Cost management training day2

Training Agenda/Objectives • Day 1: Cost Management Overview – Understanding of why managing costs are important, Army’s overall objectives, the process of Cost Management, how it differs from Budget, and key cost terms • Day 2: Cost Object Definition – Understanding of an ERP, how to build a Cost Model, and the various cost objects within a Cost Model (e.g organization, products, job orders, etc.) • Day 3: Assignment of Costs – Understanding of cost allocations/assignments, how to chose which to utilize when, how to valuate the results of the assignments (Std vs Actual), and rate creation • Day 4: Analysis and Reporting – Understanding of the results of the Cost Model and how various types of analysis and decisions are supported D2L1_p1 Day Objective & Agenda Day 2: Cost Object Definition • Understanding of an ERP, how to create a cost model and each of the cost objects supported within the cost model - Lesson 1: ERP Enabler - Lesson 2: Costing Conceptual Design - Lesson 3: Cost Centers - Lesson 4: Activity Types - Lesson 5: Cost Elements - Lesson 6: WBS Elements - Lesson 7: Orders - Lesson 8: Business Processes - Lesson 9: Statistical Key Figures D2L1_p2 I FOUND A WAY TO SAVE A MILLION DOLLARS BY SPENDING ONLY $10,000 THE $10,000 WOULD COME OUT OF MY BUDGET BUT THE SAVING WOULD GO INTO SOMEONE ELSE’S BUDGET IT’S NOT FEASIBLE (Modified) D2L1_p3 THE CHIEF OF STAFF MIGHT NOT AGREE THAT’S WHY HE IS NOT INVITED TO THE MEETINGS Lesson 1: ERP Enabler Objective(s): • To understand what “ERP” stands for and how it can support the Army’s Cost Management culture D2L1_p4 Enhanced Ability to Capture Cost Organizational Entities Cost Objects GFEBS (SAP) Cost Centers Cost Collectors • Installation • Brigade • School • Directorate • Lab Army Examples X X Real Property / Equipment Program / Project Task / Activity Special Event or Initiative Assets / Real Estate Objects Project / WBS Business Process Internal Order • Building • Training Range • Weapon System • Acquisition • RDTE Project • MILCON Project • System Test • Service Support Program (SSP) • Instructional Course • Repair Process • Test Run • BRAC • Training Event • Mandatory Training • Support to Olympics Cost assigned Directly or Indirectly X Heavy X X UA Light SUST Stryker X SUST FCS Force Generation Customer / Product $ to Reset $ to Train $ to Deploy Training (Ind) $ / Student Trng Day $ / Course Day Training (Unit) $ / Mile $ / Flying Hour $ / Weapon System Base Support Personnel $ / Service $ / Brigade $ / Installation (SRM, BOS, ENVR, FP) Military - $ / Soldier Civilian - $ / FTE Contractor - $ / FTE D2L1_p5 Equipment $ / Brigade - New $ / Brigade - Conversion Ratio: Sppt $ / Brigade $ • Brigade • Weapon System • PEO / PM • Tenant • Command • Course Many ways to Measure Cost Methodology vs System • Army’s Purpose is to Provide Operational Managers with Relevant “True” Cost Information to Make Sound Economic Decisions • Methodologies to Measure Cost (FASAB #4) Traditional vs Cost View (example) - Activity Based Costing - Job Order (Event) costing Traditional view (Inputs) - Project (with WBS) costing - Std (Product) costing - Others Salaries Supplies Contracts Travel Transportation Cost View (Process) $ 501K 44K 45K 17K 19K $626K Issue Property Receive/Turn-In Property Maintain Prop Book Store Property Administrative Support • Requires a System to Gather Cost Data and Provide Analytical Information Army Ad Hoc D2L1_p6 Financial Reports Independent Cost Models Integrated Cost Management $ 40K 72K 279K 136K 99K 626K Enterprise Resource Planning (ERP) ERP Benefits ERPs Help to Streamline & Integrate the Processes & Systems Providing the Following Benefits: • Increases Productivity Across Organizations • Improves Standardization & Efficiency of Processes • Increases Access, Consistency & Transparency of Data • Provides Collaboration Across Business Domains • Provides IT Economies of Scale • Enhances Analytics & Improves Accuracy of Data D2L1_p7 Enterprise Resource Planning (ERP) Commercial Off the Self System that Integrates All Facets of the Business D2L1_p8 Data Warehousing Analytics GFEBS End User Presentation Layer Enterprise Resource Planning (ERP) • ERP Functionality Integrates Management Accounting (Cost Management) with the Financial & Budget Accounting End User Presentation Layer End User Presentation Layer Public Sector D2L1_p9 Budget Accounting Data Warehousing Analytics Cost Management Integrated with Finance & Budget Accounting Enterprise Resource Planning (ERP) Cost Accounting ERPs (e.g GFEBS) Enable The Cost Management Process Cost Planning Cost Management Process Cost Controlling Cost Analysis Cost Management Integrated with Finance & Budget Accounting End User Presentation Layer Public Sector D2L1_p10 Budget Accounting Lesson 9: Statistical Key Figures Objective(s): • To understand what the Statistical Key Figure represents, uses, and how defined for the Cost Model D2L9_p1 SAFM-CE Army Cost Model Statistical Key Figure (SKF) Definition Statistical Key Figure Definition: A Statistical Key Figure is a piece of information about the cost object it is assigned to, e.g # FTE for a cost center, # telephones, etc • There are two types of statistical key figures: – Fixed value - Fixed values are carried forward from the period posted to all subsequent posting periods for the year – Total value - Total values exist only for the period posted P1 P2 P3 P4 P5 … 12 12 24 1.5 24 24 24 CC #1000 # Headcount # FTE D2L9_p2 SAFM-CE Army Cost Model Statistical Key Figure Uses D2L9_p3 • As a bas is (co st driv er) for cos t ass ign me nts, e.g # SAFM-CE Army Cost Model How SKFs are defined D2L9_p4 • Ev alu ate d the CL S • De ter mi ne d the SSP Workload Example CLS SBC 25 - CIF GFEBS D2L9_p5 Lesson 9: Wrap-Up • A Statistical Key Figure is a piece of information about the cost object it is assigned to, e.g # FTE for a cost center, # telephones, etc • There are two types of SKFs; Fixed which prepopulates the same data for each period until changed and Total which represents the total value of that SKF for that period only • Utilized as cost drivers/basis for cost allocations and performance reporting • Must be assigned to a cost object D2L9_p6 Questions _ statistical key figure varies each period _ statistical key figure is static from the period of entry through to the end of the year • There is a limited number of SKFs that can be assigned to a Cost Object? o True oX False D2L9_p7 Lesson 10: Capturing Costs Objective(s): • To understand how actual costs will be captured against the cost objects defined within the Cost Model D2L10_p1 GFEBS Cost Objects vs Legacy Data Elements Legacy Data Element Purpose GFEBS Cost Objects Elements of Resource (EOR) - 6000 Series Expenses & Revenues Primary Cost Elements Cost Transfers (e.g EOR 2700) Cost Movement (Budgetary and non-Budgetary) Secondary Cost Elements Command, Directorate, Branch, Unit Organizational Entity Cost Centers Civilian / Military Pay (e.g C-Type, Rank) Resource Pool (e.g Labor, Equip) Activity Types Internal Orders Internal Orders Processes/activities Business Processes Projects / WBS Elements Projects / WBS Elements Infrastructure (e.g Facility, Roads) Real Estate Objects Legacy Data Element Purpose FM Master Data Program Element, MDEP, Acquisition / RDTE Programs Budget / Program Level Mgmt Functional Area Mandates, Earmarks, Con-Ops Special Projects Funded Program Point Accounts, Functional Cost Accounts, Account Processing Codes (APCs) (e.g Installation Services, Facility Codes, Job Orders, orders, projects, etc.) D2L10_p2 Cost Model Cost Objects Full Cost Organizations Full Cost Product/Services SSPs Provided Director of Logistics) SSPA: Manage OCIE Inventory Full Cost Customers Cost Center Brigade XXX SSPB: Issue Cost Center/Resource Pool Military Labor Depreciation Contractors Military D2L10_p3 SSPC: Issue Clothing to Initial Training Soldier Central Issue facility Civilian Employees OCIE to Soldier CIV HR CNT HR MIL HR TRADO C YYY SSPD: Accept OCI Turn-Ins SSPE: Receive & Process Shipments Brigade ZZZ SSPF: Manage Chemical Defense Equipment Etc • The initial cost recognition is the primary posting (primary cost element) • Costs flow through the Cost Objects of the model (e.g secondary cost elements) using various cost assignments/alloca tions Process for Capturing Cost Expense Elements DCPS ATAAPS WMT DIMHRS WAWF FCM PCard LMP GCSS-A DTS GFEBS Fixed Assets D2L10_p4 Organizations Products & Services Payroll Cost Center Material Supplies Activity Types: Equipment Travel • • • Labor Pools Equipment usage Facility usage Operational Systems: • SKF Cost Driver #1 • SKF Cost Driver #2 Depreciation Business Process Orders (Internal, Sales, Maint.) Project WBS Element GFEBS Interfaces R1.3 DCPS ATAAPS WMT Cost Center Activity Types: • • • WAWF Credit Cards DTS D2L10_p5 Project WBS Element Orders (Internal, Job Work) Labor Pool usage Equipment usage Facility usage Cost Example 2ABM0065 Ammo Supply Point DCPS Name Name Cost Cost Element Element Actuals Actuals Quantity Quantity Perm 6100.11B1 $10,000 80 hrs Overtime 6100.11D0 $3,000 20 hrs Civ PCS 6100.12A3 $1,000 ATAAPS 10145 Quality Assurance, Inspect & Grading RG2 DTS ADKINS, SYLVIA R WAWF Purchase Cards WARS D2L10_p6 $X/Hr Travel Travel 6100.12T0 6100.12T0 $800 $800 Contracts Contracts 6100.252G 6100.252G $2,000 $2,000 Purchase Cards Cards Purchase 6100.262B 6100.262B $1,500 $1,500 DOL DOL Support Support 9100.0000 9100.0000 $2,000 $2,000 Allocation Allocation 9400.SQFT 9400.SQFT $1000 $1000 Labor Labor Charge Charge 9300.0100 9300.0100 ($2,000 ($2,000 )) Ammo 9400.AMMO ($500) SBC 23 Workload Drivers # of Requests # of Inspections $Y/Hr 10153 Supply RG2 BERRY, MALLIE H 10369 Amm Explosives & Toxic Material Work RG2 $Z/Hr GUINTHER, JOHN S MCEADY, SAMUEL E OWENS, ROBERT E YOUNG, ERNEST W BENSON, JAMES E 300ft 300ft AMMO $XX/ issue Lesson 10: Wrap-Up • The cost objects define the structure of where the actual costs are posted against • Actual costs are reflected first as the primary cost element postings in the Cost Model, then as secondaries as they are assigned/allocated through the cost model • Many interfaces to legacy applications will exist to generate the primary postings into the model • As GFEBS releases occur, more and more interfaces will be accommodated for capturing both dollars and nonfinancial operational measures D2L10_p7 Question D2L10_p8 You sur viv ed Da y 2? – Co ng rat ula tio ... Analytics Cost Management Integrated with Finance & Budget Accounting Enterprise Resource Planning (ERP) Cost Accounting ERPs (e.g GFEBS) Enable The Cost Management Process Cost Planning Cost Management. .. and how it can support the Army’s Cost Management culture D2L1_p4 Enhanced Ability to Capture Cost Organizational Entities Cost Objects GFEBS (SAP) Cost Centers Cost Collectors • Installation •... Chemical Defense Equipment Etc Cost Accounting Cost Planning Cost Management Process Cost Analysis How the information is entered, stored, used, and presented Cost Controlling End User Presentation