs were not
included in the budget or were underestimated; revenues from an event exceeded
or fell below expectations; the organization had to pay legal fees to defend
against a legal action. One time variances may, if serious, require adjustment to
other items in the current budget.
Ongoing variances occur when a regular expense or revenue source change
and the change is likely to continue. For example: the rent goes up more than
expected when a lease is renewed; a sustaining grant from government is cut or
discontinued.
• Timing variances occur when planned events or activities that involve receipts
or payments happen earlier or later than planned. The variance usually
resolves itself within a few months and nothing need be done unless the
events are delayed into the organization’s next financial year. In such cases
there will be a one-time variance in the current fiscal year and the item may
need to be included in the following year’s budget.
• In most cases the causes of variances will be apparent before they show up in
the budget reporting. If they are significant the staff or Treasurer should take
appropriate action as soon as possible and advise the board accordingly.
Recommended practices
• The board receives regular reports that compare actual year-to-date and
outlook financial results to the budget and previous year
• When actual and outlook amounts vary from budget, the board is provided
with explanations and any proposed responses
20. What did we learn from our experiences?
It has been said that this year’s planning is the beginning of next year’s. The
lessons learned from successes, failures and unexpected outcomes can be used to
confirm or revise strategies so that planning becomes a continuous process.
Strategic planning is most useful when the plan looks several years into the
future - 3, 5 or more years. If things are going well, the board and planning
group might hold an annual review of the strategic plan and consider revising it
to reflect the lessons of the previous years. Strategies can, however, take time to
settle down, and changes can be confusing and unhelpful.
If the organization is experiencing serious problems it may be necessary to
review strategy more frequently than once a year. In such cases it is important,
before changing strategy, to ask if the problems are the result of the strategy or
of the way in which the organization is implementing it.
Recommended practices
• The board, staff and volunteers take time to learn from experience
• The board reviews the strategy at least once a year – more often if necessary
• Strategies are reviewed and revised on the basis of what has been learned
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