Smart Budgeting: Integrating Financial and Strategic Planning for Outcomes
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A new report from the New Local Government Network in association with the ACCA and Mazars recommends radical changes to the way local government approaches the budgeting process.
As councils are increasingly focused not on outputs but outcomes, traditional incremental budgeting – which reflects the siloes that were built up in the 20th century – no longer properly reflects the strategies and needs of councils and local residents.
Councils should instead adopt “smarter” approaches to budgeting which make sure the strategic value of every pound goes towards meeting outcomes. They should no longer simply follow the patterns of past spending based on previous spending in individual departmental siloes.
This involves adopting practices such as shifting the focus to outcomes, using and integrating both financial and non-financial evidence, and integrating long term planning for prevention into the budget process.
An essential part of this is ensuring that councillors, officers and residents are engaged throughout the budgeting process so that outcomes are both robust and fully understood.
NLGN’s survey shows that there is a clear appetite for this. Over 80% of the councils surveyed were open to new approaches to budgeting and around half thought using a different budget process would improve outcomes for their communities.
Director of NLGN Simon Parker said:
“Many councils have come on in leaps and bounds when thinking strategically about their planning processes. Now it is time for the way they manage their finances to follow suit. Working in a way that fully integrates an outcomes based approach throughout the financial planning for local authorities is the missing piece of the puzzle towards developing robust 21st century places.”
Gillian Fawcett, Head of Public Sector at ACCA said:
“This report offers fresh insights on how budgeting practices should and can develop across councils. An incremental budgeting approach, using last year’s budget as a starting point and simply ‘slicing the salami’ is not good enough. The danger is that there will be no salami left to slice if new and innovative budgeting approaches are not adopted by councils. Whilst the report finds the challenge for local authorities is to be braver, it also highlights a challenge for central government to provide increased clarity and certainty around funding allocations.”
Gareth Davies, Partner and Head of Public Services at Mazars, said
“Many councils have already delivered unprecedented reductions in their spending whilst managing the impact on their communities. This report provides valuable evidence to support them in making the further reductions made necessary by continuing cuts in central funding.”