Managing Budgets and Financial Plans - Adelaide City Council - Assignment Example

Name: Liu Xiaoye (Cecilia) Institution: Professor: Topic: Manage Budgets and Financial Plans Course: Date: Adelaide City Council 1. Adelaide City Council is a body responsible for managing all activities within the Adelaide City to ensure that it develops into a prosperous future city. The council is committed to ensuring that the city is vibrant in terms of accommodating the country’s residents as well as visitors. This is done through creation of a wide range of communities that actively take part in all sectors of city life (Walmsey & Walmsey, 2009, p. 122). As a result, the main goal of the council is to ensure that residents and visitors alike enjoy the beautiful open spaces and facilities of the Park Lands. This is meant to show respect for the Australian heritage, shape the future of the country as well as sustain the environment. The Adelaide Park Lands as a section for this discussion are a collection of parks that surround the city. The parklands form the location of public and cultural buildings. In the recent years, the council has drawn focus in redeveloping the parklands to ensure that they meet international standards (McMillan 2010, p. 22). For the purposes of meeting its goals, the council has put in place a number of strategies driven by outcomes that work to achieve the vision of the council. In the first place, the council works with the federal government with the belief of attaining a populous capacity city. On the other hand, the unique heritage, Parklands and the City Design is aimed at ensuring that the current and future populations lead a fulfilling lifestyle. As such, the council works on the improvement of the city transport and communication systems to ensure accessibility and connectedness of the city. This is in the lieu of finding economic stability of the city as well as maintains the culture of the people living within the city. Looking at the annual report of the Adelaide City Council, there are a number of aspects seen in the balance sheet and the income statement. The income statement has the income, expenses, operating surplus or deficit and other comprehensive income as indicated on the report attached on page 51. Contrary, the balance sheet has current assets, non-current assets, liabilities, and equity. This information found on the balance sheet and the income statement is important in understanding budget classifications based on the following: The data helps the council to establish the current financial position of the organization The amount of money moving in and out of the organization Future plans and forecasts on which sector of the organization has to be financed 2. Adelaide City Council has a formal budget policy based on the fact that the city of Adelaide is in the business of offering services to the community. This implies that there are resources that have to be safeguarded under the Asset Management Policy. This policy has a number of sections that differ in the procedure and timeline. However, it is implemented collectively under the urban service committee. The personnel responsible with its functionality are the Manager Asset Management Services (McMillan 2010, p. 39). A good example of the application and statement of this policy is the “Asset Accounting and Costing Policy”. The policy states that the organization shall adopt a number of policies as listed below: The organization will keep detailed asset registers on all assets owned or under its care and control The assets will be revalued at intervals of no greater than 5years using the deprival valuation as the basis Effective economic lives will be offered to each of these assets with the written down value and depreciation value determined according to the current applicable accounting regulations Refer to: http://www.adelaidecitycouncil.com/council/policies/ for policies The Adelaide Park Lands Section is a partnership project between the state government and the Adelaide City Council. As a result, these are the sole bodies that contribute to the budgeting process at the organization (McMillan 2010, p. 49). According to the annual report, the section is the main advisory body to the council and the state government. It has a responsibility to prepare and maintain the Adelaide Park Lands management strategy. This authority is presided over by the Lord Mayor Michael Harbison. Timeline for infrastructure and asset management plane; lighting electricity and CCTV Task No Task Responsibility Resource Required Timeline 1 Upgrade and Revise Capital Planning internal Annual 2 review of Maintenance Capital Planning $ Asset Management internal annual 3 Ongoing rolling program capital planning internal, Existing program Jun-09 4 Risk Analysis $ Planning Capital Planning $ Asset Management Internal Jun-09 5 Community Consultation Capital planning Internal Jun-10 For this kind of budgeting process, the templates provided are based on the Local Government Association Infrastructure and Asset Management Plan. This is provided by the LGA. 3. Responsibility Accounting Responsibility accounting is essentially the creation of responsibility centers within an organization. This are subsections with the manager being responsible for specific tasks to be accomplished at different level. In the case of Adelaide City Council, the organization charter has achieved this through the creation of committee to take care of diverse sections (TAFE Frontiers, 2003, p. 63). There is for instance the Corporate Planning, Governance and Finance Committee. The committee is responsible for making recommendations to the council on the general priorities, techniques and policies that involve efficient and accountable management of the City of Adelaide. Investment Center, Profit Center & Cost Center An investment center is a center gauged against its capital utility as opposed to the cost and profit centers that are established on the basis of their raw costs and profits respectively. A good example of a center that can serve as an investment, profit and cost center is the Library center, Schools and Adelaide Parkland Center. This is because the committee is accountable for advising the council on matters of fiscal movement in and out of the organization. Any forms of programs that have to be undertaken by the corporation seek its mandate for any possibility of revenue to be used. 4. As a manager in the Adelaide Park Lands section, I would initiate creation of a budget three months to the beginning of the new financial year. In the management of conflicting demands, I would consider the different seasons in which these demands come up. As a result, I would focus on the pre-order, order and delivery periods of the demands so that every client is satisfied with the services provided. The most important issues to address include determination of the projected sales for the budget year. In this case, I would have to determine the direct costs, for example, costs for material sales as well as fixed costs. Since the section deals with cultural heritage enrichment and buildings, my information received from stakeholders should include a breakdown of the fixed costs and overheads. I would require knowledge of the cost of premises that includes rent or mortgage, the cost of staff as well as utilities. These will form a bulk of my expenses. To minimize incidences of overlap due to the wide range of expenses, I will ensure the budget is divided according to departments within my section. Division of the budget based on departments will as well aid in management of conflicting demands as every individual manager will focus on the information within their departments (TAFE Frontiers, 2003, p. 77). 5. Variable Costs In this organization, an example of a variable cost is the cost for paying garbage collectors and casual employees. This is because the cost varies depending on the output of the worker. They may increase based on better performance or reduce as performance decreases (Nugus 2008, p. 213). Fixed costs Based on the income statement of Adelaide City Council, it can be deduced that contracts, rent, utility costs and other expenses are fixed costs. This is because the costs are non-dependent on the output (Nugus 2008, p. 192). On the statement, these costs have remained constant within the valuable range. Direct Costs On the other hand, the employee costs in the income balance sheet of Adelaide City Council can be termed as a direct cost. These are wages for the daily contracted employees. This is based on the fact that a direct cost is one that can be traced to a specific object, either goods or services. The employee costs can be traced to the kind of work they did for the corporation. Indirect costs On the same income balance sheet, we can say that depreciation, amortization & impairment costs are indirect costs since they don’t affect a direct object. They affect the entire corporation, implying that they are costs for the whole company and not a specific good or service (Jepson, 2004, p. 107). 6. In the negotiating and gaining approval of the budget, the budgeting committee of Adelaide City Council utilizes the performance-based budgeting. In this case, they incline on the mission and goals to give an explanation on why such an amount of money is being spent on a particular activity. Resources are allocated to a particular objective in such a way that the presiding or reviewing committee sees the end result of the program as beneficial to the organization. In this case, the budgeting officer explains to the stakeholders from the results, to the strategy that can be used to attain the end results before pointing out the output of the budget (Anandarajah, Aseervatham, Reid, A. and Reid H 2008, p. 97). This makes it easier for every member to be satisfied with the budget. In the effective management of finances, support for the team members emanates from incentives. This varies from the level or amount of wages they receive to the bonuses. Management of teams is done at department level in which the heads of departments take control of their specified teams to deliver high quality services to the council as a whole. 7. A schedule of collections for the three months ending September 2010 Sales for July, August and September will be: 90% of $ (205000, 280000, 350000) = $184000, $252000, and $315000 respectively. July collections July 50% of $ 184000 = $ 92000 June 40% of $ 303000 = $ 121200 May 10% of $ 282000 = $ 28200 Total July collections = $ 241400 August Collections August 50% of $ 252000 = $ 126000 July 40% of $ 184000 = $ 73600 June 10% of $ 303000 = $ 30300 Total August Collections = $ 229300 September Collections September 50% of $ 315000 = $ 157500 August 40% of $ 252000 = $ 100800 July 10% of $ 184000 = $ 18400 Total September Collections = $ 276700 Total collections for the three months = $ (241400 + 229300 + 276700) = $ 747400 Cash Budget July August September $ $ $ Beginning Bank Balance 136100 216500 282800 Cash Sales 20500 28000 35000 Collections of accounts receivable 241400 229300 276700 Total Cash 398000 473800 594500 Expected Expenses General Expenses 35000 40000 52000 Advertising 10000 12000 15000 Depreciation on Vehicles 12000 12000 12000 Utilities Expenses 6500 7700 8000 Motor Vehicle Expenses 35200 36100 35500 Superannuation 7500 5800 6020 Wages 75300 77400 79500 Total Cash expenses 181500 191000 208020 Ending bank balance 216500 282800 386480 Note: The collections of accounts receivable are correct since they have been taken from the calculation of the collection schedule for the three months. Kindly refer to the previous section. From the information given in the assignment, the advertising expense is 15000. I don’t see any problem with the figure used. Depreciation on vehicles is a loss on the side of the company and has been taken as an expense. Bibliography: Anandarajah, A., Aseervatham, A., Reid, A. and Reid H., 2008, Manage Budgets and Financial Plans: Managing Finance, California, Pearson Education Australia. TAFE Frontiers, 2003, Manage budgets and financial plans: Diploma of Business, Sidney, TAFE Frontiers. Jepson, J., 2004, Manage Budgets and Financial Plans, Australia, Software Publications Pty, Limited. Walmsey, B., & Walmsey, H., 2009, Manage budgets and financial plans, New York, Software Publications. Nugus, S., 2008, Financial Planning Using Excel: Forecasting, Planning and Budgeting Techniques, New York, Butterworth-Heinemann. McMillan, E.J., 2010, Not-For-Profit Budgeting and Financial Management, Chicago, John Wiley & Sons. Read More