Explain a budget variance to a non-finance manager

Finance officers, grants officers and accountants spend a large part of every month explaining numbers to people who do not read numbers: programme managers, branch managers, directors, donors. So the panel asks: “Transport is 40 per cent over budget this quarter. Explain it to the programme manager.” Or they hand you a small budget-versus-actual table in the written test and ask for three sentences. The score is for clarity and for what you recommend, not for the size of your vocabulary.

A variance is simply the difference between what was planned and what was spent, in money and as a percentage of the budget line. Some variances are timing (the activity moved to next quarter), some are price (fuel went up), some are volume (more trips than planned), and some are errors (a cost posted to the wrong line). The manager needs to know which, because each has a different fix.

1. 1What happened, in one sentence with both numbers: “Transport was budgeted at 3,000 dollars this quarter and we spent 4,200, which is 1,200 or 40 per cent over.”
2. 2Why, in the manager's terms, and which kind: “Two things: fuel prices rose about 20 per cent in March, and the team made twelve field trips to Luuq instead of the eight planned because of the flooding.” Price and volume, not an error.
3. 3What it means for the rest of the grant: “If trips continue at this rate, the line will run out in August, two months before the grant ends. We would be 2,400 short.”
4. 4What you recommend, with a choice: “We can request a budget realignment from the donor now, moving 2,400 from the underspent training line, or reduce trips to ten per quarter. The realignment needs donor approval, which usually takes three weeks, so I suggest we ask this month.”