1. Hong Kong Division, March 2004
The Bottomline
Switching from Input Accounting to Output/Outcome
Management at OFTA
Presidential Engagements Dr Horace Yuen, Managing Director, ABCM Consulting (China) Ltd
Dr Joseph Yau, Council Member of CIMA Hong Kong Division and Assistant Professor, School of
2004
Business & Administration, The Open University of Hong Kong
14 Jan Annual Dinner 2004, HKICS
Alan Lung, General Manager, ABCM Consulting (China) Ltd
2 Feb Inauguration Ceremony of Accountancy
Society, City University of Hong Kong
5 Feb Spring Dinner 2004, HKU SPACE “The ABCM exercise in OFTA gives us an OFTA places high priority on training and
5 Feb Opening Ceremony and Business Forum
of Accounting Week 2004, Accounting opportunity to evaluate services costs and re- development. This is a carefully considered
Students’ Society, HKUST deploy resources in a more effective manner. management goal as OFTA sees this as the only
9 Feb ACCA Hong Kong Spring Dinner, ACCA But senior management should be prepared to way to keep up with the rapidly changing
Hong Kong
communicate openly and explain the reasons technological environment. OFTA operates on
9 Feb ICAA Hong Kong Group Spring Dinner
2004, The Institute of Chartered behind an ABC exercise to avoid having the a trading fund basis and recovers its
Accountants in Australia potential misconception problems,” WONG administration costs through the collection of
10& Public Sector Reform Conference “Changing
Kwok-shu, Assistant Director, Office of the telecommunication licence fees.
11 Feb the face of Government - Making it
happen”, Efficiency Unit HKSAR Telecommunications Authority (OFTA)
12 Feb Spring Dinner 2004, HKSA A systematic way to understand the
19 Feb Opening Ceremony of Exhibition 2004, OFTA could have been your average HKSAR key and other product costs
Hong Kong Inter-Tertiary Accountancy
Association (HKITAA) Government Department. Not much is
“Having established the costing of OFTA’s key
19 Feb Open Day, Ho Tung Secondary School spectacularly different at OFTA. But the
25 Feb Spring Dinner for Year 2004, The Society products, the next logical step is to establish the
change brought about by the introduction of
of Chinese Accountants & Auditors pricing of other OFTA “products” based on
26 Feb UCL Graduation Ceremony, HK College of Activity Based Costing and Management
their true costs. From management point of
Technology International (ABCM) at OFTA is no less than revolutionary.
8 Mar The 13th Inauguration Ceremony of
view, it is extremely important to ascertain the
CUSA 2004-2005, The Society of relative cost and benefits of each ‘product’
Accountancy, Student Union of the To begin with, OFTA is the executive arm of
delivered by OFTA to its customers. A typical
Chinese University of Hong Kong (CUSA) the Telecommunications Authority, a statutory
15 Mar Cocktail Reception to welcome Mr. Philip
example is ‘an investigation triggered by public
body created in July 1993. As the technical and
Yang as the new Chairman of HKIAC, complaints on radiation risks of transmitters’.
Hong Kong International Arbitration economic regulatory authority of the telecoms
In this example, the cost of each investigation
Centre industry, OFTA has a role of ensuring fair
needs to be allocated properly to a combination
19 Mar 30th Anniversary Dinner-Year 2004, The competition within the telecom industry. It also
Association of International Accountants, of telecom licencees, for example, pager and
Hong Kong Branch has a role and a vision of ensuring that Hong
mobile telephone operators that trigger the
20 Mar ACCA Centenary Conference - Kong gets the best telecoms services to meet
investigation costs”, said Mr. K.S.Wong.
Accountants Reloaded, ACCA the challenges of the information age.
3 Apr Faculty of Business Administration Gala
Dinner to celebrate the 40th Anniversary,
The Chinese University of Hong Kong
s e e i n s i d e
1 Feature
4 Member profile
5 Activity
6A China Overseas Building, 139 Hennessy Road,
Wanchai, Hong Kong
Tel: 2511 2003 Fax: 2507 4701
Web Site: http://www.cimaglobal.com
continued on page 2

2. This is conceptually different from the out a plan to roll-out the ABC modeling Moving on to strategic
traditional costing exercise where costs are throughout the entire department using its management - resource
assigned based on revenue or head count. own staff resources in Stage Two. Stage Three management and resource
Instead the real challenges are to find out what was the further conceptualization whereby planning
are the ‘cost triggers’ which drive the cost staff at each level have the implications and
In OFTA, high service cost does not necessary
allocation to each activity relevant to the benefits of the ABCM implementation
mean the need to reduce or stop the services
products / services in question. explained to them. Stage Four is the full roll-
being delivered because the public interest
out of ABCM which is expected to be
must be balanced against the cost. However
Setting priority and using ABC completed in the 2004/2005 financial year. In
more accurate cost information will help
information to manage OFTA the current stage Four, OFTA has avoided
OFTA to prioritise services and provide more
setting targets that are too aggressive. It also
Knowing that certain products / services have understanding of the costs of
restricts the numbers of resource items,
a relatively higher cost might not telecommunication licences.
activities and cost objects, to 165, 600 and 50
automatically mean that OFTA should stop
respectively. Furthermore, OFTA allows
delivering these products / services. Public OFTA is looking forward to the possibility of
enough time for checking, reviewing and
interest must be balanced against cost. But, at using cost trend data, which will be built up
enhancing the whole ABCM model.
the very least, ABC makes OFTA more cost over the next few years, to plan for the
conscious. Higher cost awareness at OFTA deployment of resources. Mr. Wong believes
OFTA decided against trying to achieve a
has caused better priority to be assigned. For that skeptics of the ABC methodologies in
very high degree of detail in ABCM
example, the low demand and relatively high Government should first try a pilot.
implementation. For example in data
cost of providing a 24-hour complaint hotline
collection, instead of asking staff to return
for radio interference would indicate that Mr. Wong also believes that advocates of
timesheets everyday, OFTA decided that
OFTA should reduce the service hours. This ABCM should not be looking at organizing
return on a weekly basis is good enough. In
type of cost and performance information is large forums to promote the ABCM concept
addition, OFTA has planned to automate the
extremely useful in enabling OFTA to in the Civil Service. “Nor should they be
data integration between ABC database and
effectively re-deploy their resources. looking at large departments that are input-
data gathering process in order to capture
oriented at the very beginning. The Trading
regular cost and driver data more effectively
Looking ahead, OFTA hopes that ABCM can Fund departments with strategic output-
and efficiently.
be more broadly applied within OFTA in the oriented activities will most probably need
continuous refinement of ABC information to such methodology to help them better manage
facilitate resources management and pricing their resources”, said Mr. Wong.
decisions.
Four stages of implementation at
OFTA
Misconception is not an uncommon problem.
Before the launch of ABCM, staff often
questioned the agenda behind such an
exercise. Is this a cost-cutting or “BPR”
exercise? Are they trying to cut my job?
The ABCM exercise in OFTA has given
management an opportunity to evaluate
current services and to re-deploy the resources
to new and more useful services, more
effectively. To make ABCM a success, senior
management should be fully committed to the
project and prepared to communicate openly
with all staff involved. They should explain
the reasons behind an ABC exercise to help
allay the concerns of staff as well as to avoid
any potential misconception behind the
scenes. This exercise needs commitment at
the highest level. Benefits must also be
explained to the skeptics. In the case of
OFTA, staff discussions at each of the four
stages of implementation were held.
At Stage One, OFTA commissioned external
consultants to provide conceptual training and
to conduct a pilot study. From the experience
gained in the pilot project, OFTA has mapped
2 The Bottomline