Budgeting: Using Performance Measures to Link Strategic and Fiscal Planning

1
Budgeting Using Performance Measures to Link
Strategic and Fiscal Planning
Presented to NASACT Annual Conference August
14, 2007 By Gila J. Bronner President
CEO BRONNER GROUP, LLC Chicago, IL
2
Topics

• Government Accountability Continuum
• Strategic/Financial Planning
• Role of Performance Measurement
• Evolving Role of State Finance Official

3
What is Accountability?

• Accountability is an obligation to answer for
  the execution of one's assigned
  responsibilities.
• In simpler terms, accountability is reporting.
  People account, or report to other people.
  Therefore, it is useful to consider
  accountability in context of the relationships
  between the people or organizations involved.

4
The Government Accountability Continuum
5
Strategic/Financial Planning Overview

• Strategic planning is about influencing the
  future rather than simply preparing or adapting
  to it.
• Focus is on aligning organizational resources to
  bridge the gap between present conditions and the
  envisioned future.
• The organizations objectives for a strategic
  plan will help determine how the resources
  available can be tied to the future goals.

Performance Measurement Using Performance
Measurement for Decision Making Updated
Performance Measures Approved by the GFOA
Executive Board, March 2005
6
Strategic/Financial Planning Overview

• An important complement to the strategic planning
  process is the preparation of a long-term
  financial plan, prepared concurrently with the
  strategic plan.
• A government should have a financial planning
  process that assesses the long-term financial
  implications of current and proposed policies,
  programs, and assumptions.
• A financial plan illustrates the likely financial
  outcomes of particular courses on action.

Performance Measurement Using Performance
Measurement for Decision Making Updated
Performance Measures Approved by the GFOA
Executive Board, March 2005
7
Performance Measurement Overview
Principle I Establish Broad Goals
Element I - Asses Community Needs,
Priorities, Challenges Opportunities
Element 2 - Identify Opportunities
Challenges for Government Services, Capital
Assets, Management
Element 3 - Develop Disseminate Broad Goals
Strategic Planning
Principle II Develop Approaches
Element 7 -
Element 6 - Develop Programs Services
that are Consistent with Policies Plans
Element 5 - Develop Programmatic, Operating,
Capital Policies and Plans
Element 4 - Adopt Financial Policies
Develop Management Strategies
Financial Planning
Principle III Develop Budget
Element 10 Make Choices Necessary to Adopt a
Budget
Element 8 Develop a Process for Preparing
Adopting a Budget
Element 9 Develop Evaluate Financial Options
Budgeting
Principle IV Evaluate Performance
Performance Measurement
Element 11 Monitor, Measure, Evaluate
Performance
Element 12 Make Adjustments as Needed
National Advisory Council on State and Local
Budgeting
8
Role of Performance Measurement

• Performance measures provide an important link
  between the goals, strategies, actions and
  objectives stated in the strategic plan and the
  programs and activities funded in the budget.
• Performance measures provide
  information on whether goals and
  objectives are being met.

Performance Measurement Using Performance
Measurement for Decision Making Updated
Performance Measures Approved by the GFOA
Executive Board, March 2005
9
Role of Performance Measurement

• Performance Measurement when linked to the budget
  and strategic planning process can assess
  accomplishments on an organization-wide basis.
• Meaningful performance measurements can assist
  government officials and citizens in identifying
  financial and program results, evaluating past
  resource decision, and facilitating qualitative
  improvements in future decisions regarding
  resource allocation and service delivery.

Implementing Performance Measurement in
Government Illustrations and Resources, Joni
Leithe, GFOA, 1997
10
Role of Performance Measurement

• Performance measures should be linked to the
  goals of programs and the missions and priorities
  of the organization. Governments should
• Develop a mission statement for government and
  its service delivery units by evaluating the
  needs of the community.
• Ensure that the benefits of establishing and
  using performance measures exceed the resources
  required to establish performance measures
• Develop multiyear series of efficiency indicators
  to measure the efficiency of service deliver
  within programs
• Develop multiyear series of quality or outcome
  indicators to measure the effectiveness of
  service delivery (are accomplishments being met?)
  within programs

Implementing Performance Measurement in
Government Illustrations and Resources, Joni
Leithe, GFOA, 1997
11
Role of Performance Measurement

• Develop a mechanism to cost government services
• Analyze the implications of using particular
  measures for decision making and accountability
• Develop common or improved approaches to
  utilization of financial and non-financial
  performance measures in making and evaluating
  decisions
• Use community condition measures to assess
  resident needs that may not be addressed by
  current programs and,
• Develop and periodically review supportable
  targets for each performance measure.

Implementing Performance Measurement in
Government Illustrations and Resources, Joni
Leithe, GFOA, 1997
12
Identify SMART Measures

• Specific
• Measurable
• Aggressive, yet achievable targets
• Relevant
• Time-bound

13
Anatomy of a Measure
Indicator
Data
Target
Source
From Conrad (2005)
14
Types of Targets
15
Example Measures
Example
Environmental
Social
Economic
Healthy, sustainable surroundings
Understanding Linkages
Prosperous Economy
Quality Jobs
Key Priority Areas
High-level Objectives
Change in well-being conditions (economic, social
and environmental)
Stream water quality (turbidity)
Gross Domestic Product
Children entering school ready to learn
Intermediate Outcome
Short to medium-term consequence of an output
Rate of soil erosion by water
Share of GDP in manufacturing, business and
commercial services
children enrolled in Pre-K program
Output
Kilometers of river bank with vegetation
Economic Development and Innovation Initiative
completed
The result of an activity
Demographic surveys for Head-start program
completed
Implement Economic Development and Innovation
Initiative and participate in other
cross-ministry initiatives that influence the
province's prosperity
of re-vegetation programs completed
Actions
Processes and Inputs of a policy, program or
project
Head-start program implemented
16
Example
Albertas 20-year Strategic Plan Today's
Opportunities, Tomorrow's Promise A Strategic
Plan for the Government of Alberta
Government Goal 7 Alberta will have a prosperous
economy
Core Government Measures (Measuring Up)

• Tourism industry revenues
• Barriers to trade
• Business connectiveness
• Sponsored research at University of Alberta
• Industrial disposition planning
• Biodiversity monitoring system
• Oil Sands production

• Gross Domestic Product (GDP)
• Job growth
• Labor force participation rate
• Labor productivity
• Personal disposable income
• Value-added industries
• Export trade

Goal 7 Budget and Actuals (2004-05)
3,206 million
2,519 million

• Goal 7 Government Strategies/Actions
• Securing Tomorrows Prosperity value-added
  strategy
• Agri-Food Discovery Place (AFDP) construction
• Agrivalue Processing Business Incubator
• Cottage Winery Policy
• Promoting tourism

• Ministry of Economic Development
• 3-year Business plan
• goals and performance measures

Alberta Case Study
17
Using Performance Measures toLink Strategic
Financial Planning

• GASB Service Efforts Accomplishments
• Governmental Accounting Standards Board (GASB)
  has been studying the use of performance
  measurement by governments almost since its
  creation in 1984.

GASB Website
18
Using Performance Measures toLink Strategic
Financial Planning

• GASB Service Efforts Accomplishments
• In GASBs opinion, service efforts and
  accomplishments information - including both
  financial and non-financial
  performance measures - is an essential aspect of
  the measurement of governmental performance and
  is necessary for assessing accountability and
  making informed decisions.

GASB Website
19
Using Performance Measures toLink Strategic
Financial Planning

• GASB Service Efforts Accomplishments
• Because the primary purpose of governmental
  entities is to maintain or improve the well-being
  of their citizens, information that will assist
  users in assessing how efficiently and
  effectively governmental entities are using
  resources to maintain or improve the well-being
  of their citizens should play an important role
  in general purpose external financial reporting.

GASB Website
20
Evolving Role of State Finance Official

• Enhancing overall accountability for public funds
• Sustaining viable returns
• Achieving best value in processes and
  technologies
• Promoting citizen trust and confidence
• Facilitating government-wide results and
  analytic support
• Ensuring continuous flow of financial functions
  and business services

21
Evolving Role of State Finance Official
Privacy Security Assurance Accountability
Access Service Cost, Value and ROI
Performance Delivery Fulfillment
22
Evolving Role of State Finance Official

• Recognize your expanding role in the nations
  effort to demonstrate stewardship and
  accountability to its citizenry
• Understand the ramifications of government and
  enterprise systems on performance measurement
• Rethink, strengthen, and expand previous
  performance measurement effortsor initiate
  process
• Become the champion on performance measurement
  initiatives

23
Conclusion
The State Government Finance Official must
recognize and respond to the new challenges
created by changing paradigms of governance. To
uphold and protect not only our economic and
financial systems, but the very fabric of the
American life.