Perhaps one of the most important policy decisions a governing body considers each year is the approval of the annual operating and capital budget. Equally important; however, is the process of developing and preparing the budget for review and approval. The intricacies of budget development may vary from organization to organization; however, strategic planning should be the starting point in the process. We as finance professionals should never forget that strong budgets have their roots in strategic planning.
Strategic Planning – Why do it?
Strategic planning can be defined as a systematic process that helps you identify “why” your organization exists, “whom” it serves, what benefits it provides, and the “vision” of how citizens can best be served. Simply put, strategic planning is a tool your organization can use to determine where you are, where you want to be, and how to get there.
A well-developed strategic plan, at a minimum, should include a vision and mission statement as well as goals and objectives. A vision statement should convey what an organization is “striving” to be for “whom” they serve. The mission statement of an organization should communicate what is being done to serve constituents. Lastly, goals and objectives should be established in the strategic plan that are consistent with fulfilling an organization’s vision and mission. A goal is defined as a broad statement of what an organization expects to achieve, and an objective is a method to accomplish an established goal.
Often times, the most critical issues facing an organization emerge as budget priorities. These priorities should be defined among the organization’s goals. Defining your organization’s priorities (i.e., mobility and access, livability and comfort, safe and healthy community, etc.) among goals of the strategic plan is the first step to strategically allocating budgetary resources.
How does a strategic plan translate to the budget?
Once an organization has developed and adopted a strategic plan, it should “use” the plan. The greatest way to use the plan is to incorporate the plan as a part of the budget and decision making process. The strategic plan helps to set the parameters for the operating and capital budget; therefore, service units within an organization should focus on the goals and objectives identified within the strategic plan as budget requests are being prepared. Moreover, every budget request should tie back to strategies and initiatives to fulfill the goals and objectives defined in the strategic plan. Typically, those requests that do not support the strategic plan should not be funded.
Don’t forget to link performance. Performance measurement is a process for tracking an organization’s progress toward achieving its mission, goals and objectives. Budget/service units within an organization should develop and use performance measures to provide information on whether goals and objectives are being met. For example, if the goal is to save or change lives, find a way to measure that, not how many reports were written or calls were taken. Performance measures provide an important link between the goals and objectives stated in the strategic plan and activities funded in the budget.
Strategic planning provides direction in terms of focusing resources, measuring progress and ensuring that everyone is working towards the same vision and mission. In essence, it brings together government officials, managers, staff, and citizens. Remember, the strategic plan should be the starting point in a well-developed budget process.
Article written by:
John G. Hulsey, CGFM, CPFO
University of Georgia, Carl Vinson Institute of Government