Using Technology to Rethink the Budgeting Process in the Public Sector | OnActuate
 In Finance, Public Sector, Trending Insights

Local governments are tasked with one of the most important decision-making activities – defining the budget. The budget defines how limited funds will be allocated and utilized for the fiscal year. The complicated process involves many stakeholders, all making a case to either retain their current level of funding as last year or try to increase their funding for next year. Budget cuts can negatively affect their future goals and stretch their staff thin. Constituents are looking for funding to be allocated to alleviate local issues such as homelessness, increasing crime rates, and infrastructure upgrades. When the budget is finalized and released to the public, many stakeholders are often left disappointed.

Traditional budgets

The traditional way of budgeting is defined by these common aspects:

  • Accountability: Individual line-items for each department breaking down every dollar spent on purchases and activities, which keep things simple and easy to control.
  • Predictability: Budgets often look at historical data on spending to determine how much to set for the following year. This makes the starting point of budgets predictable.
  • Flexibility: Although itemized spending is easy to track and enter in variances, it is often difficult to align budget spend with higher level societal and strategic goals. When reading through a budget, it is often difficult to see how the line-item spending is going to impact larger goals such as reducing homelessness.

Common Problems

Although there are benefits to the traditional method, this process causes common problems such as:

  • Conflict between departments: When the budget decision making process starts, each department is fighting for more funding and preventing a decrease in funding. This leads to a mentality where departments believe the only way to get more funding is when another department’s budget gets cut. There is little consideration to how jointly spending funds might result in the attainment of a larger goal. Coming from a place of scarcity makes the budgeting process more adversarial.
  • Unhappy Citizens: The traditional budgeting model doesn’t consider public sentiment. Citizens are usually left out in the dark during the process, only relying on rumors in the news and on social media of what may be cut. When the budget is finally revealed, not every citizen is happy with the final numbers which can lead to public push back.
  • Being unprepared: The budget is flexible to allow decision makers to be able to adapt. However, since it’s rooted in historical data instead of strategic planning for the future, governments are usually left scrambling to pool resources together when events such as a global pandemic, inflation or civil unrest causes policies and decisions to shift.

Solving the problems with technology

Having the right technology in place can help combat these common problems when it’s time to plan out the budget and allows you to take a different approach from the traditional methods of budgeting.

Departments working together for a common goal: Instead of having departments compete for increasing funding or fight for their budgets not to get cut, the right technology can help departments make sense of how funding is allocated. The organization can be purposeful in reviewing the larger strategic objectives of the community and work together to allocate funds to make a difference. Analytics and solid reporting tools can make this process easier.

Public Sector organizations should also consider investing in add-ons and solutions that can enhance cooperation between departments. For example, Microsoft Dynamics 365 Finance also offers CRM capabilities. This means the Finance department can utilize powerful software to keep finances and records in order, while the Communications/Marketing department can utilize the CRM side to send marketing emails, create marketing forms and schedule social media posts. Having technology that several departments can utilize can bring them together and demonstrate the positive results of their collaborative work.

Listen to citizens before finalizing the budget: The traditional method of budgeting relies on historical data to make decisions. Most of the time, the status quo is kept, and citizens who wanted changes in the budget are often left upset. After the budget is released, governments usually ask for input. Citizens express their concerns through letters or in-person to a panel, but typically nothing in the already released budget is changed.

A better approach is to ask for input first before finalizing the budget. Giving citizens the chance to bring up their concerns can help shape the budget for the year as governments now understand what most of their constituents want to address. Budgets can still use historical data as a starting point to understand how much funding is needed but then funding can be redistributed to the key areas that resulted from the public input. Investing in the right ERP technology can help track this data and ensure governments are focusing their efforts on the right areas.

Also, finding technology solutions that help build trust and accountability for the public sector is crucial. OnActuate’s Transparency Platform can keep the goodwill momentum stemming from the public input before finalizing the budget. The platform uses an online portal that citizens can access to find information, ensuring they can continue to see how the budget is being spent throughout the year. For example, citizens may like to see how much time and effort is being spent on snow removal or park maintenance. By refocusing the budget and finding the right technology that centers around the citizens first, public sector organizations ensure they are always serving the citizens.

Keep the flexibility and always be prepared: What the global pandemic has taught many public sector organizations and governments is that unexpected spending and redistribution of resources can throw the budget out of sync. Governments had to focus on keeping the economy going, while investing in healthcare to ensure citizens were safe. By having departments working together, while having technology that keeps everyone focused on the important issues at hand, the budget can always be prepared for any needed changes.

Access to records and information is easy when stored in the cloud and securely accessed by users. Changes can be seen in real-time, allowing for teams to quickly understand situations and know how to move forward.

Tying it all together

By rethinking the process of budgeting and refocusing the budget on the larger societal issues that face your communities instead of the status quo, public sector organizations can build a new approach in serving citizens. Investing in powerful cloud technology that brings all departments together, with solutions and add-ons that focus on the citizens first, not only builds better budgets but builds better-run public sector organizations.

Discover how the right technology can help your public sector organization succeed in its goals. Learn more about OnActuate and how we partner with public sector organizations on their digital transformations.