The variances reported in the final budget-to-actual comparisons incorporated in the financial statement of many governments...

The variances reported in the final budget-to-actual comparisons incorporated in the financial statement of many governments may be of no value in revealing the reliability of budget estimates made at the start of the year.

Why? How can you rationalize this limitation of the budget-to-actual comparisons?

Expert Solution

As we know that budget to actual comparisions are used for various objectives by the government but main motive are for meeting legal compliance or for identifying managerial efficiency or inefficiency on the basis of budget standards.

We know that difference between actual and budgeted need not to be disclosed in separate column by the entities as per GASB but it is done to measure the relevant differences and for making required corrective actions in real time. Thus most of the governments and organization throught the words involves in such practices and this looks quite resonable for measuring actual performance of the entity in compare to fixed standard budgets.

For every government, it is necessary to know the progress of financial performance time to time which can be measured on the basis of comparisions of final results and fixed standards. So finally we can say that such differences must be measured on the basis of final budgets.

ekkarill92 answered 1 year ago

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