Transcript Budgeting: Using Performance Measures to Link Strategic

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
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Topics
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Government Accountability Continuum
Strategic/Financial Planning
Role of Performance Measurement
Evolving Role of State Finance Official
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.
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The Government
Accountability Continuum
Evaluate results
and provide feedback
Set measurable
goals and
responsibilities
Plan what needs
to be done
to achieve goals
Report on results
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Conduct the
work and
monitor progress
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 organization’s objectives for a strategic plan
will help determine how the resources available can
be tied to the future goals.
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“Performance Measurement: Using Performance Measurement for Decision Making – Updated Performance Measures” Approved by the GFOA
Executive Board, March 2005
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.
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“Performance Measurement: Using Performance Measurement for Decision Making – Updated Performance Measures” Approved by the GFOA
Executive Board, March 2005
Performance Measurement Overview
Strategic
Planning
Financial
Planning
Budgeting
Performance
Measurement
Principle I
Establish
Broad Goals
Principle II
Develop
Approaches
Principle III
Develop
Budget
Principle IV
Evaluate
Performance
Element I -
Element 2 -
Asses Community
Needs, Priorities,
Challenges &
Opportunities
Element 4 -
Element 5 -
Adopt Financial
Policies
Element 3 -
Identify Opportunities
& Challenges for
Government
Services, Capital
Assets, Management
Develop & Disseminate
Broad Goals
Element 6 -
Develop Programmatic,
Operating, & Capital
Policies and Plans
Element 8 –
Develop a Process
for Preparing &
Adopting a Budget
Element 11 –
Monitor, Measure,
& Evaluate
Performance
Element 7 -
Develop Programs &
Services that are
Consistent with
Policies & Plans
Element 9 –
Develop & Evaluate
Financial Options
Develop
Management
Strategies
Element 10 –
Make Choices
Necessary to Adopt
a Budget
Element 12 –
Make Adjustments
as Needed
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National Advisory Council on State and Local Budgeting
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.
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“Performance Measurement: Using Performance Measurement for Decision Making – Updated Performance Measures” Approved by the GFOA
Executive Board, March 2005
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
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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;
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Implementing Performance Measurement in Government: Illustrations and Resources, Joni Leithe, GFOA, 1997
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
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Identify SMART Measures
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Specific
Measurable
Aggressive, yet achievable targets
Relevant
Time-bound
Anatomy of a Measure
Indicator
Data
Target
Source
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From Conrad (2005)
Types of Targets
Type
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Example
Policy-specific
targets
Determined in a political and/or technical process taking past performance and
desirable outcomes into account.
Example: official development assistance shall be 0.4 percent of national
GNP.
Standards
Nationally and/or internationally accepted properties for procedures or
environmental qualities.
Example: water quality standards for a variety of uses.
Thresholds
The value of a key variable that will elicit a fundamental and irreversible change in
the behaviour of the system.
Example: maximum sustainable yield of a fishery.
Benchmark
Comparison with a documented best-case performance related to the same
variable within another entity or jurisdiction.
Example: highest percentage of households connected to sewage system in
a comparable jurisdiction.
Principle
A broadly defined and often formally accepted rule.
Example: the policy should contribute to the increase of environmental
literacy.
Example Measures
Example:
Environmental
Social
Economic
Healthy,
sustainable
surroundings
Quality
Jobs
Prosperous
Economy
Change in wellbeing conditions
(economic, social
and environmental)
Stream water
quality
(turbidity)
Children
entering school
ready to learn
Short to mediumterm consequence
of an output
Rate of soil
erosion by
water
% children
enrolled in Pre-K
program
Understanding Linkages
Key Priority Areas
High-level
Objectives
Intermediate
Outcome
Output
The result of an
activity
Kilometers of
Demographic
river bank with surveys for Headvegetation
start program
Gross
Domestic
Product
Share of GDP in
manufacturing,
business and
commercial services
Economic
Development and
Innovation Initiative
completed
completed
Actions
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Processes and
Inputs of a policy,
program or
project
% of revegetation
programs
completed
Head-start
program
implemented
Implement Economic
Development and
Innovation Initiative and
participate in other crossministry initiatives that
influence the province's
prosperity
Example:
Alberta’s 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):
* Gross Domestic Product (GDP)
• Job growth
• Labor force participation rate
• Labor productivity
• Personal disposable income
• Value-added industries
• Export trade
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Tourism industry revenues
Barriers to trade
Business connectiveness
Sponsored research at University
of Alberta
Industrial disposition planning
Biodiversity monitoring system
Oil Sands production
Goal 7 Budget and Actuals (2004-05)
$2,519 million
$3,206 million
Goal 7 Government Strategies/Actions
• Securing Tomorrow’s Prosperity value-added strategy
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• 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
Using Performance Measures to
Link 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.
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GASB Website
Using Performance Measures to
Link Strategic & Financial Planning
 GASB Service Efforts & Accomplishments
• In GASB’s 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.
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GASB Website
Using Performance Measures to
Link 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.
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GASB Website
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
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Evolving Role of State
Finance Official
Privacy
Security
Assurance
Accountability
Access
Service
Cost,
Value and ROI
Performance
Delivery
Fulfillment
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Evolving Role of State
Finance Official
 Recognize your expanding role in the nation’s
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 efforts…or initiate
process
 Become the champion on performance
measurement initiatives
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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.
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