Fuel Good 2018: Performance-based Budgeting with Questica
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Learn how your organization can benefit by and become both more efficient and effective using a performance-based budgeting approach
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Fuel Good 2018: Performance-based Budgeting with Questica
- 2. #FUELGOOD18 YOUR PRESENTER Craig Ross Vice-President, Business Development Questica Inc.
- 3. #FUELGOOD18 1. Public Sector Budgeting Methodologies • Pros and Cons 2. Performance-based Budgeting (PBB) • Pros and Cons • Performance Indicators • Benchmarking and Examples 3. Bringing it all Together • Transitioning • Key Considerations • How Questica Can Help 4. Q&A AGENDA
- 5. #FUELGOOD18 Public Sector Budget Methodologies Incremental or Baseline Budgeting Zero-based Budgeting Participatory Budgeting Activity-based Budgeting Budgeting for Outcomes Performance-based Budgeting
- 6. #FUELGOOD18 Incremental/Baseline Budgeting • Organization’s budgets are based on last year’s budget framework • Only new revenue is allocated • Budget cuts are made as % of historical budget, typically across the board
- 7. #FUELGOOD18 Incremental or Baseline Budgeting Pros • Easy to implement • Less prep time • Budget stability Cons • Lack of previous year budget review • Limited in vision of value • No incentive to reduce costs
- 8. #FUELGOOD18 Zero-based Budgeting • Organizations start with a clean state every year • Must justify each expense • Focused on needs and benefits rather then history
- 9. #FUELGOOD18 Zero-based Budgeting Pros • Challenges the status quo • Adapts to changing circumstances and priorities • Detects over budgeting Cons • Difficult and time consuming • Requires expertise • Creates a sense of uncertainty
- 10. #FUELGOOD18 Participatory Budgeting • Community members identify spending priorities for the organization • Organization provides stakeholders with as much influence as possible • Community votes on proposals to fund
- 11. #FUELGOOD18 Participatory Budgeting Pros • Democratic • Strengthen relationship between community and governing body • Transparency and accountability Cons • Time for participation • Biased to more articulate groups • Areas of high level diversity • Lack of control
- 12. #FUELGOOD18 Activity-based Budgeting • Allocate financial resources to activities that see the greatest return (in the form of increased revenues) • Identify and fund high value activities, cut back on low value activities • Revenues generated are allocated directly to the unit responsible for the activity
- 13. #FUELGOOD18 Activity-Based Budgeting Pros • Units have direct control of activities • Creates incentives • Continued increase in revenue Cons • Requires time and resources • Logistically difficult for cross-department programs • Neglects non-revenue generating activities
- 14. #FUELGOOD18 Budgeting for Outcomes • Budgeting at the organization is based on prioritizing programs and services that are most important to the public • Uses performance measurement to evaluate if a program is producing results • Form of Performance-based Budgeting • Considered a best practice by GFOA
- 15. #FUELGOOD18 Budgeting for Outcomes Pros • Reflects stakeholder priorities • Efficient, transparent and innovative • Collaboration between departments Cons • Requires a lot of effort and time • Organization must undergo substantial change
- 17. #FUELGOOD18 Performance-based Budgeting • PBB’s goal is to improve efficiency and effectiveness of public expenditure, by linking the funding of public sector organizations to the results they deliver. Can also improve prioritization of expenditures. • Uses systematic performance information (i.e., indicators, evaluations, program costings, etc.) to make this connection. • PBB cannot begin until a system of performance measurement has been instituted.
- 18. #FUELGOOD18 PBB is a Management Tool • Performance budgets focus on missions, goals, and objectives to explain why money is being spent and provide a way to allocate resources to achieve specific results • PBB is intended to be a management tool for program improvement, not a “carrot and stick” methodology used to “punish” departments for not meeting goals
- 19. #FUELGOOD18 Performance-Based Budgeting Pros • Cost alignment to strategic objectives • Greater accountability and comprehensive view of each dept • Classification consistency • Increased transparency Cons • Requires specificity to operate efficiently • Time consuming to review and discuss • Assumes accurate and valid performance data • Different views of what’s important
- 20. #FUELGOOD18 Principles for PBB 1. Establish broad goals to guide government decision-making 2. Develop approaches to achieve goals 3. Develop a budget with approaches to achieve goals 4. Evaluate performance and make adjustments
- 21. #FUELGOOD18 Performance Indicators Be SMART • Specific • Measurable • Attainable • Relevant • Trackable Measurement Indicators • Inputs • Outputs • Efficiency • Service quality • Outcomes
- 22. #FUELGOOD18 Input Indicators • Cost (budgeted or actual) • Staff-year equivalents (SYE) • Full-time equivalents (FTE) • Direct labor hours (DLH) • Direct costs plus fringe benefits • Direct costs are those devoted to a particular service and include: o Personnel services o Operating expenses o Recovered costs o Capital equipment
- 23. #FUELGOOD18 Output Indicators • What was produced and/or provided • What services were delivered? • What volume was provided? • How many units of service? • Fire Dept. o Incidents responded to • Human Resources o Vacancies filled • School o # of enrollments • Library o New materials circulated o Charity o # of new donors
- 24. #FUELGOOD18 Efficiency Indicators • Inputs used per unit of output • Cost per unit where the input is money/dollars • Productivity where the input is staff hours • Fire Dept. o Cost per incident • School o Cost per student • Senior-based Services o Cost per client • Human Resources o Cost per vacancy filled o Association o Cost per member
- 25. #FUELGOOD18 Service Quality Indicators • Measures customer satisfaction, timeliness, and/or accuracy of a service o Customer surveys o Response logs o Error rates o Engagement rates o Attendance rates • Fire Dept. o Average response time • School o Parent satisfaction/engagement o Student attendance • Senior-based Services o Percent of clients satisfied with services provided • Human Resources o Satisfaction rate with vacancy processing • Association o Member satisfaction with service offerings
- 26. #FUELGOOD18 Outcome Indicators • Describe the benefit of the service to the customer • Describe what was changed or accomplished as a result of the service • How has the customer benefited? • Why is the customer better off? • What is the impact of the service? • Fire Dept. o Fire deaths per 10,000 population o Fire injuries per 10,000 population • School o Increase in graduation rates o Increase in test scores • Senior-based Services o Percent of clients who remain in the community after one year of service or information • Human Resources o Average recruitment time • Charity o Percentage of clients who benefited from service o # new research breakthroughs
- 27. #FUELGOOD18 Performance Management Model Inputs Outputs Outcomes What organization invests in: What organization does: Short-term Mid-term Long-term • Staff • Volunteers • Materials • Equipment • Technology • Research • Planning • Outreach • Workshops • Inspections • Awareness • Knowledge • Attitudes • Skills • Behavior • Decisions • Policies • Conditions • Environment • Social • Economic • Civic
- 28. #FUELGOOD18 Performance Management Examples Goals Inputs Activities Outputs Outcomes Performance Goals of Program(s) Resources Work Processes Work Produced Results & Impacts Measurement • Provide quality services or offerings • Maintain or improve performance • Provide cost- effective services • Retain members and donors • Funding • Facilities • Equipment • Technology • Supplies • Staffing • Maintaining roads or schools • Addressing inquiries • Performing inspections • Aiding emergency requests • Courses developed • Services developed • Statistical measurements • Repairs (amount/type) • Students enrolled • Licenses renewed • Fires suppressed • Arrests made • Positions filled • Courses taken • Research completed • Services provided • 90% satisfaction rating • 95% error free • 90% engagement or attendance rates • Services delivered within +/1 2% of comparable i.e., wait time, volume, etc. • Surveys, focus groups, etc. • Usage, retention, statistics, rates and averages for each specific activity • Cost comparisons • Quarterly, annual reporting
- 29. #FUELGOOD18 Types of Benchmarking Internal External Operational Strategic Commonly one year compared to a previous year’s performance Organization compared to another similar organization’s performance Organization’s recent annual or periodic performance Long term performance • Overall spending • Growth in tax base • Growth in income • Growth in funding • Private sector wages • Neighboring cities or school districts • Similar organizations • Most common measures • Current vs past performance for specific activity/service • Student graduation rates • Higher student test scores • Percentage growth over time • Member retention • Spending per $1,000 property assessment • Other specific services standards or adjustments for inflation EXAMPLE Service Area Objective Input Output Efficiency Service Quality Outcome School Maintenance 5% $1,374,500 4 4.7% 75% 7% Capital Facilities Costs within 5 percent of budgeted costs Budget/actual costs Staff Projects completed Engineering design cost as a percent of total project cost Percent of projects completed on time Contract cost growth (%)
- 30. #FUELGOOD18 PBB: Organization Excuses 1. We’re funded by state/federal, so it doesn’t matter what we do. 2. We don’t know what performance looks like yet since we just reorganized. 3. We’ve always done it this way, everything is just fine as it is. 4. We’re too busy getting REAL work done to bother with this. 5. We need more staff, more money, more time, more (fill in the blank) to do this. 6. We can’t target outcomes; they’re too specific. 7. We can’t measure what we do. 8. You’ll misinterpret any information we give you. 9. We can’t be accountable because we have no control over anything. 10. We’re different. This shouldn’t apply to us. We need an exemption.
- 32. #FUELGOOD18 Transitioning to Performance-based Budgeting Until a performance measurement system can be fully implemented, an interim solution may help set the groundwork: • An explanation of the department’s overall goals • An explanation of what the department has accomplished in the past year • An explanation of what the department intends to accomplish in the coming year • An explanation as to what is different from last year in the proposed budget and why • A compliant budget showing past year budget expenditures
- 33. #FUELGOOD18 Key Considerations • Manage accuracy by developing meaningful, valid and reliable performance indicators • Establish the link between resources and results early and maintain that link through budget development, appropriation, and budget control processes
- 34. #FUELGOOD18 How Questica Can Help • Comprehensive budgeting and performance software • Transparency and data visualization software
- 35. #FUELGOOD18 How Questica Can Help • Comprehensive budgeting and performance software Questica.com/Budget
- 36. #FUELGOOD18 Questica OpenBook • Data visualization software is key to building transparency and trust • Sharing financial and non-financial data visually with interactive charts, tables, graphics with descriptive text and informational pop-ups • Share with your organization’s internal or external shareholders with search, sort and filter options • Integrates seamlessly with Questica Budget Demo sample visualizations at questica.com/openbook
- 37. #FUELGOOD18 Questica OpenBook Demo sample visualizations at Open School
- 38. #FUELGOOD18 Q&A
- 39. #FUELGOOD18 THANKS! Craig Ross cross@questica.com 1.877.707.7755 x 513 All presentations will be made available after the conference.
- 40. #FUELGOOD18 Please take 5mins to fill out your session evaluations One lucky winner will win an Amazon Echo!
- 41. #FUELGOOD18 www.sparkrock.com @sparkrockinc Nonprofit, Human Services & K12 software to help you serve more people, with less effort, stress & expense.
Editor's Notes
- There’s an element of performance involved in that you are measuring “cost per activity”. This is a more conceptual methodology rather than how the budget is structured (for example. Division > Dept > CC or Program > Services). Activities – departments generating tuition, fees, etc.
- Have this slide up as people exit the room.