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Local Government Budgeting: Linking Your Budget and Strategy

In a time of unprecedented uncertainty, it’s more important than ever before to link your budget to your strategy. With strategy linked to budget, you can focus on what is critical and leverage the budget process to get stuff done.

Ted, Founder and Managing Partner at ClearPoint, has over 25 years of experience working with organizations to improve their performance management and strategy execution processes.

 

Does your organization grow weary of an eight-month long budgeting process? Does the budgeting process help your organization find value, or is everyone just recycling budget requests from previous years? By tying budget to strategy, you can help staff better understand how decisions are made and create connections to the big picture as you work toward shared goals.

Local Government Budgeting Process

No matter what approach you take to budgeting, you have an opportunity to link it to strategy to help people see the value in your budget development process. When you link budget to strategy, you can stop dreading the budget process and instead, get inspired by budgeting!

With regular management and meetings, a linked budget and strategy allows your organization to achieve its long-term priorities. In 2020, we conducted a survey amongst local governments to learn more about their budget and strategy alignment, reporting, and results. The insights shared show the positive impact of close alignment between budget and strategy as well as consistent, regular reporting processes.

Download the whitepaper for full survey results and case studies featuring the budget process of three local governments. 

Here's how to align strategy and budget in your organization:

  1. Start by clearly defining long term goals (the first step in building your strategic plan).
  2. Define the budgeting process. Four options for approaching your budget:
    1. Priority-based budgeting (PBB)
    2. Zero-based budgeting (ZBB)
    3. Budgeting for outcomes (BFO)
    4. Base budgeting
  3. Communicate strategy and budgeting process clearly to departments.
    1. Ensure department budgets link to strategy
  4. Compare previous budget to plans (not to continue previous budgeting process, but to check your assumptions).
  5. Consider creating a StratEx budget.
    1. This is a separate part of the bigger budget
    2. This type of budget is cross-departmental and designates strategic project funding
  6. Manage your budget within a strategy management cadence.
    1. Be aware of strategy reporting, strategy decision making, etc.
    2. Adapt and change at appropriate times (revisit budgets after strategy meetings).
    3. Provide appropriate reporting for decision making.

A tool like ClearPoint can really help

ClearPoint can serve as the central hub for all data and information about your budget and strategy. Our Data Loader tool allows you to import budget data from a variety of systems and can update your data live in ClearPoint from your existing data sources automatically. (Plus, we’ll help you get it all set up. From there, it’ll run automatically.)

With your data loaded in the tool, you can easily update all departments on their progress and aggregate up to show budget and strategy across the organization. (And with our permissioning features, you can ensure each user and department only accesses the information relevant to their particular priorities and needs).

You can also bring qualitative and quantitative information side by side to tell a story about the progress of your strategy and updates to your budget, plus chart budget performance against an average of previous years to see how you’re doing over time.

See ClearPoint Live

Linking Your Budget to Long-Term Goals

Just like your strategy, your budget needs to be linked to your long-term goals. Once you’ve developed those long term goals, you can start to build your 3-5 year strategic plan and a 1-2 year associated budget.

When building your strategic plan, it’s important to involve your stakeholders, including staff and residents. It’s also important to set bold, but realistic goals that take into account your organization’s strengths and weaknesses.

When creating the plan, ensuring alignment between departments and the overall strategy is critical. Each department should support the overall strategy, and departmental plans that tie departmental efforts to organizational strategic goals can make this alignment clear.

Different budgeting processes make linking budget to long-term goals easy. Any of the below approaches to budgeting can link to your strategic plan. One size does not have to fit all; however, some are more comfortable fits depending on your organization.

Four Types of Local Government Budgeting

Different budgeting processes make it easy to link your budget to your long-term goals.

List of definitions of various budget terms

Priority-based budgeting

Priority-based budgeting (PBB) involves linking budget priorities to your strategic plan goals. PBB is driven by the idea that the initiatives and programs that support an organization’s priorities are those that should be funded by the budget. This data driven approach ensures that all funding dollars help the organization work toward its high-level goals and that program budgets are allocated based on true priorities.

The great thing is that if you have done a good job communicating your strategy, and if you have a living strategic plan, your organization should already understand these goals, and thus priority-based budgeting is a natural outcome.

Zero-based budgeting

If you are using zero-based budgeting (ZBB), you take a similar approach—building your budget from the ground up based on the priorities. However, with zero-based budgets, you don’t build off of last year’s budget; you start from zero, and then build from what you need. This might be a great approach for the current environment. (Curious why I think so?)

Zero-based budgeting helps to establish an organizational culture of ongoing cost management. It relies on increased visibility into what drives the costs of each budget item and requires setting aggressive budget targets going forward to ensure a balanced budget. In addition, continuous reviews of cost management and performance are crucial to its success.

Budgeting for outcomes

Budgeting for outcomes (BFO) is similar to priority-based budgeting, but it focuses on outcomes the organization is working towards rather than priorities. Imagine your outcomes are either your strategic plan goals or the measurable results from your strategic plan. Budgeting for outcomes allows local governments to create alignment between what the public wants and what the governments provide.

A key tenet of budgeting for outcomes is a focus on what you want and how much you’re willing to pay for it (as opposed to assessing what you currently have and how much it costs). The process will demand a lot of reorganizing, but your strategy and budget will benefit as a result.

A great place to start with budgeting for outcomes is looking at how much funding you have and then ranking your goals based on priority. You can then allocate money to the outcomes with the highest priority and continue distributing money until the funds are spent.

Base budgeting

Base budgeting uses the current year’s budget as the baseline for the new budget. The current year’s budget and allocations are adjusted according to actual spending that has occurred throughout the year as well as inflation and projections for the upcoming year; this forms the basis of the new budget.

Are you starting to see a pattern in these budgeting approaches? We’re not saying they are the same; certainly, different organizations have seen different results and benefits from each. But with a little creative thinking, you should be able to guide your organization to linking its budgeting approach to the strategy management process.

Budgeting FAQs






When done correctly, budget planning has many benefits for a local government and it’s community. By engaging residents and sharing progress, local governments increase transparency and trust. Multi-year plans help to ensure decision-making is long term and by tieing budgets to goals, they can be shifted as priorities shift.
It’s important to communicate your local government’s budget objectives, as well as the budget performance throughout the year. There are many ways to share your budget both internally and externally including with budget books, press releases, presentations and via social media. When sharing your budget, you may want to consider also sharing the overall progress of the goals your budget is tied to with a performance management tool or dashboard.
Budgeting decisions directly affect residents and the places that they live and work. To ensure support of the strategic plan and budget, regardless of the types of budget that you are preparing, engage your residents in advance through surveys, open houses, forums and panels. Many organizations also provide a place online where residents can review the budget priorities and performance and provide feedback.

Ways to engage residents in the process include: Open houses Citizen academies Focused discussion sessions Needs surveys The annual budget directly affects where citizens live and work, and should be influenced by their needs and concerns.

The budget preparation process varies by organization and the budget format that your organization uses. All budgeting processes should start by defining your organization’s high-level goals. Typically, this is when you want to get feedback and input from internal stakeholders (like your City Manager and Department Directors) and external stakeholders (like residents and local businesses). Then, you’ll need to choose which budget process you’re going to use and educate all members of your budget office on the process. You’ll also need to ensure you have a process for departments to submit budget requests both during and after the annual budget process.

Once you’ve received feedback and all requests, you’ll need to balance the budget and allocate funds appropriately. Throughout the year, provide updates to stakeholders and don’t forget to provide annual reports at the end of each year.

Local Government Budgeting: Linking Your Budget and Strategy
 

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