# Sample Budget Analysis

> Fictional educational example. Amounts refer to the North Valley Special
> Education Cooperative and should not be used for a real budget.

## Executive finding

The adopted budget is balanced at **$4,550,000** of revenue and expense. The
current forecast is **$4,520,000** of revenue and **$4,547,000** of expense, a
forecasted **$27,000 deficit**. The headline is not simply that salary is under
budget. Vacancy savings of $90,000 are more than offset by a $115,000 contractor
overage, and restricted grant revenue is forecast $30,000 below budget.

## Revenue

| Source | Budget | Forecast | Variance | Interpretation |
| --- | ---: | ---: | ---: | --- |
| Five district contributions | $3,350,000 | $3,350,000 | $0 | Unrestricted service-fee revenue under the fictional member formula |
| State and IDEA grants | $1,000,000 | $970,000 | $(30,000) | Restricted; confirm eligible costs and award terms |
| Medicaid reimbursement | $160,000 | $160,000 | $0 | Documentation and collection timing remain a cash risk |
| Other | $40,000 | $40,000 | $0 | Small and not a solution to structural cost pressure |

Revenue recognized is not the same as cash collected. The quarterly district
schedule and reimbursement lag should be included in a separate cash forecast.

## Expense

- Salaries: $90,000 favorable, primarily vacancy-related.
- Benefits and payroll costs: $27,000 favorable, largely following the vacancy.
- Contracted services: $115,000 unfavorable from vacancy coverage.
- Assessment materials: $5,000 unfavorable from higher fictional volume.
- Technology: $5,000 unfavorable due to a security renewal.
- Insurance, legal, and audit: $2,000 unfavorable from privacy review.
- Other operating categories: $13,000 favorable in total.

The net staffing effect is not a $90,000 saving. Salary and benefit savings total
$117,000, while contractor overage is $115,000. The near-offset also ignores
continuity, supervision, recruitment, service quality, and allocation effects.

## Cost behavior

| Item | Direct / indirect | Cost behavior | Reason |
| --- | --- | --- | --- |
| Clinician assigned to one district | Direct | Step-fixed | Cost remains until another FTE threshold is crossed |
| Director and central administration | Indirect | Fixed within current scale | Supports all districts |
| Contractor day | Direct when traceable | Variable | Changes with days purchased |
| Mileage | Direct or allocated | Variable | Changes with travel |
| Shared security platform | Indirect | Fixed or step-fixed | License tier may change at thresholds |
| Assessment protocol | Direct when traceable | Variable | Changes with evaluation activity |

## Restrictions and availability

The state grant, IDEA pass-through, Medicaid-related revenue, and some grant-funded
development or technology costs require documented eligibility. “Restricted”
does not describe whether cash has arrived, and “unrestricted” does not mean
outside the adopted budget or governing policy.

## Questions requiring clarification

1. What accounting basis and fund structure does the report use?
2. Are all district receivables current and undisputed?
3. What portion of grant revenue is recognized, collected, encumbered, or at risk?
4. Which vacancy drives contractor use, and what is the expected fill date?
5. Do contractor rates include travel, supervision, records, and insurance?
6. Which costs are allocated by service usage versus the member formula?
7. What current liabilities and encumbrances are outside the budget-to-actual view?
8. What reserve and working-capital policies apply?
9. Does lower salary spending indicate any missed or delayed service?
10. What decision threshold requires governing-committee action on the forecast deficit?

## Recommended management actions

1. Add a monthly cash schedule for district and reimbursement timing.
2. Present salary, benefit, and contractor variances as one staffing bridge.
3. Confirm grant restrictions and the $30,000 forecast reduction.
4. Update expected, constrained, and growth scenarios after the recruitment decision date.
5. Report both financial and service implications to the governing committee.