Management's Vision Statement for ABC
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Interior’s Integrated Business Management System
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Implementation
of an Interior Enterprise Management Information System and Activity Based Cost Management
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March 3, 2003
Table of Contents
- Vision
- Why do we need management information?
- How do all the pieces of the management puzzle fit together?
- What is Activity Based Cost Management (ABC/M)?
- What is the current situation?
- What would an enterprise management information system do?
- What are the design principles for the cost and performance modules of an enterprise management information system?
- What is being done to implement ABCM in Interior?
Implementation of Interior’s EMIS and ABCM
The Interior integrated
business management approach is a systematic way of improving organizational
performance by linking strategic objectives to realistically established goals;
by allocating resources to accomplish desired performance levels; and by
measuring and reporting results that meet our mission objectives.
To accomplish this, Interior will implement a system that provides timely
and accurate management information to support operations and enterprise
planning and reporting. The data from this system will link budget, financial, grant,
workforce, and customer information. This
information will allow Interior employees to improve program performance, assure
budgets support best value results, better respond to customer demands, and plan
for workforce skills needed to deliver program commitments.
Why
do we need management information?
The Department of the
Interior has a mission that includes providing recreation, resource protection,
resource use, and serving communities, as described in the DOI draft Government
Performance and Results Act (GPRA) Performance Plan. While Interior employees struggle to provide mission services
in an environment in which the budget has been and continues to be constrained,
external and internal “drivers” are impacting the scope of work to be
performed and the context in which we must do the work.
These include: population
growth in key areas that have created increased pressures for services on lands
managed by Interior; an aging infrastructure[1];
growing law enforcement and homeland security challenges; and increased demand
by citizens for good public-sector business practices.
Citizens expect
accountability in the use of their tax dollars, and they are driving the
increased demand for good public-sector business practices.
They demand that the government:
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Be transparent about how dollars are spent and the results of those expenditures;
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Assure the validity and necessity of work being performed;
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Verify work is performed efficiently and effectively; and
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Deliver value for the expenditure of their tax dollars.
As the President’s
Management Agenda (PMA at page 23) explains:
The American people should be able to see how
government programs are performing and compare performance and costs across
programs. The lack of consistent
information and reporting framework for performance, budgeting, and accounting
obscures this necessary transparency.
An indication of the
increased demand for good business practices is the new Office of Management and
Budget (OMB) review of the effectiveness of programs that constitute twenty
percent of every Department’s budget. OMB
scores those programs based on information regarding strategic goals, measures,
cost, and program implementation. OMB will continue to review an additional twenty
percent of Interior’s programs until all programs are ultimately assessed.
This performance assessment is one element of the Administration’s
overall effort to integrate budget and performance.
In addition to budget and performance integration, Interior is developing
an integrated approach to common work processes and systems[2]
across the bureaus and Department to reduce operational overhead costs and to
improve efficiencies so that more dollars are directed to core mission work.
As Interior employees respond to these increasing challenges to program implementation, it is imperative that they have management information available to improve performance and that they have the capability to provide information about progress and the cost of performance. Currently, the lack of consistent, timely management information makes it difficult to fully discuss program performance and cost of performance within the bureau or as a Department, with OMB and Congress, and with citizens and other partners. An enterprise management information system will provide timely and accurate management data to Interior employees and managers to better support operations and decision making.
How
do all the pieces of the management puzzle fit together?
Interior is identifying its
programmatic goals in the new Interior GPRA Performance Plan.[3]
The Plan identifies outcomes for the work performed at Interior along
with performance measures that will enable Interior employees to track their
progress. Beginning in FY04, the
budget is aligned with the work needed to achieve the GPRA Performance Plan
goals and targets. An enterprise
management information system will provide information to Interior employees
related to the cost and progress in meeting the GPRA Performance plan.
As illustrated below in the
Interior Enterprise Business Management Model a number of tools will be
available to help Interior employees gauge how well they are doing in achieving
Interior and Bureau goals and provide information that allows informed choices
to be made about program delivery. These
tools include performance reporting, cost management, customer/employee
research, workforce planning, reengineering, and information technology.
What
is Activity Based Cost Management (ABCM)?
ABCM is a management tool
that captures the cost of performing work at a sufficient level of detail to
understand the costs of activities and the performance resulting from those
activities. The availability of
cost information at the activity level creates an entirely new dimension to
assess performance and results. To
gather activity based cost information,[4]
employees define the work that must be completed to achieve the outputs and
outcomes identified in the GPRA Performance Plan. The work is broken into activities that describe the
consumption of resources or cost associated with doing that work. Understanding that information, program managers and
employees can decide where scarce dollars will create the most return or how the
process of doing the work can be improved thereby making resources available for
other work. It also improves our
estimation of how much work can be accomplished with available resources.
This use of the cost information to manage the programs is ABCM, and it
is essential to integration of budget and performance in DOI.
Bureaus are also planning to
develop a bureau-level plan that tiers off the GPRA Performance Plan.
This plan would identify outcomes, strategies, outputs that are unique to
the bureau or that need more precise delineation to be useful to bureau
management. The bureau could
likewise determine that more precise cost information is necessary and collect
detailed data beyond what is required at the Departmental level.
What
is the current situation?
Currently each Bureau has worked independently to
supply a certain level of management information to meet their operational and
planning needs. The results vary as
the information is retrieved from information systems ranging from simplistic to
complex integrated approaches in order to provide managers and employees various
types of information, including cost, performance, and customer data.
Moreover, while the Bureau systems have some overlap in the software used
and the type of information supplied for program management, the systems do not
“talk” to one another. Overall,
there is no integrated approach in Interior to deliver management information,
although bureaus continue to develop systems to provide managers useful, current
information.
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Current Scenario |
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What
would an enterprise management information system do?
The Interior Enterprise
Management Information System (EMIS) will provide planning and performance
information to managers and employees so they can better understand how their
work contributes to the overall effectiveness of the Bureaus and the Department
in meeting broad and challenging mission objectives. The detail needed to make the information useful will vary
depending on the management purpose, but an enterprise management information
system enables the same data to be used at Departmental, Bureau, and field
levels without making additional data entry or inquiries.
We would input the data once and use it many times—thereby avoiding
multiple inquiries by individual Bureaus or from headquarters or regional
offices for the same data. Components of the management information that would be housed
in the EMIS are the activity based cost data and the GPRA performance data.
An Enterprise Management
Information System approach recognizes that consolidated enterprise data is
needed at the Departmental level. For
example, four Interior bureaus administer wild land fire programs and report on
the same performance measures and results.
A single reporting system avoids the duplication of effort and cost that
would
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occur if each of the wild
land fire bureaus were to build their own system. However, an enterprise approach is sufficiently flexible to
recognize the uniqueness of individual bureaus and their need to define and
gather management information that may only be relevant or useful for that
individual bureau. This enterprise
approach for a management system, outlined in the Financial and Business
Management System,[5]
will warehouse data from a variety of sources to make it available to Interior
employees for both enterprise and individual Bureau needs.
Information can be
summarized at the Departmental or Bureau levels for senior leadership or viewed
at the transaction level if needed for detailed analysis by managers and
employees. The Department and
Bureaus will use management information to:
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Improve organizational performance and demonstrate accountability in carrying out the mission.
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Integrate budget and performance by:
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Integrating planning targets, budget data, and evaluation information so managers and employees can create an enterprise plan for program implementation;
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Aligning budget resources to best achieve GPRA Performance goals and targets;
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Representing accurately the full costs of mission activities to integrate costs of outputs and programs with performance in budget justifications and resource allocation; and
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Documenting program effectiveness by systematically demonstrating how program results impact budget decisions.
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Enable program managers to improve decisions relating to their programs by:
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Allocating resources to achieve an effective return on investment;
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Reallocating resources to respond to changing needs and emerging priorities;
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Providing baseline data to emphasize areas where work processes could be improved to achieve resource savings or avoid costs;
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Focusing on the cost and performance drivers that can create the best programmatic results; and
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Justifying fees or recovering full cost reimbursements.
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Meet the requirements of the Government Performance and Results Act and the Chief Financial Officer’s Act by providing information about performance and the cost of achieving the goals.
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Meet all the requirements of the Statement of Federal Financial Accounting Standards (SFFAS) No. 4, Managerial Cost Accounting by providing meaningful, useful management information and costs on a regular basis using Activity Based Cost Management (ACBM).
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Definitions of cross cutting work activities will be uniform so the cost of outputs will have the same meaning in each bureau and across the Department.
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Individual bureaus may choose to define additional or more detailed activities to provide information needed by bureau managers, as long as these lower level activities consistently link to DOI crosscutting activities.
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A single source of management information will ultimately be accessible and locally usable by all employees.[6]
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Activity based cost information will be derived from official accounting transactions as recorded in time and attendance records by individual employees and by the coding of non-labor expenditures related to the specific work activities.
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Activity based costs will be coded to reflect the actual work performed or the actual use of resources rather than recording against planned or available budgets.
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Data will be real time so that performance and financial data will be available daily or as soon as it is generated by its source system.
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Performance output targets and actual performance outputs achieved will be entered.
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Performance and cost data will be entered once, but will be accessible for multiple purposes by multiple users.
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Reports will be pre-defined or created by the user without the need to have a detailed knowledge of the underlying databases or reliance upon technical staff.
What
is being done to implement ABCM in Interior?
An ABCM Steering Group has
been established to guide the overall implementation of ABCM in Interior.
Each bureau has a representative to assure that the bureaus are prepared
for implementation of ABCM within their bureau by October 1, 2003.[7]
Teams with bureau
representatives are developing definitions of activities in seven cross-cutting
functions.[8]
All Interior bureaus and the Office of the Secretary are participating in
pilots to test initial activity definitions.
Specific pilots are ongoing in Arizona until April to:
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Conduct an on-the-ground test of a limited set of initial activity definitions.
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Gain experience with each bureau in having individual employees record their labor costs based on work activities defining the work they have performed.
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Identify training issues, especially as it relates to an explanation of the description of ABCM concepts and activity definitions.
Additional work to implement
ABCM is moving along several parallel tracks.
Representatives from bureaus will work to:
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Incorporate the best practices and lessons learned into the Interior ABCM development through meetings with all the Bureaus. This will consider the experience of MMS, OSM, BLM, NBC, and OHA in implementing ABC systems and the pilots underway in BIA, FWS, NPS, and the seven functional areas.
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Define the activities for the remaining work related to the GPRA Performance Plan.
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Address the training and implementation of a time and attendance system to facilitate employee coding to ABCM work activities.
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Develop the system requirements and pilot modules for the cost and performance modules of the Enterprise Management Information System.
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Map the cost activities to the existing accounting system so that information will be consistently recorded by the bureaus.
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Train employees on ABCM by explaining their responsibilities for coding to the work performed.
What
is the schedule for an enterprise management information system and
implementation of ABCM?
First Quarter FY2003:
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Review the existing sources of management information within Interior.
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Chart a course for data collection and reporting in an Enterprise Management Information System that will enable information access to program managers and to budget, planning, finance, and evaluation staffs. (To maximize the use of available dollars, Bureaus should not invest in systems for time and attendance reporting, cost reporting, performance reporting, or management reporting without Departmental agreement that the proposed system does not duplicate elements of the Enterprise Management Information System.)
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Develop and implement an initial coding system for Arizona pilots.
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Identify cross-cutting pilot units and train employees.
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Implement pilots.
Second Quarter FY2003:
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Conduct quarterly review of management data with Assistant Secretaries, Bureau Heads, and MIT.
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Review the draft GPRA Performance Plan to further refine performance measures.
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Identify the costing activities related to remaining segments of the draft GPRA Performance Plan.
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Develop cost data through cross-cutting pilots in AZ (with BOR, BIA, USGS, NPS, and FWS) and the pilots in BLM, OSM, MMS, NBC, and OHA.
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Develop a training plan for Interior FY04 implementation.
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Initiate alignment of DOI cost information with end outcome goals.
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Identify strategies to make accounting systems modifications and identify the revised cost structures needed to support ABCM.
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Complete analysis of the current management system capability in Interior.
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Initiate team to develop the cost and performance pilot modules of the Enterprise Management Information System.
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Conduct an annual planning meeting to review past results (actual targets/measures) and future performance goals and planned targets as a precursor to out-year budget formulation decisions.
Third Quarter FY2003:
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Evaluate pilots.
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Refine FY04 cost activities and codes.
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Establish test applications for cost structure changes and initiate table changes in FFS.
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Assess the changes necessary for the Hyperion application to accommodate the cost changes made in FFS.
Fourth Quarter FY2003:
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Deploy initial pilot cost and performance modules of the Enterprise Management Information System and implement the modules throughout DOI.
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Establish a time and attendance process and data entry system to enter cost data
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Train Interior employees on ABCM implementation.
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Complete and test changes to all bureau FFS tables, screens, and reports needed to record ABCM activities.
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Complete and test Hyperion changes if any are needed.
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Incorporate FY04 Appropriation decisions into planning targets.
First Quarter FY2004:
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Initiate ABCM throughout Interior.
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Initiate process of Bureau-specific cost refinement.
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Train Interior managers and analysts about analytical tools available to assess performance.
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Initiate refinement of pilot cost and performance modules of the Enterprise Management Information System.
Second Quarter FY2004:
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Conduct an annual planning meeting to review past results and future performance goals as a precursor to budget formulation decisions.
Third Quarter FY2004:
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Review DOI activities and definitions.
Fourth Quarter FY2004:
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Make adjustments to the Enterprise Management Information System to reflect adjustments to DOI/Bureau activities and definitions.
[1] Interior is dealing not only with the aging infrastructure needs of its physical assets, but also needs relating to hardware and software and the necessity to prepare for the potential retirement of a large percentage of the workforce.
[2] Common processes include support activities such as property and procurement, as well as program areas such as land appraisals or maintenance. The biggest savings potential may come from efficiencies in non-support activities.
[3]The GPRA Performance Plan is the strategic plan that is required by the Government Performance and Results Act.
[4] As Karen Burk and Douglas W. Webster, authors of Activity Based Costing & Performance (American Management Systems, Inc. 1994) you can trace or allocate costs. As they state at p. 48:
Your goal is to assign costs in the most objective manner practical. This will ensure that activity and product costs are more easily understood and less subject to debate.
Whenever possible and practical, trace costs to the activities and products that consume those costs…Tracing establishes a more causal relationship between resource consumption and the activities that benefit, and between activity usage and the products that benefit.
[5] This project in its formative stage was called the Financial Management System Migration project. The FBMS is presented in the FY04 budget.
[6] An integrated management system is a part of the FBMS and will be developed incrementally over several years. For example, initially not every employee will have access to the enterprise management information system from their desktop, in light of constraints on funding and deployment capability. The two modules of the EMIS that are applicable to ABCM are the ones that deal with cost and performance data and will be deployed in FY04.
[7]
The
Office of Surface Mining and the Minerals Management Service are the two
smallest bureaus in Interior and are on a different accounting system from the
other bureaus. They are scheduled
in FY04 to be the pilots for the implementation of a new core financial
system. Consequently, they will
continue to collect cost information using their existing systems.
[8] The areas in which teams developed activity definitions were: wild land fire, recreation, maintenance, litigation, law enforcement, invasive species, and indirect costs.