activity-based budget article

Activity-Based Budgeting: Creating a Nexus between Workload and Costs

By

Jon M. Shane

Copyright 2005 www.jonmshaneassociates.com Page 1

INTRODUCTION

At some point in an executive’s career they will be required to develop a budget for

something. Indeed it is a prime responsibility. A budget is merely a plan described in financial

terms. Knowing which budget plan to choose is a matter of what needs to be conveyed. There are

many different budget styles, each with a different purpose. For example, the most common

government budget is the line-item style, which answers the question: what is to be bought? This

budget plan is oriented toward control and economy. A program budget answers the question:

what is to be achieved? This budget plan is oriented toward planning and effectiveness. And a

performance budget answers the question: what is to be done? This plan is oriented toward

management and efficiency.1 Each has its place depending upon the goal. However, one budget

style, which has gained popularity over the last few years, has the ability to link activities to

costs, giving executives a better understanding of the full costs of service and resource

allocation. This plan is an activity-based budget (ABB).

Activity-based budgeting is an outgrowth of activity-based costing (ABC), which is

similar to zero-based budgeting.2 This budget type accounts for how staff members allocate their

effort among activities. Once the full cost of each activity has been calculated, drivers can be

established that link support activities to the primary activities of the organization—in a law

enforcement environment the primary activities are the direct costs of program delivery3 (e.g.,

patrol services, investigations, tactical operations, traffic control, etc.). By developing a

comprehensive activity-based budget executives are able to create a clear nexus between

workload and costs. Once developed, executives and managers can exercise control in several

ways: 1) assign personnel based upon a demonstrated need, 2) expand or contract personnel

proportionately as the need changes, 3) uncover waste and hidden costs, 4) view which activities

are most and least expensive, thus subjecting them review, 5) assess the full efficiency of the

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organization, 6) identify places to cut spending, 7) establish a cost baseline that may be

influenced through process or technology changes that reduce effort requirements for the

activity,4 and, perhaps most importantly 8) argue from an informed, objective position in favor of

the organization’s budget.

This article will analyze a hypothetical police precinct and the activities of the patrol

force to determine: 1) how many officers are required to handle the workload, 2) the salary,

material and equipment costs, and 3) the distribution of time across three primary categories of

patrol work: calls for service, administrative and proactive activities.

ACCOUNTABILITY AND THE POLITICS OF BUDGETING

Accountability

Being entrusted with public monies requires the utmost integrity and responsibility. In

recent years there have been efforts afoot to make budgets more readable and understandable. An

ABB is transparent and eliminates hidden costs. Not only does it afford a reader the ability to see

where the funds are being spent, it gives a manager who has oversight the ability to see at a

glance the most expensive activities and where to exercise control.

One of the keys to accountability is to ensure the manager assigned to the budget has real

control over the resources that take the form of decision-making authority, information and

skills. “A manager cannot be responsible for a budget in which they have no authority to approve

expenditures.”5

The Politics of Budgeting

Appropriations battles are common. In fact, as an executive charged with budget

implementation and control, subordinate personnel expect the executive to engage in

appropriations battles as an exercise in leadership and argue on their behalf for what they need to

carry out their functions. In preparing for battle it is useful to know a few things about the budget



process: 1) “budgets reflect choices about what government will and will not do, 2) budgets

reflect priorities—between police and flood control, day care and road repair, 3) budgets reflect

the relative proportion of decisions made for local and constituency purpose, and for efficiency

and effectiveness, and broader public goals. [Most importantly], public budgets are not merely

technical managerial documents; they are also intrinsically and irreducibly political.”6 Since

budgets are politically driven it is also useful to know the elected leaders’ platform, which is

often mutually beneficial when seeking funds. The police department will compete with the other

departments of city government for limited funds, so it is of paramount importance for the

executive to prepare a sound budget justification.

SUCCESSFUL BUDGET STRATEGIES AND JUSTIFICATION

Strategies

Strategies differ from justifications. A strategy is an approach; a careful plan or method;

it is the art of devising or employing plans toward a goal. A justification means to prove or show

to be just, right, or reasonable; to show to have had a sufficient legal reason.7 The chief

executive’s goal is to retain the agency’s base budget, and, if possible, to increase it above the

current year’s appropriations. Developing a logical strategy is the means to that end.

In November 2002, the Police Executive Research Forum (PERF) posted the final draft

of roundtable discussions with several police chiefs from around the country. Among the

different budget strategies that were considered, using crime and workload data was first on the

list.8 Other research by Greene, Bynum and Cordner (1986) revealed that “increased workload

was the second greatest factor contributing to an increase in positions.”9 While not infallible,

workload data is reasonable and objective. The other strategies discussed by PERF were: 1)

“capitalize on sensational crime incidents (ideally not occurring locally),2 ) careful mobilize

interest groups, 3) plan strategically, 4) participate fully in the federal grant process, 5) maintain



a close working relationship with the local chief executive and governing board members, and 6)

involve all levels of the police department.”10

Other data that can support a budget proposal includes: 1) aggregate population and

population density, 2) racial and ethnic composition of the city, 3) age composition, 4) gender

composition, 5) education levels, 6) median household income, and 7) per capita and household

income.

Justification

Budget strategies and their attendant analysis are important, but justification is the main

ingredient to the success for the agency’s budget. A solid justification includes all of the relevant

information for the legislative body, the budget office and the city’s chief executive. Budgets

should be justified in three separate spending categories: mandatory, base and discretionary.

Budget Justification Categories

Mandatory expenditures are those governed by federal, state or local law (e.g., social

security, pension, unemployment contributions, and contractually negotiated benefits). Salaries

may also fall into this category, except for those that may be considered discretionary. It is best

to justify mandatory budget expenditures by citing the applicable laws (i.e., federal, state local).

Base expenditures are defined as those that are essential for the agency’s continued

operation. These include utilities, equipment, supplies and materials, printing and other

consumables (i.e., operating expenses). Justification in this category comes from analyzing

previous budgets and projections for service delivery. The executive must be prepared to explain

increases in operating expenditures, such as developing a special task force to address a spike in

drug crime. Workload data and performance-improvement data are always welcomed by budget

review members.



Discretionary expenditures are those that enhance an existing level of service. These

expenditures do not affect the agency’s operations, but they do contribute to improved service

delivery or a particular program’s efficiency. A good example is hiring; by hiring more officers

the agency expects to improve response time, and reduce fear of crime, but not having the extra

officers does not adversely impact the agency’s ability to provide basic service. In defending

discretionary spending it is imperative for the executive to convince the budget review members

of necessity or worthiness of the proposal. Once again workload and performance data are at the

top of list for developing the rationale.

THE WORKLOAD ANALYSIS

A recurring theme in budget development is objectivity. An objective budget, based on

empirical data, is the most reasonable and the easiest to justify. A question that is often raised in

law enforcement circles is: how many officers do we need? Or, how many officers should we

have? Typical responses sound like this: as many as we can afford; as many as the Mayor and

Council want; as many as the people of the city are willing to pay for. While there is merit to

these statements “the only logical and defensible means of determining how many persons

should be assigned to patrol duty is through a careful and systematic analysis of the duties

performed by patrol officers.”11 This is true of any position within the police department, and the

first step toward a logical budget justification is a workload analysis.



Collecting the Data

A workload analysis is “the process of collecting and analyzing data on patrol activities

for the purpose of more efficient scheduling and deployment of manpower.”12 In activity-based

budgeting the process begins by collecting data on calls for service (CFS). This type of data is

generally captured by a computer aided dispatch system (CAD). If a CAD system is not

available, then it is necessary to capture the data manually. It is important to have at least one full

year’s worth of data in order to account for seasonal fluctuations or other anomalies that might

occur. A better data set is two full years worth of CAD data to account for the same fluctuations,

and also to account for personnel trends. For example, if officers are hired or officers are

separated from employment this may adversely impact how CFS are handled including the

amount of time required to do so.

The data set must include the following items: 1) type of call, 2) average number of hours

spent handling the call,13 3) number of calls of that type for the year (or the period being

examined), 4) number of officers required to handle the call, and 5) total employee hours per

modality.14 Once the principal modalities are captured they should be formatted for a typical

spreadsheet application, such as MS Excel.© After the columns are arranged it is easy to

calculate the total employee hours per modality.15 Figure 1 represents the principal modalities

and the acuity.



Figure 1: Principal Modalities (Major Activities)

Service Demands

Acuity Hours

Per Unit

Units Per

Year

Total Employee Hours Per

Modality Officers

Required Percentage Allocation

Murder 3 41 246 2 0.20% Robbery 1.5 2,110 6,330 2 5.15% Burglary 1 1,877 3,754 2 3.05% Court Appearances 1.5 1,234 9,255 5 7.53% Theft (shoplifting and all others) 0.58 6,522 7,566 2 6.15% Arson 1 51 102 2 0.08% Rape 1.5 88 264 2 0.21% Fraud 0.75 211 158 1 0.13% Prostitution 0.33 1,003 662 2 0.54% Gambling Offense 0.42 468 197 1 0.16% Vicious Animal 0.33 214 141 2 0.11% Bomb Threat 1 12 24 2 0.02% Fire (car, house, building) 1.5 123 369 2 0.30% DWI 1 44 88 2 0.07% Emotionally Disturbed Person 1 120 240 2 0.20% Traffic Control 2 2,190 13,140 3 10.69% School Crossing 2 1,080 6,480 3 5.27% MV Pursuit 0.75 81 243 4 0.20% Arrest (average for all types of arrests) 1.5 15,264 45,792 2 37.25% Warrant Service 0.75 73 110 2 0.09% Code Enforcement Violations 0.33 315 104 1 0.08% Juvenile Condition (curfew, truancy and all others) 0.75 457 343 1 0.28% Street Collapse 1 14 28 2 0.02% Wires Down 1 58 58 1 0.05% Burglar Alarm (residential, commercial) 0.33 2,555 1,686 2 1.37% Suicide 1.5 22 66 2 0.05% Sick/Injured Person 0.75 720 540 1 0.44% Train Accident 8 1 48 6 0.04% Kidnapping 3 11 66 2 0.05% Carjacking 1 77 154 2 0.13% Drug Sales 0.3 5,041 3,025 2 2.46% Assault (shooting, stabbing, blunt force) 0.75 1,000 1,500 2 1.22% Stolen Vehicle Report 0.75 2,645 1,984 1 1.61% Assist Officer (back up) 0.25 152 76 2 0.06% Directed Patrol Activities 0.33 5,475 3,614 2 2.94% Shots Fired 0.33 730 482 2 0.39% Domestic Violence 1.25 3,255 8,138 2 6.62% Motor Vehicle Accident (with or without injuries) 1 1,825 3,650 2 2.97% Disorderly Conduct (fight, loud music, noisy crowds) 0.3 2,555 1,533 2 1.25% Person with a Gun 0.42 401 674 4 0.55%

Total 60,115 122,927 hours 100.00%



The hours per unit is the average amount of time spent handling a single CFS of that type

(e.g., handling a single murder will take 3 hours). The units per year is the total number of CFS

for that type (e.g., there were 41 murders for the year). The total employee hours per modality is

derived by simple multiplication:

total employee hours per modality = hours per unit × units per year × officers required

For example, a call for a murder takes 2 officers 3 hours to handle. Over the course of 1 year

officers will handle 41 murders for a total of 246 employee hours. Repeat these calculations for

each modality and then sum the units per year and the total employee hours per modality. The

sums of these two categories are the foundation for future calculations and for ABB

development. The sum of the units per year is 60,115; the sum of hours per employee modality is

122,927.The percentage allocation can be added as a last column. This will give the reader an

excellent visual representation of which activities consume the most and least of the budget.

Figure 1 shows that arrests consume 37.25 percent of the time, followed by traffic control

duty with 10.69 percent. The percentages can be ordered from highest to lowest, or vice versa,

and contrasted against each other for comparison purposes. This is where efficiency begins to

reveal itself. Restated, this method allows the executive to see where time is spent, thus

influencing processes or technology changes that reduce effort requirements for the activity.

Distributing Officers’ Time across Management Categories

The next step is one of the most important in the budget development process, because

what happens with the distribution of time directly affects the budget. After the baseline

calculations are determined it necessary to distribute the time across three primary categories:

service demands (i.e., CFS), administrative, and proactive activities.

The first category, service demands, is critical since the other categories receive their

allotted time based on what is allotted in this category. The sum of employee hours per modality



(122,927) represents 100% of the workload. Obviously there are other things police officers must

do besides respond to calls for service, such as administrative activities (i.e., submitting reports,

attending meetings) and proactive activities (i.e., community policing, directed or self-initiated

activities). It is not realistic to formulate a budget around 100% of the total employee hours per

modality without factoring in a police officer’s other responsibilities. This is where prudent

management decisions must be made regarding how much of the officers’ time the department is

willing to distribute across these three categories. Stated another way, the lower the percentage

of time that is allocated for service demands, the more police officers the department will need.

For illustration purposes the allocation is 60 percent for service demands, 10 percent for

administrative activities, and 30 percent for proactive activities. The calculations for service

demands, administrative and proactive activities when added together total 204,878 required

patrol hours. It will take 134 police officers to handle 204,878 hours of CFS for the year.

Once the total hours are calculated, the next step is to calculate the effective strength of

the patrol force;16 the effective strength differs from the actual strength, which will be explained

later. Based on a work-year of 2,086 hours, the effective strength is 98.23 full-time equivalent

(FTE’s) patrol officers. Since police officers do not actually work 2,086 hours per year, one

additional calculation is necessary, the relief factor. Figure 2 depicts the distribution of time

across the three primary management categories, and the effective patrol force strength.



Figure 2: Distribution of Time Activity % Time Daily/Minutes Daily/Hours

Service Demands 60% 122,927 288 4.8 Administrative 10% 20,488 48 0.8

Proactive 30% 61,463 144 2.4 Total 100% 204,878 480 8

Availability 2,086 (40 hours per week, 52.14 weeks per year) Effective Strength 98.23 FTE Patrol Officers

Relief Factor 1.360 FTE Patrol Officers Actual Strength 134 FTE Patrol Officers

Actual Patrol Force Strength and the Relief Factor

Actual patrol force strength is the number of officers required for patrol in order to

handle the workload. The relief factor, also known as nonproductive FTE, accounts for officers’

time off for various reasons. The more basic and preferred work unit for these calculations is

hours instead of days. Hours are a more discreet and flexible work unit; days are depicted only

for illustration purposes. The relief factor is derived by a two-part subtraction and division

equation:

relief factor = (work year – total time off) = personnel availability; (work year ÷ personnel availability)

This example begins with a work year 2,086 hours; subtract 552 hours of allotted time off

(i.e., Nonproductive FTE). The difference is “personnel availability.” The work year (2,086) is

then divided by personnel availability (1,534). The quotient is 1.36. This means it takes 1.36

police officers for every position to provide an acceptable level of service 365 days per year, 24

hours per day. Figure 3 represents the relief factor calculations for this example.



Figure 3: Nonproductive FTE (Relief Factor) Time Off Days Hours Vacation 28 224

Compensatory 5 40 Sick Leave 15 120

Personal 3 24 Training 8 64

Bereavement 10 80 Total Time Off 69 552

Work Year 260.70 2,086 Personnel Availability 191.70 1,534

Relief Factor 1.360 1.360

The final step is to determine actual patrol strength. Actual patrol strength is determined

by multiplying the effective strength by the relief factor.

actual patrol strength = effective strength × relief factor

The effective strength is 98.23; the actual strength is 134 (134 = 98.23 × 1.36). Thus, according

to the distribution of time as depicted in figure 2, 134 officers are required to carry out 204,878

hours of patrol operations over a period of one year; 66% (88 officers) are assigned to service

demands and 34% (45) are assigned to proactive activities, a ⅔, ⅓ split.

Management and Support Staff Positions

All police precincts operate with command rank personnel, supervisors and support staff.

These personnel must be accounted for to ensure an accurate budget is developed. Depending

upon contractual stipulations or other managerial prerogatives, these positions may or may not be

accounted for by ratio. If the positions are not accounted for by ratio, then a fixed number is all

that is needed. Figure 4 outlines the staff necessary to complete the precinct workforce.



Figure 4: Supervisory and Investigative Staff By ratio: 1 Sergeant per 7 officers Sergeants 19.08 effective strength

1 Lieutenant per 5 Sergeants Lieutenants 3.82 effective strength 1 Detective per 20 officers Detectives 8.82 effective strength

Sub Total 31.71 FTE Support Staff

Management Staff Not by ratio: 1 Captain per command Captain 1.000 effective strength

1 Executive Officer Executive Lieutenant 1.000 effective strength Sub Total 2.000 FTE Command Staff (managers)

Support Staff for Management

By ratio: 4 support staff members per manager Civilian Aides 8.000 effective strength Sub Total 8.000 FTE Civilian Aides

Total 41.71

Figure 5 outlines the precinct’s total personnel complement. The total personnel required to staff

this precinct is 184. Now that workload and staffing has been projected, the results will be used

to develop the activity-based budget.

Figure 5: FTE Subtotal Position Complement Work Hours Relief? Captain 1 9-5 MF No Actual Strength

Executive Lieutenant 1 9-5 MF No Actual Strength Lieutenant 5 24/7 Yes Actual Strength

Sergeant 26 24/7 Yes Actual Strength Detective 9 9-5 MF No Actual Strength

Patrol Officer 134 24/7 Yes Actual Strength Civilian Aides 8 9-5 MF No Actual Strength

Total FTE's 184 Actual Strength

BUDGET DEVELOPMENT

Salary Calculations and the Rate per Employee Hour

The first element of ABB is calculating salaries. The largest expenditure of virtually

every budget is personnel; in many instances personnel account for more than 90 percent of total

budget expenses. The goal in this section is to establish the rate per employee hour. The purpose

of establishing this figure is to create a baseline from which to work; this figure is also necessary



for monitoring purposes: if cuts must be made, it may not be possible to do so from salaries since

salaries are usually contractual. Knowing how mush it costs to perform the required work is

beneficial to managers and supervisors as they monitor individual and collective performance.

To calculate the rate per employee hour, use this equation:

rate per employee hour = (salary × “X”% benefits) × FTE ÷ total employee hours per modality

Figure 6 outlines the FTE salary calculations including the benefits package. The rate per

employee hour is $128.86.

Figure 6: Salary Calculations (includes relief factor) Benefitsat 20%

SalaryCost Title FTE Salary

134 $71,214 $14,243 $11,451,211 Patrol Officers 1 $108,109 $21,622 $129,731 Captain 1 $92,016 $18,403 $110,419 Executive Lieutenant

26 $84,789 $16,958 $2,645,417 Lieutenant 5 $77,215 $15,443 $463,290 Sergeant 9 $72,214 $14,443 $779,911 Detective 8 $27,125 $5,425 $260,400 Support staff

184 $15,840,379 Total Salary Cost divided by 122,927 total employee hours per modality

Rate per employee hour $128.86



Materials and Equipment Costs

The next category to be accounted for is materials and equipment. In lean fiscal times

training and equipment budgets are the first items to be reduced. Materials usually consists of

consumable supplies such as pens, paper, flares, crime scene tape and other office supplies.

Finding the unit cost for materials is a simple calculation based on a fixed amount per employee.

In this example materials are appropriated at $700 per employee, or $128,480 total. The unit cost

is derived by dividing the total cost ($128,480) by the number of units per year (60,115). The

unit cost for materials is $2.14.

Equipment is a larger category that consists of various items necessary to adequately

carry out the functions of the patrol officer. The equipment category usually consists of items

that have a useful life of more than three years, however this is not a rule. Equipment costs are

calculated by spreading the cost of individual items across the useful life of the equipment. Since

having to incur the full cost of the equipment will not come until it must be fully replaced, the

cost is predicated upon its useful life. The equation is:

cost = (quantity × unit cost) ÷ useful life in years

The total cost for equipment is $513,290. The unit cost is derived the same way as the unit cost

for materials; the unit cost for equipment is $8.54. Figure 7 depicts the total and unit cost for

materials and equipment.



Figure 7: Materials and Equipment Materials Equipment

Computers

Quantity Unit Cost Useful Life/yrs Cost Paper, Pencils, Reports, Forms,

Crime Scene Tape, Flares and all other Consumable Supplies (@ $700

per employee) $128,480 15 $1,700 5 $5,100 Total $128,480 Shotguns 25 $700 15 $1,167

divided by units per year 60,115 Typewriters 15 $300 5 $900 Unit Cost $2.14 Marked Police Cars 36 $35,000 3 $420,000

Prisoner Van 1 $40,000 6 $6,667 First Aid Kit and Replacements 80 $140 3 $3,733 Non Traditional Vehicles 5 $19,000 7 $13,571 Night Vision Equipment 5 $7,500 7 $5,357 Walk-through Metal Detector 1 $5,500 10 $550 Gas Masks 200 $320 7 $9,143 Mesh Traffic Vests 50 $30 5 $300 Tripod Scene Lighting 5 $1,000 7 $714 Megaphones 10 $90 7 $129 Prisoner Legirons 25 $43 10 $108 Snow Blower 1 $2,600 5 $520 Laser Printers 10 $1,400 5 $2,800 Unmarked Police Cars 6 $28,000 5 $33,600 Traffic Cones 100 $35 10 $350

Suites of Furniture 5 $7,500 10 $3,750 Photocopier 1 $25,000 6 $4,167 Fax 4 $499 3 $665 Total $513,290 divided by units per year 60,115 = equipment per unit $8.54

Present Level of Service

The final step is to calculate the costs for the present level of service. This is where all of

the previous calculations are reconciled to form the ABB. The first step is to replicate the table

that holds the principal modalities (see figure 8). Again, the principal modalities serves as the

foundation upon which the remainder of the budget will rest. A few additional calculations are

necessary to arrive at the total cost. These include salary per hour, salary per unit, material per

unit, equipment per unit, and unit cost.



Salary per Hour

The salary per hour cost is calculated by multiplying the rate per employee hour

($128.86) by the total number of officers required. For example, the total number of officers

required to handle a murder is 2; multiply this by the rate per employee hour and the salary per

hour is $257.72.

salary per hour = rate per employee hour × total officers required

Per-unit Costs

“Unit costs compare the volume of work anticipated to the items needed to complete the

work and the funds required to purchase the items. This method [is] used to justify the need for

personnel or equipment. . .”17 This is the most salient feature of activity-based budgeting since

identifying the individual costs is what this budget plan seeks to accomplish.

Salary per Unit

The salary per unit cost is calculated by multiplying the hours per unit (3) by the salary

per hour ($257.72). The salary per unit cost for the modality “murder” is $773.16.

salary per unit = hours per unit × salary per hour

Unit Cost

The unit cost is the sum of salary per unit ($773.16), materials per unit ($2.14), and

equipment per unit ($8.54) costs. The unit cost for “murder” is $783.84.

unit cost = salary per unit + material per unit + equipment per unit

Total Costs

The total cost is the final calculation in the budget. Total costs are derived by multiplying

the units per year for each modality (41) by the unit cost ($783.84). The total cost for the

modality “murder” is $32,173.31.

total costs = units per year × unit cost



Figure 8 is the completed ABB plan outlining the entire cost for salaries, materials and

equipment. It is readily apparent that the percentage of the budget allocated per modality in

figure 8 very closely approximates the percentage of time allocated per modality in figure 1.

Figure 8: The Activity Base Budget: Present Level of Service

Units Per

Year

Hours Per

unit Officers

Required Total

Hours

Salary per

hour

Salary Per

unit

Material per unit

Equipment per unit

Unit Cost

Total Cost

Percentage Allocated

Murder 41 3 2 246.00 $257.72 $773.16 $2.14 $8.54 $783.84 $32,137.31 0.19% Robbery 2,110 1.5 2 6,330.00 $257.72 $386.58 $2.14 $8.54 $397.26 $838,210.65 5.09% Burglary 1,877 1 2 3,754.00 $257.72 $257.72 $2.14 $8.54 $268.40 $503,779.40 3.06%

Court Appearances 1,234 1.5 5 9,255.00 $644.30 $966.45 $2.14 $8.54 $977.13 $1,205,774.74 7.32% Theft (all types) 6,522 0.58 2 7,565.52 $257.72 $149.48 $2.14 $8.54 $160.15 $1,044,521.19 6.34%

Arson 51 1 2 102.00 $257.72 $257.72 $2.14 $8.54 $268.40 $13,688.20 0.08% Rape 88 1.5 2 264.00 $257.72 $386.58 $2.14 $8.54 $397.26 $34,958.55 0.21% Fraud 211 0.75 1 158.25 $128.86 $96.65 $2.14 $8.54 $107.32 $22,644.70 0.14%

Prostitution 1,003 0.33 2 661.98 $257.72 $85.05 $2.14 $8.54 $95.72 $96,010.59 0.58% Gambling Offense 468 0.42 1 196.56 $128.86 $54.12 $2.14 $8.54 $64.80 $30,324.99 0.18%

Vicious Animal 214 0.33 2 141.24 $257.72 $85.05 $2.14 $8.54 $95.72 $20,484.81 0.12% Bomb Threat 12 1 2 24.00 $257.72 $257.72 $2.14 $8.54 $268.40 $3,220.75 0.02%

Fire (all types) 123 1.5 2 369.00 $257.72 $386.58 $2.14 $8.54 $397.26 $48,862.52 0.30% DWI 44 1 2 88.00 $257.72 $257.72 $2.14 $8.54 $268.40 $11,809.43 0.07%

Emotionally Disturbed Person 120 1 2 240.00 $257.72 $257.72 $2.14 $8.54 $268.40 $32,207.53 0.20%

Traffic Control 2,190 2 3 13,140.00 $386.58 $773.16 $2.14 $8.54 $783.84 $1,716,602.49 10.41% School Crossing 1,080 2 3 6,480.00 $386.58 $773.16 $2.14 $8.54 $783.84 $846,543.69 5.14%

MV Pursuit 81 0.75 4 243.00 $515.44 $386.58 $2.14 $8.54 $397.26 $32,177.75 0.20% Arrest (all types) 15,264 1.5 2 45,792.00 $257.72 $386.58 $2.14 $8.54 $397.26 $6,063,719.11 36.79% Warrant Service 73 0.75 2 109.50 $257.72 $193.29 $2.14 $8.54 $203.97 $14,889.52 0.09%

Code Enforcement 315 0.33 1 103.95 $128.86 $42.52 $2.14 $8.54 $53.20 $16,757.86 0.10% Juvenile Condition 457 0.75 1 342.75 $128.86 $96.65 $2.14 $8.54 $107.32 $49,045.62 0.30%

Street Collapse 14 1 2 28.00 $257.72 $257.72 $2.14 $8.54 $268.40 $3,757.54 0.02% Wires Down 58 1 1 58.00 $128.86 $128.86 $2.14 $8.54 $139.54 $8,093.08 0.05%

Burglar Alarm (all types) 2,555 0.33 2 1,686.30 $257.72 $85.05 $2.14 $8.54 $95.72 $244,573.34 1.48%

Suicide 22 1.5 2 66.00 $257.72 $386.58 $2.14 $8.54 $397.26 $8,739.64 0.05% Sick/Injured Person 720 0.75 1 540.00 $128.86 $96.65 $2.14 $8.54 $107.32 $77,271.00 0.47%

Train accident 1 8 6 48.00 $773.16 $6,185.29 $2.14 $8.54 $6,195.96 $6,195.96 0.04% Kidnapping 11 3 2 66.00 $257.72 $773.16 $2.14 $8.54 $783.84 $8,622.20 0.05% Carjacking 77 1 2 154.00 $257.72 $257.72 $2.14 $8.54 $268.40 $20,666.50 0.13% Drug Sales 5,041 0.3 2 3,024.60 $257.72 $77.32 $2.14 $8.54 $87.99 $443,566.72 2.69%

Assault (all types) 1,000 0.75 2 1,500.00 $257.72 $193.29 $2.14 $8.54 $203.97 $203,965.97 1.24% Stolen Vehicle 2,645 0.75 1 1,983.75 $128.86 $96.65 $2.14 $8.54 $107.32 $283,863.62 1.72% Assist Officer 152 0.25 2 76.00 $257.72 $64.43 $2.14 $8.54 $75.11 $11,416.08 0.07%

Directed Patrol 5,475 0.33 2 3,613.50 $257.72 $85.05 $2.14 $8.54 $95.72 $524,085.74 3.18% Shots Fired 730 0.33 2 481.80 $257.72 $85.05 $2.14 $8.54 $95.72 $69,878.10 0.42%

Domestic Violence 3,255 1.25 2 8,137.50 $257.72 $322.15 $2.14 $8.54 $332.83 $1,083,349.10 6.57% Motor Vehicle

Accident 1,825 1 2 3,650.00 $257.72 $257.72 $2.14 $8.54 $268.40 $489,822.80 2.97% Disorderly Conduct 2,555 0.3 2 1,533.00 $257.72 $77.32 $2.14 $8.54 $87.99 $224,819.08 1.36%

Person Armed with a Weapon 401 0.42 4 673.68 $515.44 $216.49 $2.14 $8.54 $227.16 $91,091.48 0.55%



Total 60,115 122,927 $16,482,149 100.00%

Budget Summary

Once the ABB is prepared, it is useful to create a small budget summary by category. The

categories for this budget are salaries, materials and equipment. The budget summary will help

you reconcile the individual pieces of the budget. The total cost presented in figure 8 is

$16,482,149. When summing the categories (salaries, materials, equipment) in the budget

summary, the total must equal the ABB total; otherwise an error was made some where in the

calculations. A simple pie chart of the finished budget gives the reader a good perspective of

how the funds are distributed.

Budget Summary

Total from Figure 6. Salary Calculations Salaries $15,840,379 96.11% Total from Figure 7a. Material Materials $128,480 0.78%

Total from Figure 7b. Equipment Equipment $513,290 3.11% Total $16,482,149 100.00%

Budget Allocation

Salaries, $15,840,379, 96.11%

Materials, $128,480, 0.78%

Equipment, $513,290, 3.11%



SUMMARY

The ABB is an objective way to link workload to costs. It is easy to design. Each division

of the police department can create an ABB to see how efficiently they are operating; link all the

individual budgets and the department now has a comprehensive picture of its operating posture.

Supervisors can use ABB to make adjustments in processes or shift personnel. Police

administrators can use ABB to create partnership programs with community-based

organizations. In this sense, it is useful to see the proportion of the ABB that is allocated to each

partner. Another internal use for ABB is to justify hiring and promoting personnel. By using

accepted industry standards of span of control, an executive can argue in favor of hiring and

promoting based upon the volume of work.

Beyond its internal uses, ABB has other merits. Many grant programs require an ABB in

order for the grantor to see where their money is being spent and how efficiently the grantee can

administer the program. ABB can easily be turned in to a performance-based budget by attaching

performance standards. ABB can also be used together with benchmarking to identify best

practices.18 The basic steps in corporate benchmarking are: 1) decide what process to benchmark,

2) study the process in your own organization, 3) identify benchmarking partners, 4) analyze the

processes of benchmarking partners to identify differences that account for superior

performance, 5) adapt and implement “best practices,” and 6) monitor and revise.19 In this

example, effecting arrests consumes nearly 37 percent of the activity. The arrest process could be

benchmarked to determine if there is a more efficient way to process them, including new

technology that reduces the effort.



Here are three perfectly practical uses for ABB:

1. Contracting or purchasing police service: “The most common of the alternatives for providing police service available to municipalities is purchasing police services from a nearby municipality. Purchasing services often proves to be less costly when compared to the cost associated with establishing a municipal police department. The level of service and policing efficiency is often greater, depending upon the agreement developed, because of the availability of the resources of a larger police department…Many elected officials in Pennsylvania have found this method for providing municipal police service to be very beneficial for their communities (p.3).”20

2. Consolidating police service: “A less common method of providing local police service is developing a program of consolidated police services. In this approach several municipalities join together to create a police department which is outside the direct control of any one municipality. The police department is governed by a separate board or commission composed of elected officials from each community…Each municipality contributes its share of the total cost of operating the department based upon whatever method of distributing costs is agreed upon.” 21

3. Centralized support services with a decentralized patrol function: “This alternative to providing police services can best be described as simply providing your own police patrol and relying upon other units of government or agencies to provide its support. Purchasing such supporting functions as dispatching services, record keeping, criminal investigation services and personnel service functions can help to keep costs to a minimum and controls unnecessary growth in the police department…Purchasing support services often proves to be much less costly than maintaining the service within the police department and is usually just as efficient.”22

In each of the aforementioned practices it is incumbent upon government executives to develop

a proportional cost picture of: 1) the type and quantity of services that are needed, and 2) the

proposed cost of delivering those services. A comprehensive workload analysis is the first step

to be performed; this will provide a clear understanding of the expectations prior to executing a

contract.

Activity-based budgeting holds some promise as a solution to the faults and frustrations of

traditional budgeting methods:

1. “Traditional budgets don’t identify waste. ABB exposes non-value costs.

2. Traditional budgets focus on workers. ABB focuses on workload.

3. Traditional budgets focus on division cost. ABB also focuses on process cost.



4. Traditional budgets focus on fixed versus variable costs. ABB also focuses on used versus unused capacity.

5. Traditional budgets measure “effect.” ABB measures root “cause.”23

ABB is an alternative to traditional government budgets; the line item may be required by

law, but there is nothing preventing an organization from adopting ABB to solve internal

problems. In the words of Peter Drucker (1990): what is the bottom line when there is no

“bottom line?” Performance!24



Notes

1 Riley, S. L and Peter W. Colby. (1991). Practical Government Budgeting: A Workbook for Public Managers.

Albany: State University of New York Press. 2 A zero-based budget begins by preparing an operating plan or budget that starts with no authorized funds. In a zero-based budget, each activity to be funded must be justified every time a new budget is prepared. 3 Maddox, D. (1999). Budgeting for Not-for-Profit Organizations. New York: John Wiley and Sons. 4 Maddox. p.228. 5 Maddox. p.20. 6 Rubin, I. S. (2000). The Politics of Public Budgeting: Getting, and Spending, Borrowing and Balancing. 4th ed.

New York: Chatham House. 7 Both definitions from Mirriam-Webster on-line retrieved on August 31, 2004 from http://m-w.com. 8 Police Executive Research Forum. (2002). Police Department Budgeting: A Guide for Law Enforcement Chief

Executives. Washington, D.C.: PERF. 9 Greene, J.R. Tim S. Bynum and Gary W. Cordner. (1986). Planning and the Play of Power: Resource Acquisition

among Criminal Justice Agencies. Journal of Criminal Justice, Vol. 14. pp.529.544. 10 PERF. p.2. See also Aaron Wildavsky, The Politics of the Budgetary Process, 3rd Ed. (Boston, MA: Little Brown

and Company, 1979), pp.63-126. 11 Hale, C.D. (1981). Police Patrol: Operations and Management. New York: John Wiley and Sons. 12 Hale. p.163. 13 Any portion of an hour is calculated as such. For example, 20 minutes is captured as .33 hours; 47 minutes is captured as .783 hours. 14 In budgeting, “modalities” are the attributes (i.e., major activities) that are being examined. In this case the attributes are the types of calls for service. 15 In budgeting, “acuity” is the distinct detail; the calculations that comprise the budget. 16 The “effective strength” of the patrol force is how many officers are on duty at a give time. See Hale, p.167. 17 Riley and Colby. p.54. 18 Ammons, D.N. (1999). A Proper Mentality for Benchmarking. In Gerald J. Miller, W. Bartley Hildreth and Jack Rabin, Performance Based Budgeting. 2001. Boulder, CO: Westview Press. pp. 419-429. In public sector application the term “benchmarking” “features the identification of a point of reference for comparison or measurement purposes. With a benchmark, public officials can measure the performance gap between where they are and where they want to be, and can track their progress in closing the gap.” 19 Ammons. p.423. 20 Governor’s Center for Local Government Services. (1998). Administering Police Services in Small Communities:

A Manual for Local Government Officials. 4th ed. Harrisburg, PA: Pennsylvania Department of Community and Economic Development.

21 Governor’s Center for Local Government Services. p.4. 22 Governor’s Center for Local Government Services. p.4. 23 Pryor, T. (2004). What happened to ABB? Integrated Cost Management Systems, Inc. Retrieved on December 23,

2004, from http://www.icms.net/news-18.htm. 24 Drucker, P.F. (1990). Managing the Nonprofit Organization: Principles and Practices. New York: Harper

Perennial.


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