Olympic accounting authority- Cost control systems

Résumé du document

In your role as head management accountant, you have been asked to prepare a report for your new junior colleagues in the organization who are new to accounting and have little management accounting experience. In your report you may decide to focus upon a broad range of issues relevant to the topic. Alternatively, you may decide to focus your report on one particular aspect of management accounting which you think is of crucial importance to the Olympics. In 2006 the Olympic committee has decided to dedicate £400 billion in order to establish a Cost Control system. This system is compounded of two core elements: a planning process and a responsibility accounting scheme. The planning process requires enumerating the Olympic committee plans of action, which are the construction of an Olympic Park, the improvement of the transports, the development of sustainable issues, the celebration of cultures and the organization of the security; all those plans must then be implemented and cost.

Extraits

[...] In the case of the Olympic Games this preparation has been led by the Department for Culture Media and Sport, with input from the Delivery Authority and the Treasury. One of the major plan of action is the creation of the Olympic Park in East London which will house the sport venues (an Olympic stadium, aquatic facilities, a Velodrome, Hockey Handball and Basket-Ball arenas), and provide accommodations for the athletes. The other action plans concern the improvement of the transports to and from the Lower Lea Valley, the development of sustainable issues for the construction of the infrastructures, the celebration of the cultures (festivals, exhibition programs, ceremonies and the setting of the security during the Games Implementation The implementation is a key element of the budget since any delay in the actions of the Olympic committee can be disastrous for the organization of the Games. [...]

[...] Once the variances are analyzed, some remedial actions can be led to reduce the actual cost. Conclusion By setting a cost budget and creating a responsibility accounting system, the Olympic committee will be able to ensure an effective Cost Control. However responsibility accounting is based on the controllability principle, which means that Management accountants should be held responsible only for the results they can control. In other words, it is suitable to charge to a responsibility center only the costs that can be influenced by the manager of that center. [...]

[...] This system is compounded of two core elements: a planning process and a responsibility accounting scheme. The planning process requires enumerating the Olympic committee plans of action, which are the construction of an Olympic Park, the improvement of the transports, the development of sustainable issues, the celebration of cultures and the organization of the security; all those plans must then be implemented and cost. The Olympic Games set up being the unique output; a job costing system appears to be the most suitable. [...]

[...] Responsibility accounting involves the creation of units called responsibility centers, which have control over costs in the organization. The Olympic Committee has created three responsibility centers: the Olympic costs center administered by the Olympic Delivery Authority, the staging costs center administered by the London 2012 Organizing Committee, and a wider costs center administered by the mayor of London and the Department for Culture Media and Sport. Performance reports in each of these centers permit to compare actual and budgeted costs. [...]

[...] In order to remove the effects of those uncontrollable factors, I would recommend the Olympic committee the use of “flexible budgets“. References Books -Management Accounting, by Copeland and Dascher, Hamilton Publishing Company -Management Accounting for Business, by Dury, 3rd Edition. [...]