“Incorporate Activities Based Costing (ABC) into the state’s accounting system with expenditures tied not only to costs but to measurable performance outputs. Adopt performance-based budgeting throughout state government.  Appoint a “performance management” director who works for the Governor through DFA, and provide for a small volunteer performance accountability “advisory group” to be put in place for oversight purposes. Murphy Commission, Policy Foundation project, September 1998


(August 2014) The U.S. Marine Corps (USMC), for 15 years has effectively used a fiscal reform that could save Arkansas taxpayers millions of dollars in scarce economic resources. The reform is activities based costing (ABC), defined by the Murphy Commission1 as an accounting system that “allocates dollars as they’re spent in agencies–in a consistent and uniform manner–to defined service activities and administrative and support functions.”


USMC: “We Can Learn A Lot … From Others”


“ABC,” a 1999 USMC document2 explains, “is a methodology focused on measuring cost and performance of processes in order to produce relevant and explicit information for decision-makers.”  A can-do spirit infuses the USMC document, which states:


“We can learn a lot about successful ABC implementation from others.  Local teams should begin to study immediately the lessons recorded in books such as “Implementing Activity-Based Management In Daily Operations” by John A. Miller; “Cornerstones Of Decision Making, Profiles Of Enterprises ABM” by Steve Player and Carol Cobble; and “Activity-Based Management, Lessons From The ABM Battlefield” by Steve Player and David Keys.”


The USMC document notes, “Unfaltering leadership has proven to be the decisive factor for ABC/M successes in other organizations.  The commitment to succeed must be strong, persistent, and smart.”3


Three Supporting Functions


A 2003 USMC document4 notes “three supporting functions,” at “the tactical level,” that are required to support “critical enables” that make ABC possible:


         Standardization and Rationalization of Data Elements.  The decision elements used to build programs must “undergo a deliberate review” prior to each fiscal cycle “to ensure that the most relevant elements are available for decision makers.”


         ABC Model Standardization.  “The ABC models provide a means to view execution of funding across appropriation and resource stovepipes.  A configuration control board will be established to continually define and refine the requirement for consistent and standard high-level model standards across the installations.”


         Program Budget Documentation Database.  The database, “a web-based system accessible to all Marine Corps users, is the Corps’ primary means of gathering data for program development.  It facilitates controlled, orderly, timely staffing and editing of initiatives by program sponsors, advocates and HQMC departments.”  The database “will facilitate the collection and display of the standardized performance measures and cost data.”




The Foundation recommended ABC in 1998. The USMC has used ABC since 1999.  Arkansas will elect a new governor this year.  The new administration should enact ABC in 2015 to save Arkansas taxpayers scarce resources.

1  Policy Foundation report, “Making Arkansas State Government Performance Driven And Accountable” (September 1998). “When tied to outputs under a system of performance budgeting,” the report notes, “ABC becomes a vital tool of managerial information and needed public reports to citizens.”

2  “Marine Corps Activity Based Costing (ABC)” (July 28, 1999)


3 Other lessons include: “keep vision and objectives clear, keep models simple and manageable (especially in the beginning), emphasize the importance of an ABC/M communication/education plan, communicate and share results (especially in the beginning), set expectations at a reasonable level (expect some setbacks and plan to be persistent), train managers to use ABC/M information, and make sure all the right people are involved (in training and model development).”

4 Marine Corps, “Activity Based Resource Management (ABRM Implementation” (July 7, 2003)

http://www.marines.mil/News/Messages/MessagesDisplay/tabid/13286/Article/117059/activity-based-resource-management-abrm-implementation.aspx.  The document explains, “The Marine Corps, in executing its “responsibilities to “man, train, equip, and sustain forces to provide war fighting capabilities to the combatant commanders requires that resources be optimally applied to functions that support our strategic plans.”  The document explains the USMC is “increasingly under pressure” from groups including the Office of Management and Budget and the U.S. Congress to “link performance with resources, also known as performance based budgeting (PBB).”  PBB was also recommended by the Murphy Commission, and is discussed in the 1998 Foundation report.