Budgeting 2.0 What’s Best for Your Entity!

1. Budgeting 2.0What’s Best for Your Entity! Mark D. Abrahams, CPA, President, The Abrahams Group Edward Bean, Finance Director, City of Somerville, MA Walter Rossmann, Assistant Budget Director, City of San Jose, CA Malisa Files, Deputy Finance Director, City of Redmond, WA AGA Webinar January 23, 2013

2. Learning Objectives • We are seeing several approaches to budgeting including zero based budgeting, performance-based budgeting, program budgeting, service level budgeting, target budgeting, budgeting for results, priority budgeting, and budgeting for outcomes. Each uses to some degree performance and cost data to understand how well programs are performing. • Participants will gain an understanding of the practical application of some of these budgeting tools

3. A Shift In Budgeting • There has been a noticeable shift in budgeting since 2008 • The shift is away from the line-item, incremental approach to business planning, ZBB, program budgeting, target budgeting, performance budgeting, and priority driven/outcome based budgeting • Source: GFOA, 2011

4. Presenters and Subjects Mark D. Abrahams, CPA, MBA, CGFM President, The Abrahams Group Framingham, MA Introduction and Moderator Ed Bean Finance Director City of Somerville, MA Focus on Program Budgeting Walter Rossmann Assistant Budget Director City of San Jose, CA Focus on “Budget Tool Kit”, ZBB, PBB and Program Priorities Malisa Files Deputy Finance Director City of Redmond, WA Focus on Priority Budgeting

5. Part 1 What is Performance Management? The Concept

6. National Performance Management Advisory Commission • The commission created the framework expressly for public managers and public officials, who must provide leadership for initiating and sustaining performance management • Performance management comprises the concerted actions an organization takes to apply objective information to management and policy making in order to improve results. • Performance management uses evidence from measurement to support governmental planning, funding, and operations. • Better information enables elected officials and managers to recognize success, identify problem areas, and respond with appropriate actions – to learn from experience and apply that knowledge to better serve the public.

7. Performance Management Definition • Performance management is an ongoing, systematic approach to improving results through evidence-based decision making, continuous organizational learning, and a focus on accountability for performance • Performance management is integrated into all aspects of an organization’s management and policy-making processes and transforms an organization’s practices so that they are focused on achieving improved results for the public

8. Performance Management Cyclehttp://www.pmcommission.org/

9. Performance Management Framework • STRATEGIC • PLANNING • Develop Entity Mission • Conduct Needs Assessment • Develop Entity Goals • Identify Entity Outcomes • Develop Policy Direction • EVALUATE • RESULTS • Develop Benchmark • Recognize Standards • Determine Service Level Gaps • Reengineer Processes • Revise Targets and Budgets • Performance Audits • Program Evaluations • Employee Appraisals • PROGRAM/ • ACTIVITY • PLANNING • Conduct Needs Assessment • Identify Programs • Develop Program Goals • Identify Activities • Develop Activity Objectives • Develop Activity Targets • Set Priorities • MANAGE WORK • PROCESSES • Develop Plans and Schedules • Convert Inputs to Outputs • Determine Costs (ABC) • Record Measurement Data • Develop Baseline • Validate Data • BUDGETING • FOR RESULTS • Align Systems • Allocate Resources • Present by Program • Integrate Goals and Measures • Outcome Budgeting

10. Performance Management Elements – Principles in Action • Planning • The alignment of planning, budgeting and measurement and an associated focus on long-term results • Budgeting • Moving from line item inputs to program outputs or outcomes, linking $ to results • Management • Aligning operations to achieve targeted results • Evaluation • Determining and enhancing efficiency and effectiveness, to improve results

11. Cross-Cutting Practices: Measurement and Reporting • Measurement • Track the accomplishment of goals and objectives • Strategic and operational measures • Family of measures (inputs, outputs, efficiency and outcomes) • Relevancy, timeliness, verifiability • Reporting • Baseline • Fact based data • Timely, accurate • Accessible • Internal and external reporting

12. Performance Management - Budgeting • A shift of emphasis from budgetary inputs to outcomes • The integration of budgeting and strategic planning and an associated focus on long-term results • The linking of $ to results • Integrating performance information into the budget • Developing a budget based on services, not organization • For each program, developing a program goal with measurable inputs, outputs, efficiency and outcome measures • Knowing the costs of providing your services • Communicating your story and planned accomplishments

13. Performance Management Summary • In short, using fact based, performance data to manage for better results • It is a cycle, with four elements, with two overlapping parts • Its power lies within its connectivity • Budgeting is an essential component

14. Part 2 Budgeting Approaches and Tools to Consider Program Budgeting Budgeting ‘”Tool Kit” Priority Budgeting

15. Agenda • Ed Bean will now discuss how Somerville has implemented performance management including several approaches and tools with a focus on program budgeting • Walter Rossmann will follow Ed to discuss San Jose’s approach to budgeting, including their “tool kit” and “pragmatic budgeting,” and how this approach has worked in San Jose • Malisa Files will follow Walter to discuss how priority budgeting helped Redman achieve its objectives • Mark Abrahams will then summarize • We will answer questions after each presenter

16. Budgeting 2.0What’s Best for Your Entity! • Somerville Slides

17. Budgeting 2.0What’s Best for Your Entity! • San Jose slides

18. Budgeting 2.0What’s Best for Your Entity! • Redmond slides

19. Summary

20. Performance Management • Management tool • Not an end in and of itself • Part of a performance management system • Strategic Management • Program Based Management • Data Driven • Various Budget Approaches within a performance management framework

21. Common Planning and Budgeting Themes Planning Budgeting What programs should we fund in order to best achieve our priorities? What level of service should we fund within a program? 3. For a given service level, are the requested inputs reasonable for the output we expect to receive? • What are the community’s priorities and how should we fund to best achieve the priorities? • How much and what quality of service does the community need from a given program? • Is the service provided efficiently?

22. Common Planning and Budgeting Themes • Planning process used to identify priorities • Budget process used to fund programs to achieve priorities • Results driven • Not incremental • Use of performance measures and data • Citizen input impact

23. Summary • This webinar has explored budgeting within a performance management framework • We have seen how three communities have used different approaches to achieve performance results • We hope this webinar has helped you learn techniques that can assist you to achieve your objectives

24. Contact Information Mark Abrahams 508 788-9172 Bettergov@aol.com www.theabrahamsgroup.com Ed Bean 617 625 6600 x3210 ebean@ci.somerville.ma.us http://www.ci.somerville.ma.us/departments/finance/fY13-budget Walter Rossmann 408 535-8188 walter.rossmann@sanjoseca.gov http://www.sanjoseca.gov/index.aspx?NID=183 Malisa Files 425 556-2166 mfiles@redmond.gov www.redmond.gov/bp