A variance is the difference between actual and budgeted income and expenditure. Therefore, at the University, we only get variances in GL (General Ledger) on Chest funded activities.
For all other sources of funds budgetary control will be implemented by recognising and resolving surpluses or deficits.
Adverse and Favourable Variances
An adverse variance is where actual income is less than budget, or actual expenditure is more than budget. This is the same as a deficit where expenditure exceeds the available income.
A favourable variance is where actual income is more than budget, or actual expenditure is less than budget. This is the same as a surplus where expenditure is less than the available income.
When should I investigate and resolve a variance?
A variance (or surplus or deficit) should be investigated and resolved when it is significant.
Unfortunately significance is not absolute, it does depend upon context. What is significant to a department may not be significant for the University which has a total annual expenditure in excess of £600m. For departments we recommend that variances of 10% or £1,000 are treated as significant. However departments are free to set their own limits higher or lower than this, and to have different limits for different types of income or expenditure.