Guidelines for budget making

If ever the adage, “You can’t please all of the people all of the time” applied, it would be in the area of budgeting. The budgeting process involves the allocation of limited resources to competing priorities, many of which are worthy yet seldom receive all of the funding they seek.

Three years ago, eight organizations representing local and state government recognized that too little information on effective budgeting practices existed and that identification and sharing of such practices was lacking. They joined to form the National Advisory Council on State and Local Budgeting.

The council’s major objectives are assessing and fostering improvement in local and state budgeting practices. Founded by organizations representing elected officials, government administrators and finance professionals, the council includes the National League of Cities, the U.S. Conference of Mayors, the National Association of Counties, the Government Finance Officers Association of the United States and Canada, the International City/County Management Association, the Council of State Governments and the National Conference of State Legislatures.

The council undertook a three-year mission to recommend budgeting practices, and, in December 1997, it released a set of 59 practice statements pertaining to the planning, allocation and management of resources. The practices are designed to address certain weaknesses that frequently occur in government budgeting.

Those include the lack of a long-term perspective, failure to integrate operating and capital budgets, unrealistic revenue forecasts, inadequate consideration of service delivery alternatives, lack of performance measures to assess results, inability to measure the cost of services, and political pressures to maintain or increase spending even while revenues decline.

The recommended budget practices are one- or two-page statements consisting of a one-sentence description of each practice, a brief rationale for it, a description of the desired results and supplementary notes that elaborate on the practice. The council also provides one or more real-life examples for nearly all of the practices, excerpted from actual budgets, strategic plans, policy statements, reports and other memoranda.

The chronologically organized practices include setting goals, creating budgets in tune with those goals and with available resources, developing financial and program policies, examining alternative service delivery approaches, and routinely monitoring and evaluating performance. Program effectiveness, stakeholder satisfaction, and financial and legal compliance are among the areas to be monitored.

The practices encompass four themes: * taking a long-range, multi-year perspective in planning and budgeting resources; * incorporating citizen and other stakeholder involvement into the entire budget process; * allocating resources based on a vision and goals; and * measuring performance to assess accomplishments. The practices are voluntary guidelines, not mandatory standards. They are intended to provide a framework for governments to assess and improve their budget process.

The eight co-founding organizations and other council members are publicizing and promoting the practices. Reaction has been favorable, and the council may reconvene in 1999 to assess the need for changes to the practice statements.

Copies of the practices can be obtained from the GFOA web page (www.gfoa.org); or by contacting the GFOA. The practices with accompanying examples also are available in CD-ROM format.