The City of Columbia, SC has identified critical concerns and developed a strategic plan to achieve its goals. Columbia has submitted its annual budget for FY 2013-2014. The budgeted and actual expenditures; and revenues have been reviewed. A variance analysis was done to determine how expenditures and revenues have proceeded through the first quarter. A “Variance is the difference between what is budgeted and what is spent” (p. 129) There are (2) two problematic areas of the budget which have been identified and recommendations for correcting these issues will be discussed.
The first problematic area in the first quarter of FY 2013-2014 is in the area of revenues. The variance analysis shows that the revenues are coming in slightly lower than expected. The end of the first month shows that Interest on Investments is down by $131,000. Additionally, at the end of the first month only 7% of the Interest on Investments has been recorded instead of 8.33% or 1/12th of the revenues, however overall revenues are at 8%. By the end of the first quarter Local Sales Tax and Interest on Investment line items are below the expected totals. These line items are 18% of the budgeted amount. The 3 month expectation is that the budgeted amount should be at 25%. Overall revenues are down $272,000; however the overall revenues have remained on track and are at 25% of the total budget.
The sources of the reduced revenues are Local Sales Tax and Interest on Investment has been affected by the economy. Investments have not performed as expected and sales are off resulting in lower sales tax revenue. The first policy adjustment to assure that the lack of revenues from these two budget items does not create a deficit at the end of the year is to require monthly financial statements from al l departments. This requirement will give the budget
analysts the ability to report to Department Heads and increase in deficits that will cause problem for the City.
It is essential that the City maintain adequate levels of cash balances to mitigate risks such as unanticipated revenue shortfalls and emergency spending. Cash balance levels are also a crucial consideration in long-range financial planning. As a result the City should establish a minimum reserve amount to assure that general expenditures and revenues can be balanced. This Rainy Day Fund should be limited to replacing unanticipated declines in revenues and emergencies as determined by the City Council. The...