NACSLB recommended budget practices: what they are and how to use them.

• Author: Gross, John
• Position: National Advisory Council on State and Local Budgeting - Includes related article on the Government Finance Officers Assn's recommended budget practices

The work of the National Advisory Council on State and Local Budgeting provides a broad-based "seal of approval" for a good budget process and offers a rationale and structure for change for those governments that choose to pursue its recommended practices.

A major event in governmental budgeting occurred on December 15, 1997, with the release by the National Advisory Council on State and Local Budgeting (NACSLB) of a budgeting framework and recommended practices for state and local government budgeting. The framework and practices took three years to develop, and there is an even longer history to the overall project. In 1990, the Government Finance Officers Association (GFOA) Committee on Governmental Budgeting and Management issued a "white paper" identifying the need for substantial improvement in governmental budgeting. The GFOA responded by sponsoring a national symposium and then a national task force to better determine the nature and extent of the identified need. A broad spectrum of government officials and finance industry leaders participated in the symposium and task force, and both groups confirmed the need for substantial improvement in the budgeting guidelines available to governments. They also made it clear that any effort to remedy this situation should be aimed at guidance, not a prescription or requirement.

Based on the precursor work, GFOA and seven other associations representing state and local government professionals and elected officials formed the NACSLB (the Council) in 1995 with a three-year mission to develop recommended budget practices for state and local governments. The composition of the Council encompassed all components of local government and included representatives from labor organizations as well as academia. GFOA provided staffing to the Council.

When the Council first met, there was concern among members as to what could be accomplished and whether it would be useful. However, by the end of the second meeting, common issues and concerns with regard to governmental planning and resource decision making began to emerge. The elected officials were often leaders in this discussion. They strongly believed in the need for clearer plans and directions prior to the making of budgetary decisions. Other strongly held beliefs that emerged early were 1) the need for parties (stakeholders) interested in the budget to have an opportunity to become knowledgeable and to participate in the budget development and adoption process, and 2) a conviction that budget practices should provide substantial flexibility to governments and should be in the form of recommendations, not mandates.

As a first step toward defining recommended budget practices, the Council developed a framework that provides an overview of the budgeting process and outlines the key principles and elements of a good budgetary process. These principles and elements are not individually revolutionary nor even surprising: the framework's value lies in its comprehensive, structured outline of the entire budget process. Most important, the framework is agreed upon by a broad range of government interests.

The Council's framework defines the budget process as the development, implementation, and evaluation of plans for the provision of services and capital assets, a far broader definition than the more traditional development of a budget document and a set of expenditure and revenue figures. The associated mission is to help decision makers make informed choices about the provision of services and capital assets and to promote stakeholder participation. The framework became the basis for developing the 59 recommended budget practices that embody the Council's vision as to what governments should do to implement the recommended budget process. Over three years, the Council developed, debated, and refined these 59 budget practices one by one. The framework that had been developed at the start of the process was reviewed and refined along the way.

The Council released a draft of its work for formal comment in the summer of 1997 and subsequently received comments - which were generally very favorable from a number of states and local governments. Suggestions made by respondents were considered by the Council and a good number of them were incorporated into the final product. A set of examples also was gathered from across the United States and Canada.

Notwithstanding the diverse perspectives and interests of the members of the Council, the framework and practices released to the public in December 1997 represent a strong consensus on the key aspects of governmental budgeting by the members of the Council. The GFOA's Executive Board has adopted a Recommended Practice endorsing the work of the NACSLB, shown as Exhibit 1.

Principles, Elements, and Practices

The framework for budgeting is based on four principles, shown in Exhibit 2, and describes an iterative planning and decision-making process consisting of a few basic steps: considering what is to be done, developing a plan to do it, implementing the plan within available resources, evaluating progress, and making adjustments. Through the work of the Council, these steps are now formally associated with a good governmental budgeting process and a government can see that unless it is performing all these components as part of a unified process, there are improvements to its budgeting that can be made.

Twelve elements - essentially "super practices" - describe high-level activities required to achieve the principles of good budgeting. Shown in Exhibit 3, each element is associated with a specific principle.

The 59 practices identify the steps required to achieve the higher-level activities identified by the 12 elements. A practice is intended to be applicable to state and local governments of all sizes and types, including school and other special districts. Illustrating the hierarchical nature of this framework is Exhibit 4, which lists the titles of the elements associated with the first principle budget practices associated with each of those elements. The practice statements are short and concise. Each one provides a one-sentence overall description of the practice, a brief outline of the rationale for the practice, a discussion of what the output (results) of the practice should be, and some explanatory notes. Exhibit 5 illustrates the format and content of the complete statement of Practice 3.2.

In developing the practices, the Council intended to be descriptive rather than prescriptive in its approach and to deal with the general, not specific, implementation. The practices are recommendations, not requirements, and they are intended to apply to all types and sizes of state and local government. There is great latitude in...