Financial Statements Variance Analysis

1
Financial Statements Variance Analysis

• Presented by
• Jeni Halpern

2
Purpose of Analysis

• To inform readers and decision makers
• To provide accurate financial information
• Supports data to be included in the Financial
  Statement Highlights in the MDA (Management
  Discussion and Analysis) section of the PAR
  (Performance and Accountability Report).

3
Financial Statements

• Statements to Analyze
• Balance Sheet
• Statement of Net Cost
• Statement of Changes in Net Position
• Statement of Budgetary Resources

4
Criteria for Analysis

• Use Reporting Center reports see example (A)
• Select criteria for report Balance Sheet
  example (B)
• Run report and add column for Notes number and
  rows for explanations- example (C)
• Determine criteria for explanations 10 and
  25million.

5
Example A
6
Example B
7
Example C-1
8
Example C-2
9
Prepare for Analysis

• For each line of the financial statement selected
  for analysis
• Query the database to get to the level of detail
  necessary to extract transactions or accounts
  that make up the value.
• Example of reports available to assist in the
  analysis
• Crosswalk Trial Balance by General Ledger
  account.
• Trial Balance by General Ledger for the
  account.
• Brio query for transaction detail.
• Paper document for support of entry.

10
Analyze

• Compare amounts for each period.
• Identify components of variances.
• Summarize in words reasons for all components of
  the variance ( and - ). Explain why amounts are
  different not just increased or decreased.
  This is visible but doesnt explain. Understand
  it and teach it
• Spell out words do not use acronyms.
• (Continued)

11
Analyze

• FSA Accounts Receivable - Line 1 - Sample
  explanation
• A reduction of 30million in receivables with
  Treasury in the Direct Financing Account. This
  was due to a change in the calculation method for
  a more precise calculation of interest due from
  Treasury. In 2004 the receivable was based on an
  estimate for the entire year/4 and the 2005
  receivable was calculated with the Credit
  Calculator Tool (CCT) an OMB tool previously used
  to calculate interest only at year end.
• An 8 million reduction for cash in transit with
  CCC, this is a timing difference.
• (continued)

12
Analyze

• (Continued)
• An increase of 14million of administrative
  receivables consisting mainly of accrued rent.
  This was due to the installation of PCAS (a
  receivable billing system) and it was decided not
  to bill until installation of the system was
  completed in April 2005.

13
Analysis results

• Review analysis and correct errors as necessary.
• Review and analyze results to confirm agency
  activities for the period.
• Communicate results to Management.
• Supports data to be included in the Financial
  Statement Highlights in the MDA.

14
OCFO Processes

• Review accuracy of financial statements received
  from agencies.
• Read and understand variance analysis submitted.
• Apply criteria for variances to the consolidated
  financial statements (10 and 25 million).
• Include agency explanations in the Financial
  Statement Highlights of the MDA section of the
  PAR that meet consolidated financial statement
  criteria example.

15
Financial Statement Highlights FY 2004

• Budgetary Resources and Outlays
• USDA receives most of its funding from
  appropriations authorized by Congress that are
  administered by the Treasury Department. Total
  resources consist of the balance at the beginning
  of the year, appropriations received during the
  year, spending authority from offsetting
  collections and other budgetary resources.

 
continued
16
Financial Statement Highlights FY 2004

• Restatement
• In Fiscal 2004, Treasury issued updated
  requirements for reporting Cash Held Outside of
  Treasury. Treasury does not consider the Escrow
  Account Balances as outlays until the funds are
  transferred from the Escrow account to reimburse
  outside parties. This change impacted the Risk
  Management Agency in that a restatement of the
  2004 and 2003 Statement of Budgetary Resources
  and a reclassification in the Balance Sheet in
  Fiscal 2004 and 2003 needed to be made.
• The Escrow account balance _at_ 9/30/2002
  (beginning balance in 2003) was 116million,
  100million _at_ 9/30/2003 and 83million _at_
  9/30/2004.
• In Fiscal 2003, 100 million was reclassified on
  the Balance Sheet from Other Assets to Cash Held
  Outside of Treasury (Cash and Other Monetary
  Assets). On the Statement of Budgetary Resources
  a restatement of the fiscal year 2003 beginning
  obligated and unobligated balances (116million)
  and net outlays of 16million (116 less 100)
  was made. In Fiscal 2004, the beginning obligated
  balance was restated on the Statement of
  Budgetary Resources by 100 million.

 
continued
17
Financial Statement Highlights FY 2004

Analysis of Resources In Fiscal 2004, Commodity
Credit Corporation received an increase in
appropriation of 5.2 billion from the prior
Fiscal year. The increase related to expenses
attributable to the 2002 Farm Bill that were
17.7 billion in fiscal 2002. These expenses were
reimbursed by appropriations in fiscal 2003, and,
expenses of 22.9 billion for fiscal 2003 were
reimbursed in fiscal 2004. The Food and
Nutrition Service agency experienced a
significant increase in two of its major programs
that resulted in a 5.3 billion increase in
appropriations in Fiscal 2004. 86 of the
increase is attributable to the Food Stamp
Program due to growth and 14 of the increase is
in Child Nutrition Programs for meal services and
also higher food costs
 
continued
18
Financial Statement Highlights FY 2004

• Presented below are some key components of USDA
  Balance Sheet for comparison and analysis.
• Assets

 
19
Financial Statement Highlights FY 2004

• Fund Balance with Treasury
• Congressional appropriations are the primary
  funding source for USDA operations.
• Appropriations are used to fund programs and are
  available to pay current liabilities and finance
  authorized purchase commitments. Funds received
  and disbursed are generally processed by the U.S.
  Treasury.
• Cash and Other Monetary Assets
• Cash and Other Monetary Assets consist mainly of
  funds held in escrow to pay property taxes and
  insurance for housing borrowers, loan repayments
  and excess reserves from fee-for-service
  programs.
• In Fiscal 2004 the Commodity Credit Corporation
  recorded their Undeposited Collections as
  Receivables. The Undeposited Collections in
  Fiscal 2003 were classified in Cash and Other
  Monetary Assets. This created a reduction of
  51million in Fiscal 2004 Cash and Other Monetary
  Assets.

20
Financial Statement Highlights- FY 2004

• Accounts Receivable
• Accounts Receivable includes both,
  intra-governmental and with the Public.
• As of September 30,2004 Commodity Credit
  Corporation recorded 372 million in receivables
  due from producers. This amount represents
  overpayments of 2003 counter-cyclical payments.
  Advance payments were made in January 2004.
  Subsequent to that, market prices rose, thereby
  eliminating the need for the program subsidy
  payments.
• The Direct and Counter-Cyclical Program, the
  Peanut Quota Buyout and Milk Income Loss Contract
  Program are all programs that support producers
  for market price fluctuations and crop
  production.

21
Financial Statement Highlights- FY 2004

• The Risk Management Agency Producer Premium
  revenue increased by 341 million due to
  increased interest in the Crop Revenue Coverage
  insurance plan. The plan covers losses in revenue
  in addition to loss in production. Producer
  Premium is the of Premium paid by the Farmer or
  Rancher. The percent charged to the Farmer or
  Rancher is approximately 40.