Saturday, December 18, 2010

Performance Based Budgeting

Now that the stresses of developing yearly budgets are about to begin, I thought it would be a good time to discuss an issue associated with Performance Based Budgeting. This approach to allocating funds is particularly important to municipalities for two reasons:
1) the goal of work programs for these organizations is to achieve the long term policies of the community (bringing them into the future the citizens seek); and,
2) their responsibilities are funded by the citizens.

In simple terms, funding in performance based budgets is tied to specifically identified objectives and measured results. While I can not imagine another way to develop a budget, or compare one budget cycle with another, without defining, measuring and assessing results, I would like to focus on the way performance is to often measured in municipal government settings.

To be effective in performance based budgeting, it has to be closely tied to procedures and strategies that allow for effective monitoring of service provision indicators.  If your measurements are meaningless or misguided, your assessment of the performance will be equally flawed.  Monitoring activities without integrating assessments of goals, actions, and results, is just the recording of data, with no meaningful conclusions to work with.

For example, one of the indicators often used for Planning Departments to measure service performance is the number variances (or any application for that matter) processed in a given year. This only tells you two things, how busy you have been, and sometimes (when processing time is included in the analysis), how fast these applications have been turned over. If you were in the business of keeping busy this would be helpful. A more meaningful measurement would be to look at the nature of these variances; why they were necessary; what were the cumulative impacts; and, if they indicate a failing in the existing regulatory structure that necessitated them in the first place.

Performance based budgeting can not be successfully supported with shallow, or meaningless data. So if you are involved in budgeting remember to look at your performance indicators to see that they tell you the results of your work; the effectiveness of your actions; and thirdly, where opportunities for improvement lie. Have fun number crunching.

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