MBAX 6431 Week 7 Budget Variance Write-Up Example

Four Gaps Between Budget and Actual at Ashford Falls: A Variance Write-Up That Explains Overtime, Vacancies, Fuel and Sales Tax by Cause, Control and Whether They Will Recur

Student Name

Walden University

MBAX 6431: Finance & Budgeting for the Public Sector

Instructor Name

Month Day, Year

Four Gaps Between Budget and Actual at Ashford Falls: A Variance Write-Up That Explains Overtime, Vacancies, Fuel and Sales Tax by Cause, Control and Whether They Will Recur

Purpose and Baseline

Every adopted budget is a forecast with legal force, and by the end of the year some lines have missed it. This write-up compares the general fund of Ashford Falls, the composite city of about 210,000 used in this course, with its year-end actuals. All figures are illustrative. The council adopted a $300 million general fund budget and amended it once in June, adding $2 million for storm cleanup after a spring flood, so the amended budget of $302 million is the right baseline for judging departments. A variance measured against the adopted figure would count the council's own mid-year decision as a departmental overrun.

Table 1

Selected General Fund Lines: Adopted, Amended and Actual, Illustrative

Composite city; figures illustrative. Variances under $500,000 are not discussed individually.

How the Rows Were Chosen

Rows were chosen by size. Any line whose variance exceeded $500,000 receives a full paragraph; smaller variances, which together net to less than $400,000, fall inside the threshold and are noted only in the appendix schedule. The storm cleanup line appears in the table to show how the amended baseline works: against the adopted budget it would look like a $1.9 million overrun, but against the amended budget it came in slightly under. Each of the four large variances is examined with the same three questions: what caused it, whether the department could have controlled it and whether it is likely to recur next year (Mikesell, 2018).

Overtime and Vacancies, Read Together

The two largest variances are best read together. Police overtime ran $3.0 million over its $6.0 million budget, while salaries across departments came in $4.0 million under, mostly because positions sat vacant longer than the budget assumed. About $2.6 million of the salary savings was in the police department, which averaged 22 vacant officer positions during the year against a budget that assumed 8. Every vacant patrol shift that minimum staffing rules required to be filled was filled with overtime. The overrun and the underspend are two sides of one cause: the department could not hire as fast as officers left.

Cause: slow hiring against rising separations. Control: partly within the department, which controls its recruiting effort, and partly not, since the regional labor market for officers has tightened. Recurrence: likely, unless hiring improves. The combined effect was a net saving to the general fund of about $1 million, which is why the two lines should not be judged separately. A council member who sees only the overtime line will conclude the department overspent; one who sees both will conclude the department was short-staffed, which is a different problem with a different remedy (Rubin, 2020).

Fuel

Fuel ran $1.1 million over budget, about 34 percent. Cause: the budget assumed an average price set in the previous October, and prices rose sharply through the spring and summer. Consumption, measured in gallons, was within 2 percent of the prior year. Control: outside any department's control; no department could have used materially less fuel without cutting service. Recurrence: uncertain. Prices may fall back, but the city has no hedge or fixed-price contract. The finance office should consider a fuel price contingency or a fixed-price purchase agreement for part of next year's needs.

Sales Tax

Sales tax revenue came in $1.8 million below the $60 million budget, a 3 percent shortfall. Cause: local retail spending flattened after midyear, and one large retailer closed in August. Control: none; the city sets neither the rate nor the base. Recurrence: likely to persist for at least part of next year, since the retailer's site remains empty. Because the sales tax is the city's most economically sensitive revenue, as the revenue analysis noted, a shortfall of this size is a warning about next year's estimate rather than an accident of one year.

What the Variances Show Together

Taken together, the four large variances leave the general fund about $1.9 million worse than the amended budget: $3.0 million plus $1.1 million over on spending, $4.0 million under on salaries and $1.8 million short on revenue. Small favorable variances elsewhere covered part of the gap, and the rest came from a modest draw on reserves. Without the vacancy savings, the shortfall would have been nearly $6 million, which is why those savings are themselves a sign of trouble rather than good management. Two of the four causes, slow police hiring and soft sales tax, are likely to recur. Those two deserve attention in next year's budget: a realistic vacancy assumption for police paired with a matching overtime budget, and a more conservative sales tax estimate (Government Finance Officers Association, 2026).

References

Government Finance Officers Association. (2026). Best practices: Budget monitoring. GFOA.

Mikesell, J. L. (2018). Fiscal administration: Analysis and applications for the public sector (10th ed.). Cengage Learning.

Rubin, I. S. (2020). The politics of public budgeting: Getting and spending, borrowing and balancing (9th ed.). CQ Press.