Performance Based Budgeting is perhaps the most essential Outcome Management tool used by the City
The Performance Based Budget (PBB) is a customer based, performance driven, results oriented budget system based on Outcome Management. Outcome Management is a management approach that focuses on the results achieved by providing a service.
The first step to outcome management is to identify the desired results or outcomes that align with the purpose of the organization and meet the needs of the customers:
What is it the customer wants?
How do we best deliver what the customer wants once we have identified their desires?
How do we know whether we have met their desired results or outcomes?
Performance Based Budgeting is characterized by explicitly focusing on the outcomes, as well as evaluation of programs by measuring the relationship between resources and results. It therefore helps assess performance of a program in terms of its effectiveness and efficiency. Enhanced efficiency provides savings that can be reallocated to enhance program delivery or add new services.
Performance Based Budgeting allocates resources based on service performance
Unlike the traditional line-item budget system that allocates resources based on organizational units and line item expenses, Performance Based Budgeting allocates resources based on service performance; both planned and actual performance are measured in terms of service effectiveness and efficiency.
Rather than attaching budgets to specific items of expense (line item budgeting), budgets are tied to overall program outcomes.
Funds can be shifted by the program manager to those areas that provide the greatest return toward meeting the desired outcomes. This flexibility allows responsiveness to changing service needs or unanticipated demands.
By means of linking resource allocation to service performance, the Performance Based Budget sets forth, in measurable terms, all the services to be provided by the City and at what level they are to be provided. The Performance Based Budget is therefore not only a budget document, it is an important policy document of the City.
With this much needed information, the budgetary system is capable of providing a data driven mechanism to direct government decisions or actions to prioritize services and allocate funding on the basis of in-depth programmatic and financial analysis.
PBB supports government accountability in the allocation of limited resources.
The process ensures that government decisions are carefully made on the basis of in-depth programmatic and financial analysis. It tells service deliverers, customers, and policy makers what they get for their money. It demonstrates results by clarifying what constitutes program success.
Performance Based Budgeting is another tool that makes program planning more effective. It helps the City establish and clarify expectations for the results to be accomplished and provides more flexibility for the City to meet goals and objectives over a period of time.
Performance Based Budget Implementation
Performance Based Budget is applied to all City programs. Programs are defined within each organizational department and generally tie similar services together under one program manager.
Each program has a budget. A completed program budget presents the purpose and objectives for which funds are required, the costs of the programs proposed for achieving these objectives, and quantitative data measuring the accomplishments and work performance.
The budgeting process starts with individual service programs using the following structure:
Program Outcomes define the desired effects of the activities and are broad statements of a program's purpose (e.g. “To prolong roadway life by maintaining and repairing streets” or “To increase safety in the community by providing police patrol, traffic enforcement and other field operations”)
Program Objectives describe the program outcomes and their intended impact in measurable terms and define how well a program is meeting its desired outcomes (e.g. “So that street reconstructs are necessary on fewer than 2% of the City’s street miles per year” or “So that crime rates for serious crimes in Concord are in the lowest quartile when compared to cities of comparable size”)
Performance Indicators measure the effectiveness in reaching a program objective by describing an aspect of the impacts of the service, establishing a qualitative service level, and then tracking progress toward meeting that service level (e.g. “Actual reported Index Crimes is within the lowest 25% of California Cities over 100,000 population)
Task/Activities measure outputs (units) of the program objective and how efficiently they are produced (e.g. “Unit Cost” or “Units/Hour”)
Data relating to performance and cost are collected and reported on a monthly basis; comparing actual performance and cost with planned performance and costs. The Monthly Budget Reports help track progress, so the program manager can make adjustments accordingly.
By the end of the fiscal year, a Year-End Report is prepared by the manager that analyzes the cost and performance of the program in accomplishing its planned outcomes.
From a programmatic perspective, by reviewing regularly the performance data, it is possible to understand service trends and to be able to identify changes quickly. The data alerts program managers which parts of the program are doing well and which need improvement. Therefore, program managers can make use of the data to help identify potential problems and take timely corrective actions.
Program managers and their team revisit the goals and outcomes of the program regularly. Revisiting helps improve the services provided to residents, enhance desirable outcomes, and ensure the outcomes are still aligned with the organization and service demands.
Performance data also serves to communicate program success and service levels to the public by providing a measurable indication of progress toward desired public goals. This can prove useful when developing support for a particular program improvement, both internally and in the community.