cost accounting

The Work Breakdown Structure.
All costs and controls should be based on the projects work breakdown structure. The work breakdown structure is the total project broken down into successively lower
levels until the desired levels for control purposes are reached. It is described in detail in the 'Planning Projects' course. The work breakdown structure provides the
framework on which costs, time and schedule/performance can be compared against the budget - for each level of the work breakdown structure. Cost accounts are central to project control and each may comprise more than one work package, as illustrated on this screen. The term work package is a generic name for a low-level task or job assignment - it describes a discrete piece of work and facilitates the monitoring and reporting of work in progress.

The cost analysis of a project is normally based on the information contained in work description forms. These forms are often used to initiate and authorize the work
required of the project as well as the monitoring and control of the associated work. The detailed design of work description forms is the responsibility of project
management, as is the release, monitoring and control regime under which they will operate.

Cost Accounts.
A cost account occurs at an intersection of the work breakdown structure and the organizational breakdown structure at which functional responsibility for the work is
assigned. The costs are then compared with actual work performed - for project control purposes. Cost accounts are central to project control and each may comprise more than one work package, as illustrated on this screen. The term work package is a generic name for a low-level task or job assignment - it describes a discrete piece of work and facilitates the monitoring and reporting of work in progress. For large scale projects resources may not be under the direct control of project management. In this case, work description forms can be used to secure the resources they require and these forms will normally contain details of the cost centers to which the work should be attributed. The work description form will normally attribute cost centers that are responsible for carrying out the work. The degree to which the cost center is specified reflects the level of autonomy that the departmental manager has in assigning the work within sections and units under his control.

Comparing Actuals to Budgets.
The identification and implementation of cost centers and work description forms does not in itself solve the problem of project control. The major problem with securing an accurate picture of the status of a project is related to when and how accurately the project staff complete the project reporting forms - that are in turn summarized to produce an overall management picture of the project. Cost data collection and reporting are of fundamental importance to any project control system. Project control is based on periodic comparison of the actual cost of work performed to the budgeted cost of work performed. It is good practice for the actual and budgeted cost of work performed to be detailed in control reports, either weekly or monthly, for all levels of the work breakdown structure.

Importance of Objective Project Data.
Key decisions will be made on the basis of data fed back from the project environment to the various levels of management. If this data is not accurate it will pose a real threat to the success of the project. The characteristics of each individual project should influence the data collection procedures adopted. In the context of larger projects, the collection and interpretation of project data may require the services of project support staff. It is a key responsibility of the project manager to devise a suitable approach to data collection and interpretation and this should be specified at project initiation.

From Timesheets to Reports.
Project team members should maintain up-to-date timesheets and records of the activities they are involved with. This information should be passed to their task leader for analysis and assimilation. In larger projects, project office staff may undertake data collection and analysis. Task leaders should be good communicators and be able to maintain a clear picture of the progress in their area of work. They should collect and collate progress related data and present this to the sub-project manager in an agreed format. Sub-project managers should be responsible for keeping the overall project manager updated on the status of their sub-project and its progress in relation to the plans. It is the project manager’s responsibility to analyze and collate the information that they receive into regular reports to senior management. These reports may be produced at regular intervals, for example monthly, and/or in response to exceptional circumstances.

An Objective Analysis.
Accurate project data enables a project to be run on the basis of objective reporting rather than on subjective feedback. A series of project control and financial concerns are likely to play a role in the data collection procedures applied to each project. It is the project manager’s responsibility to consider these when devising a suitable approach to data collection and interpretation. The size, complexity and importance of the project should influence the scope of the data collection procedures adopted. Maintaining control over a multi-disciplinary project made up of numerous sub-projects is a very different proposition to controlling a short-term low budget project. In the context of larger projects, the collection and interpretation of project data may involve project support staff- typically from a dedicated project office. The availability of these support staff may influence the mechanisms applied to a project.

The degree of control that is to be applied to a project should be specified at project initiation. These should reflect the type and frequency of controls that senior
management wish to see applied to the project - and this will have a fundamental effect on the data capture mechanisms required. The collection, analysis, interpretation and reporting of data involves a significant human effort and therefore has an associated cost. When the required control framework is
specified it must also be costed and included in the plans that seek approval for the project at project initiation.

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