Issues preventing governments from effectively budgeting and how to avoid them
Budget cycles are long, labor-intensive processes, despite help from the Government Finance Officers Association’s budgeting best practices that help government organizations manage fiscal budgets year-round.
According to the International City/County Management Association, traditional processes that govern budgeting, planning, forecasting, reporting, and risk management can’t keep up with today’s unpredictable markets.
Tremendous effort and manpower are needed to support government budget cycles. The problem with extensive budget-planning cycles is the risk that the adopted budget is misaligned with evolving business conditions.
As a result, your government’s budget becomes less relevant the longer you take to develop it. As you work to streamline and shorten budgeting processes, you’re able to generate more relevant budgets that are better able to serve citizens.
Here are a few of the biggest issues governments face when creating budgets and how you can avoid them:
A lack of organizational and strategic alignment of budget priorities: It feels like a budget cycle barely ends before the next one begins. This signals a lack of alignment in organizational and strategic budget objectives, which results in incredibly long budgeting seasons.
To combat this, provide top-down leadership at the start of each budget cycle, aligning priorities and initiatives throughout the organization. Build public trust by moving toward a results-oriented government through the application of goals, objectives, and performance measures that are aligned with the budget formulation. These measures can help evaluate progress toward achieving goals.
A lack of access to data: Most governments use Microsoft Excel or legacy software applications to budget for the fiscal year. However, these programs were developed for the private sector, so they’re often not integrated with other important sources of data (e.g., financial and personnel system data). So governments don’t have the data they need to craft and manage budgets.
To remedy this disconnect, you can choose a government-specific budgeting software that pulls data from all departments. Newer technologies allow for opportunities to aggregate historical and current data into intelligence-driven cloud platforms to reveal the scope of your municipal needs and align those with your budget priorities.
A lack of stakeholder engagement: Government budgets are often based on expected revenues as opposed to the needs of community stakeholders. But by engaging stakeholders, you’re showing that you understand what’s important to them and can ensure their needs are met.
Collaborate with colleagues, management, and constituents to define next year’s goals. To focus on outcomes driven by priority-based budgeting, these goals must be identified and tied to budget allocations for the achievement of those objectives.
The organizations that engage through collaboration build trust and understanding, which increases transparency.
A lack of flexibility: Governments can get trapped in a “this is how it’s always been done” mentality. But when prioritizing and planning budgets, this way of thinking should be tossed out.
Each fiscal year produces new challenges and needs, which means reevaluating strategic priorities, measuring benefits vs. spend, and building a consensus aligned with your performance outcomes prior to your budget season.
Also, don’t fall into the “use it or lose it” trap. This practice causes a surplus of funds in the new budget that get spent on previously “unbudgeted” items and results in overspending year over year without any alignment with the core objectives.
Don’t introduce something new in the middle of an intense budgeting season. First, determine the priorities that are aligned with the outcomes your city or county is trying to achieve. Then, establish the best strategies for achieving those outcomes with the available resources. Alignment, collaboration, and technology will create transparency and trust in the budgeting process.
Erin Latham founded Mo’mix Solutions with the goal of offering data accessibility to public sector government and education. She has served as a technology and open data government advisor to local and state government and higher education organizations for more than 15 years.