Somerville’s Program-Based Budget

1. Somerville’s Program-Based Budget Edward Bean Finance Director January 23, 2013

2. TOPICS TO COVER • Setting: What is the fiscal context of Somerville? • Goals: Why did the City want to convert from a line item to a program-based budget? • Conversion Process: How did the City convert the whole budget with very limited resources? • Budget and Performance Management: How does the budget fit in with a complete City performance management program? • Budget Hearings: How did the new budget improve Board of Aldermen discussions? • Possible Next Steps: How will we build on this budget? • Resources: Feel free to customize what we’ve done to your city or town!

3. Converting the line item budget and putting into place performance management systems was possible, even in Somerville’s resource-constrained environment. SETTING: Total Size of Somerville Budget

4. GOAL: Why convert Line Item to Program-Based Budget? • Help elected officials and top management focus more on accountability for service quality, quantity, efficiency, and effectiveness; • Help direct resources and activities to the most strategically valuable purposes; • Help improve program operations via regular and timely collection and monitoring of performance data; and • Communicate the results achieved with tax dollars.

5. GOAL: What should the budget tell us? • What does a department do? • What services are performed? • What does the customer receive as an end output? • How much work results from each dollar spent? • What is the cost per unit of service for each program?

6. GOAL: What should the budget narrative tell us? • What is the Department Mission? • How is the Department Organized? • What were the Department’s accomplishments in the last fiscal year? • What are the Department’s priorities in the current fiscal year and how do they relate to the Mayor’s strategic priorities? • What are the significant budgetary changes from the prior to the current fiscal years?

7. GOAL: What did we need to do? • Define what services a department provides, expressed as programs and activities; • Define the program and activity goal, what service it provides, to whom and why; and • Define performance indicators to track the progress of attaining the goal.

8. How was the budget converted without much cost? CONVERSION PROCESS: Overview • In the 2004/2005 winter, consultant Mark Abrahams helped develop a pilot component of the FY05 budget; • In the fall and spring of 2004/2005, 61 KSG students from Professor Linda Bilmes’ cost accounting class worked with the Finance Department and SomerStat to inventory departments’ major functional areas and assign costs to these programs and work activities; KSG Student with Mayor’s Office • 27 departments were interviewed; 107 programs (functional areas) were identified; and 460 activities under programs were identified; • Activity maps were prepared in Excel and then imported into an Access database, from which the final 143-page budget document was printed; • In FY07, a third class of students worked with SomerStat to revise the budget.

9. CONVERSION PROCESS: Step 1: Reviewed Line Item Budget

10. CONVERSION PROCESS: Steps 2&3: Identified Programs & Activities Programs Activities

11. CONVERSION PROCESS: Step 4 – Allocated Resources to Programs From % allocations, derived spending on each program

12. CONVERSION PROCESS: Step 5 – Set Efficiency & Effectiveness Measures • Efficiency of Street Sweeping Program • Inputs to outputs – cost per unit • Cost per ton of debris removed • Outputs to inputs – productivity • Tons of debris removed per employee

13. Components: CONVERSION PROCESS: Example - IT’s Phone & Computer Support Program Output Program Cost Program FTEs Cost per Program Output Program Outcomes Program Goals Activity Descriptions and Outputs

14. CONVERSION PROCESS: Narrative Example

15. BUDGET & PERFORMANCE MANAGEMENT: Summary The budget is one piece of a set of City performance management tools that allow for very regular monitoring of issues and goals and for problem-solving.

16. BUDGET & PERFORMANCE MANAGEMENT: SomerStat SOMERSTAT MEETINGS PROGRAM: CURRENT Traffic & Parking 9/23/04 (monthly) Public Works 9/29/04 (bi-weekly) Police 10/21/04 (bi-weekly) Fire 10/27/04 (monthly) IT 11/4/04 (monthly) Personnel 11/9/04 (monthly) Environmental 3/31/05 (monthly) 311 4/28/05 (monthly) Youth & Rec 7/27/05 (monthly) Library 9/14/05 (bi-monthly) Health 9/27/05 (monthly) Inspectional Services 10/5/05 (monthly) Capital Projects5/9/06 (monthly) SPCD9/15/2006 (weekly) Current departments’ budgets account for 93% of the City’s operational budget.

17. BUDGET & PERFORMANCE MANAGEMENT: SomerStat SomerStat reviews the budget activity analysis in meetings.

18. But SomerStat also reviews many other data sources and carries out more in-depth data analysis on all finance and operational topics. BUDGET & PERFORMANCE MANAGEMENT: SomerStat

19. Surveys test the quality of service for internal and external customers. Data gets used in the budget and in SomerStat meetings. 2007 Citizen Survey Question Examples BUDGET & PERFORMANCE MANAGEMENT: Surveys 2005 Staff Survey Responses for Sample Department, Sorted by Difference in % Agree Relative to Citywide Totals

20. 311 keeps track of both emerging constituent issues and chronic operational problems. Data get assessed in SomerStat meetings and reported weekly to employees. BUDGET & PERFORMANCE MANAGEMENT: 311 T&P Health DPW Mayor Police City Clerk Auditing

21. Somerville is now launching a mystery shopper program and will host regular, neighborhood-based ResiStat meetings to solicit resident input on City service delivery and quality of life. BUDGET & PERFORMANCE MANAGEMENT: Mystery Shoppers

22. KEY BENEFIT: Budget Hearings At the City’s budget hearings, the quality of discussion was significantly improved by second year of budget. Also, departments presented the highlights of their prior year’s SomerStat meetings.

23. The budget is a work in progress – with constant refinement. Next steps include: POSSIBLE NEXT STEPS 1. Allocate central support (IT, Finance, Personnel, DPW, etc.) costs to all programs. Full costing requires direct and indirect costs. 2. Improve data collection and maintenance. Budget relies heavily on information and we need means and sources to collect data. 3. Improve cost accounting systems. We need to link data systems that track service delivery to financial systems, so as to charge hours worked to programs and activities. 4. Compare data over time. Historical program efficiency is measured by comparing the cost per unit of service over time against historical unit costs. 5. Benchmark with other municipalities. There is a lack of readily available data comparing service standards between municipalities.

24. We hope for the creation of a regional data sharing system to support benchmarking, as exists in North Carolina Benchmarking Project: (see http://www.sog.unc.edu/programs/perfmeas/measures.html) POSSIBLE NEXT STEPS

25. RESOURCES • Feel free to use our databases and templates and/or customize them… just ask! • Also, feel free to visit a SomerStat meeting and tour 311 • Contact: • Edward Bean, Finance Director, 617-625-6600 (3210), ebean@ci.somerville.ma.us