# Presentation: 667526

## Activity-Based Costing and Management at the US Fish & Wildlife Service

- ABC Steering Committee
- November 2003

##    Topics

- ABC Implementation Status
- Performance Management & ABC Framework
- Linking ABC to Performance  & Performance to Budget

**Notes:**
Over the past year OMB has made significant progress in pushing agencies closer to full budget and perforamnce integration.  Following their lead, DOI has instituted material changes in how the bureaus develop their budget estimates for executive branch decision-making.  In this regard – there are 3 important topics I would like to discuss:
ABC Implementation Status
Performance Management & ABC Framework
Linking ABC to Performance  & Performance to Budget

Next Slide 

## Getting Started

**Established Executive Oversight Team**
- Deputy Regional Directors & Assistant Directors
**Selected Contractor with ABC Experience**
- Grant Thornton
**Set Goals for Implementation**
- Establish FWS Work Activities
- Link FWS Work Activities to DOI Work Activities
- Align All FWS Work To DOI Strategic Plan
- Set FWS Operational Goals
- Link FWS Goals to FWS Work Activities to DOI

## Integrated Performance Management Framework 

**Notes:**
The second topic I wanted to discuss – was the pervasive change to Performance Management and ABC throughout the Department.  
The Department, for the past 2 years, has been transitioning to an enterprise – performance based management framework consistent with this President’s and the previous Administrations management agenda.  
The DOI enterprise system requires all bureaus to align all work and resources to the DOI Strategic Plan Goals.  To create a bureau Operational Plan that links to DOI Goals and forms the foundation for our Performance Budget.  The DOI enterprise system incorporates Activity Based Costing and they hope to eventually directly access Bureau-level legacy systems (like ECOS, RMIS, etc.).  

During this time, we have been working to pull all of the pieces of the puzzle together in a way that it would make sense for the Service and in a way that we could talk about how our work processes would now fit together while being responsive to the Departments new business operations.  The management systems model on the slide –Integrated Performance Management Framework – is the result.  

Top Box -- DOI Strategic Plan and by extension the Service’s Operational Plan  – is really the starting point for future budgeting and accountability decisionmaking by DOI & OMB.  
The Service has not developed a new Operational Plan yet.  We have taken a very deliberate approach – for two reasons – first to ensure we knew where DOI was going with this new business operation, and secondly for this to be meaningful for the Service to build it from the bottom up.  
We have spent the last 1 1⁄2 years working with each program to develop the underpinnings of what should become a real operational plan – not just a shelf piece.  The Planning and Evaluation Staff has conducted goal setting workshops with each program – to help transition to this new business model,  to help each program survive the new OMB Program Assessment Rating Evaluation – which relies on program performance goals and measures, and to integrate ABC with program goals and measures.  

Planning & Budgeting Box (left side of model) – shows primarily that budgets will be built with the performance goals mind and linked to the DOI goals; budgets will reflect full costs of those goals which will be obtainable from our ABC system.   Resource decisions will be made based on how much each program needs to reach their part of the performance targets.  All funding and work will be represented in our goals.  In addition, both our operational plan and program plans & budgets must incorporate the OMB PART results.  In some cases our final PART evaluation from OMB required new measures or goals be incorporated.   
Middle Box – is our operational view – setting final performance targets, costing to our work activities in ABC, measuring our accomplishments against DOI, Service and program goals and measures.  

End of Year Box – Performance and Accountability Evaluation & Reporting.  We will be responsible for reporting our success in meeting the DOI & Service goals/measures for meeting mission, as well as, areas of the President’s Management Agenda, and the OMB PART recommendations.  One area that we have continued to score poorly on the PMA and the PART has been the lack of an formal and consistently applied internal program evaluation system – similar to OMB’s PART.   
Next Slide 

## ABC Implementation Status --  2003 

-  Phase I -- February through June
** ****Complete initial pilots in Regions 1 & 3.**
** ****Develop draft standard ABC model & definitions.**
** ****Benchmark implementation process. **
-  Use Web-Based Employee Survey Tool
-  Use More Robust & Direct Training
-   **Convene Deputies Team ABC Implementation.**
-   Orientation, Issues Identification, Solutions
-  Phase 2 – August through October
-   **Implement Regions 4, 6, & 9.**
-   **Conduct activity dictionary reviews ****(approximately 180 activities). **
**   ****Established National ABC working group (Oct 1-3).**
-   Validate Activities, improve work definitions, coding guidance.
**    ****Brief Deputies Team on ABC implementation status and ABB.**
**    ****FFS Re-Configuration – Draft List of ABC codes to Finance.**

**Notes:**
ABC Implementation Status --  2003
Phase I – 
Work began on FWS ABC development in February of this year with the 2 pilots in Regions 1 & 3.  This effort was completed in June.  
The design of our system is based on the development of a  standard set Activity Based and definitions; with each region having a model that belongs to them – made up of their specific data – that is aggregated in a national model.  Setting up specific regional models will allow regions to build out their own models to capture more detail below the national standard model. 
Benchmarking -- During the pilot implementation we learned that FWS would require a different approach than Grant Thornton had used for other bureaus (BIA, MMS, FBI or Commerce’s Patent Trademark Office)  Lesson learned included:
 FWS would need a Web-Based Employee Survey Tool – instead of a relying on survey data collected  using a Microsoft Access data base to manage it. Starting with Phase 2 – we are using a web-based fairly simple survey to collect data – it is pushed out through an email (which is unique to each employee) and managed through a hosted databased.  We have been told by employees who have taken the survey that it only takes 15 minutes.  When I took it – it took me.................
Grant Thorton learned that their original proposal to use train the trainer to support each regional implementation during the time that the consultant were not in the region would not work..... Grant Thorton quickly investigated other methods to conduct frequent, cost-effective distant-learning training to support each implementation for the remainder of the project.  We are using a type of video   Use More Robust & Direct Training
  Convene Deputies Team ABC Implementation. 
  The Deputies Team, working with the ABC Project Team was designated by the Director  to oversee the development and smooth transition of the Service to ABC.  The ABC Project team has been working successfully with the Deputies Team throughout this development and implementation effort.  
 Phase 2 – August through October 
Implement Regions 4, 6, & 9.  Completed program and regional interviews and labor and non-labor surveys are in progress.  Survey data is being used to establish a baseline for our work activities. 
Conduct activity dictionary reviews (approximately 180 activities). 
Established National ABC working group (Oct 1-3). Validate Activities, improve work definitions, coding guidance. Will talk more about this team a little later in the presentation.  
Brief Deputies Team on ABC implementation status and ABB.  ABC Project Team attended the last deputies meeting in Maine earlier this month – providing an update on ABC implementation and provided them with a pre-view of how Activity Based Costing Data will be used in budgeting and performance 
FFS Re-Configuration – Draft List of ABC codes to Finance.  DOI has required all bureaus to trace costs for work activities through their financial systems.  As such, we have been working closely with Paul and his folks to make this happen.  We have provided Finance with a draft list of FWS/work activities and their respective codes – so Finance can get started on their part of this project.  We have also aligned our work activities with the DOI ABC codes and definitions (this in itself was a very difficult process –getting all 8 bureaus to agree on a common set of definitions that adequately capture their work).  
Next Slide 

## ABC Implementation Status

-  Phase 3 – October through December
-   **Implement Regions 5, 7 and 2**
-    **FFS Re-configuration – Final ABC codes to Finance late ****	****November.**
**   ****Development of implementation support materials for employees ****	****by ABC workgroup.**
**   ****Establish FWS/ABC Website **
**   ****Deputies Team – work session on cost objects**
**  **FWS Operational Plan (goals = cost objects).
-   Phase 4 – Servicewide Implementation January 2004
-     **Second Qtr. Evaluation of FWS - ABC data in sequence with ****	****DOI/ABC Evaluation of activities.       **
**    **

**Notes:**
Phase 3 – This is our last set of implementations – we are finishing up with regional implementations in regions 5, 7 and 2.  
Using the same protocols as in previous regions.  
Trying to orient everyone to activity base costing – what it means and how it can be used.  
Providing an opportunity to answer employee questions and concerns. 
Validating the current set of activities and their definitions as well as identifying and new activities that should be included in the dictionary.
Conducting the labor and non-labor survey – support with our on-line and conference  
FFS Reconfiguration – We will be providing the “Final” set of FWS ABC codes, and activity dictionary to Finance by Thanksgiving.  At that time it will be necessary to call a moratorium on any further changes to the activity list in order for Finance to complete their work on FFS.
ABC Workgroup -- Because this will be a new process effecting every employee, we are asking the ABC workgroup to assist in the development of  employee T&A and other purchase document coding guidance materials.  We are hoping to pull the group together in November – 
ABC Website -- We are also in the process of establishing an ABC/performance management website to support this national implementation effort.  
Deputies Team -- One of the action items for the last Deputies Team meeting was to reconvene a session to specifically look at a key element of our ABC system – Cost Objects (FWS products and services).  The Deputies agreed that as a result of the changes by DOI and OMB in the performance and budget integration arena– that the Service should look at the Operational Plan Goals as the Cost Objects for ABC.  

Phase 4 – We have stayed on schedule throughout this project and hopefully we will be ready to go operational in January 2004.  
Second Qtr. Evaluation of FWS - ABC data in sequence with DOI/ABC Evaluation of activities.     DOI will be conducting an evaluation of their first quarter results from bureau who participated in DOI/ABC at the end of the second quarter.  We are planning on conducting a similar evaluation of our use of FWS work activities – to see how costs are being attributed and if there is an opportunity to compress the number of work activities....  
Moratorium on FWS Changes ends- The Project Team working with both the ABC workgroup and the Deputies Team will provide recommendations for changes to the Activity Dictionary. Incorporation of Deputies recommended changes – integration with DOI system

## FWS Activities = 180

## FWS Activity Drivers Example

**Region 1 Example**

## DOI  -- FWS Crosswalk 

- 	***DOI ***	***Activity Name***	***FWS Activity ***	***FWS Activity ***	***FWS Activity Description***
- 	***Crosswalk***	***Numbers***	***Code***
- 	65	Manage Records, Central Files, Mailrooms, 6.1.3	6S	Administer Recruitment and Staffing
- 	and Library/Imformation Services
- 	65	Manage Records, Central Files, Mailrooms, 6.6.2	9Y	Manage Records, Files, Mailrooms and Libraries/Info. Services
- 	and Library/Imformation Services
- 	66	Provide Other Management Support 	6.1.2	C7	Process Employee and Labor Relations Cases
- 	Services
- 	66	Provide Other Management Support 	6.1.5	Q8	Conduct Workforce Planning
- 	Services
- 	66	Provide Other Management Support 	6.6.1	5K	Provide Office Support
- 	Services
- 	66	Provide Other Management Support 	6.6.3	6G	Process Information Quality, FOIA, Privacy Act and Liability Requests
- 	Services	and Claims
- 	66	Provide Other Management Support 	6.6.4	9A	Attend Non-Specific Meetings
- 	Services
- 	66	Provide Other Management Support 	6.7.1	Q4	Develop and Deliver Training
- 	Services
- 	66	Provide Other Management Support 	6.7.2	9D	Attend Training
- 	Services
- 	67	Perform Planning	6.5.5	5R	Manage Competitive Sourcing Initiatives
- 	68	Provide Central Leadership	6.5.3	O5	Conduct Strategic Planning and Performance Management
- 	82	Operate, Maintain and Manage IT 	6.2.1	8L	Develop and Manage Information Resources

## DOI and Agency Linkage

**DOI and Agency Linkage**

**Sustain Biological**
**Communities**

**Resource Protection**

**Improve Health of **
**Watersheds,**
**Landscapes, & Marine**
**Resources**

**Protect Cultural **
**and Heritage**
**Resources**

**DOI Mission Component**
**DOI Strategic**
**Goals**
**General**
**Goals**

**% wetland acres achieving **
**desired conditions**

**% stream mines achieving**
**desired conditions**

**% upland acres achieving**
**desired condition**

**% marine/coastal acres achieving**
**desired condition**

- FWS, NPS, MMS, BIA, BLM, etc...

## ABC Aligns to FWS Program Goals

- Performance Targets -acres

**Notes:**
In making the connection between budget formulation and performance – the DOI and OMB are asking bureaus to re-orient their requests to align program/organization performance to goals – ....the example of performance data on the slide presents:
 actual accomplishment data for 2003 for acres restored for wetlands, uplands and riparian habitats. 
 proposes performance targets for 2004 and 2005.  

We are in the process of aligning our work activities and tasks to our set of program, bureau and Department goals. This will provide the linkage between performance, cost and budget.  Our ABC system will capture costs for restoring wetlands, restoring riparian and restoring uplands.... The amount shown below the ABC activities represents the full cost of that work.  This cost is linked to program goals and measures; Service goals and measures, and ultimately DOI goals and measures through “activity drivers” (primary workload indicator). Activity drivers create the relationship between the source our activity costs – restore wetlands and its destination product  -- Acres of Wetlands Restored.  

## ABC activities should align to FWS program goals

**ABC Activities**
**align with goals**

**Notes:**
Now getting back to the example – using ABB concepts. 

The ABC work activity for Restoring Wetlands – for example
	is capturing the costs for 5 distinct programs – cost are captured through T&As, purchase orders, etc.
	So the cost for
Restoring Wetlands for FY ’03 is $2.5 million.  This full cost amount includes all direct ( multiple programs) and indirect costs related to the performance of this work. 
Restoring Riparian areas is $274 thousand.
Restoring Uplands is $1.5 million. 

	Next Slide

## Budgets built around ABC intelligence

**Notes:**
This very simplistic example – will give you a sense of how DOI and OMB will be using ABC data in the context of both budget decision making for formulation and internal budget decision making for budget allocation.  

Carrying this example through:

If Restoring Wetlands cost FWS $2.5 million and we restored 10,000 acres in FY ’03 – and we know this because we have linked the activity drivers (workload indicator – acres restored)  from all five programs contributing to this goal and also can look back through the ABC data (we have insight into the detail down to the organization and employee level).  The cost per unit would be $255 per acre restored for wetlands, $14 per mile restored for riparian and $300 per acre for uplands.  

Of course we can raise lots of red flags about how work is different from year to year and place to place.  This would be true if we were to allow decisions to stand based on this simple presentation of cost data: however, bureaus will need to ensure that their ABC systems have a sufficient level of granularity and specificity to respond to this type of misapplication of cost data.... Our ABC system can provide decision makers with the various distinctions in our work, ie. Geographic differences in wetland restoration costs; or work processes that one program or functional unit uses vs. another that may allow the costs to vary.  

Over time as we use ABC more, we can resize, reshape or relevel or otherwise readjust our ABC system’s structure in response to solving new business problems.  

## Unit cost information assists in planning and budgeting by goal

- *includes base

**Notes:**
Moving to the next step – applying activity based budgeting and performance concept – using the per/unit cost to the total targeted performance for restoring wetlands in FY’05 – the full budget request would be $7.6 million. OMB has said they will be making budget decisions based on performance and that agencies need accurate cost information to justify their budget requests.  OMB believes it will be very important to have a comprehensive method that establishes what the cost is of providing a service – because it is the only fair way to evaluate what’s working and what’s not working.  ABC is that method because they believe it levels the playing field – it is fact-based data and allows the bureaus to build their own business cases.  

In an effort to try to get agencies to integrate cost, performance and budgeting, in FY’02 OMB used a similar approach in making budgetary decisions for wetlands restoration by comparing the costs from FWS, NRCS and COE – the most expensive being COE, we were in the middle and NRCS was the least.  Results was that OMB – cut COE by the amount in excess.  

I guess – my take away message is that our ABC data needs to be as accurate as possible, and meet DOI requirements – because it will be used.  

## FY 2004 Implementation Issues

- Many FWS Work Activities to One DOI Work Activity
- Sets up Multiple FWS Outputs to One DOI Work Activity
- Maintain Balance between Useful & Reliable Activity Cost Information at the Bureau
- Optimizing Re-engineering Opportunities
- Performance Budgeting & Work Integration

## Lunch Break