Communicate Cost Management Overview

Communicate Cost Management Overview

Terminal Learning Objective
Action: Communicate Cost Management Overview. Conditions: You are a GFEBS data processor with access to a computer, the GFEBS training database, applicable GFEBS references, and awareness of Operational Environment (OE) variable and actors Standards: With a minimum of 80% accuracy, learners must demonstrate proficiency with: Define Key terms and Legislative Requirements of Cost Management Explain Cost Management Significance in Decision making Describe the Cost Management Process in GFEBS Conduct GFEBS Overview and Navigation

Cost Define Key Terms Management (and sub-processes) Culture
Accounting Analysis Planning Controlling Cultural Shift Operational / Resource Manager Cost (1) Controlling (CO) Module: The Controlling Module is the area within GFEBS that enables Cost Management. Cost planning, analysis, measurement, and reporting to be done in the CO module. (2) Cost Management: Is the process of managing business operations efficiently and effectively through the accurate measurement and thorough understanding of the “full cost” of an organization’s business processes, products, and services in order to provide the best value to customers. (3) Cost Accounting: Is the process of identifying, measuring, analyzing, interpreting, and communicating information for the pursuit of an organization’s goals. (4) Cost Analysis: The acquisition and interaction of functional outcome data with cost data to produce valid and verifiable information. (5) Cost Measurement: The ability to track and report on Cost associated with activities and tasks. (6) Cost Object: Cost Objects are master data where costs are collected to measure an activity, output, or item. For example, a cost object can be a cost center, internal order, or business process to capture the cost of an organization, a function, task, product, service, or a customer. (7) Full Cost: The sum of all costs associated with an organization, product, or service to include activities performed by other entities regardless of funding sources. (8) Funded Costs: The value of goods or services received because of an obligation of funds (obligation authority) by the organization performing the work (e.g., civilian labor, building, and grounds maintenance). These costs are funded in the Annual Operating Budget of the organization.

Cost Management Overview
‘Managing Business Operations Efficiently & Effectively Through the Accurate Measurement & Thorough Understanding of the Full Cost of an Organization's Business Processes, Products & Services in Order to Provide the Best Value to Customers.’

Cost Management Overview (Cont.)
Historically, financial practices in the Federal Government (to include the Army) focused solely on managing budgets. The Army moved in the direction to change traditional business practices to rely more heavily on cost management information for all decision-making. Effective cost management requires us to make cost part of the Army’s culture. Culture is the underlying belief and principles guiding behaviors of Soldiers and civilians.

Cost Management Overview (Cont.)
What are our alternatives? What can we do to fulfill our mission with limited resources that are available? There are three possible responses: - obtain additional funding - reduce force structure - become cost effective

Cost Management (Sub Processes)
Data must be: - Accurate, timely, and relevant - Understand the full costs of organizations, operations, products, and services - Connected to operational output/performance data and financial data Analysis to evaluate: - Variance - Depreciation - Trends and Forecasting - Product, service, or activity cost by element

Cost Management (Sub Processes-Cont.)
Management must: - Partner among resource managers, operational managers, and the resource consumers - Perform cost planning - Set cost targets and efficiency goals - Allocate overhead - Manage capacity Compute standard labor rates “Top Down Support”

Growing in the Cost Culture
Cost Management “What It Should Cost” Outcomes STANFINS/SOMARDS Budget Allocations Obligations Execution reporting Financial Accounting Limited Analysis Managerial/Cost Accounting Cost Allocations Cost Centers Cost Drivers Cost and Performance Cost Planning Cost Control Feedback and corrective action Goals, results and predictive tools . Cost Measurement “What It Actually Cost” Inputs & Outputs “What did we spend?” Input A Cost Culture is the Cultural Shift from “Accomplish the Mission at Any Cost” to “Accomplish the Mission Considering Cost”

Cost Planning Cost Planning is the use of a Cost Model for “should-cost” forecasting to make informed decisions Cost Planning Often Performed for: Budget Requirements Requests Costs Estimations Output Quantities Capacity Management Risk Analysis Various Time Frames: Out year / Current year, Quarterly, Monthly Standard Rates Defining Targets to Measure Efficiency and Effectiveness Cost Controlling Cost Accounting Cost Management Process Show Slide #10: Cost Planning Facilitator's Note: Discuss Cost Planning: Ask the question; Who’s mainly responsible for Cost Planning? Operations Manager (OM) In Cost Planning: Use cost products for “should-cost” to inform decisions. Tying together costs, from all related sources, with outcome data provides crucial, experienced-based analytic data for decision-making during Planning, Program Development, Budget Formulation, and Execution. 2. Establishing efficiency targets for costs based on planned inputs required to perform work (labor, materials, supplies, and equipment) and outputs to effectively meet customer demand (number of trainees, number of test, etc) Cost Analysis

Information to Make Sound Economic Decisions*
Cost Accounting Cost Accounting translates the operational value chain into financial values Cost Planning Cost Accounting is the dollar valuation of the cost measurements resulting from business operations Cost Measurement has meaning only when considering its purpose Defining Cost Measurement should be carefully considered and evaluated Alternative cost methods should be evaluated under operating environment Cost Controlling Cost Accounting Cost Management Process Show Slide #11: Cost Accounting Facilitator's Note: Who’s mainly responsible for Cost Accounting? The Resource Manager (RM) In Cost Accounting: Accumulate and record all elements of cost, i.e., full cost, incurred to accomplish an objective. Is the measurement of actual cost in comparison to plan. The intent of this step is to provide accurate, timely and relevant cost information (financial and non-financial) that captures “full costs” – such as unfunded, free goods, overhead, and depreciation. Cost Analysis Purpose Is the key to Understanding the Army ERP Cost Design (GFEBS): To Provide Operational Managers With Relevant “True” Cost Information to Make Sound Economic Decisions*

Cost Analysis Cost Analysis is the integration of functional outcome data with cost data to produce valid and verifiable information to conduct various forms of analysis Cost Planning Sample types of analysis include: Organizational performance Analysis of alternatives Variance analysis Economic analysis Cost / Risk assessments Trending Cost Controlling Cost Accounting Cost Management Process Show Slide #12: Cost Analysis Facilitator's Note: Who’s mainly responsible for Cost Analysis? The Resource Manager (RM) In Cost Analysis: Acquire and integrate functional outcome data with cost data and produce valid and verifiable information. 2. Provides understanding of what drives cost or causes variance from plan. Cost analysis can explain variance between plans and actual to support controlling and forecasting, provide operational managers with full cost view of producing products/services, and support economic, life-cycle cost and cost benefit analysis for resource-informed decision making. Cost Analysis

Cost Controlling Cost Controlling is to take “Best Value” and/or “Best Practice” actions to realign the organization to achieve the defined objectives Cost Planning Actions taken based on information provided from Cost Analysis results Redeployment of resources between outputs Change outputs (e.g. do more or less) Update/revision of plan information, e.g. updated Std. Rate Execution of trade-off decisions, e.g. OT versus external support Cost Controlling Cost Accounting Cost Management Process Show Slide #13: Cost Controlling Facilitator's Note: Who’s mainly responsible for Cost Controlling? The Operations Manager (OM) Facilitator’s Note: Review the VG with the students In Cost Controlling: Use cost products for “best value” and “best practices” actions. 2. Taking action based on analysis to reduce cost, improve process and address changing demands based on internal and/or external factors. Cost controlling requires that operational manager make informed decisions on resource consumption and refine/reengineer processes to continuously improve and drive efficiencies. Cost Analysis

Cost Controlling (Cont.)
When Controlling Cost is where the benefits of Cost Management are realized The step where leaders and decision-makers use the results of their cost analysis as decision support, implement the changes and enhancements that ultimately move us to a more efficient Army.

Legislative Requirements
Chief Financial Officers Acts (1990) Government Performance Results Act (1993) President’s Management Agenda (2002) OMB Performance Assessment Rating Tool OSC Requires Army Performance Budget Public Sector GAAP (SFFAS 4) required full cost information (1995) The Army used SFFAS 4 to develop GFEBS costing module requirements.

LSA #1 Check on Learning Q1: ____/____ is the underlying belief and principles guiding behaviors of Soldiers and civilians. A1: Q2: T/F: Cost Accounting translates the operational value chain into financial values A2: Q1: ____/____ is the underlying belief and principles guiding behaviors of Soldiers and civilians. A1: Q2: T/F: Cost Accounting translates the operational value chain into financial values A2:

LSA #1 Summary

Cost Management Significance
Understanding the resources that are representative to the Army X X X X X X X X Heavy Heavy Heavy X X Light Light Light X X X Stryker Stryker Stryker X X UA UA UA UA SUST SUST SUST SUST SUST SUST FCS FCS FCS Force Generation $ to Reset $ to Train Training (Unit) Training (Ind) $ to Deploy $ / Mile $ / Student Trng Day $ / Flying Hour $ / Course Day $ / Weapon System Base Support Personnel Equipment $ / Service Military $ / Soldier $ / Brigade New $ / Brigade Civilian $ / FTE $ / Brigade Conversion $ / Installation (SRM, BOS, Contractor - $ / FTE Ratio: Sppt $ / Brigade $ ENVR, FP) 18

Making Informed Decisions
What is a Decision? (Definition) A position or opinion or judgment reached after consideration. Working out the importance of individual factors, and choosing the best course of action to take. Benefits of Informed Decision Making: Will better utilize resources, and improve program and operational effectiveness. Objective and systematic way of collecting, examining, analyzing and reporting information to support decision-making Conceptual way of thinking Applies to all aspects of managing programs, finances, and operations

Making Informed Decisions (Cont.)
Basic Guidelines For Good Decision: Define the problem/concern/question/need Ask questions; utilize critical thinking Examine the evidence (i.e. data) Analyze assumptions and biases Be objective; avoid emotional reasoning Don’t use either/or thinking; don’t over-generalize Consider other interpretations Accept that there will be uncertainty/questions

Questions for Decision Makers
What capabilities are my organization responsible for producing and what do they cost? What are the key cost drivers? How can we generate the required capabilities more effectively and efficiently? What can we do to reduce management overhead and indirect costs? How can we use cost information to make better decisions?

Explain Communication Management
Operational Manager: primary focus is on cost planning and cost controlling Resource Manager: facilitate the cost accounting and cost analysis aspects in support of the operational managers Operational and Resource Managers must work together to optimize resources to reach an end goal The Lines of Communications are always open

LSA #2 Check on Learning Q1: Cost Management provides Army leaders and managers with ____ / ____ and ____ (financial and non-financial) cost information. A1: Q2: T/F: As it pertains to decision making, one should NOT consider other interpretations, for this causes confusion. A2: Q1: Cost Management provides Army leaders and managers with ____ / ____ and ____ (financial and non-financial) cost information. A1: Q2: T/F: As it pertains to decision making, one should NOT consider other interpretations, for this causes confusion. A2:

LSA #2 Summary

Cost Management and GFEBS
Managing Business Operations Efficiently & Effectively Through the Accurate Measurement & Thorough Understanding of the "Full Cost" of an Organization's Business Processes, Products & Services in Order to Provide the Best Value to Customers. Cost Accounting Cost Management Process Cost Planning Cost Analysis Cost Controlling

GFEBS Roles/Responsibilities
Centralized Controlling Master Data Maintainer Decentralized Controlling Master Data Maintainer Cost Driver Collector Cost Allocation Processor Cost Plan Maintainer (1) Centralized Controlling Master Data Maintainer: This role’s responsibilities include performing the activities and tasks related to creating and editing cost Master Data elements at the Headquarters, Department of Army (HQDA). (2) Decentralized Controlling Master Data Maintainer: This role’s responsibilities include performing the activities and tasks related to creating and editing cost Master Data elements throughout the Army, particularly at the operational level (i.e., IMCOM). (3) Cost Driver Collector: This role is responsible for activities and tasks related to transaction adjustments to statistical key figure (SKF) quantities, Activity Type quantities, etc., for value-added use. (4) Cost Allocation Processor: This role performs activities and tasks related to evaluating cost assignment options, defining overhead rules, determining if a proposed movement of costs is budget relevant, defining assessment and distribution, and defining automatic assignment of Activity Types and business processes. (5) Cost Plan Maintainer: This role performs activities and tasks related to evaluating planning options; planning primary costs on cost centers, business processes, and internal orders; and planning prices of Activity Types and business processes.

GFEBS Roles/Responsibilities (Cont.)
Business Intelligence (BI) Labor Reporter Payroll Corrections Processor Business Intelligence (BI) Payroll Payroll Interface Processing Monitor BI Payroll Auditor Controlling Close Processor DTS Interface Processing Monitor Roles (6) Business Intelligence (BI) Labor Reporter: This role is responsible for making updates to the non-financial attributes and ensuring that the Detail Labor Cost Report displays the changes. (7) Payroll Corrections Processor: This role is responsible for making corrections, as necessary, to facilitate the processing of all time-tracking and payroll transactions from the various interfaces. (8) Business Intelligence (BI) Payroll Correction Processor: This role is responsible for making updates to the non-financial attributes and for ensuring that the Detail Labor Cost Report displays the changes. (9) Payroll Interface Processing Monitor: This role’s responsibilities include performing the activities and tasks, assigning quantities of Activity Types and business processes to receivers, posting payroll results, defining accrual calculations and automatic assignments of costs, posting the detailed level gross pay file (BI), maintaining personnel Master Records, and posting payroll-related payments. (10) BI Payroll Auditor: This role enables authorized users to run and view the Audit Report for labor. Sensitive personnel data such as social security numbers (SSNs) may be viewed in this report and assignment of this role should be limited. (11) Controlling Close Processor: This role’s responsibilities include performing the activities and tasks related to carrying out the Controlling Close process, updating the cost model, and sending cost data to external systems. (12) DTS Interface Processing Monitor: This role’s responsibilities include validating travel authorizations, sending DTS travel authorization acknowledgements, validating travel vouchers, recording disbursements, and managing accounts receivable.

The Cost Process in GFEBS

Create Master Data Elements in GFEBS
This is your first step in the process. Cost Master Data includes various cost objects to support the collection and measurement of costs for products, services, and organizations across the Army, such as Cost Centers, Internal Orders, etc.

Perform Assignment and Define Settlement Rules
Cost assignment methods determine how costs flow from sender to receiver. Proper execution of the cost assignment process is essential to the accomplishment of Army objectives in GFEBS. The mechanisms chosen and the cost objects selected form a foundation for analysis and become the enabler of management action.

Establish Allocations in GFEBS
Allocations are used to assign costs from a sending cost object to a receiving cost object and be sure accurate measurements are performed. Within GFEBS there are two main types of Cost Allocations: - Value-Based - Quantity-based

Cost Allocation Types (1) Value-based: Involves allocating actual dollar amounts (2) Quantity-based: Involves allocating a quantity (Usually hours of some type of activity) Two Main types of Cost Allocations: 1- Value-based: Value –based allocations involve allocating actual dollar amounts. 2- Quantity-based: Quantity-based allocations involve allocating a quantity, which is usually hours of some type of activity.

Perform Cost Planning The Army executes Cost Planning utilizing GFEBS data The Cost Plan estimates what it should cost to provide products and services Calculates the “cost per output or service,” During the year of execution, actual and planned costs are compared

Capture Costs GFEBS captures actual costs
Actual costs are used in Cost Analysis to measure variance between what costs were planned for a specific period against what costs were actually incurred during that same period.

Reporting and Analysis
The managerial accounting close happens at period or year-end During this step all costs are settled to the appropriate area This process supports the overall financial close process

The Cost Process in GFEBS

LSA #3 Check on Learning Q1: What is the first step in the GFEBS Cost Management Process? A1: Q2: The 2 Cost Allocation Types are: [a] Size / Unit of Measure [b] Value / Quantity [c] Hours / Days A2: Q1: What is the first step in the GFEBS Cost Management Process? A1: Q2: The 2 Cost Allocation Types are: [a] Size / Unit of Measure [b] Value / Quantity [c] Hours / Days A2:

LSA #3 Summary

Conduct GFEBS Overview and Navigation
What is the General Fund Enterprise Business System (GFEBS)? A web-based financial, asset, and accounting management system that provides the Army relevant, reliable, and timely financial information. GFEBS standardizes and streamlines financial business processes. GFEBS is deployed in over 200 locations, supporting more than 79,000 end-users.

Conduct GFEBS Overview
Two primary types of data exist in GFEBS - Master data is information about a person or an object, such as a cost object, vendor, or (general ledger) G/L account. For example, a vendor master record contains the vendor’s name, address, and payment terms. Using master data helps users to avoid data redundancy. GFEBS populates the header fields with saved master data information. -Transactional data is transaction-specific data that is associated with master data. Transactional data is created from a single business event such as a purchase requisition or a request for payment. When you create a requisition, for example, GFEBS will create an electronic document for the transaction. a. Master data is information about a person or an object, such as a cost object, vendor, or (general ledger) G/L account. For example, a vendor master record contains the vendor’s name, address, and payment terms. Using master data helps users to avoid data redundancy. GFEBS populates the header fields with saved master data information. b. Transactional data is transaction-specific data that is associated with master data. Transactional data is created from a single business event such as a purchase requisition or a request for payment. When you create a requisition, for example, GFEBS will create an electronic document for the transaction.

Conduct GFEBS Overview (Cont.)
Transactions GFEBS has the ability to process a million transactions a day Active Army Army National Guard Army Reserve GFEBS is organized for reports, analysis and development activities into 6 functional areas. All users across the Army draw common data from and record transactions in the Enterprise Central Component (ECC) (Real-Time). Periodically, data is transferred from the real-time ECC to the business warehouse (Business Intelligence (BI)), which also includes time-delayed analytic and reporting capabilities. BI

Conduct GFEBS Overview (Cont.)
GFEBS roles determine: what activities an end user performs when using the system what sections of the system an end user has access to what training an end user needs to perform their new roles successfully A role is defined as a major grouping of activities that reflect a specific aspect of a person’s job A role may have several activities aligned to it, an activity can only be aligned with one role A person may be assigned one or more roles, and roles can be assigned to one or more persons There should be a separation of duty amongst the roles to prevent fraud and abuse

Conduct GFEBS Navigation
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Conduct GFEBS Navigation (Cont.)
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SMITH DOD CA- 02 ALLEN DOD CA- 03 3 BROWN DOD CA- 01

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Note: The Production Portal is used for actual GFEBS input. 7

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Transaction Codes (T-Codes) allow the users to perform the following functions: Create (01) Display (02) Change (03) Run reports These functions allow the flexibility of daily tasks performed and are also instrumental in job role mapping

To access various transactions within GFEBS, users must enter transaction codes in the Command Field T- Codes are a sequence of characters that identifies a transaction or function in GFEBS T-Codes allow the user to perform their various job functions in GFEBS

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Command Field Menu Button Add to Favorites Button

General Help(PSW) and Logging Off F1 Field Explanation

Data Tabs Additional Data Tabs Dropdown Free-Form Input Fields

Required, Optional and Conditional For additional Field Information click in the field and press F1 Required Fields Optional Fields Conditional Fields

Radio Buttons Checkboxes

Status Bar The Status bar is located on the lower left corner of the screen. It displays information such as warning and error messages. There are three different types of status messages. Review the message types listed below. Message Type Description Error Message - Messages indicating incorrect entry in the system such as required or inaccurate data. You will not be able to continue with your transaction until these messages are addressed. Info Message - Affirmative system messages or messages displaying information on a transaction. Warning Message - Messages that identify information that may possibly be an error. These messages may or may not allow you to continue with your transaction, depending on its function within the system.

Message Type Symbol Error Information Warning

Using Wildcard Characters (*) Performing wildcard search will increase system performance since fewer records will be pulled from the system. Here are some examples of using a Wildcard search: Placing the * at the end of a string causes the system to return all records that begin with the letters before the *. Placing the * at the beginning of a string, the system will find all records that contains the characters at the end. If you place the * at the beginning and end of the string, the system returns all records that contain the string at the beginning, middle, and/or end.

Match Codes allow users to select or search for a value from a list. Matchcode Icon Wildcard Characters

Favorites Favorites are a saved reference in the form of a link to a particular function, location, or site. To add a favorite, you must locate the transaction you would like to save from the menu path on the GFEBS Portal Home Screen. Adding Favorites To add a transaction to your Favorites folder, drill into the menu path on the GFEBS Portal Home Screen. Select and highlight the transaction and click the button. Review the following screen shot that highlights how to add a favorite.

Transactions that are frequently used that have been added to the favorites folder. Saved Favorites

GFEBS References GFEBS Home MilSuite Financial Management Web Page
GFEBS Training and Performance Support Website (GFEBS Help) MilSuite 1. GFEBS Home: 2. GFEBS Training and Performance Support Website (GFEBS Help): 3. MilSuite: 4. Financial Management Web Page: Financial Management Web Page

GFEBS References (Cont.)
Review Helpful GFEBS Reference Material Folder: Helpful Resources for GFEBS Users GFEBS Resource Reference List Common Transaction Code Quick Reference Guide Role to Course Master Mapping File GFEBS Access and Familiarization

LSA #4 Check on Learning Q1: What are the 3 types of data entry fields? A1: Q2: Radio buttons offer a single selection, while _____________ offers a multiple selection? A2: Q3. What allows users to select or search for a value from a list? A3. Q1: What are the 3 types of data entry fields? A1: Q2: Radio buttons offer a single selection, while _____________ offers a multiple selection? A2: Q3. What allows users to select or search for a value from a list? A3.

LSA #4 Summary

TLO Summary Action: Communicate Cost Management Overview.
Conditions: You are a GFEBS data processor with access to a computer, the GFEBS training database, applicable GFEBS references, and awareness of Operational Environment (OE) variable and actors Standards: With a minimum of 80% accuracy, learners must demonstrate proficiency with: Define Key terms and Legislative Requirements of Cost Management Explain Cost Management Significance in Decision making Describe the Cost Management Process in GFEBS Conduct GFEBS Overview and Navigation

Communicate Cost Management Overview

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