Budgeting for the Public and Non-Profit sectors | HB Publications and Training Int. | Skillshare

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About This Class

An excellent course on budgeting for anyone working in the public or voluntary sector, such as government, local government, health, housing, education, enforcement, fire and any publicly funded organisation.

This course will assist budget holders to monitor and control their budgets. It will focus on the importance of delivering objectives with the funds allocated, and achieving value for money. 

This is a comprehensive course delivered by experts, and will provide an excellent opportunity to develop and improve skills and knowledge in this area. On completion of this course, participants can obtain Continuing Professional Development (CPD) hours/points along with a CPD certificate.

We will provide budget holders with tools and techniques to cope with the demands of budget management, particularly when they have a non-finance background. We will explain terminology, and set out best practice processes and procedures, and provide ideas to manage more difficult budgets. 

The course will explain the importance of variance analysis in monitoring budgets and how to make the variances meaningful as a management tool. Other basic techniques such as commitment accounting, projecting outturns and budget drivers will also be covered.

In order to effectively manage budgets, budget holders will need accurate and complete financial management information, and we give examples of the types of report that are most helpful.

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HB Publications and Training Int.

Finance Skills for the Public Sector


Hello, we are HB Publications and Training International and we specialise in delivering finance training courses to those working, or wishing to work, in the public and non profit sectors. Whilst the principles are the same as for commercial businesses, the language used is different. This course is about managing budgets which is very important to ensuring public services can be delivered. We are CPD accredited and participants can gain a certificate on completion. Our many years of experience and expertise has allowed us to write a series of books called "Essential skills for the public sector". 

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1. 1: Welcome to H Bees Budget Monitoring gun control. In this course, we will be going through how you manage, monitor and control your budgets. This course is relevant for all types of budgets, large and small, on DFO organizations in the public and not for profit sectors. Your present is today will be Jennifer and Charles Now for the introduction. Every country in the world delivers public services and they all require public funding of one kind or another. The people responsible for spending public money need to know how to manage their budgets. Andi, they need to be able to show value for money. This calls is going to demonstrate how this is dumb. It will help. Everyone has a budget to manage, or anyone who wishes to take up a role where managing budgets is required. We know you're going to enjoy learning with us, especially including the exercises and self development activities. I will now take you through the contents of the course. We will begin with budget monitoring In this section, we will cover what is a budget and why should it be monitored? We will take you through the steps in the monitoring process. Andi discuss how to establish actual expenditure along with the importance of monitoring income. Well, then go on to commitment accounting. This allows us to account for orders as well as allocating budgets. Commitment accounting enables budget holders to know exactly how much of the budget they have remaining at any one point in time. Parents analysis is a key technique for monitoring budgets. We will take you through how to calculate a variance on the reasons for parents is occurring. We'll also outline what you can do in order to control variances. Budget control drivers gives us an understanding off what actually controls the budget. This is important because it helps to inform the budgetary control techniques we can implement. We distinguish between controllable on uncontrollable variances and identify what type of control actions can be taken. We also introduce a technique of projecting the out turn. This enables budget holders to consider what their budget will look like at the end of the year. It helps budget holders monitor the control outcomes based on the actions they have taken. Financial management information helps to underpin all the activities that we would have covered previously. We look at different types of budget monitoring. Report Andi Consider the sorts of monitoring routines and responsibilities budget holders and managers should undertake At the end. We look at the next steps budget holders can consider in order to continue to increase their skills and abilities in this most important area. Let's get started. We are sure you're really going to enjoy this course. It will both inform on. Develop your skills and we'll get started on our first topic. Charles is going to take you through it. 2. 2: Hi, I'm Charles, and I would explain what we mean by the term budget. Whilst there are many explanations, these are the factors we consider to be most important. The budget is a financial plan over a specific time frame. It should arise from the organization's business or service plans, which says house its objectives and how they're to be achieved. The budget also identifies how resources are allocated to specific activities. These figures provide a set of financial targets for both income and expenditure over the lifetime off the budget and finally, they could be used as a benchmark or measure to control her financial resources. I used to deliver and achieve the planned objectives. Every organization will have its own budget setting process, which may take some time and often commences several months before the beginning off the new financial year. Ideally, budgets have been agreed and set for the start of the financial year, allowing budget holders to begin with a clear view off the resources available to them. Organizations in the public and non profit sectors often have to work within a budgetary constraint fixed for a set period of time. For example, 123 years. This is not mean that individual budgets cannot be very junior year, particularly if circumstances change. If priorities are objective, change one organization, it may be necessary to reallocate resources that is, to change budgets part way through the year. This is achieved by making what is referred to as a violent moving money from one budget toe. Another. The impact of the environment is always zero. That is, the amount taken from one budget must match the amount added to the other budget environment is a term which is not always known by budget holders. But the important thing to remember is what environment does. It makes the budget that needs to be monitored more realistic in a relation to achieving the objectives. Often it is the budget monitoring process that highlights the need for the violent. Budgets are set for income, and expenditure on the income budget is sometimes referred to as an income target. Income can arise from a variety off sources, including commercial activities such as fees, charges and sales. If an income target is exceeded, the extra income may be used to fund additional activities. This allows expenditure budget to be increased. According me the big picture off, the budget objective must still be achieved. For example, a break even budget for the year requires the income and expenditure budgets to be equal. Now, for a quick exercise, drop down the answers to these two questions before Jennifer takes you through the next section. 3. 3: Charles has just explained what a budget is. Andi in the next few lectures will be taking you through the monitoring process. Step by step, these steps will all be covered in detail. The 1st 1 is to ensure the actuals a cracked. And although this sounds off this, there are quite a few factors to take into account. The next step is to compare the actual to the budget on we calculate the difference between the two, which is called a variance. Having calculated variances, we will then look at analyzing them in order to identify exactly what is causing the variants leading us to the next step, which is to take action to eliminate variances and to achieve our targets, we have to look at expenditure on income. Andi. Many organizations have income targets, which are very important, as they often dictate the amount that is available to spend. The information required for monitoring is usually produced by the accounting system in the form of management accounts. There are many different forms of management accounts, and we will be discussing these in detail later in the course we want to take monitoring well. Budget monitoring can be in undertaken at many different levels, all of which are very important. Let's start with the budget users. These people use budgets but may not be responsible for them. In other words, they will spend from other people's budgets. However, they should still be involved in monitoring their used. We then have the budget holders. The budget holder will have budgetary responsibility and therefore need to monitor the budgets regularly manages. They may be responsible for many different budget holders on have several different budgets as well as maybe having their own bay, therefore, need to ensure that all budgets are being monitored. Senior managers have a more strategic responsibility. There may be responsible for a division or department, and they must ensure that budgets are being monitored across every aspect. Andi ensure their staff have the appropriate skills to do so. Finally, finance staff are often asked to get involved in the budget monitoring process. This will include providing the management accounting information to budget holders, and occasionally there may even have dedicated responsibility to monitor budgets. Now you don't need to be an accountant to monitor a budget on DWI will certainly be giving you some examples and exercises throughout this training course, which will enable you to become excellent at monitoring your budget 4. 4: as promised. We will now look at the first step in the monitoring process, which is to establish the actual expenditure in order to monitor a budget. It is important to get the actual right. The actual expenditure used for budget monitoring includes a number of components. Andi. The underpinning principles apply for a while figures as they must be accurate and complete . Now calculating the actual includes the following elements. The 1st 1 is what has Bean paid. This includes all the payments that have been made un processed on the accounting system, then added to that we should have all the invoices that have been received for payment but have yet to be processed through the system on these air, usually called creditors or payables, Krul's is a term familiar to accountants but perhaps unfamiliar to budget holders. This is the cost of goods and services received to date yet to be invoiced by the supplier . A Krul's can be adjusted on a regular basis i e. Monthly, but often a cruel czar only made at the end of the year. This last element commitments relates to goods and services ordered but not yet received or used. This is important to establish how much budget is available to spend. Let's look at an example. Take the following extract from a management report. The largest. It's a month six report. That means it covers the period from the beginning of the year. Andi up to and including six months so far. We refer to the figures shown below as white T. D figures I year to date. So we have the budget on the actual year to date on the budget remaining as the columns Onda. We have two categories that have been described Salaries and temporary star the next take Saturdays, the budget year to date I. The budget for months 126 included is 340,000. The actual year to date is 300,000. That is the actual that is either being page or is pay a bull I creditors on Dora Cruise. Andi. The budget remaining is the difference between the budget and the actual I e. 40,000. The next row looks a temporary staff on the budget year. Today it is 10,000 against the natural spend off 50,000 giving us a remaining budget off 40,000 negative in other words, the actual expenditure has exceeded the budget for that period by 40,000. Using the Monets Mint report extract from the previous slide, we have managed to find out some additional information. Assuming everything is in UK pounds, we see there is an invoice for Chantry Star on the desk which is yet to be processed. This is for £1500. You're also where that a temporary staff member has been engaged for 20 hours this week at £20 per hour. This has yet to be invoiced. There are no official purchase orders raise to your knowledge from this information, we can calculate the actual on the report. We have £50,000 actual year to date. However, we have to add the outstanding invoice off £1500 plus the fees yet to be invoiced. This is £400 ie 20 hours at £20 per hour. These two added to 50,000 gives a total of 51,900. It sounds a little bit complex, but you will see how easy it is when you want to take a simple exercise. Just prefer to the resources on have a go. Make sure you complete it, though before you look at the solutions 5. 5: following on from our previous lectures. We emphasize that monitoring income is just as important as monitoring expenditure. Public sector and non profit organizations usually have a mixed source of funding, with the majority coming from the public, purse or government. This can be in the form of grants directly and indirectly through funding. Authorities of these are usually for a fixed amount over a specific period of time. Other income may include fundraising, donations, fees, charges, rents and so on, some of which may arise from commercial activities. The stages in the monitoring process have been discussed earlier are particularly important for income, which may be more difficult to control if the source of the income depends on third parties in some organisations, monitoring income is undertaken by specialist department, leaving other budget holders free to focus on controlling expenditure. However, many budget holders may have responsibility for monitoring both income and expenditure. The first step in the monitoring process is to establish the actual and in the case of income, there are two key elements the income received which is banked and appears on the accounting system on the invoices or demands raise for goods and services served on third parties but yet to be received. These are referred to as debtors or receivables. Having established the actual budget, holders need to ensure that debtors are received. Otherwise the actual income could be overstated. If some of these debts become irrecoverable, outstanding debtors can turn into bad debts, which then have to be written off against the income. It should always be remembered that any shortfalls in income is equivalent to overspending . The difference between income and expenditure is referred to as a surplus or deficit for public sector and non profit organizations. This is the same as a profit or loss for a private sector company. Your business. Some budget holders will have a target surplus or deficit that needs to be monitored. If the objective is to have a balanced budget, this means that there should be no surplus or deficit and income should equal expenditure. Our next section will cover commitment, accounting 6. 6: welcome to this section on commitment, accounting, we consider accounting for commitments to be a key tool in monitoring budgets. Accounting for committed expenditure is one of the differences between management accounting used internally for budget monitoring. ANDI Financial accounting used in the preparation of the financial accounts. Expenditure is committed when an organization raises a purchase order for goods and services or has a contractual arrangement to make regular payments to a supplier over a period of time. Most accounting systems can facilitate on record commitments on will display them on management reports. Remember that nine The value of commitments is important to establishing the actual expenditure off a budget. I accurately enabling the budget holder to calculate the remaining budget available to spend in the future. To get the actual right, we said, we need to include the cash paid, the creditors i e. Payables a Krul's when relevant, I'm finally commitments. These are the goods and services Aldridge but not yet received or used. Most organizations will have some form of purchase ordering system, raising a purchase order in advance off making expenditure. These purchase orders can be in paper form or generated online by the accounting system. They're usually sequentially numbered. On each purchase order will have a unique number. This purchase order number is given to a supplier who should ensure it is quoted on their invoice. When the goods or services have bean supplied, some organizations will not pay a supplier without a purchase order number. It is important that purchase orders are regularly monitored. As with all other items of expenditure, that is, we need to ensure that the purchase order is still required. Andi current. For example, if a purchase order is no longer needed, it should be cancelled with the supplier and removed from the accounting system. This will done release the budget for use elsewhere. A purchase order review is particularly important at the end of the financial year if works or supplies have been started but not completed on a cruel should be made at the end of the air. If not, the purchase order should be cancelled. If the purchase order has been fulfilled, the supply should be encouraged to raise their invoice so that the payment can be made or a creditor established. No battle seems easy. So far, Commitment accounting is straightforward, however, in order to consolidate your knowledge. We recommend that you want to take the commitment, accounting exercise that forms part of this material. When you're really happy that you understand everything we've covered so far. Move on to the next section. 7. 7: Hello again. We're now going to begin our parents analysis section. The term variance is a common one, but I will explain what a variance is in the context of budget monitoring. A variance is the difference between the budget on the actual for a particular period. This could be a month, 1/4 or year. In fact, the way in which variances are calculated may differ in every organization. We will discuss this fervor in the next lecture. The variance compares what has been planned with what has actually been achieved. UN. Relates above income and expenditure differences may be positive or negative. Establishing variances is the next step in the budget monitoring process and is a key analytical tool for understanding why a budget is not on target. Variances can be referred to in many different ways, positive or negative, plus or minus favourable or adverse overspend or understand. All these terms are interchangeable on relate to the same thing. That is which way the variances in comparison to the budget, over budget or on the budget. Variances are easy to calculate, and you only need to know how to add and subtract in order to perform a simple calculation . The above table shows a simple variants calculation. Each line refers to the same expenditure category. The first line compares a budget off 12,000 with an actual spend off 13,200 resulting in an over spinoff 1200 or on adverse variance. The second mind compares the same budget with an actual off 12,000. This camp plates as zero variance that is the actual spend is on target. The final line shows on understand off the budget by 800 which has been called a favorable variance. The mathematics is simple, but the interpretation can be far more complex. We will be considering this in depth in electrical reasons. For variances. Here is a simple example. Get some paper and write down your answer. Calculate Levin's for each line and state. Whether or not it is positive or negative, you may use any terminology you prefer. We will go through this in the next lecture 8. 8: Now you know what a variances. And in this lecture we will concentrate on how to calculate of Arians. The actual calculations are straightforward and usually only involves attracting one number from another. Sometimes variances can be calculated as a percentage. This calculation is a little more difficult, and we show you how in the last slide the terminology used that is the same. It could be an either percentage over understand or a positive or negative percentage. It is normal for the variants calculations to be automated within management reports. However, budget holders need to understand how to undertake the full range of variants calculations just in case they wish to analyze their budgets manually. Remember the simple example. Hopefully, you are able to fill in the gaps. The first line showed a budget off 6000 for furniture andan actual off 6000 as well, and that gives us zero variance would usually describe this is on target. The second line shows a budget of 6000 with an actual of 10,000. We calculate ah, 4000 negative variance. In this case, Aunt often referred to his adverse Now notice. We also put 67% in Roda's well, showing an adverse 67% variance. The third line is a budget of 6000 against the natural 4000. This gives a 2000 positive variants or favorable there INTs, or 33% favorable. The technology really is just up to you. However, you cannot say which of these is the best position. So you're out. So should have, ideally, be you don't know. This is because we don't know what actually calls the valances, and we will come back to this in detail later. A variants can be calculated month or month. Oh, what is very common is for the variants to be calculated for the year to date. Both parents is a useful Andi. They often show different things, providing a better picture of what is really a caring. We can see this from the example below. It's a month six report for furniture. The actual for the month is 10,000 against a budget for the month of 2000 which means the variants for months six is a negative 8000. However, when we look at the year to date figures, I months 126 combined. We see that the actual is 10,000 against a budget of 12. This gives a variance off 2000 positive notice. The order of the actual and budget column has changed from our first example. This is a warning. You always need to check the headings in order to understand which way the variant is going on. From the last slide, this table shows that in month six we had an overspend of 8000 compared with the year to date under spend of 2000. This makes sense because it shows us that the £10,000 expenditure was made in Month six, whereas the budget seems to have been split equally over the year at 2000 per month. The year to date figure shows us that whilst we should have spent 12,000 so far this year, we've only spent 10. Expenditure does not arise on a monthly basis for things like furniture. However, the budget has bean broken down at an equal amount each month in nature. Four. We emphasized the importance of the actual for monitoring purposes. When given figures to monitor, you need to understand if the actual includes items such as creditors and commitments. If they do not. You may wish to make a manual adjustment in order to have a more accurate variants. Let's take our previous example. The parents would be different if we found out that there was a commitment for 4000. Instead of the actual being 10,000 it would now be 14,000 resulting in a negative 2000 variants as opposed to the positive one. Sometimes the variance calculation can be done in a different way from the previous examples. The actual year to date figures can sometimes be taken away from the budget for the year. This gives is a figure which really is the budget remaining. It is, however, sometimes described as a variance. It's a very useful calculation for monitoring. Looking at our example, then the actual year to date is 14,000 which is our 10,000 including our commitment of 4000 . The budget for the year is 24,000. This is our 2000 per month for 12 months, which adds up to 24,000 giving us a budget remaining off 10,000. This figure allows the budget holder to know exactly how much of the body it is left to spend for the remaining six months. One of the things you should always check is the time period covered by the figures you're monitoring. There were usually headings on the management report which will enable you to ensure you really understand the parents calculations that are being made. Andi convey therefore, used the information in a positive way. Well, we've come apart a lot in this session. Onda, we think, would be a great idea for you to get some practice by downloading the exercise worksheet we've provided there are solutions as well so that you can check your calculations just in case you're not sure how to work out a percentage, though we set it out below to take the budget. You subtract the actual and then divide that by the budget, multiplying by 100% to give you a percentage figure quite easy, really. Always check back over the previous slides to make sure that you've understood everything 9. 9: In the last lecture, we covered how appearances are calculated. Now we look at the reason severance is occurring. This helps the budget holder to interpret and analyze appearance. There are many reasons for the variances and the most common ones are as follows. Poor profiling, miscoding and errors, processing delays, poor planning, assumptions increases or decreases in demand. On foreseeing events, we will discuss each one in detail. Poor profiling is one of the most common reasons for variances. The variance arises because the pattern of the expenditure or income budget has not been correctly distributed across the year. Sometimes it expenditure have a very clear profile. For example, quarterly utility bills, monthly salaries except, however, other items baby more random in nature or occurrence of one off event. Many accounting systems divide budgets equally between the 12 months of the year, resulting in what we call a straight line profile shown here as the Green Line. The actual expenditure may be very different, as shown by the blue line. This results in parents is every month, which may not be of concern if the budget holder understands that the differences are arising due to timing. This is important therefore, for budget holders to be aware of their budget profiles, particularly for large budgets. The management reports that show variances are usually produced from an accounting system. Management reports depend on financial data being accurately entered into the accounting system, irrespective of the system being used. However, sometimes there is occur. These areas could involve, for example, miscoding to Annette. Incorrect Department Business unit Cost centre order An incorrect item such a stationary coded to uniforms. Also wrong amounts being entered. The budget holder should ensure errors air correctly when they come to light processing delays. My arrives for many reasons, but the result is that the information being used to calculate a variance is incomplete. This can result in the budget holder misinterpret interferences on making an incorrect decision about their budget. Unfortunately, budget holders may be unaware of delays when they're monitoring their budgets. This situation could be partly avoided if they communicate with the accountants or the finance staff who produced the management information on a regular basis substance. They know whether or not the information are monitoring is up to date, and complete variances arises the difference between the actual and the budget. The budget figures will be based on assumptions which, ideally relate to a business or service plan. The budget should be set to achieve specific objectives on the budget. Holders should be aware of what these are. In some cases, budgets are based on last year's figures, which may or may not be appropriate for the current year. Occasionally, budgets are reduced to achieve savings, sometimes without consideration to the impact on service delivery targets, which can only be achieved with a larger budget. Such planning assumptions will result in variances on budget. Holders need to be aware of the plan for their budget and to ensure they understand the assumptions that have been made. If the plan all the assumptions are unknown to the budget holder, they should set out their own targets for the budget that have been allocated to VIN in line with the organizational expectations on base them on sound assumptions, which Macon Vend monitor some budgets are demand led on our therefore highly influenced by increases and decreases in demand. These demand fluctuations will lead to variances, for example, about it for care for older people may be based on a specific number of clients for the year. If the demand exceeds this number, there will be a variance as the amount actually spent will exceed the budget. Income budgets are often equally as affected by demand, especially when charges are being levied to the public. For example, on income target may be set on the expectation that a certain number of people would pay for eye tests. However, if demand for this service declines the income pudge it will be underachieved. It is therefore important for budget holders to know the assumptions behind such budgets so they can quickly identify trends. Reflected interference on analyze the overall impact on their budget. Finally, unforeseen unplanned events are very likely to court guarantees as they would not have been budgeted for some organization hold what we call contingencies for such a current is. 10. 10: having understood the reasons for variances arising from your management reports or identified by your own calculations, you then need to take action. This session considers what to do about variances on highlights and most common techniques . Firstly, we reported there. It is my exception. This is where large differences are highlighted for further investigation. Then we look at the likelihood of the variants escalation during the course of the year. We must also distinguish between controllable vest. It's uncontrollable variances and set out some of the actions that can be taken in order to control the variance. The control of various is is important regardless of whether the variances positive or negative. If you encounter a significant variance. June budget monitoring, it should be reported to senior managers at the earliest opportunity. This is especially important if the variances outside the budget holders range of control actions. Remember, monitoring under spent budgets is just as important as overspend budgets. Positive variances may indicate the underachievement off objectives a non delivery of services. Some organizations will set a certain level in order to trigger an exception report. This might be if the variances over a certain amount or a certain percentage, for example, 5% off the budget. Other aspects maybe also considered, such as if the variances increase in month on month, or showing some kind of trend off, over or under spending on the budget. Or it may be clear that the budget is going to be completely spent by the end of the air. This might be fine if the objectives have already been achieved by this time. However, if it is a salary budget and Sarah's still have to be paid, the alarm bells may read. There may be easy explanations for any of these types of exceptions. However. It is important that the budget holder investigate the vengeance is and identify the cause . This example shows Line one having a negative Tempus and Variants online free a positive 6.7% variance. Both of these are above a 5% exception level and therefore would need investigation. It should be noted that the on target line two should not necessarily be ignored. If the budget in line to Waas for free salaries and in fact only two staff members were imposed, then we would expect a favorable variance and therefore, in this scenario, the on target variance is actually an adverse result. It is important to identify whether or not a parent is ongoing or a one off incident. If it is an ongoing variance that is month on month, the cumulative variants continues to grow. This may be an indication that the variance is going to escalate and perhaps is out of control. This is particularly the case if the budget is linked to demand. If the budget holder knows that there is demand growth at a greater rate than in the budget assumptions, the variance will obviously escalate accordingly. Understanding what drive the variance on the rate at which of fairness is likely to escalate will enable the budget holder to take the appropriate action. Some variances are turned uncontrollable because they relate to budgets. Are are demand led or fixed in nature. This can be for income and expenditure. Items budget such as rent, contract payments, salaries and fees may be uncontrollable. In the short term, controllable variances relate to budgets are variable in nature and not directly linked to demand such as furniture and uniforms. Some budgets are only uncontrollable in the short term, as in the long term changes can be made which will correct the variance in the future. For example, contracts can be re negotiated and supply has changed. But this may take time. You must have an understanding of what is driving the variance so that you can determine whether or not it is controllable. There are also budgets that fall in between these two categories, such as marked in. Whilst this is controllable, reduced expenditure and marketing services mainly to a decrease in fee income and hence be a false economy, this controllable budget may be linked to an uncontrollable one. There are a number actions that can be taken in order to control variances. These can be summarised as follows. Firstly, take control of the budget cause in the variance. There are budget control actions that will be covered in a later section if the parents is uncontrollable. Identify budgets with controllable variances which can be used in mitigation, for example, balance in variances by creating favourable variances which mitigate the unfavorable ones. Another action is toe have an impact on the causal factors generating the variance. For example, travel expenses may be generating adverse variances due to expenditure on taxis. This could be reduced by encouraging a greater use of public transport off the verities arrived you to poor profiling and timing of income and expenditure. This can be easily rectified by making adjustments to the profile to take account of time in if known all control actions, it must be monitored toe. Identify whether or not they're having the required impact on various levels in the future . You can now get some practice on your own organization, look at your own budget and undertake the South Development Activity, which is available to be downloaded. Having completed this section on variance analysis, the next section will examine budgetary control techniques in detail. 11. 11: welcome to our section on budgetary control techniques. In this section, we will be describing budget drivers understanding what drives the budget be expenditure or income will often provide the reason for the variances that arise. Budget drivers can also assist in the development of the budget. In the first instance, there will also be lectures on how to calculate projected out turns, different budget control actions that can be taken and the importance off monitoring outcomes. Fatties are the objectives for your budget being achieved? All these techniques should be part of a budget holders toolkit. Such a taken really undertake effective monitoring and control. A body driver is an aspect of the service that drives income or expenditure in many cases for services. This is related to the cost of labor, for example, the number of hours or days required to deliver the service. However, the budget driver tends to be available rather than a fixed cost again. For example, in the case of labour, this will be temporary or contract stuff. Full time employees whose salaries are paid regardless of service level, should be seen as an overhead cost. As such, they will not drive overall costs up or down as they will not change. Some examples of budget drivers are given. This follows the number of clients may drive certain costs associated with them. For example, hospital patients require meals, clean sheets, laundry, etcetera. Expenditure on these items will increase with the number of plants. The number of hours may drive costs, especially where the input cost of the service can be calculated on an hourly rate. For example, if the cost of open in a library is stated as a rate per hour, the longer the opening hours, the greater the cost. Hourly rates are particularly important when using temporary agency or contract staff. The more hours used, the greater the cost. The usage off staff time may be driven by another aspect of the service for example, the number of clients, number of visits, number of interviews, number of enquires and so on. These examples reflect activity levels, which drive costs and are often associated with demand. One of the control actions we will discuss later will consider how a budget holder can manage. Demand. Projects can also be seen as a budget driver, as a project usually has its own budget, along with targets. For example, if a project is time related on there is a delay. This may have a direct impact on expenditure or income relating to the project. Income is also affected in the same way as expenditure, with the number of customers often being the key driver. For example, if the government charges a fee for passports, the level of income achieve will depend on how many passports are issued, which may be very difficult to predict. Give some consideration to your own budget and think about what really drives the items of income and expenditure within it. We will be given some more detailed examples in the next lecture. 12. 12: this lecture is going to consider budget drivers in more depth by looking at example, budgets and identifying the key drivers. In each case, this will help you and trying to analyze your own budget. This approach is relevant regardless of the sector you work in on whether or not you have expenditure or income budgets. You may have a budget, which is primarily salaries on very little other types of expenditure. But even in this case, there may be areas such as expenses and training. We're understanding the budget driver may prove useful. Our first example. Schools. When monitoring a budget of this kind, there will be a number of different drivers across the range of budgets, including number of Children, school opening hours, teacher to people ratios, curriculum requirements, health and safety changes in any of the apart will have an impact on expenditure and some income budget such a school meals. For example. If there are more Children, we will have to spend more on school meals, and if the opening hours are longer, then all expenditure relating to keeping the school open will also increase. Most of these drivers should be known in advance on conformed the basis off the budget setting calculations. Our second example is emergency services. This budget will have different drivers to schools. However, there will also be similarities, such as staffing levels. The top of drivers in this case will include the number of vehicles, the number on grade of staff required for each vehicle, the number of call outs, the size and nature of the catchment area. Health and safety requirements. Changes in any of the above will have an impact on expenditure. However, unlike people, numbers for schools call out, numbers are unpredictable on they must be attended to. This is a demand led budget. All that example, these hospitals. This is also a demand led budget. In other words, we're never sure how many clients or patients we're going to have at any one time. But there are aspects of hospital services which are essential on budgets are often viewed as secondary, such as life saving operations. Budget drivers will include a number of patients, number and type of interventions, for example, what type of operation, what type of medication and prescription staff to patient ratios. For example, Ness's doctors and other types of cast, off size and nature of the catchment area Health and safety requirements. Countries such as the United Kingdom have hospital services that are free at the point of delivery. Other countries have painful services and therefore drivers will impact on both income. Andi expenditure. Our fourth last example is the office based service. There are many public and nonprofit services that involve office based activities such as processing applications, issuing permits, producing reports, giving advice on someone. Well, staff costs may be fixed. In the short term, there will still be elements of variability where budget drivers become important. For example, the number of applications permits, licenses, the number of meetings, interviews, presentations and sold data protection requirements, the use of consultants, legal services, professional advice on any other outside suppliers. Now you understand what budget drivers are. You should take a look at your own service on decide which of the key factors that drive the expenditure or income. Then it is those things that need to be monitored as well as the figures. Hopefully, that's all beginning to make sense. But one of the questions you may have is how do I get the information that I need to do that? We will discuss this more in our lectures on management information 13. 13: this lecture is going to discuss the technique or projecting out terms. Projecting the out turn is a term it relates to the calculation off the expected year and budget position At a particular point in time some organizations may refer to this is a forecast or a projection are expected year end position. The term knowledge is less important than the principle. The upturn allows budget holders to look at their future position. And if this is at variance with the original budget, established the reasons why and take appropriate action. It's a very useful technique to assist budget holders with budgetary control. The projected out turn is ideally calculated on a monthly basis, although depending on the nature of the service organization a quarterly projection, they be sufficient. It is a combination what has been spent or earned to date. Yes, what is expected for the remainder of the year. This out turn is then compared with the budget for the year and the variance calculated as before, Go back to the variance analysis lectures. If you are unsure about this, our example is given below. We have a month six budget for furniture. The budget year to date is 10,000 and so far the actual year to date is 8000 giving a year to date variants off 2000. The annual budget either budget for the year was 20,000. However, the projected out turn is 22,000 giving a negative variance for the year off, 2000 projected. Remember the projected out turn is a computation made by the budget holder off what he or she expects to have spent by the end of the year. Continuing on from the previous example, the above table shows a Month six management report with a positive variance for the year to date figures. However, the out turn for the end of the year shows a negative parents of 2000. The nature of the expenditure is furniture. Andi is therefore controllable. Clearly, the future plans to spend an additional 14,000 on furniture, and the 2nd 6 months is causing the negative variance. This figure may have been based on orders already made. All the budget holder may have calculated what has been demanded within the organization for the 2nd 6 months. In order to remain within budget. There is only a further 12,000 available on this should impact on the future plant spending over the next six months to ensure that the variance is reduced to zero. Comparing out turns can be very useful. If the projected out turn is calculated on a regular basis, it is possible to compare a month to month or quarter to quarter. This comparison will highlight the impact of management decisions that have been designed to control the budget. If these are being affected, the projected out turn will move closer and closer to the original budget each time. This is on the assumption that the objective is to meet budget targets. So in month one, the out turn will have one month of actual on 11 months off projections, whilst at month 11 the projected out turn will only have one month off projections as 11 months will be actual. Therefore, the projection should become more and more accurate as the year progresses on actual expenditure and income levels are known. The basis of calculating the projected out turn is simple, but it isn't always easy to do the next lecture. We will look in detail as to how to make these calculations, however fundamentally the calculation could be looked at as follows. Our month six budget again on we're looking at furniture. The actual expenditure year to date, including commitment, is 8000. The expected expenditure for the rest of the year is 14,000 so the total, which is a plus B I 8000 plus 14,000 equals 22,000. And that's the figure that we had, as are projected out. The figure A actual expenditure is based on information that we have on should be available on the accounting system. The figure B i e. The expected expenditure for the rest of the year is calculated by the budget holder. This should be based on their knowledge of the budget, the budget drivers, the business plan on the service objectives our dearly. This should not be just a mathematical progression. A mathematical progression would have assumed that if we've spent 8000 in the 1st 6 months , will spend a further 8000 in the 2nd 6 months. This would given out turn off 16,000 rather than the 22,000 but has been based on the budget holders knowledge, their arm or calculations on the way on DWI will give several examples as to how to calculate the projected out, so make sure you already and you may even need a calculator. 14. 14: this lecture will concentrate on how to calculate the projected out. Protecting the out turn requires forward thinking and future planning. This could be straightforward for budgets that have very little change during the year, such as a fixed budget, black salaries or rent budgets that have a great deal of variability over the year. However, such as a demand led budget, will require the budget holder to have a good understanding of the service, such as understanding budget drivers. And we've covered budget drivers in previous lectures. Protected Out turned should take account of known future events, such as when new employees are due to start or price changes to new or existing contracts. We're now going to go through a basic out turn calculation. This is a simplistic approach to calculating the projected out turn for the year. Using an average formula, we look at the expenditure to date on, and the number of months multiply by 12 months for the year to calculate the projected out turn. In other words, we assume expenditure arises at the same rate every month. This is best shown in the example. If 4000 was spent in the 1st 4 months of the year. Using this very simple formula, the out turn would be 12,000. In other words, 4000 expenditure to date, divided by the number of months, which is four multiplied by 12 months. Andi. This estimate assumes that 1000 expenditure will arise every month going forward until the end of the year. This approach is really only suitable for expenditure income that has a very even fixed profile across the year. Applying this formula to other costs or income can give a very distorted result, especially if there are seasonal fluctuations. This approach is sometimes used in an automated accounting system where the budget holders are able to and put their knowledge or whether is a lack off any other relevant information . In order to project a more accurate out turn, it is useful to gather as much information as possible. This will include the basis for the budget, such as the number and grade of staff for the sunrise budget or the budget drivers that have been used for calculating service costs, things like the number of clients, other aspect, such as contract terms and conditions, ongoing fixed costs such as rent are all necessary to get an accurate figure. The actual to date figures are also important. The budget holders should establish exactly how they have been compiled and ensure they include creditors and commitments. If not, they should be factored in. The budget Holders should also be aware that he known future events which will have an impact on their expenditure or their income. Estimates of future activity based on future demand are also important. Along with the impact of legislation or policy, the budget holder really needs to understand the budget in order to get an accurate, out turned figure. Let's take a scenario based in the school setting. The physics departmental head has been asked to calculate a projected out turn for the following budgets based on the information in the report below, It's a month for report. It's covers salaries. The budget year to date is 40,000 and the actual is also 40,000 giving a zero variance. The budget for the years 120,000 on it might be possible to do the simple out turned calculation. In this case, a salary should arise relatively evenly. Over the year, we can see that 40,000 actual year to date, divided by four and multiplied by 12. I would give a projected out turn of 120,000 living on to equipment. The budget year to date is 4000 and the actual expenditure 6000. This gives any negative 2000 variance or an overspend. Looking at the budget for the year we have 12,000 on the projected out turn. If calculated in a simple way, may give a very misleading result. This would be the same for trips. We have a budget year to date of 2000 and no expenditures. So far, This gives a positive variance of 2000 on the budget for the year is 6000. Before any projected out turn calculations can be made, it is sensible to find out the basis for the original budgets. What we have found out is that salaries were based on three members of Star one at 50,000 into 35,000 inclusive of all costs. The equipment budget was based on 120 people's, with an average spend per people off 100 each. Andi. There were two school trips planned for the year, taking an average of 30 peoples in the staff member. The school contribution, however, was fixed at 3000 per trip, with the balance being made up from people contributions. Now in order to be accurate with the projected out to own calculations, we need a little more information and we found out the following one member of staff on 35,000 is leaving at the end of month 10 and will not be replaced until the new financial year. The student intake was below expectations and so the number of students is 100 rather than 1 20 The average spend on equipment, however, is expected to remain the same. One school trip has already been arranged and that's going to take place in month six. But payment of the school contribution has not been made yet. The second trip is to be scaled back in order to make savings on the school will only contribute 1500. Now we have gathered the information we can begin to complete the calculations, so in the case of salaries, we cannot use the simple method because we have a lever part way through the year. Therefore, we have to add to the 40,000 incurred so far. Eight months work off to salaries, the one in 50,000 and the one at 35,000. So if we divide that by 12 and multiply through for the further eight months, we get 56 667 To this, we need to add only six months off believers salary because they're going to leave in month 10. So this is 35,000 divided by 12 and multiplied by six, giving 17,500 be equipment projected out Turn should be 100 times 100 for the year, which takes account off the decrease in pupil numbers. Instead of 120 we only have 100. The trips projected out turned will reflect the saving off 1500 on the second trip. So here's our report. We can now fill in the projected out turned column. So if we are together 40,056 667 and 17.5, we get the projected out turn for salaries off 114167 The equipment out turn is 100 times 110,000 on the trips out, turn is 3000 for our first trip in month six and for the 1500 for the second trip, giving US 4500. The budget holders actually quite pleased with these projected out turns because the endear position, as predicted, will be savings on all budgets. I think the best thing is to get some practice on working out projected out turns. You can do this by downloading the worksheet that has been provided with this course You can then go on to try and calculate your own projected out turns on that will definitely help you in managing your budget. 15. 15: we have considered some valuable budgetary control techniques, such as variances on project in the out turn in the previous lectures. Please refer back to them if necessary. We now consider the actions that need to be taken in order to really control budgets at an individual and organizational level, having established reasons for budget variances and understanding the potential future position of the budget. By calculating the projected outturn, the budget holder is now in a position to take control actions. In order to take control of the budget. The budget holder needs to be proactive rather than reactive. Controlling the budget is not just about the money, but also about the services being delivered. Certain control actions will have a direct impact on the quantity or quality of the service and therefore must be considered in light of the organization's objectives. A budget will need to be controlled if there's current or predicted over or under spending or if income is not being achieved. There may also be cases where unplanned savings are required in order to counter overspend in elsewhere in the organization. The types of action that can help in control in the budget are given below cash limits. Decrease in controllable expenditure, increase in income, re profiling and re forecast in the budget. Re prioritizing services. Reducing services. Undertake environments, instigate and spend to save initiatives using contingencies. Set and monitor targets To ensure the impact one or more off these actions may need to be implemented in order to achieve the desired results. We will look at some of these suggestions in more detail certain. A cash limit is where budget holders are given a numerical limit for their budget, which must not be exceeded without agreement with senior managers in the organization. This limit needs to be assessed in terms of practicality, risk and service impact, particularly in the case off a demand dead budget. There may be a need to engage some of the other actions, such as re prioritizing or reducing services in order to stay within the limit. Project managers given this task should draw up a plan as soon as possible, setting out how it is to be achieved. Budget holders should know which of their budgets are controllable. In the short term, these budgets can be reviewed to make savings which can be available to counter overspending elsewhere. It must be emphasized that in order to achieve these savings, actions must be taken, which result in a reduction or a halt in off spending. In that particular area, for example, expenditure on furniture may be halted to make saving, but this will mean that planned purchases need to be cancelled. Increase in income has the same impact as making savings. However, this can only be achieved if the income is controllable. For example, raising prices maybe to decrease demand in some areas and hence income is not increased. Profiling budgets allows the budget holder to consider the timing of activities on a related expenditure and income. Some elements of a budget may be fixed on may arise evenly over the year where his office can be variable and volatile. In the case of control in the budget, it may be possible to delay certain activities until additional funding is secured or even into the following financial year. Having calculated a projected out in which fairies from the original budget, it may be possible to re forecast the future expenditure, such interference is eliminated. This would require examining the budget drivers using the original projection on making changes such as waste reduction, efficiency, use of technology and so on. In all cases, the aim would be to minimize the impact on the level or quality of service being provided and to continue to meet service objectives. Re prioritizing or reducing services can be very difficult as they often result in the organization service objectives not being achieved. In some cases, the reduced service will cause a negative reaction with the public, such as closing libraries or reducing opening hours for some public services. Often, the public sector have to provide statutory services, which cannot be reduced due to the legal obligation to provide them. Reductions in services such as police fire ambulance exception can result in longer waiting times, which may have a life on name risk. Therefore, it is important to undertake a risk assessment when considering this type of control action . The spend to save approach to controlling budget requires a more strategic view as the impact of spend to save activities often take time to yield results. Examples include investing in technology, which may be costly in the short term but will lead to considerable savings in the future. Investing in marketing activities to generate income investing in infrastructure to reduce operational overheads and so on. Ideally, a cost benefit analysis should be undertaken before any major spend to save projects are agreed to ensure they will yield the desired budgetary control impact. A body told her, may be able to take action within their own area by use environments. This allows somebody is to be increased by decreasing others by the same amount. Sometimes it is necessary to taken organizational view by moving budgets from one service area toe another in order to balance overspending, me priorities or legal obligations. If an organization department or cost centre stroke business unit has a contingency, this can be used to balance of the spending. However, public and nonprofit organizations tend not to have significant contingencies, regardless of the action or actions a budget holder decides to take in order to control the budget. It is important to ensure these actions are having an impact. In order to monitor the budgetary control actions, the budget told us should ideally set targets to be achieved. For example, the out turn variance reduces month on month by X percent, or the number of clients increases or decreases by why amount the's thought it should be measurable, and we require regular information gathering. If, through budget monitoring, the actions decided on our not having the desired effect, they need to be revised by looking at different approaches until the budget comes under control. There are occasions where some budgets cannot be controlled due to their nature. If these areas are significant, they should be brought to the attention of senior management at the earliest opportunity for more strategic action to be taken. This is why regular monitoring is essential, along with the understanding the budgets under your control and considering what is likely to happen in the months ahead, there is a self assessment worksheet available for you to download. This will help you to consider whether or not your budgets are under control on what types of actions are available to you in respect or proactively control your budget, you may find you need to ask questions in order to establish your organization's policies and procedures around action, such as violent use of contingencies making changes to your services. Spend to save initiatives on target seven. In the next section, we consider the type of financial management information that will help you to understand your budgets and to support you in making these types of decisions 16. 16: we have considered the sort of control actions that should be taken on this lecture will cover the process off, ensuring that they are affected. The first thing is to identify appearances on their cause on previous lectures have covered these things. The next is to develop and implement a plan of action to control the budget. This should include setting some sorts of targets for achievement. When this has been done, a regular review should be undertaken, Andi projected out terms revised on a monthly bases action should continue until the variances have either been eliminated or the targets achieved. Calculating variances and establishing their cause have already been covered on with this knowledge. Budget holders are in a position to make decisions about the future and how they can best control their budgets. These decisions are very dependent, though upon the accuracy and completeness or the financial management information being used to calculate those variances. Budget holders should ensure that they are confident in the information they use in order to reduce the risk. In their decision making, budget holders must not lose sight off the overall objectives they are trying to achieve now developing an action plan should be the same, regardless off the type of service area you are responsible for. The first thing is to set a target or objective that you wish to achieve for example, the expected reduction in the variance or the level of savings etcetera. Then identify what actions need to be taken on the time scale in which they should be taken . This will help you with monitoring, for example, things like increasing efficiency rates or lower in unit costs. You then need to check the impact on service delivery both the quantity and quality to ensure that objectives are still being that if the current action plan is not having the desired effect on that budget is still out of control. All the service is being detrimentally affected. Then you need to revise your plans. I'm going back to setting targets to be achieved timescales to achieve them in monitoring their impact on revising actions if necessary. Let's take an example off the emergency services right? We can see that below. There's a management report for a district ambulance service in two months. Four Report on bond. There are several expenditure areas. Temporary staff are budgeted. 5000 for the period year to date on actual expenditure is 10,000 year to date, giving a negative parents of five. The annual budget or budget for the year is 15,000. Based on this, the projected out term is 30,000. Equipment maintenance has a budget of 14,000 with an actual year to date expenditure of six , giving a positive parents of 8000. The budget for the year is 28,000 on the upturn has been projected as 28,000 fue is 12,000 budget for the four months. The actual expenditure is 13,800 for that period, giving a variance off 1800 negative. The annual budget is 36,000. On the out, turn has been calculated at 41,000 400. So with this information, we should be asking a few additional questions. Andi. The notes give a bit more explanation. Temporary staff have been used to cover a dispute over shift patterns. Equipment maintenance is planned during the year and the budget has been profiled to reflect this plan. However, there has been a delay to the first phase of the maintenance, but it should be back on target in the next two months. The cost per litre fuel is 15% higher than that used when setting the budget. This is not expected to reduce in the foreseeable future. This information enables us to understand the projected out turn figures using the information in the previous slide. As a budget holder, there are a number of decisions that could be made in order to control the budget. However, it is important to consider the risk on and the impact on services before implementing a plan of action. Examples off the times of action that could be taken are given US follows. Resolve the dispute in order to reduce the need for temporary staff. Dispute resolution, however, may be costly in itself. On changing the shift patterns may also have an impact on staff costs. Sometimes it's necessary to have third politics to assist in dispute resolution. Ensure the planned equipment maintenance delay is remedied quickly not only to ensure the budget is on track, but defective vehicles will impact on the quantity and quality of services being delivered As fuel costs are outside the budget holders control it may be necessary to request additional funds fired into the budget. Below is an extract from the management report. Two months later, it's a month six report compared to the previous month. Four. Report in month six, it would appear that temporary staff budget year. Today it's 7 500 is compared with an actual spend of 12,500. This gives us a variance of 5000 negative, but it should be noted that this parents has stayed the same as the month four. Variance. The budget for the year is still 15,000 but the projected out turn has now reduced to 20,000. The equipment maintenance budget year to date is 14,000 and the actual spend is also now 14,000 giving zero variance. The budget for the year is 28,000 and the projected out to 28,000 fuel is budgeted so far to be 18,000. But the actual expenditure for the six months is 20,700. This variance is a negative 2700 on is showing an increase from the previous month for report. But budget for the year is 36,000 on the projected out has remained the same as that month for at 41,400. The notes with this management report identify that temporary star have been reduced as the dispute is now resolved on and the overspending going forward will not change. But we do need to find savings to compensate for the 5000 overspend already incurred to date equipment. Maintenance has now been brought into line with the profile, so there is no need for any further action. Fuel call salivary 9 15% above budget on environment has now been requested from senior management. 17. 17: Welcome to our last section on financial management information. This section is going to include lectures on the difference between financial accounts and management accounts, the different types of management information. Andi Example management accounting reports, which could be used or developed for budget monitoring purposes. If you go through all the lectures in this section, you will hopefully be able to consistently monitor and control your budgets with the information that you need on the techniques that you have learned in our previous sections . Let's start with what our financial accounts financial accounts report on the past, they stated organizations income expenditure for a specific period, usually a year, and also the assets and liabilities. At that particular point in time. The accounts are presented in two main financial statements called the income and expenditure account. On the balance sheet organizations have a legal requirement to produce annual financial accounts in a timely manner on meet specific standards, many of which are international standards. Most publicly funded organizations and required toe have their accounts independently audited. In order to ensure those funds have bean properly accounted for management accounts different, they report on the present and the future as well as the past. They reflected organizations, planned income and expenditure, usually in the form of a budget or a forecast or projection. The management accounts complete, presented in any format that an organization finds useful. Their purpose is to assist in implementation off the financial plan developed to support the achievement off the organisation's objectives. Management accounts complete produced at any time, depending on the accounting system being used. The frequency often depends on the nature of the service being delivered. First organizations produce monthly management accounts, but they could be produced weekly or quarterly. It is advisable that management accounts are produced, but there is not a legal requirement. Management accounts rely on accurate and complete financial accounting information in order to compare the past income and expenditure with the planned or future income expenditure for the same period. So both sets of accounts are very useful, but they have different uses and we summarize them below financial accounts. They're legally required. They have a standard format and they allow comparisons between different organizations. They provide historic information which could be relied upon Duncan be used to measure performance. They provide information on the financial standing of the organization and its future viability and sustainability. They could be used as a basis for making future plans on four decision making. On the other hand, management accounts are not legally required but very advisable. They could be designed to be used in a wide range of different ways for different staff between managers, budget holders, senior directors and so on. They provide regular information on the present, which can be used for the assessment of the future. On the impact off decision making they provide information on planned expenditure and income. Andi include commitment, accounting. They can be used to compare actual expenditure with budget Andi as a basis for projecting out turns. We've discussed all of these things in the previous lectures. There are many common factors between the finance and management accounts. These include the need for accurate and complete financial information. Transactions need to be processed in a timely manner. Accounting adjustments such as journals to correct errors, established provision, bad debts across and so on. These accounting terms are covered in our book called Finance for Nonfinancial. Public sector managers just visit our website for details. They need a proper level of financial governance to ensure financial procedures are being followed and to avoid fraud. They both need a good financial accounting system. Most organizations have one. Andi. They produce both the financial and management accounts. Now for a quick quiz. It is going to be easy, by the way. Just dropped down on a piece of paper. The answers to the following Where would you find the commitments? Where would you find out how much surplus the organization had made for the year? How could you find out how much your organization is worth? Where would you get the information? You need to project the out turn? The answers to this quiz can be found in one of the handouts attached to this course. 18. 18: there are many different types of monitoring the information that budget holders should refer to in order to control budgets. These are not all financial activity reports, quantity performance reports, quality employees, reports efficiency and effectiveness you and it costs reports efficiency income reports quantity. These reports can be produced on a regular basis to coincide with the management accounting information activity reports will be varied depending upon the type of activities undertaken to deliver the service. The budget told her, should know which of these activities drive their budget and develop the relevant activity report. For example, client numbers I was worked number of enquiries, number of applications, facilities and equipment usage occupancy rates. These reports will assist budget holders, explain on understand variances and inform protected out turned calculations. Performance measurement is usually against targets the target set, maybe internal or external, the information in performance reports, maybe a legislative or official requirement, or maybe just useful internally. In order to manage a service, the performance reports will often reflect the levels of activity, but in a comparative manner. This data me really to budget drivers and could be used to help understand the variances in the budget performance will include statistics on waiting times, processing times, unit costs covered a little later, customer satisfaction ratings and so on. Most organizations in the public and nonprofit sector will have a range off different types of employees, including permanent temporary contract and agency staff. Also, volunteers may be used to deliver aspects of services dependent on the nature of the service. Reporting hours worked is very useful to analyze how staff time has been deployed. This data can be calculated by using time sheets or other methods of wonderful staff time. Other employees reports will include attendance levels, vacancy rates, sick, this rate expense claims and so on. Being able to establish the cost of services is a key component off budget she control. We will look at the most basic unit cost calculation as an example subset the benefit off such reports can be understood. The cost on budget off a residential home for 50 residents per annum is one million the cost. Her resident is therefore 20,000. If the occupancy rate is only 40 residents for the year, then the cost per resident is 25,000. If the residential home keeps of in budget, there will be a new variants. However, a unit cost report, which are apparent off 5000 per resident, highlight in that whilst budgets have not mean over spent, there is a higher than planned unit cost, which could be due to inefficiency and waste activity reports also highlight this. This is a large topic, and we have a book on the subject costed in price in public sector services. Should further information be needed? Monitoring reports produced by the financial system will include income as well as expenditure. All the techniques already covered apply equally to income budgets. There are other reports which are also useful when monitoring income, including sales fees. Charges for months that her levels and analysis, sales fees, charges, prick lined or customer price per unit. Net income profits or surplus per unit grant application success rates grant claims made per month or quarter. Remember that shortfalls in income are the same as overspending on gains in income can equate to savings. Budget holders and managers should consider what types of report are most useful. Given a type of income, they have to monitor and control. Find out if you have enough management information to really understand your budget by undertaking the self development worksheet available to download 19. 19: In order to undertake effective budget monitoring in control, the budget holder will need some form off report. During our previous sessions, we have covered a range of different reports, all of which provide very useful information for budget monitoring in some organisations. The financial system will only produce a limited range of budget management report. The budget holder must decide which type of report is most useful to monitor and control their particular budget, they may need to develop their own report. In some cases, we will recap on the main styles of report in the followings Lights Parents reports These are many and varied on include monthly variances year to date variances, but a year compared to the projected out turn variances and comparisons of projected out turns months or months as variances. So decide what you want to monitor and design the appropriate report. All the variances give useful information and even if they are not available on a standard report, the budget holders should now be able to calculate them easily. There are other monitoring reports that are very useful, such as the budget remaining report. This shows the budget used to date against the total annual budget for the year on the budget Holder can then see how much budget is left to spend for the rest of the year. An example is given below. This is a month for report, and you might remember it from our previous lectures. Santer is year to date. Expenditure is 40,000 without any commitment on the budget used. Year to date is 40,000. Now. We're not doing the variance between the expenditure on budget. What we're calculating is how much of our budget do we have left for the rest of the year? And in this case, as the budget for the year is 120,000 we know we have 80,000 left to cover the remaining eight months off the year. If we look at the equipment budget, the expenditure is 4000 Onda. We have 2000 off committed expenditure, so the budget year to date that has been used and committed is 6000. This compared with the budget for the year of 12,000 leaves US 6000 for the rest of the year. On our trips, we can see that expended just so Faras 2000. But we have a commitment of 1500 showing that the budget used so far is 3500 against the annual budget of 6000. Gives it a budget remaining off 2500. This information allows the budget holder to plan for the next eight months how they're going to use their remaining budget. A report showing the unit cost variances is also their useful Onda. We will be covering this in a separate course. You have now come to the end of this section and hopefully you feel you can really take control. Having undertaken this course, you should understand the different techniques you can use to monitor and control your budget. You should also have a clear idea off the different financial management reports that will be useful to you. If there are any areas that you aren't quite clear about, please go back to previous lectures. I'm listening Game 20. 20: This is our final lecture and we're going Teoh give you a quick summary off what you have covered during the budget monitoring and control cause by HB Publications. We've covered all the areas that we set out in our introduction. And hopefully, if you're a budget holder, manager or person responsible for spending a budget, you have found this course very useful. This course has been targeted for those who work in organizations that a publicly funded or not for profit. However, the techniques and information contained in this course is universally applicable to any organization, including private businesses. We will quickly summarize the key points that we have covered in the following slides and then suggests a mech steps. For those of you who wish to continue learning, we started off by covering budget monitoring. We looked at what is a budget and why it should be monitored the steps in the monitoring process on how to establish actual expenditure. We also discussed the importance of monitoring income. We went on to explain commitment, accounting on then variance analysis a key technique in monitoring budgets. We went through lectures showing how to calculate a variance. The reasons for their Ince's and what to do about their Ince's budgetary control techniques and budget drivers was our next section, Onda. We discussed controllable and uncontrollable variances. How to take control action, how to calculate and understand projecting out terms on how to monitor control outcomes. Our final section discussed financial management information where we looked at the difference between financial and management accounts, budget monitoring reports and also discussed what was common between the tea. Well, what are the next steps? We really hope you have enjoyed this course and have found the content valuable with respect to monitoring and controlling budgets. Some of you may wish to have further reading on this topic, and we refer you to our book managing the developed budget, which is available in bookshops. And there's an e book from all leading retailers as well as our own website at www 0.8 b publications dot com. Remember, there are additional CPD points available for reading this book. We would then encourage you to undertake a self development activity and stubble have been suggested during this course. Revisit some of the lectures and consolidate your learning. Please look out for other courses by HB publications and also visit the above website to see the range of books available in our essential skills, Siris on our online assessments.