Activity-Based Budgeting:
Creating a Nexus between Workload and Costs
By
Jon M. Shane
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
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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
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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.
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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.
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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.
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Figure 1:
Principal Modalities (Major Activities)
Service Demands
Murder
Robbery
Burglary
Court Appearances
Theft (shoplifting and all others)
Arson
Rape
Fraud
Prostitution
Gambling Offense
Vicious Animal
Bomb Threat
Fire (car, house, building)
DWI
Emotionally Disturbed Person
Traffic Control
School Crossing
MV Pursuit
Arrest (average for all types of arrests)
Warrant Service
Code Enforcement Violations
Juvenile Condition (curfew, truancy and all others)
Street Collapse
Wires Down
Burglar Alarm (residential, commercial)
Suicide
Sick/Injured Person
Train Accident
Kidnapping
Carjacking
Drug Sales
Assault (shooting, stabbing, blunt force)
Stolen Vehicle Report
Assist Officer (back up)
Directed Patrol Activities
Shots Fired
Domestic Violence
Motor Vehicle Accident (with or without injuries)
Disorderly Conduct (fight, loud music, noisy crowds)
Person with a Gun
Total
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Hours
Per
Unit
3
1.5
1
1.5
0.58
1
1.5
0.75
0.33
0.42
0.33
1
1.5
1
1
2
2
0.75
1.5
0.75
0.33
0.75
1
1
0.33
1.5
0.75
8
3
1
0.3
0.75
0.75
0.25
0.33
0.33
1.25
1
0.3
0.42
Units
Per
Year
41
2,110
1,877
1,234
6,522
51
88
211
1,003
468
214
12
123
44
120
2,190
1,080
81
15,264
73
315
457
14
58
2,555
22
720
1
11
77
5,041
1,000
2,645
152
5,475
730
3,255
1,825
2,555
401
60,115
Acuity
Total Employee
Hours Per
Officers
Modality Required
246
2
6,330
2
3,754
2
9,255
5
7,566
2
102
2
264
2
158
1
662
2
197
1
141
2
24
2
369
2
88
2
240
2
13,140
3
6,480
3
243
4
45,792
2
110
2
104
1
343
1
28
2
58
1
1,686
2
66
2
540
1
48
6
66
2
154
2
3,025
2
1,500
2
1,984
1
76
2
3,614
2
482
2
8,138
2
3,650
2
1,533
2
674
4
122,927 hours
Percentage
Allocation
0.20%
5.15%
3.05%
7.53%
6.15%
0.08%
0.21%
0.13%
0.54%
0.16%
0.11%
0.02%
0.30%
0.07%
0.20%
10.69%
5.27%
0.20%
37.25%
0.09%
0.08%
0.28%
0.02%
0.05%
1.37%
0.05%
0.44%
0.04%
0.05%
0.13%
2.46%
1.22%
1.61%
0.06%
2.94%
0.39%
6.62%
2.97%
1.25%
0.55%
100.00%
Page 7
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
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(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.
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Figure 2:
Distribution of Time
Activity
Service Demands
Administrative
Proactive
Total
Availability
Effective Strength
Relief Factor
Actual Strength
%
60%
10%
30%
100%
Time
122,927
20,488
61,463
204,878
2,086
98.23
1.360
134
Daily/Minutes
Daily/Hours
288
4.8
48
0.8
144
2.4
480
8
(40 hours per week, 52.14 weeks per year)
FTE Patrol Officers
FTE Patrol Officers
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.
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Figure 3: Nonproductive FTE (Relief Factor)
Time Off
Vacation
Compensatory
Sick Leave
Personal
Training
Bereavement
Total Time Off
Work Year
Personnel Availability
Relief Factor
Days
28
5
15
3
8
10
69
260.70
191.70
1.360
Hours
224
40
120
24
64
80
552
2,086
1,534
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.
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Figure 4:
By ratio:
Supervisory and Investigative Staff
1 Sergeant per 7 officers
1 Lieutenant per 5 Sergeants
1 Detective per 20 officers
Sergeants
Lieutenants
Detectives
Sub Total
19.08
3.82
8.82
31.71
effective strength
effective strength
effective strength
FTE Support Staff
1.000
1.000
2.000
effective strength
effective strength
FTE Command Staff (managers)
8.000
8.000
41.71
effective strength
FTE Civilian Aides
Management Staff
Not by ratio: 1 Captain per command
1 Executive Officer
Captain
Executive Lieutenant
Sub Total
Support Staff for Management
By ratio: 4 support staff members per manager
Civilian Aides
Sub Total
Total
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
Captain
Executive Lieutenant
Lieutenant
Sergeant
Detective
Patrol Officer
Civilian Aides
Complement
1
1
5
26
9
134
8
Total FTE's
184
Work Hours
9-5 MF
9-5 MF
24/7
24/7
9-5 MF
24/7
9-5 MF
Relief?
No
No
Yes
Yes
No
Yes
No
Actual Strength
Actual Strength
Actual Strength
Actual Strength
Actual Strength
Actual Strength
Actual Strength
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
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Page 12
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:
FTE
134
1
1
26
5
9
8
184
Salary Calculations (includes relief factor)
Salary
$71,214
$108,109
$92,016
$84,789
$77,215
$72,214
$27,125
Benefits
at 20%
$14,243
$21,622
$18,403
$16,958
$15,443
$14,443
$5,425
divided by
Rate per employee hour
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Salary
Cost
$11,451,211
$129,731
$110,419
$2,645,417
$463,290
$779,911
$260,400
$15,840,379
122,927
$128.86
Title
Patrol Officers
Captain
Executive Lieutenant
Lieutenant
Sergeant
Detective
Support staff
Total Salary Cost
total employee hours per modality
Page 13
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.
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Figure 7:
Materials and Equipment
Materials
Paper, Pencils, Reports, Forms,
Crime Scene Tape, Flares and all
other Consumable Supplies (@ $700
per employee)
Total
divided by units per year
Unit Cost
Equipment
$128,480
$128,480
60,115
$2.14
Computers
Shotguns
Typewriters
Marked Police Cars
Prisoner Van
First Aid Kit and Replacements
Non Traditional Vehicles
Night Vision Equipment
Walk-through Metal Detector
Gas Masks
Mesh Traffic Vests
Tripod Scene Lighting
Megaphones
Prisoner Legirons
Snow Blower
Laser Printers
Unmarked Police Cars
Traffic Cones
Suites of Furniture
Photocopier
Fax
Quantity
Unit Cost
Useful Life/yrs
Cost
15
25
15
36
1
80
5
5
1
200
50
5
10
25
1
10
6
100
5
1
4
$1,700
$700
$300
$35,000
$40,000
$140
$19,000
$7,500
$5,500
$320
$30
$1,000
$90
$43
$2,600
$1,400
$28,000
$35
$7,500
$25,000
$499
5
15
5
3
6
3
7
7
10
7
5
7
7
10
5
5
5
10
10
6
3
Total
divided by units per year
= equipment per unit
$5,100
$1,167
$900
$420,000
$6,667
$3,733
$13,571
$5,357
$550
$9,143
$300
$714
$129
$108
$520
$2,800
$33,600
$350
$3,750
$4,167
$665
$513,290
60,115
$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.
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Page 15
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
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Page 16
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
Emotionally Disturbed
Person
44
1
2
88.00
$257.72
$257.72
$2.14
$8.54
$268.40
$11,809.43
0.07%
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
Burglar Alarm (all
types)
58
1
1
58.00
$128.86
$128.86
$2.14
$8.54
$139.54
$8,093.08
0.05%
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
Motor Vehicle
Accident
3,255
1.25
2
8,137.50
$257.72
$322.15
$2.14
$8.54
$332.83
$1,083,349.10
6.57%
1,825
1
2
3,650.00
$257.72
$257.72
$2.14
$8.54
$268.40
$489,822.80
2.97%
Disorderly Conduct
Person Armed with a
Weapon
2,555
0.3
2
1,533.00
$257.72
$77.32
$2.14
$8.54
$87.99
$224,819.08
1.36%
401
0.42
4
673.68
$515.44
$216.49
$2.14
$8.54
$227.16
$91,091.48
0.55%
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Total
60,115
122,927
$16,482,149
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
Total from Figure 7a. Material
Total from Figure 7b. Equipment
Salaries
Materials
Equipment
Total
$15,840,379
$128,480
$513,290
$16,482,149
96.11%
0.78%
3.11%
100.00%
Budget Allocation
Materials, $128,480,
0.78%
Equipment, $513,290,
3.11%
Salaries, $15,840,379,
96.11%
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Page 17
100.00%
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.
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Page 18
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.
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Page 16
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
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Page 17
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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