Analysis of Direct Costs Affected by Changes in Sales Volume

This report provides an analysis of the City of London's budget and pension scheme costs for the years 2014-2015 and 2015-2016. The report highlights the challenges faced in managing the budget, including estimating future resources, handling complexity and uncertainty, and controlling operational expenses. To address these challenges, the city has developed strategies such as supplementary planning documents, community infrastructure levy, evidence base, statement of community involvement, and local development scheme for reviewing the local plan strategy. The report also provides an overview of the pension scheme costs, including investment management costs, non-property investment, property investment, and total expenditure. Additionally, it highlights the importance of financial statement analysis in understanding the city's budget and pension scheme costs.

The OPERATING BUDGET
Student
[Company name] [Company address]

Table of Contents
Introduction.................................................................................................................................................2
About the agency....................................................................................................................................2
Mission Goals..........................................................................................................................................2
Objectives................................................................................................................................................2
Departments............................................................................................................................................2
Strategic plan...........................................................................................................................................2
Budget of the agency...................................................................................................................................3
Financial summary...................................................................................................................................3
Department budgets...............................................................................................................................3
Funding....................................................................................................................................................4
Capital projects........................................................................................................................................4
Debt administration.................................................................................................................................4
Cost analysis................................................................................................................................................5
Fixed costs...............................................................................................................................................5
Step-fixed costs.......................................................................................................................................5
Variable costs..........................................................................................................................................5
Challenges for managing the budget...........................................................................................................6
Strategies for reviewing...............................................................................................................................6
References...................................................................................................................................................8
Appendix.....................................................................................................................................................9
Existing financial plan..............................................................................................................................9

Introduction
In the present paper, the operating budget of local government agency is prepared. The
operating budget is organized by addressing the financial summary, budget of different
departments, sources of funding, capital projects, and debt administration. The cost analysis is
also done which includes fixed costs, step-fixed costs, and variable costs. It also explains the
strategies, challenges faced while managing the budget and the existing financial plan. The
agency selected for preparing operating budget is City of London, UK.
The main idea behind this paper is to examine, proposing and preparing an operating budget for
the next five years.
About the agency
The city of London is a distinct diverse organization and it plays an important role and wide
remittance which is beyond an ordinary local authority. The corporation is older than the
parliament and it is a key provider of the services. It is headed by Lord Mayor.
Mission Goals
The mission of an organization includes mainly three aims. Firstly, to support and promote the
country as the world’s leading financial and business Centre. Secondly, to increase an
employment, opportunities and skills through working in a partnership. Thirdly, to enhance the
culture, green spaces and its history.
Objectives
The objective of the company includes: promoting opportunities, working with the community,
enhancing, protecting and promoting an environment, vibrant and culture rich city, and a safer
and strong city.
Departments
The city of London in headed under three departments namely: corporate department, service
department, institutional department. The chamberlains of corporate department is Peter kane,
the service department is directed by Ade adetosoye and the institutional department is managed
by Nicholas Kenyon.
Strategic plan
The plans and policies set their vision and strategy to shape the square mile. The local plan
which includes schedule of modification added to the notice. The planning strategy in the period
of 2026 which includes policies map which swaps the core London strategy of 2011 and unitary
development plan 2002. The London strategic housing land availability assessment strategy is

used for new local plan. The equality and inclusion strategy is adopted by the company which
aims to provide respectful, inclusive, and without partiality environment.
Budget of the agency
The budget of the agency includes the information of statements of accounts, annual audit letters,
summary budget and annual statement of governance.
Financial summary
The financial summary is described as the summarization report of the company which shows
the how the funds used by the company is entrusted to the owners and creditors. It reflects the
financial position of the company.
Following is the financial summary of the city of London:
Financial summary
Particulars 2014-15 2014-15 2015-16
City fund
Gross expenditure 363.5 394.7 372.6
Net expenditure
before government
104.7 107.3 101.6
Grants and taxes
Government grants
and taxes
110.4 110.7 101.8
Surplus to reserves 5.7 3.4 0.2
City cash
Gross revenue
expenditure
167.1 182.6 175.4
Net revenue income 159 170.5 166
Operating deficit 8.1 12.1 9.4
Profit on assets sales 2.0 11.4
Deficit from reserves 6.1 0.7 2.6
Budget housing
estates
Gross expenditure 38.3 45.1 40.8
Gross income 41.1 43.5 44.4
Deficit from reserves (2.8) 1.6 (3.6)
Department budgets
Following is the department budget:
Particulars 2014-15 2014-15 2015-16
City fund

Gross expenditure 363.5 394.7 372.6
Citi fund summary
Net expenditure
2014-15 2014-15 2015-16
Barbican Centre 24.0 24.9 25.0
Barbican residential 0.1 0.9 1.0
Community and
children services
11.2 11.9 11.4
Culture heritage and
libraries
20.1 20.2 20.1
Finance (7.7) (6.7) (10.2)
Licensing 0 0.2 0.1
Markets -0.8 -0.8 -0.8
Open spaces 1.4 1.5 1.6
Planning and
transportation
12.6 12.6 13.7
Police 60.4 60.4 57.5
Policy and resources 60.4 60.4 57.5
Port health and
environmental
services
3.7 3.7 3.9
Property investment
board
14.1 14.7 14.4
City fund
requirements
-34.4 -36.2 -36.1
City fund
requirements
104.7 107.3 101.6
Funding
The funding of the company is 50 percent made by the public resources and 50 percent through
income from other source.
Capital projects
The capital projects Frobisher crescent project, theatre flying system, website & content
management system, beech gardens, disabled facility grand, the lodge 2 S106, Holloway estate,
avoidable square estate, golden lane estate, Middlesex street estate, southwark estate.
Debt administration
Following are the prudential indicators for administrating the capital expenditure and external
debt:
Debt
Administration by
committee
Net expenditure
2014-15 2014-15 2015-16
Culture, heritage and 0.9 0.9 0.9

libraries- city office
records
Establishments 11.6 11.6 11.0
Finance-chamberlain 31.3 31.5 31.8
Finance- city
surveyor,
remembrance, and
town clerk
19.9 19.7 19.8
Total net expenditure 63.7 63.7 63.5
Recovery of costs (63.7) (63.7) (63.5)
Total administration 0 0 0
Cost analysis
Fixed costs
It is defined as the cost which doesn’t effect from the changes in the units. It remains constant
regardless of changes in the volume of sales.
Step-fixed costs
It is defined as the analysis which is fixed for some units and variable after that it is Variable
costs. It includes both fixed and variable costs.
Variable costs
It is defined as the costs which is direct affected with the changes in the sales volume.
For all the above three cost analysis, financial statement analysis method is used:
2015 2016
Investment management
costs
Non property investment
(Variable costs)
3.6 3
Property investment (Fixed
costs)
15.4 16.3
Total expenditure 19.0 19.3
Income and expenditure account 2014-2015:
Particulars 2014-15 2014-15
Current service
costs
(12.1) (11.9)
Past service costs - -
Gain or settlements (0.1) 0.5
Employer
contribution
9.3 8.8

Unfunded pension
payments
0.3 0.3
Net pension scheme
costs
(2.6) (2.3)
Return on pension
scheme assets
22.4 19.3
Interest on pension
scheme liabilities
0.1 (2.4)
Net finance income/
expense
(2.5) (4.7)
Net charge 47.4 11.1
2015 2014
Pension scheme assets(actual-
expected assets)
25 (8.2)
Expected gains and losses (0.1) 7.6
Changes in underlying
present value of liabilities
(66.0) (23.9)
Actual gains (41.1) (24.5)
Increase in irrecoverable
surplus
- -
Actual gains (41.1) (24.5)
Challenges for managing the budget
Following are the problems which are faced for managing the budget:
1. The first and the foremost challenge is to estimate the level of resources that is used in the
future for the support of established agency.
2. Another important challenge is to handle the complexity, dynamism and uncertainty in the
business.
3. To control the major challenging areas which includes operational expenses, risk management,
and changes in the scope.
Strategies for reviewing
The strategic plan includes supplementary planning documents, community infrastructure levy,
evidence base, statement of community involvement, and local development scheme for
reviewing the local plan strategy.
 Supplementary planning documents
 Community infrastructure levy
 Evidence base

 Statement of community involvement
 Local development plan
References
(2016). Retrieved 15 July 2016, from http://www.cityoflondon.gov.uk/about-the-city/how-we-make-
decisions/budgets-and-spending/Documents/city%27s-cash-accounts-2015.pdf
(2016). Retrieved 15 July 2016, from http://www.cityoflondon.gov.uk/about-the-city/how-we-make-
decisions/budgets-and-spending/Documents/summary_budget_book_2015_2016.pdf
Area enhancement strategies - City Public Realm - City of London. (2016). Cityoflondon.gov.uk. Retrieved
15 July 2016, from http://www.cityoflondon.gov.uk/services/environment-and-planning/city-public-
realm/Pages/strategies.aspx
Budgeting for Immigration Enforcement. (2011). http://dx.doi.org/10.17226/13271
Equality and Inclusion strategy - How we make decisions - City of London. (2016).Cityoflondon.gov.uk.
Retrieved 15 July 2016, from http://www.cityoflondon.gov.uk/about-the-city/how-we-make-decisions/
Pages/equality-inclusion.aspx
History of the Mayoralty - The Lord Mayor - City of London. (2016). Cityoflondon.gov.uk. Retrieved 15
July 2016, from http://www.cityoflondon.gov.uk/about-the-city/the-lord-mayor/Pages/history-of-the-
mayoralty.aspx
Managing the Budget Process | Government Finance Officers Association. (2016). Gfoa.org. Retrieved 15
July 2016, from http://www.gfoa.org/managing-budget-process
Planning policy - Planning - City of London. (2016). Cityoflondon.gov.uk. Retrieved 15 July 2016, from
http://www.cityoflondon.gov.uk/services/environment-and-planning/planning/planning-policy/Pages/
default.aspx
Search results - City of London. (2016). Cityoflondon.gov.uk. Retrieved 15 July 2016, from
http://www.cityoflondon.gov.uk/search/results.aspx?k=department%20budgets
The City Together - Community partnerships - City of London. (2016). Cityoflondon.gov.uk. Retrieved 15
July 2016, from http://www.cityoflondon.gov.uk/about-the-city/about-us/community-partnerships/
Pages/the-city-together.aspx

Appendix
Existing financial plan