Advanced Activity-Based Costing Gives Danish Prison and Probation Service New Insights into Resources, Costs and Efficiencies
With more than 12,000 inmates in 4,400 facilities and another 8,000 people under other forms of supervision, the Danish Prison and Probation Service (DPPS) carries out judicial sentences and helps rehabilitate offenders. DPPS’ value lies in “the art of balancing punishment and care.”
An enterprise of this scale presents operating and financial challenges as well as many questions. Gaining a clear economic overview is difficult in an organization with a budget of DKK 3 billion (US$525 million). Executives need answers to strategic questions such as: Would a reduction in the number of facilities lower overall costs? Which prisons are finding new ways to save and how are they doing it? What does it cost to offer special facilities for female inmates, high-risk prisoners and other special groups? Inmates can work with crafts, manufacturing or agriculture - but what are the costs associated with each activity?
Embracing Activity-Based Costing
"SAS consultants delivered a prototype within a week, and it lived up to our expectations," said Peter Schultz-Nielsen, Senior Consultant for DPPS. "It was clear that SAS could do the job."
The development work was carried out with involvement from the actual penal institutions, to ensure that the ABC system was appropriate. Employees at the resource management office worked with SAS consultants to build the model with the primary task of mapping all the costs from the financial system to the SAS Activity-Based Management solution.
"We had some talented, hard-working consultants from SAS," Schultz-Nielsen said. "Typically, we are not always keen on consultants, but the SAS people proved their value to us. SAS was a professional partner and we liked the fact that they incorporate appropriate external domain knowledge and are not only concerned with their own IT tools."
"Our goal is to operate DPPS as efficiently as possible," said Ole Hansen, Deputy Director. "We have chosen to invest time, money and focus on this ABC project. Now we can report, for example, the total annual costs of the Directorate's primary tasks and objectives. We attach great importance to the demands of the Ministry of Finance and the National Audit Office, and ABC provides ample details to meet these demands for transparency and accountability".
"First and foremost, the project strengthens the financial management of our institutions. The ABC project is about management, organization and process," explained Schultz-Nielsen, whose office is responsible for budget, financial management, capacity planning and occupancy.
ABC in Negotiation
"We have dual roles as supervisor and supplier of financial management tools," said Schultz-Nielsen, who added that the system allows them to compare institutions and enhance best practices throughout DPPS. "We offer a great degree of freedom and look at the whole picture rather than just hard numbers. The ABC system is part of an ongoing dialogue since the insights can point to improvements."
The innovation of the ABC system creates financial visibility into the costs of buildings and salaries, which account for 75 percent of the agency’s annual costs. The system also allows DPPS to meet new cost-reform targets, because ABC figures have the desired level of detail. Moving forward, DPPS plans to develop the ABC solution further, by adding more functionality and users. This could include new analysis and performance indicators that the agency can build with SAS Activity-Based Management.
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The agency overseeing the Danish prison system wanted a better understanding of the underlying relationships and costs of its resources and facilities.
SAS® Activity-Based Management
SAS Activity-Based Management provides a model for cost relationships and new insight into finances - including the possibility of implementing a wide range of operational and financial improvements.
“"SAS consultants delivered a prototype within a week, and it lived up to our expectations. It was clear that SAS could do the job."”