Auxiliary Standard Operating Procedures


SUBJECT:

Quarterly Variance Analysis

SOURCE:

Auxiliary Accounting, Financial Management Services

DATE ISSUED:

September 2005

DATE OF LAST REVISION:

May 2012

ASOP NO:

17.0

RATIONALE:

The purpose of this ASOP is to assist reporting auxiliary organizations (see ASOP 2.0) in understanding the requirements of the Quarterly Variance Analysis process. Each quarter, the financial statements of every reporting auxiliary organization are reviewed by the Auxiliary Senior Executive Team (ASET). The ASET team is comprised of representative senior administrators from each campus. The Quarterly Variance Analysis is a tool that is used to explain significant variances in the financial statements of each organization reviewed by the ASET committee. It is also used as a tool to explain any variances that impact the university financial statements.

 

The Quarterly Variance Analysis is reviewed by Auxiliary Accounting. After the review and any subsequent follow-up concerns are cleared, Auxiliary Accounting uses the Quarterly Variance Analysis responses to update the ASET committee.

ASOP:

I.  General Timing of the Quarterly Variance Analysis

 

It is mandatory that reporting auxiliary organizations complete the Quarterly Variance Analysis and submit to Auxiliary Accounting within five business days after the close of each fiscal quarter.

NOTE: In addition, organizations should also send a copy to their campus administrator.

A reminder will be sent through the auxiliary listserv at the end of each quarter to remind organizations of the deadlines for submitting the variance analysis. To subscribe to mailing list, click here.

 

II.   Required Documentation to submit to Auxiliary Accounting

 

A detailed document is posted to the Auxiliary Accounting website that provides step-by-step instructions on completing the Quarterly Variance Analysis. In short, the organization must run the PDQ Generator report for their organization including the Balance Sheet, Balance Sheet Executive Summary, and the Income Statement.

After running the PDQ, all variances to be explained will be highlighted on the financial statements. All explanations for variances should be written to the right of the highlighted variance on the excel document. All explanations should be as detailed as possible.

Please note that all reporting auxiliary organizations are required to submit financial statements even if there are no variances above the calculated materiality level. In such cases, the financial statements should be sent to the appropriate campus administrator and auxiliary accounting with note explaining that there are no variances that meet the reporting criteria.

Once the variance explanations are complete, send the file to the Auxiliary Inbox at auxacct@iu.edu and to your campus administrator.

 

III.  Appropriate Variance Explanations


The explanation of variances should be quantified with dollar amounts or percentages. Appropriate explanations will provide details of WHY the variance occurred.

  • If the variance is mainly related to a transaction(s), then please indicate the relevant amount(s), document #s, and / or other details specific to the transaction.
  • If the variance is related to a change in business conditions/operations, then please note the change and quantify the effect, if possible.
  • If the variance was due to an accounting error, please provide as much detail possible for the related transactions.

If explanations are not sufficient, the reporting auxiliary organization will receive follow-up questions from their auxiliary consultant.

 

Examples of Appropriate Explanations

 

1. Accounts Receivable

 

Actual                    Prior Year           Variance

$400,000                $325,000              $75,000

 

ExplanationIn the fiscal year, we began doing business with ABC company. On 06/30, this company had a $63,500 Invoice outstanding.

 

2. Accounts Payable

 

Actual                    Prior Year          Variance

$250,000                $500,000             ($250,000)

 

ExplanationWe purchased a $200,000 machine in May FY11, the invoice for which was not paid until FY12.

 

3.Sales & Services

 

  Actual                Budget                Variance

$50,000                $40,000                 $10,000

 

ExplanationIncrease in occupancy from 285 to 320.  Also a 3% increase in rates was implemented.

 

4. Supplies & Expenses

 

 Actual                 Budget                   Variance

$2,500,000          $3,000,000             ($500,000)

 

ExplanationReceived unexpected discounts of 15% on supplies purchased for X program.

CROSS

REFERENCE:

ASOP 2.0 - Definition of a Reporting Auxiliary/Service Center

Auxiliary Quarterly Variance Analysis Instructions
Who is my Auxiliary Consultant?
Campus Administrators
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RESPONSIBLE

ORGANIZATION:

 

Auxiliary Accounting, Financial Management Services