Skip to content
EMPOBase
en

How to run a budget vs actual review for a grant

By the EMPOBase team · · 4 min read

Short answer

A budget vs actual review compares what a grant planned to spend with what it has spent and committed, line by line, for a period. Pull the approved budget, the posted actuals and the open commitments, calculate the variance and burn rate for each line, then explain any line outside your tolerance. End with actions: reallocate, speed up, slow down or ask the donor.

Key points

  • Compare budget, actuals and commitments; actuals alone hide money already promised.
  • Set a tolerance, such as 10%, and explain only the lines outside it.
  • Read variances against time elapsed, not only against the total budget.
  • Every review ends with named actions and dates.

Why the review matters

A grant budget is a promise to a donor. A budget vs actual review tells you, early, whether you are keeping it. Overspending one line can make costs ineligible. Underspending can mean activities are late, or that the donor reduces the next payment. Both are easier to fix in month four than in month eleven.

What do you compare?

Use three figures for each budget line:

FigureWhat it meansWhere it comes from
BudgetThe approved amount for the lineThe signed grant budget, plus approved revisions
ActualWhat has been spent and postedThe ledger, for this grant and line
CommitmentWhat is promised but not yet paidOpen purchase orders and contracts

Available = Budget − Actual − Commitment. Many teams forget commitments. A line can look healthy on actuals alone while a large purchase order is about to land.

Step-by-step review

  1. Fix the period. Choose a cut-off date and make sure the month’s entries are posted. A review on half-posted data wastes time.
  2. Pull the figures. For each line, list budget, actual to date, commitments and available balance.
  3. Calculate variance. Variance = budget to date − actual to date. Show it as an amount and a percentage.
  4. Calculate burn rate. Compare the percentage of budget spent with the percentage of the grant period passed.
  5. Apply a tolerance. Agree a threshold, for example 10% or a fixed amount. Only lines outside it need an explanation.
  6. Explain each flagged line. Ask the budget holder why. Typical reasons: activity delay, price change, exchange rate movement, a cost charged to the wrong line.
  7. Decide actions. For each flagged line, record one action, an owner and a date.

How to read a variance

A variance is a question, not an answer. Read it against time and activity:

  • Underspend with late activities means delivery is behind. Look at the work plan, not the budget.
  • Underspend with activities on time may mean prices were lower. You may reallocate, if the donor allows it.
  • Overspend early in the grant may be planned (for example, equipment bought in month one). Check the spending profile.
  • Overspend on staff lines often comes from salary changes or wrong time charging. Check the timesheets.
  • Large swings month to month often mean entries are posted late or to the wrong line.

What should the output look like?

Keep the output short so managers read it:

  1. One table: each budget line with budget, actual, commitment, available, variance and burn rate.
  2. A list of flagged lines with a one-sentence explanation each.
  3. Actions with owners and dates.
  4. Any line that needs a donor conversation, flagged clearly.

File it with the period’s other grant records so the next review starts from the last one’s actions. Our article on spotting an underspending grant early covers warning signs between reviews.

A worked example

Take a 12-month grant, six months in. The training line has a budget of 40,000 for the year, so the budget to date is about 20,000 if spending is even. Actuals are 9,000 and open commitments are 6,000.

  • Variance to date: 20,000 − 9,000 = 11,000 under budget (55%).
  • Burn rate: 22.5% of the line spent after 50% of the time.
  • Available for the rest of the year: 40,000 − 9,000 − 6,000 = 25,000.

The budget holder explains that two training rounds moved to month seven because of the rainy season, and the venue contracts (the 6,000 commitment) are already signed. The action is not to move money. It is to confirm the new training dates in the work plan and check the line again next month. If the trainings slip again, the team discusses a budget revision with the donor before month nine.

Without the commitment figure, the line would look 31,000 underspent, and someone might move money away from it, just before the venue invoices arrive.

Common mistakes

  • Comparing actuals with the total budget instead of the budget to date.
  • Ignoring commitments, then being surprised by a large invoice.
  • Treating exchange rate movements as overspend without separating them out.
  • Running the review in finance alone. The budget holder knows why the numbers moved.

Where EMPOBase fits

In EMPOBase, Finance keeps line-item budgets per project and per grant. Budget vs Actual updates as purchases are committed and journals post, and Restricted Funds show what is spent, committed and still available per award. Each ledger line can carry a project, a grant budget line and a fund, so one posting serves all three views. The ledger is for project and grant control; it does not replace your statutory accounts. Read more on the procure-to-pay workflow page, or see what EMPOBase covers and where it stops.

Questions people ask

How often should we run a budget vs actual review?

Monthly for most grants. A short monthly review catches problems while you can still fix them. Add a deeper review each quarter, before donor reports.

What is a burn rate?

The burn rate is the share of the budget spent compared with the share of time passed. Spending 30% of a budget after 50% of the grant period suggests underspending.

Do we need donor approval to move money between budget lines?

It depends on the agreement. Many donors allow small moves within a percentage limit and ask for approval above it. Check the agreement before you move funds.