Criminal Justice Information Services Division (CJIS)

Transcription

1 Federal Bureau of Investigation (FBI) Criminal Justice Information Services Division (CJIS) Fee Setting Methodology Presented by : Ms. Debra L. Long, FBI CJIS Fee Programs Unit, Chief Mr. Tom Davis, Deloitte Consulting, Senior Manager Mr. Chad Holmes, Deloitte Consulting, Manager January 25, 2011

2 Agenda Framework of Fees Activity Based Costing Overview Implementing ABC for FBI/CJIS - 2 -

3 Framework of Fees The FBI relies upon a base of laws, standards and policy guidance to determine how cost analysis is conducted and how user fees are established. Public Law Statement of Federal Financial Accounting Standards Number 4 / Managerial Cost Accounting Concepts and Standards for the Federal Government OMB Circular A-25 Standards Policy Guidance Legal Authority - 3 -

4 Legal Authority Public Law Provides authority to establish and collect fees to process Criminal History Record Information checks for non-criminal justice purposes Policy Guidance Standards Legal Authority - 4 -

5 Standards Statement of Federal Financial Accounting Standards Number 4 Provides managerial cost accounting concepts and standards to provide reliable and timely information of the full cost of federal programs, their activities, and outputs Policy Guidance Standards Legal Authority - 5 -

6 Policy Guidance OMB s Circular A-25 Provides that User charges will be sufficient to recover the full cost to the Federal Government of providing the service. Full cost includes all direct and indirect costs to any part of the Federal Government of providing the service Policy Guidance Standards Legal Authority - 6 -

7 Costing Methodologies Focuses on the activities of a production cycle, based on the premises that (a) an output requires activities to produce, and (b) activities consume resources Activity Based Costing Process Based Costing Accumulates costs by individual processing divisions (organization divisions that perform production processes) Standard Costing Job Order Costing Costs are carefully predetermined or expected costs that can be applied to activities, services, or products on a per unit basis Approach accumulates and assigns costs to discrete jobs - 7 -

8 Activity Based Costing Selected by FBI CJIS Cost Control Proven cost accounting methodology providing detailed and defensible analysis of cost Transparency Greater visibility into indirect costs that are typically subjected to broad and untraceable allocations under traditional accounting methods Adaptability Overarching approach allows for application in simple/complex organizations - 8 -

9 Activity Based Costing Overview

10 Activity Based Costing Fundamentals ABC Principle Managers do not necessarily manage costs directly They manage activities that consume costs ABC Approach Resources are consumed by activities Activities are consumed by products/services Resources Resources Activities Activities Products & Services Products & Services

11 Traditional Government Accounting vs. Activity-Based Costing Traditional view Activity based view GL accounts for warehousing Labor and gen admin $ 4,340,674 Facilities 4,362,867 Equipment 1,025,246 Total $9,728,787 Cost activities for warehousing Handle product $ 5,061,743 Store product 4,619,179 Package product 47,865 Total $9,728,787 Traditional Gov t Accounting Ensures Public Trust Guarantees funds spent on purposes approved by Congress Ensures fund commitments limited to Congressional Appropriations Ensures individual accountability for expenditure of public funds Provides costs by organization and function ABC Provides costs by activities and processes Provides costs of products and services Improves product/service cost accuracy for industrially funded activities Helps align resource consumption with strategic goals Relates performance to the activities that contributes to products or services

12 Activity-Based Costing Methodology # of People # of Items F i n a n ci al Square Footage % of Time Distribute Mail Conduct Inspections Prepare Meals # of Inspections # of Meals Services Products Customers $$$ s # of Requests Resource Drivers Activity Drivers Defines the flow of resources to activities Defines the flow of activity cost to products/ services Information from financial system to include all Object Classes Structured to match the General Ledger and the organizational structure Attributes to identify different types of funding, types of employees, object classes, etc. High level processes serve as centers in the model with a second level of detail providing the activities Provide process and activity costs (dollars & People) Attributes to group data into useful categories, types of work, regulation type, etc Products and services provided as a result of the work being performed Customers who consume the services produced Product and service cost (dollars & People)

13 Assignment Methodology The objective for using an effective driver is to accurately translate Expenditure Costs into Activity Costs. Resources Resource Drivers Activities Cost Drivers Products and Services % of Time Activity 1: $40k # of Requests Total Cost $400,000 10% 5% 20% 5% 5% 5% 5% Activity 2: $20k Activity 3: $80k Activity 4: $20k Activity 5: $20k Activity 6: $20k Activity 7: $20k 25,000 25,000 40,000 10,000 Service 1: $100k Service 2:$100k Service 3 :$160k Service 4 :$40k 5% Activity 8: $20k 20% Activity 9: $80k 20% 100% Activity 10: $80k Total Activity Cost: $400, ,000 Total Service Cost: $400,000

14 Activity Based Costing Model The End Product Key Features Captures As-Is snapshot Defines business by functions, activities, products, services and customers Provides framework to capture baseline cost and workload Has activity classification capabilities, e.g. Commercial Activity vs. Inherently Governmental, contract vs. in-house, FAIR Act reason codes, etc. Can be used for to answer data calls with defendable data

15 Traditional Approach To Building An ABC Model Identify Products, Services, and Customers Identify Processes, Activities & Resource Data Gather Financial & Workload Data Build ABC Model "What is produced from the work performed and who benefits from the work that is perform?" Conduct storyboard session to identify Products and Services produced as an output of work performed During storyboarding, identify internal and external customers who benefit from the outputs "What processes/ activities are performed to produce the outputs?" Conduct storyboard sessions to determine what activities support each process Determine level of detail desired for study Interview finance office employee to obtain organization structure by department by grade Assist finance office in obtaining the organization's financial information by department by object class Administer data calls to employees to collect resource driver data (% of time) Administer data calls to collect workload data to be used for activity drivers Construct the resource module of the model to match the organizational structure Input labor rates for each grade level Input financial data obtained from finance to include all object classes Input resource & activity driver data call information

16 Common Challenges and Solutions to Implementing Activity Based Costing Challenge Challenge Description Common Solution Inaccurate Responses Maintaining Traceability of Costs Cost Accounting Requires Management Discretion Personnel responses can be jaded to reflect optimal performance and not actual performance (E.g. 50% of time on strategic support versus 15% of actual time) Without cost accounting systems, it becomes difficult to report how costs incurred in the early portion of a fiscal year support an activity ABC-based data requires management interpretation and does not provide a single answer Rely upon existing data sources/systems to validate how people report their time Conduct ABC surveys on a quarterly basis and be able to provide ABC responders with relevant (i.e. purchase orders, sub-object class, etc) supporting information to provide context Effective Management Reports that provide focused areas of analysis and core points for managers to make effective decisions

17 Activity-Based Costing What ABC Is Measures consumption of resources by activities and the cost of those activities by their products and services ABC is a model and not the business The ABC model is a living document What ABC is Not A New Accounting System A Silver Bullet /Panacea Effortless and Without Cost

18 Implementing ABC for FBI/CJIS

19 Core Elements of CJIS Activity Based Costing Model Resources Activities Products and Services Relied upon FBI s Financial Management System complete Fiscal Year expenditures Relied upon FBI s Bureau Personnel Management System for Personnel Information Conducted Working Group sessions with over 30 groups to develop activities and potential drivers Working Groups used survey responses to allocate Labor and Nonlabor Costs to these activities Deloitte coordinated with CJIS leadership to develop products and services list

20 Assigning Human Resources (HR) Costs Description of Cost: These HR costs include broad personnel management support, to include: recruiting, staffing, benefits management, etc. These costs are incurred by HR for all FBI activities to include support for the processing of reimbursable fingerprint and namebased criminal history checks. Issue: What would be the most accurate method of assigning these overhead costs to reflect the costs of providing the service? Driver Options Driver Characteristics Decision Budget Support to CJIS CJIS Portion of Personnel of the FBI s Total Workforce This drives costs based on the proposed amount of financial support that HR provides to CJIS This drives costs based on the number of CJIS personnel as a percentage of the total FBI workforce Deloitte used this option to allocate HR costs to CJIS based on the concept that HR s costs are correlated with the number of people within an organization

21 IT Shared Service Costs Description of Cost: These are typically costs incurred in the management, maintenance and development of the IT systems and IT networks. Issue: What would be the most accurate method of assigning these overhead costs to reflect the costs of processing billable fingerprint-based criminal history checks? Driver Options Driver Characteristics Decision Date Center Square Footage Production Volume Computer Processing Utilization (CPU) This drives costs based upon the space occupied by each system s set of servers, processors, utility consumption, etc. This drives cost based on the volume of the transactions as they relate to CJIS products and services This drives costs based on the system utilization needed to process the transactions Deloitte elected this option based on the understanding that CJIS systems were sized and maintained to accommodate transaction volumes and processing requirements

22 Assigning General PP&E/Building Costs Description of Cost: These costs are for maintaining the facilities, CJIS grounds, and the overarching cost of the CJIS facility. Issue: What would be the most accurate method of assigning these overhead costs to reflect the costs of providing the service? Driver Types Driver Characteristics Decision Square Footage of Facility Dedicated to Each CJIS Section CJIS Personnel to Activities This driver assigns costs based on the number of people/processes completed by each of CJIS seven organizational sections and their respective organizational units This driver assigns costs based on the number of CJIS personnel driven to each CJIS activity Deloitte elected this option based on the opinion that space and maintenance were contingent on the number of people completing an activity

23 Translating Costs into Fees ABC Defines Cost Pool Resources Activities Products and Services Fee Classes Defined Building an ABC Model to translate costs into Fees Aligning Activity costs to the Product and Services provides unit costs which provide the basis for the Fee Classes Fee Classes are reviewed to determine applicability (E.g. the unit costs have become insignificant) and relevancy (E.g. new fee classes) Unit Costs are rounded up to the nearest $0.25 and are presented as the Fee

24 Lessons Learned from Implementing ABC at CJIS Costs Objects: Unit Costs are difficult to report if they were not initially identified as a core product or service Activity Analysis and Development: Working Groups tend to go either into too much or too little detail when identifying activities provide guidance on what defines an activity Drivers: Choose Drivers that accurately exhibit the relationship between the cost and activity or activity and cost object