Variance Analysis - The City of Memphis

Variance Analysis - The City of Memphis

Introduction

The City of Memphis is an agency providing one of the best public services to the citizens and visitors of the Tennessee state of US. It was incorporated in 1826 (Annual Report, 2012). The agency is providing services to its citizen & visitors such as holding elections for Mayor of the state, collection of real as well as personal property taxes, promulgation of the laws governing city and other services. The City works as an intermediary between the government and the citizens so as to facilitate the general public and strengthen the relationship & communication between them.

Apart from all the aforementioned services the City provides, it also provides a complete range of municipal services to its citizens. It includes all those kind of services that can make a society civilized and human-friendly. In order to provide all these services, the City administration continuously strives to achieve their goals & missions consistently. These all efforts initiates with a comprehensive planning & budgeting. And analysis such as variance analysis helps to identify the gaps between what is forecasted and what is actual. It helps the agency by providing information as a feedback and assist in building themselves better.

All the data is extracted and employed for the variance analysis from the Annual Report of the City of Memphis duly for the year 2012.

Importance of Variance Analysis

It is very rare that expectations meet reality when it comes to numbers. There is always remained a difference between the expected value and the actual outcome i.e. variance. Variance analysis is a complete process of identifying the gaps & causes between the actual performance & the forecasted values (Crosson & Needles, 2011). Variance analysis process outlines the various steps through which management & administration identify the variances & appropriate remedial actions are drafted and implemented.

Figure 1: Variance Analysis Process (Crosson & Needles, 2011, pp. 350)

It is easy to calculate the quantitative differences however, it is much difficult to know about qualitative reasons for such numerical differences (Chen et. al., 2008).

Variance Analysis of the City of Memphis - 2013

FY'13 (Adopted)

FY'13 (Forecasted)

Variance (in $)

Variance (in %)

Revenues

Local Taxes

$524628364

$520420170

-4208194

-0.808614701

State Taxes

$55660114

$67888185

12228071

18.0120753

Licenses and Privileges

$10482191

$10777220

295029

2.737524148

Fines and Forfeitures

$15180100

$14916908

-263192

-1.764387097

Charges for Services

$251051326

$252103212

1051886

0.417244188

Health Premium Revenues

$122126931

$126443376

4316445

3.413737545

Transfers

$151618533

$152142357

523824

0.344298597

Other Revenues

$15855253

$20389867

4534614

22.23954673

Proceeds from Refunding Bonds

$0

$0

0

-

Planning and Development Grants Revenue

$6823298

$4521843

-2301455

-50.89639335

Total Revenues

$1153426110

$1169603138

16177028

1.383121118

Expenditures

Personnel

$491487588

$487289444

-4198144

-0.861529847

Materials & Supplies

$190643849

$167955399

-22688450

-13.50861606

Capital Outlay

$7253119

$6973156

-279963

-4.014867873

Grants & Subsidies

$115094937

$91709499

-23385438

-25.49947198

Inventory

$28600206

$24899786

-3700420

-14.86125222

Transfer Out

$69804748

$94410413

24605665

26.06244822

Claims Incurred

$108238032

$111792761

3554729

3.179748821

Redemption of Serial Bonds and Notes

$70168036

$70168036

0

0

Interest

$75872718

$84550440

8677722

10.26336705

Other Expenditures

$8855583

$27363877

18508294

67.63768891

Retirement of Refunded Debt

$0

$0

0

-

Planning And Development Grant Expenditures

$6823298

$4262000

-2561298

-60.09615204

Gain (Loss) on Sale of Asset

$0

$0

0

-

Miscellaneous Expense GF

$0

$0

0

-

Total Expenditures

$1172842114

$1171463496

-1378618

-0.117683394

Table 1.0: Variance Analysis (Data retrieved from City's Operational Budget, 2014)

Evaluation of Results & Identification of Problematic Areas

Because the year 2013 is not yet completed, variance cannot be calculated by comparing with the budgeted amounts. The aforementioned table therefore calculates the variance between the adopted budget and the forecasted budget. The variance between the adopted and the forecasted budget will reveal the validity of the forecasting models that the agency utilizes and the rationale-based additions or subtractions in it i.e. adopted budget.

Taking revenues first, the significant differences can be seen in three ...