adcom june 2012 Activity Based Costing [ABC]

Transcription

1 adcom june 2012 Activity Based Costing [ABC]

2 List of Contents Activity-Based Costing: Definition, Objectives and Benefits Project Approach, Scope & Methodology... 4 Major Activity Groups... 5 Example 1: Detailed Activity Structure for Education.. 7 Example 2: Detailed Activity Structure for Health 8 ABC Cost Allocation Model. 9 Preliminary Results Total Direct Costs per Field & Program (2011 actual costs) Core Activities Total Direct & Indirect Costs (2011 actual costs).. 11 Preliminary Results for Agency-Wide Benchmarking & KPIs. 12 Education Schooling Activity Group.. 12 Health Primary Care Activity Group.. 13 Relief & Social Eligibility & Registration Activity Group. 14 Infra Structure & Camp Improvements Camp Improvements Activity Group. 15 Lessons Learned & Recommendations Activity Structure. 16 Objective & KPIs. 17 Organization & Processes. 18 Way Forward

3 Activity-Based Costing: Definition, Objectives and Benefits Activity-based costing (ABC) is a special costing model which identifies all activities in an organization and assigns total cost (direct and indirect) to each activity according to the actual consumption of resources. ABC is valuable addition to the current Accounting and Result Based Management (RBM) systems, as it focuses on logically structured activities and services, which cannot be fully captured and analyzed by the given tools. ABC clearly defines and describes all activities and services provided by the Agency (internal and external services) in a unified and harmonized structure which enables the Agency to: Provide a pure functional service perspective independent from individual organizational setups. Ensure comparability/benchmarking of specific activities/activity groups across the Agency. Be more transparent on total costs of each activity, considering staff costs, other direct costs and indirect costs on all Agency levels. Establish a fair, realistic and transparent methodology to allocate indirect costs. Combined with clear objectives and KPIs for UNRWA s services, ABC can provide a comprehensive basis for better decision making (reduce costs and/or increase efficiency and effectiveness) on all management levels. 3

4 Project Approach, Scope & Methodology Definition of an UNRWA Activities Dictionary to capture and describe all external and internal services/activities in workshop series with all relevant departments in headquarters and the fields (approx. 120 workshops have been conducted). Analysis and grouping of the existing cost structures regarding staff costs, supplies, infrastructure costs, direct and indirect costs and definition of a fair and transparent cost allocation model to provide the total costs of the front line activities. Customize and calibrate an Excel based ABC model Integrate current accounting system with the ABC model and provide monthly reports for all management levels. In order to manage the complexity and initially set up the general structure and methodology for ABC for UNRWA, the first phase of ABC project focused on General Fund (GF) resources only. In a second phase (subject to funding) the ABC model will be extended to also capture Emergency Appeal and Projects, hence, providing total costs of UNRWA s activities and services. 4

5 Project Approach, Scope & Methodology Major Activity Groups Based on their functional character, activities have been grouped in three major categories: Core Activities Core Activities reflect the agency s front-line activities. The core activities are the major focus of the ABC exercise, so they have the highest level of detail and bear full absorption costs. Internal Support Internal Support have the character of real services with a potential service provider customer relation (at least partially). The management focus for these services is increasing efficiency by given quality levels of services. Executive Management & Governance Executive Management & Governance comprises all corporate, management and management support functions, which have a more superior, political and tactical character (no real or potential service provider customer relation), e.g. Com-Gen Office, DIOS, Dispute Tribunal, etc. 5

6 Project Approach, Scope & Methodology Major Activity Groups (Cont.) What are the total costs of UNRWA s front line activities/ services? Education Core Activities Relief & Social Health Microfinance* Infrastructure & Camp Improvement 2 Internal Internal Support HR IT Finance Procurement & Logistics Administrative Security Output-View Emergency* Executive Management & Governance Allocation of 1 1 capacities and costs Organization (Departments, etc.) Input-View *As not part of GF, the activities have been defined, but are not used in the ABC costing model 6

7 Project Approach, Scope & Methodology Example 1: Detailed Activity Structure for Education Education (EDU-L1-1) Schooling (EDU-L2-1.1) Teacher Training & Developement (EDC/ ESF) (EDU-L2-1.2) Technical & Vocational Education & Training (EDU-L2-1.3) Planning & Management / Support (EDU-L2-1.4) Basic Education (EDU-L ) Institution Management & Professional Support (EDU-L ) Institution Management & Professional Support (EDU-L ) Programme Management / Education front office (EDU-L ) School Management & Professional Support (EDU-L ) Teaching (EDU-L ) Preparatory Teaching (EDU-L ) Elementary Teaching (EDU-L ) Education Staff Training (EDU-L ) Pre-Service Training (EDU-L ) In-Service Training (EDU-L ) Institution Mgt & Professional Support Trade Vocational (6-EDU-L ) Institution Mgt & Professional Support Technical Education (6-EDU-L ) Training (EDU-L ) Area Education Management & Professional Support (EDU-L ) Administration (EDU-L ) Extra Curricular Activities (EDU-L ) Secondary Education (Lebanon) (3-EDU-L ) School Management & Professional Support (3-EDU-L ) Teaching (3-EDU-L ) Extra Curricular Activities (3-EDU-L ) Student Training (EDU-L ) Trade Vocational Student Training (6- EDU-L ) Technical Education Student Training (6-EDU-L ) Activities can be located on each level of the hierarchy. Instructor Training (EDU-L ) Costs and staff capacities always need to be allocated on the lowest level. Placement, Career and Social Guidance (EDU-L ) Placement & Career Guidance Trade Vocational (6-EDU-L ) Placement & Career Guidance Technical Education (6-EDU-L Extra Curricular Activities (EDU-L ) Field specifics Lebanon Field specifics West Bank 7

8 Project Approach, Scope & Methodology Example 2: Detailed Activity Structure for Health Health (HEL-L1-1) Primary Care (HEL-L2.1.1) Secondary & Tertiary Care (HEL-L2.1.2) Cross-cutting Health Care (HEL-L2.1.3) Programme Management (HEL-L2.1.4) Medical Care (HEL-L ) General OPD / consultation (HEL-L ) Oral Health (HEL-L ) Physiotherapy (HEL-L ) Disease Prevention and Control (HEL-L ) Communicable Diseases (HEL-L ) Maternal & Child Health (HEL-L ) Maternal Health (HEL-L ) Pre conception care (PCC) (HEL-L ) Ante-natal care (HEL-L ) Post-natal care (HEL-L ) Family planning services (HEL-L ) Child Health (HEL-L ) Outpatient specialist care (HEL-L ) Outpatient specialist care at UNRWA HC (HEL-L ) Outpatient specialist care outsourced (HEL-L ) Hospitalization (Diagnostic groups) (HEL-L ) Outsourced Hospitalization (HEL-L ) Radiology / X-Ray (HEL-L ) Laboratory (HEL-L ) Other diagnostic services (HEL-L ) Pharmaceuticals (Medicine and medical supplies) (HEL-L ) Medical Equipment (HEL-L ) Prosthetic devices (HEL-L ) Programme Management & Administration (HEL-L ) Area Management & Administration (HEL-L ) Non-Communicable Diseases (HEL-L ) Mental Health (HEL-L ) Child Growth Monitoring (HEL-L ) Pediatric consultation (HEL-L ) School Health (HEL-L ) All (Secondary & Tertiary) Hospitalization (Gaza, Jordan, West Bank) (HEL-L ) Secondary Hospitalization (Lebanon & Syria) (HEL-L ) Community Health (HEL-L ) Special children with special needs (SCSN) (HEL-L ) Tertiary Hospitalization (Lebanon & Syria) (HEL-L ) UNRWA Hospitals (Qalqilia) (HEL-L ) 8

9 Project Approach, Scope & Methodology ABC Cost Allocation Model 1 Allocation of HQ overhead costs to the fields 2 Allocation Field Office Management to core activities and internal support services HQ Core Activities Executive Management & Governance Education 3 4 Allocation internal support services to core activities 1 Health Relief & Social Internal Support Microfinance Allocation core activities to core activities (only ICI) Emergency Field A Field B Field n Core Activities Core Activities Education Health Education Relief & Social Infrastructure & Camp Improvement Health Relief & Social Emergency HR IT Finance Procurement & Logistics Administrative Security 1 2 Executive Management & Governance Executive Management & Governance Core Activities Infrastructure & Camp Infrastructure Improvement Internal Support & Camp Education Health Improvement Microfinance 1 Infrastructure & Camp Improvement Executive Management & Governance 4 2 Internal Support Microfinance HR Relief & Social Procurement & Logistics Emergency IT Microfinance HR Administrative Procurement & Logistics Emergency Finance 3 IT Security Internal Support Finance HR IT Administrative Security Procurement Administrative & Logistics Finance Security 9

10 Preliminary Results Total Direct Costs per Field & Program (2011 actual costs) Based on 2011 actual costs, the following table illustrates the breakdown of direct costs to each activity group. Direct costs associated with Core Activities comprise 84% of 2011 actual costs while Internal Support constitute 16% of total 2011 actual costs. Direct costs associated with Education constitute the largest expenditure (69% of total core activities costs and 58% of overall total costs for 2011). Core Activities Internal Support (amounts in million USD) Field Education Health Relief & Social Infrastructure & Camp Improvement Human Resources Finance Procurement & Logistics Information & Communication Technology Administrative Support Security Executive Management & Governance Legal Affairs Total Headquarters* Gaza Lebanon Syria Jordan West Bank Total % of Total 58.3% 14.8% 6.6% 4.5% 1.6% 1.2% 3.9% 1.2% 2.0% 0.8% 4.8% 0.4% 100.0% * Includes Amman & Gaza HQ 10

11 Preliminary Results Core Activities Total Direct & Indirect Costs (2011 actual costs) As shown in earlier slides, the ultimate objective is to determine the ultimate cost of UNRWA s core front line activities. Hence, the table below shows the impact of allocating indirect costs associated with internal support services to core activities. Within each cluster, activity hierarchies with up to 5 levels have been developed to logically structure the activities and also provide a drill-down logic for the ABC reporting. The ABC Model allows further drill-down on each activity level where specific KPIs can be developed and compared across the Agency. (amounts in million USD) Field Infrastructure & Camp Education Health Relief & Social Improvement Total with Total with Total with Total with Total Direct Total Direct Total Direct Total Direct Indirect Cost Indirect Cost Indirect Cost Indirect Cost Headquarters* Gaza Lebanon Syria Jordan West Bank Average Total * Includes Amman HQ and Gaza HQ 11

12 Preliminary Results for Agency-Wide Benchmarking & KPIs Education, Activity Group Schooling Total Costs Schooling Total Costs Schooling per Pupil $ ,00 $1.800,00 $ ,00 $1.600,00 $ ,00 $ ,00 $ ,00 $ ,00 $ ,00 $ ,00 $1.400,00 $1.200,00 $1.000,00 $800,00 $600,00 $400,00 $200,00 $- HQ GFO LFO SFO JFO WBFO Average $- HQ GFO LFO SFO JFO WBFO Average Schooling direct cost total Schooling indirect cost total Schooling: Average direct costs per Pupil Schooling: Average indirect costs per Pupil As well on the activity group level, the comparison of absolute numbers will not provide insights on efficiency and unit costs, therefore the total costs of Schooling have been divided by the number of pupils enroled in 2011 to show the Schooling costs per pupil per field. It s obvious that the cost per pupil deviate largely across the fields, with rather high total costs per pupil in LFO ($ 1,500) and WBFO ($ 1,200) and SFO, JFO and GFO with almost half the costs, ranging from $ 580 to $

13 Preliminary Results for Agency-Wide Benchmarking & KPIs Health, Activity Group Primary Care Total Costs Primary Care Total Costs Primary Care per Patient Visit $ ,00 $16,00 $ ,00 $ ,00 $14,00 $12,00 $10,00 $ ,00 $8,00 $ ,00 $ ,00 $6,00 $4,00 $2,00 $- HQ GFO LFO SFO JFO WBFO Average $- HQ GFO LFO SFO JFO WBFO Average Primary Care direct cost total Primary Care indirect cost total Primary Care: Average direct costs per Patient visit Primary Care: Average indirect costs per Patient visit GFO shows the highest total costs for Primary Care with approx. $25M, followed by WBFO and JFO. Looking at the average Primary Care costs per patient visit, GFO has the lowest costs with approx. $6, whereas LFO spends more than $14 per patient visit. SFO and JFO are in the mid-field with around $10 per visit. 13

14 Preliminary Results for Agency-Wide Benchmarking & KPIs Relief & Social, Activity Group Eligibility & Registration $ ,00 $ ,00 $ ,00 $ ,00 $ ,00 $ ,00 $ ,00 Total Costs Eligibility & Registration Total Costs Eligibility & Registration per Registered Refugee $6,00 $5,00 $4,00 $3,00 $2,00 $ ,00 $ ,00 $1,00 $- HQ GFO LFO SFO JFO WBFO Average $- HQ GFO LFO SFO JFO WBFO Average Eligibility & Registration direct cost total Eligibility & Registration indirect cost total Eligibility & Registration: Average direct costs per Registered Refugee Eligibility & Registration: Average indirect costs per Registered Refugee GFO shows the highest total costs for Eligibility & Registration with approx. $4M, followed by LFO and JFO with approx. $2M. Looking at the average Eligibility & Registration costs per registered refugee, LFO displays the highest average costs with approx. $5, followed by GFO with $3.30 and WBFO with slightly over $2. JFO seems to be the most efficient field with $1 per registered refugee. 14

15 Preliminary Results for Agency-Wide Benchmarking & KPIs Infra Structure & Camp Improvements, Activity Group Camp Improvments Total Costs Camp Improvement Total Costs Camp Improvement per Refugee Living in Camps $ ,00 $2,50 $ ,00 $2,00 $ ,00 $ ,00 $1,50 $ ,00 $1,00 $ ,00 $ ,00 $0,50 $- HQ GFO LFO SFO JFO WBFO Average $- HQ GFO LFO SFO JFO WBFO Average Camp Improvement direct cost total Camp Improvement indirect cost total Camp Improvement: Average direct costs per Registered refugee Camp Improvement: Average indirect costs per Registered refugee In contrary to other core programmes, ICI HQ is directly providing services for Camp Improvement in the fields, which explains the high amount of direct costs in HQ as well as the relatively high amount of total costs (including the allocated indirect costs from HQ) compared to the direct costs generated in the fields. The only field with a high amount of direct costs is GFO with $850k. Looking at the average total costs of Camp Improvement per refugee living in camps, GFO and SFO have the highest costs with around $2.25 per refugee, followed by LFO with almost $2.00. JFO has the lowest average costs per refugee with slightly more than $1.00 and WBFO in the middle with $

16 Lessons Learned & Recommendations Topic Activity structure Lessons learned & recommendations The defined activity structure is a big step for the Agency as it is the first agency-wide harmonized catalogue of UNRWA services. ABC projects like this always need a learning phase of the first 6 12 months until everything is stable and all parties involved have gained some experience to work with the model and its reports. The next step is to conduct joint workshops per program/activity group of HQ and field departments to discuss and analyze the first ABC results and figures on one hand, and on the other hand challenge the activity structure itself (structure, level of detail, comparability, etc.). 16

17 Lessons Learned & Recommendations (Cont.) Topic Objectives and KPIs Lessons learned & recommendations The goals and objectives currently used in the HIP/FIP are on a very high and general level with no or limited focus on specific activities and services as defined in the ABC model. On the output level, a lot of reasonable KPIs already have been defined, which could also be used on an activity level. Nevertheless, if the Agency aims for activity based management, it is strongly recommended to specify and define objectives for each activity to determine the management focus (quality, efficiency, etc.) and the suitable KPIs. What should be defined in any case are clear and standardized cost drivers per activity group and where suitable on activity level to calculate unit costs (number of students, number of benificiaries, number of patients, number of consultations (all by categories, if required). 17

18 Lessons Learned & Recommendations (Cont.) Topic Organization & Processes Lessons learned & recommendations The results of the ABC project will not deliver recommendations for potential organizational or processual optimizations just by pressing a button, but especially using the possibility to compare the fields and question the differences it will provide indicators where it is worth to analyze in more detail and increase efficiency or adapt good practice from other fields Way forward The next step is a trial phase of approximately 2 to 3 months with extensive consultation with all managers in HQ and Field departments, to introduce them to the ABC reports, discuss the results and make final amendments to the model (e.g. allocation factors) After this trial phase the ABC reports will be distributed to managers of all levels In November / December, the staff and cost allocations will be verified and adjusted based on the YTD results