Title: Activity-Based: Costing, Management and Budgeting
Abstract: ACTIVITY-BASED COSTING The City of Indianapolis has held the line on taxes and general efficiencies strengthen its competitive position regionally, nationally and in the global marketplace. Unlike other municipalities, Indianapolis has embarked on an aggressive performance management program. Several components of the program, initiated in a short time frame, are being deployed to all employees through a comprehensive training effort. The combination of all facets of this performance management discipline is commonly referred to as the strategic tools initiative. These innovative tools, described in more detail below, are as follows: * Activity-Based Costing Management * Performance Measures * Activity-Based/ Performance Budgeting * Performance Reporting Performance-Based * Compensation Also combined with these tools is the effective use of citizen surveys to gauge the public's perception about the amount and quality of service delivery. Opportunities for citizen input are offered several times each year. The results are distributed throughout all departments for use in developing new--or revamping ongoing--projects or processes that address the public needs: The city encourages citizen input about individual projects, which support the overall division. An example would be neighborhood meeting at various stages of road improvement project. Activity-Based Costing (ABC), which is more common to private industry, has recently crossed over into the government sector, at the federal state and local levels; The city historically knew what direct costs were at the organizational level, but not how much it cost to perform a particular activity, Full cost estimates were determined by the typical hod of including indirect or overhead expenses by using a multiplier on direct labor costs. This method of guessestimating the cost of city programs and services made it difficult to believe in them, The city realized the following needs: * Accurate information about the cost to provide city services * Measuring productivity * Measuring the quality of service delivery * Measuring the efficiency of service delivery Activity-Based Costing is a tool that helps break down a business into core activities, Each activity becomes the cost focal point, Each activity becomes a discrete operating unit with processes subject to analysis and potential for redesign, This analysis can be done at each phase of the process as well as the process in total. Activity-Based Costing provides a technique for cost control that assigns costs -- both direct and indirect -- of products or services (activities), based on if the consumption of resources, In other words, it gathers all associated cost of generating a unit of output and it helps you understand the details or circumstances that drive the cost. When the ABC project was engaged, we anticipated the following benefits: * Improved management * Significantly improved service and cost savings * Delivered a dollar's worth of service for each dollar of investment The Activity based management tools give support data for analysis of contracting verses in-house scenarios. Public forces within the City have successfully competed for street maintenance, sewer maintenance, solid waste collection and mowing service contracts. These are but a few of the examples of where competition was deployed. Another benefit derived from these tools, is the ability to benchmark and make adjustments towards efficiency. The city has used information from other agencies, cities, and to a large extent, the private sector, to benchmark performance. To truly wring out the inefficiencies in the organization, benchmarking, analyzing and reporting become continual activities for all managers, as well as those individuals and work teams closest to the product/project development. For those agencies that generate revenue for services rendered, there is an attempt to establish the true internal cost of performing a service and recoup as close to 100% through properly priced user fees. …
Publication Year: 1996
Publication Date: 1996-04-01
Language: en
Type: article
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Cited By Count: 6
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