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Weekly UpdatesIntegrating Performance and Budgets:The Budget Orifice of Tomorrow
Jonathan D. Breul and Carl Moravitz, Editors
Rowman & Littlefield Publishers, Inc.
www.rowmanlittlefield.com
2007
233 pages (paperback)
List price: $32.95 (paperback), $79.95 (hardcover)
Allocation of scarce resources to competing objectives has always been a daunting task. In today's world, governments are increasingly incorporating strategic processes into their operations to increase the efficient allocation of resources and to provide evidence of results. Integrating Performance and Budgets: The Budget Office of Tomorrow from the IBM Center for the Business of Government sets out to resolve some of the challenges surrounding performance budgeting by offering tips on successful integration of performance information into the budgeting process. The volume is organized into five chapters exploring topics of past, current, and future budget processes and ways in which performance and cost information can be incorporated into the culture of budget officials.
Jonathan Breul and Carl Moravitz begin the book by outlining the history of the budgeting process and how this process has been influenced by a series of congressional proposals and amendments to federal budget guidelines. The Government Performance and Results Act (GPRA) and the Program Assessment Rating Tool (PART) are two initiatives designed to improve government accountability and encourage government organizations to integrate performance measurement into the budgeting process. The authors illustrate how various governments have been able to link their budgets to program costs and performance, at the same time acknowledging that no single approach exists, and discuss the role of new technologies in successful performance budgeting. Standardizing, simplifying, and automating processes, as well as adopting common data standards emerge as several facilitating policies that high-performance organizations have been pursuing in their quest to create a more direct link between budget allocations and program performance.
In the second chapter, Philip Joyce presents a description of the budgeting process--from preparation to approval, execution, and evaluation--using the federal government as an example and discusses how officials can transition to performance budgeting at each of these stages. Dr. Joyce identifies potential sources and types of performance information useful to the budgeting process and suggests the best purposes and users for such information. The chapter concludes with a summary of key findings and recommendations for facilitating the transition to performance budgeting, emphasizing that although performance initiatives have progressed substantially, technological and motivational impediments to the use of performance information in the budgeting process continue to pose a great challenge to government officials.
In the next chapter, Julia Melkers and Katherine Willoughby describe the use of performance measures in the budget process at the state level. The authors follow up their previous study exploring the use of performance measures in state governments, carried out in 1998, to determine how the government performance initiative has progressed. They find that although performance measurement remains limited in the budgeting process, it has been incorporated more frequently into management processes, leading to notable enhancements in communication and information dissemination. Additional analysis reveals that leadership support, maturity of performance measurements, and intensity of measurement use are some of the most critical factors in sustaining a successful performance-based system.
The next section provides a glimpse into performance measurement initiatives made at an international level. Burt Perrin compiles experiences and suggestions of current and former government officials from developed and developing countries in initiating an outcomes-based (as opposed to outputs-based) approach to analyzing results. These experiences turn out to very widely and largely depend on the political and economic situation prevailing in a nation. Nevertheless, all participants agree that analyzing outcomes of a program provides a more meaningful interpretation of progress than its more simple outputs analogue, particularly from a citizen's viewpoint. A long-term vision, communication and feedback, availability of training, appropriately aligned incentives, and transparency play a big role in successful implementation of outcome measures; and in the presence of risk and uncertainty, particularly in developing nations, success has been achieved through flexible implementation approaches and extensive use of pilot programs for various government initiatives.
Lloyd Blanchard concludes the volume with a discussion of costs. Professor Blanchard argues that a link between a program's full cost and performance is essential for accurate budget decisions. Most budgets are allocated based on direct, rather than full costs of program, and therefore fail to account for a potentially large portion of expenditures. The author offers two suggestions to correct for this lack of accountability: prorated cost allocation and activity-based costing. Under the first method, an organization assigns a portion of indirect costs (such as overhead, HR management, and facility management costs) to a specific program based on the number of cost drivers (such as number of employees, square feet, or buildings) employed by that program. In the latter case, the organization seeks a cause-and-effect link, assigning proportionate costs directly to activities that lead to these costs. The author concludes with a set of recommendations for agencies interested in developing their own appropriate cost allocation method that would improve the performance budgeting process.
As a rather dense collection of free-standing reports written by different authors, there are obvious disconnects and redundancies from one chapter to the next. Although this book certainly touches on many different aspects of performance/ budgeting integration, it carries more value as an encyclopedic text than as a comprehensive volume on the topic of performance budgeting. Nonetheless, even though the volume in its entirety does not seem to be intended for the same audience on a practitioner level, each chapter individually provides useful information to officials at various levels of government, facing a specific set of problems, and may provide a valuable frame of reference to government consultants.
ANASTASIA SHCHERBAKOVA is an intern in the GFOA's Research and Consulting Center in Chicago, Illinois. She is pursuing her Ph.D. in public policy at the University of Chicago.
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