Best Practices in Budgeting: Putting NACSLB Practices into Action.

• Author: Calia, Roland
• Position: National Advisory Council on State and Local Budgeting - Statistical Data Included

This article highlights how four local governments have improved their budgeting and financial management processes by implementing innovative best practices. Special emphasis is placed on stakeholder input, financial planning, and performance measurement.

Since publishing the National Advisory Council on State and Local Budgeting (NACSLB) recommended practices in 1998, the GFOA has undertaken an aggressive effort to publicize the recommended practices and encourage governments to incorporate them within their budget process.' The purpose of this article is not to revisit the objectives of the NACSLB or its recommended practices per se, but to illustrate the efforts of governments to adopt best practices within their budget framework. The examples included in this article are not intended to be representative of all governments, but rather illustrative of how governments are improving their operations by adopting best budget practices.

Ideally, governments would like to adopt management innovations that have been used repeatedly and are therefore "true and tested." As commonly used today, a best practice may be an unproven innovation that results from thinking outside of the box and that may represent a paradigm shift. Best practices are unproven in the sense that they may not have been systematically evaluated. Put differently, process improvements may not be directly attributed to the implementation of a best practice. When systematic and rigorous empirical work provides evidence in support of the use of a best practice, it becomes recognized as a recommended practice by a profession. In adopting an unproven best practice, governments run the risk of implementing a "bleeding-edge" innovation. The decision for a government to adopt a best practice from the private sector or another jurisdiction needs to be considered carefully to minimize policy failure.

This article discusses components of the budget process in four governments with award winning budgets: Tucson, Arizona; Dakota County, Minnesota; San Clemente, California; and San Diego, California. The purpose of presenting these case studies is to help other governments learn about best practices used to link planning and operation functions to achieve greater service provision effectiveness and efficiency.

NACSLB Recommended Practices

Recently, several governments have compared their budget process to the NACSLB framework and have integrated the framework within their overall budget process. For example, the City of Scottsdale, Arizona's strategic budget process is consistent with the NACSLB framework. [2] The County of Hillsborough, Florida, also has publicized its efforts to incorporate stakeholder input into its budget process in a manner consistent with the NACSLB framework. [3] Additionally, some special districts also have adopted the NACSLB recommended practices. The Santa Clara Valley Water District in California uses the NACSLB framework to develop its results-oriented biennial budget. [4]

Although governments are evaluating their budget process against the NACSLB recommended practices, it should not imply that all of them have implemented best practices to be consistent with the NACSLB framework. Put differently, because the NACSLB is descriptive and does not specify which methods should be used to implement the recommended practices, governments have the discretion to use methods that they think are suitable for achieving the task at hand. As such, governments can use simple or sophisticated methods for conducting revenue forecasts, setting priorities, and performing other management and budget functions.

The NACSLB recommended practices consist of four principles, 12 elements, and 59 recommendations. The principles are:

* establish broad goals to guide government decision making;

* develop approaches to achieve goals;

* develop a budget consistent with approach to achieve goals; and,

* evaluate performance and make adjustments.

These principles underscore the need for governments to have a sound budget process that incorporates long-term planning, establishes linkages to broad organizational goals, focuses budget decisions on results and outcomes, integrates stakeholder input, and provides incentives for providing effective and efficient financial stewardship. In so doing, the NACSLB principles ask four basic budgeting and management questions.

* How will the accomplishment of the goals and objectives be measured?

* How will the goals and objectives be accomplished?

* What goals and objectives are to be accomplished?

* What resources will be used to achieve the goals and objectives?

These principles also encompass the array of planning and budget functions that cut across a governmental organization. Finally, these principles take into account that the budget process consists of financial, managerial, political, and technical dimensions.

Although the principles appear to have an hierarchical structure, they actually represent the iterative planning and decision-making process of budgeting.

A budget practice is defined as a procedure that assists in accomplishing a principle and element of the budget process. To operationalize a budget practice it must be 1) clearly linked to activities in the budget process and 2) specifically contribute to the development, description, understanding, implementation, and evaluation plan for provision of services and capital assets. In short, budget practices represent methods for achieving particular budgetary subprocesses and activities. Exhibit 1 summarizes the NACSLB principles, elements, and recommended practices.

Best Practice Governments

State and local governments have the discretion to adopt and implement practices that best suit their particular financial and budgeting processes. The following section presents case studies of governments that have implemented best practices to improve their financial management and budgeting processes. They are:

* Incorporating Stakeholder Input--Tucson, Arizona's Livable Community Vision Program;

* Identifying Program Challenges--Dakota County, Minnesota's Monitoring of Service Delivery Inputs and Outcomes;

* The Budget Development Process--San Clemente, California's Long-Term Financial Plan; and,

* Performance Measurement and Evaluation--San Diego, California's Municipal Operations Benchmarking Process.

Incorporating Stakeholder Input

Incorporating citizen preferences into its budget can be an arduous task for any government. The NACSLB recommends that governments establish broad goals to provide overall direction to the resource allocation and budgetary decision-making process. Goals should be developed through a proactive process that assesses the needs, concerns and priorities of the community. Stakeholder participation at the developmental phase that links the budget can be useful in shaping the implementation of governmental programs and services.

The City of Tucson's willingness to develop long-term goals through a collaborative process with its citizenry and then link these goals to the budgeting process is a "best practice" example of how to assess community needs, priorities, challenges and opportunities. The city's "Livable Tucson Vision Program" establishes long-term, community-driven goals that are intended to shape the budget and hold policymakers directly accountable for developing programs and services that address the needs and concerns of the community. In developing its 1999-2000 annual budget, more than 1,200 citizens, members of the business community, and city employees participated in a collaborative goal-setting process. Together they helped lay the groundwork for developing specific strategies designed to guide the budget process and establish new programs and services that meet the needs of the community.

Tucson began its Livable Vision Program by conducting a series of public forums held in each of the city's six wards. The initial stages engaged citizens in discussing their values, needs, and concerns. An Internet site was developed to give citizens who could not attend community meetings an opportunity to participate, and special efforts were made to reach Spanish-speaking segments of the population with bilingual programs. Through this process, a consensus of community concerns quickly emerged around issues of neighborhood safety, public education, environmental protection, the local economy, and employment opportunities. Subsequent workshops incorporated the values, concerns, and priorities identified by stakeholders and worked to identify a common vision for the city as a whole. What emerged were 17 broad based...