What happens when you are off on your budget? How do you handle the variances? What is the difference between a favorable and unfavorable variance? Solution Answer: Off-budget is the revenue and spending of certain Federal entities that Congress wants to protect from the normal budget process. \"On-budget\" includes these entities, and is the total amount reported in the Federal \"unified\" budget. Off-budget spending is excluded from budget caps, sequestration, and pay-as-you-go requirements. Examples The three main entities that are off-budget are the Social Security Trust Fund, the U.S. Postal Service, and Fannie Mae and Freddie Mac. Variance Analysis: A variance arises when there is a difference between actual and budget cost.They indicate whether and to what extent standards set have been achieved . Variances can be either: A favourable variance :If the actual cost is less than than standard cost, the difference is known as favourable variance,credit variance or positive variance denoted by (F) or (Cr.)- it increases the profit. A Unfavourable variance: If the actual cost exceeds standard cost, the difference is known as unfavourable variance,dedit variance or negative variance denoted by (A) or (Dr.)- it decreases the profit. The significance of a variance will depend on factors such as: .