On innovation in budgeting

“I’m on a mission to overthrow traditional budget processes used in 99% of organisations across the world. It’s a process set up to preserve the status quo.” The Director of the Office Of Budgeting in Baltimore City Council is a man on a mission, and whilst I wanted to applaud his words I was, I’ll admit, mildly sceptical about the odds of changing such an institutionally-entrenched system. For is there any more bureaucratic, professionalised and overly-complicated system than the annual budget cycle in a a public institution? One of the key themes from a recent conference on outcomes and impact has bene how people are trying to overcome the organisational inertia that makes change so hard, and nowhere has this been more clearly illustrated than in budget and resource allocation processes. 

This plays out in how different public sector agencies have responded to austerity and rapidly reducing budgets – not just in the UK but, judging from the stories here, globally. Common to this response is the seemingly ubiquitous ’salami slicing’ approach to budget reduction. Just take 15% off all budgets across the board. Of course, this is madness, as it impacts both successful and failing programmes the same. As Rep Diana Urban (Connecticut) was clear, the key is to equip decision-makers with the information needed to tell the difference between the two. Otherwise is this not an irrational approach? Surely all this is doing is abdicating the responsibility of making difficult decisions, in part because of a lack of a clear and transparent process, and in part because it allows decision-makers to say they were impartial and fair: “we treated all budget holders the same” or “everyone shared the pain”. 

What could a new approach look like? Much progress has been made in the US in particular, and the talks from Connecticut and Baltimore illustrated this. Traditional budgeting processes take as their starting point last year’s spend; funding targets are set on an agency by agency basis; agencies submissions set out how their allocation will actually be spent, and the debate in this process centres around what will be cut. This contrast sharply with the new approach being adopted in Baltimore in which next year’s goals are the starting point, funding targets are set by outcome, agencies set out how the work helps achieve the outcomes and the debate centres on what to keep. 

Such a clear and transparent process is notoriously difficult to achieve. Anyone working in the public sector will have tales of the difficulties of trying to align budgets and spend with the new political priorities and agenda of a new administration. “How much do we spend on service X?” is a naive yet pertinent question that can’t always be answered without prefacing with ‘it depends’. Hearing about 5-10 year journeys in Baltimore and Connecticut were inspiring in terms of what can be achieved and some of the barriers that need to be overcome. 

Yet shouldn’t local people be able to clearly understand what their tax dollars (or pounds) are being spent on? Opening up this process to third sector providers, agencies, staff mutuals and other services, and involving citizens in this process, not only makes the process transparent but begins to crowdsource ideas about ‘what works’ to change the agreed measures. I suspect that all too often the complex remains complex in part because simplifying things requires time and effort and in part because it means people need to be employed to find their way through the financial data; enter the vested interest as a central barrier to culture change. 

Yet when budgets and collective efforts are aligned around quality of life outcomes rather than services, it becomes possible to see the bigger picture and how areas outside your functional responsibility as a manager can actually help achieve a common outcome. There were many examples given of this, yet the one that sticks in my mind comes again from Connecticut. It turns out that 82% of animal cruelty cases were not acted upon or prosecuted, yet there is evidence that animal cruelty is often a pre-curser to harm against children (Sandy Hook). By utilising their data the Departments of Agriculture (DOA) and Children and Families (DCF) were able to better understand this link and establish a single reporting form used by both Departments (itself a minor miracle!). As a result in 2015 there were 65 cross reports which highlighted 9 cases that were about to be closed by the DOA and 8 cases that were not previously known to the DCF. Seventeen children were prevented from coming to harm, and the only cost was the design of a common form. Budgets are not an end in themselves, or a process to be endured and checked as ‘done’. They are a means to an end, especially when focused upon outcomes that matter to the people we serve. 

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