Budgets

A budget is a financial plan outlining the projected revenues and expenditures of an entity.  The budget allows an organization to be fiscally responsible and prioritize their available resources in an effective and transparent manner.  Most public service leaders are responsible for a budget on some level whether it be the creation of the budget or the maintenance of the adopted budget.  Understanding the way your organization’s budget is created and maintained ensures that you can advocate for your department and the resources they need to fill their roll within the organization.

Learning Objective

To become familiar with how to create a budget, the different approaches to creating a budget, and to highlight the fiscal responsibilities of public managers.  Additionally, how to effectively communicate the budget and budgetary needs to the appropriate stakeholders.

Types of Budgets

  • Object Line (Line Item) Budgeting
    • Object line or line-item budgeting is a traditional and one of the simplest forms of public budgeting. Categories of expenses are listed line by line with the allocated expenditures.
      • Pros: Most simplistic method of budgeting, easy to track spending on line items, and allows for easy comparison of previous years
      • Cons: Limits flexibility of spending and may encourage spending money unnecessarily so that funding is not lost
  • Program Budgeting
    • Program budgeting focuses on specific programs or activities that an organization is trying to address.  This type of budget is designed to be focused on the priorities of the organization and outline costs of these programs.
      • Pros: Increased transparency and accountability by identifying where and how funds are being allocated
      • Cons: Defining programs and their boundaries can be a challenge due to different perspectives surrounding the scope of a program
  • Outcome Based Budgeting
    • Outcome-based budgeting is focused on the desired goals or results that an organization desires to accomplish.  The desired results are decided, and the budget is designed to ensure that outcome is met.
      • Pros: Increased accountability by linking resources directly to measurable outcomes, and can allow for more informed choices about resource allocation
      • Cons: Increased complexity in developing, and defining clear and measurable outcomes
  • Performance Budgeting
    • Performance-based budgeting focuses on the efficiency and effectiveness of an organization’s operations.  Certain benchmarks in performance are decided and prioritized to encourage being efficient and cost-effective.
      • Pros: Emphasizes the efficiency of programs, and can increase transparency of resource allocation
      • Cons: Increased complexity in creating the budget and certain metrics can be challenging to quantify or measure
  • Zero-Based Budgeting
    • Zero-based budgeting requires that all expenses are justified and approved for each new budget period.  This assumes the budget starts with a clean slate and must be created from scratch to be sure that all expenditures for the next budget cycle are required.
      • Pros: Allows for more flexibility, and accountability between years since all expenses are analyzed each year and require justification
      • Cons: Requires more time and can be more complex to determine accurate needs and costs

Required Internal Standard Operating Procedures (SOPs)

  • Budget Requests
    • Policies and procedures should be developed and known regarding how employees and managers are able to submit budget requests at various stages of the budget cycle so employees can provide their services to the public they need to have their required resources available and will need to know the correct way to communicate those needs within your organization.  Having clearly-defined policies and procedures will ensure they will be able to communicate their requests.
  • Budget Creation and Approval Process
    • The process your organization establishes to create and approve the annual budget should be clear and transparent within your organization and for your constituents.  This ensures the public’s trust in the organization.
  • Accountability and Checks and Balances
    • Your organization should ensure that there are processes and policies set in place to ensure there are checks and balances throughout the organization regarding the budget and all financial matters.  This includes making sure no one individual has too much authority over expenditures, and that there are adequate auditing processes implemented and enforced.
    • Failing to establish and enforce these policies can leave the organization open to financial liabilities, the potential for fraud, and the loss of public trust.

Fiscally Responsible

  • Balanced Budget
  • Responsible allocation of resources
  • The public trusts the organization to allocate resources for the best interests of the community.  To maintain this trust, it is important that public resources are allocated in such a way to minimize or eliminate waste and are only allocated for official business.

Presenting Budget Summaries

  • Know your audience: It is important to create presentations that are tailored for the audience they are intended for. 
    • Do they want a lot of detail, or just the highlights?  A group of elected officials may want to know the details, while a citizen may want to know more general information.
    • All relevant and important information should be presented so that it is clear and easy to identify. 
    • Know what communication median may be most effective for your audience.  Does your audience want a lot of detail, or do they want to know just the highlights?
  • Be clear in your communication:
    • Relevant and important information should be clear and easy to identify.
    • The information and graphs should be properly labeled and not open to misinterpretation.

Grants

  • Finding a Grant
    • League of Wisconsin Municipalities has useful information regarding grant opportunities and resources (https://www.lwm-info.org/1655/Grants).
    • You can also search online for other private, non-profit, and public organizations that offer grants.
  • Writing a Grant Proposal
    • Tips for writing a grant proposal – donorbox.org
      • Be prepared: Be sure that the grant you are applying for is correct for this project and your organization.  Know the requirements of the grant and any important dates or deadlines.
      • Don’t be generic: Make sure that you tailor your proposal to the organization giving the grant.  Make sure that your request is in line with their mission.
    • General format of a grant proposal – (https://writing.wisc.edu/handbook/assignments/grants-2/)
      • Short overview: A Short abstract or summary of the project and your organization.
      • Examination of a need or problem: Statement of the need, the reason and any supporting data as applicable.
      • Description of your project: The details of the project, including goals, outcomes, timeline, and metrics that will be used to determine success.
      • Budget: The amount of money requested and how the funding will be allocated.
      • Other sections as required:
        • Cover Letter
        • Organization Qualifications
        • Supporting Documents
  • Reporting on Grant Objectives
    • Once you receive a grant it is important to keep track of performance metrics so that the success of the funded program can be determined.
    • Additionally, to ensure accountability that the grant money was used for the intended cause, it is important to keep clear documentation noting where the grant funding was allocated.  Be sure that you understand any limitations or restrictions placed on the grant money received.

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