|
What is a monthly financial
report and why is it necessary?
A monthly financial report is
a written document that creates a snapshot of an organization's
financial situation by reporting on its revenues and expenditures
(money in and money out). One of the goals of a monthly financial
report is to compare the monthly and year-to-date activity
against the amounts budgeted to ensure the municipality is
on track with its budget projections. If there are any areas
where the organization may be overspending or under-receiving,
this could require adjustments to the budget to ensure the
organization can still meet its goals.
Note: A monthly financial report
is not a verbal report by staff, or a look at the check register
and/or bank statement. It is a written report that categorizes
and summarizes information in an easy to understand format
that compares the budget to what is actually happening.
Who is responsible for preparing
the monthly financial reports?
Under state law (AS
29.20.500(4)) the
chief executive officer (mayor or manager if manager form
of government) is responsible for making monthly financial
and other reports required by the governing body. Typically,
the actual preparation of a monthly financial report is assigned
to the bookkeeping staff or treasurer to prepare. Ultimate
responsibility for ensuring this is done accurately and on
time, however, remains with the chief executive officer.
How much information should
be included in a monthly financial report?
The governing body decides exactly
how much detail they want to see and what information should
be brought to their attention. Detailed financial reports
can become confusing and difficult to understand. On the other
hand, generalized reports often leave out the details needed
to identify potential financial problems. It is possible to
personalize your organization's reports so they provide enough
detail to keep the governing body sufficiently informed, but
do not overwhelm the reader with too much detail that hasn't
been summarized appropriately.
How do you prepare a monthly
financial report?
The key to creating a good financial
report is in your record keeping. If the 'books of original
entry' are set up well and maintained, there should never
be an acceptable reason for a report not being available.
The report is based on the information contained in the budget
and summarized information on what financial transactions
have taken place for the month. If the records are well maintained
and carefully updated as each transaction occurs, all that
is required is some simple addition and updating the appropriate
report items. The "Model Financial Record Keeping System" Manual
(Commerce) provides detailed information on all aspects of managing
municipal finances and record keeping.
What standard information
should the governing body see in the monthly reports?
There are many types of financial
reports. The most common type of financial report is a simple
comparison of revenues and expenditures. (This type of report
when used in business is often called a "profit and loss
statement.") Since the business of government is not
to generate profit, the purpose of a report to a governing
body is to keep them informed and ensure that the finances
are adequate to provide the services and accomplish the goals
identified for the fiscal year. A monthly financial report
to a local government should at a minimum compare actual revenues
and expenditures with the amounts budgeted.
The standard report format recommended
for use by local governments is a report by department or
project/service and line item and includes the following information:
- Budget amount;
- Activity for the month;
- The total amount year to
date; and
- The difference between the
year-to-date amount and the budgeted amount (balance remaining).
Should a financial report
be provided at every meeting?
If your local governing body
holds more than one meeting a month, it is not necessary to
see a monthly financial report at each meeting. The governing
body decides this. A monthly financial report, however, is
required once a month at the regular meeting. Either way,
the administrator needs to have financial information available
for the governing body at any meeting where they might have
to allocate funds or make financial decisions.
|
