COMMUNICATE THE ADOPTED BUDGET

WHO IS THE BUDGET FOR?

An adopted budget must be communicated to the public, elected officials, and staff.

The overarching goal of communicating the budget is to provide stakeholders with confidence that local government is using money wisely as well as to build credibility and provide accountability. 

Most fundamentally, the budget transmits legally required information. The budget usually creates the government’s legal authority to tax and spend, so it is necessary to establish the dates that the budget covers, the components of the government the budget covers, and the dollar amounts appropriated. 

Though this information is necessary, it is likely not enough to give stakeholders confidence that wise decisions have been made with the public budget. Thus, a local government should economize on the time and energy used to report this information. That way, more time and energy are available to produce information that will increase stakeholders’ confidence. 

So, the question we must ask is: What information will be most cost-effective for giving stakeholders confidence that wise decisions have been made with the public budget? We can start by identifying the different stakeholders that must be communicated with. 

Internal to government is elected officials and staff. External to government is the public, though it may be helpful to divide the public into different categories. The general public requires a different communication strategy than the media or members of the public who take a special interest in what local government is doing. 

For internal stakeholders, the budget should communicate key strategic priorities and policies that are being funded by the budget. It should show the priorities and policies in a way that makes it possible to hold the local government accountable for following through on that plan. For example, if achieving strategic priorities depends on the successful implementation of several new programs, the budget should show the spending that has been allocated to those programs (not just the department they might be managed by) and the performance measures that show if the money is making an impact. 

Internal stakeholders will also need to know how much money has been allocated to the services that government provides and how much is available in the accounts and line items that managers are expected to manage. Do not include much of this information in budget communications to the public. Instead, include it in the computerized financial information system that management reports are generated from. 

Like internal stakeholders, external stakeholders will want to know that the public’s priorities are being addressed in a way that gives them confidence that public money is being used wisely. In some cases, the public may not benefit from the details that internal stakeholders need. As an example, let’s consider public safety, which is a priority for many communities. Breakdowns of spending by public safety programs might be less helpful than a presentation that puts spending on a scale that nonexperts can better relate to, like the cost per household or cost per person for public safety services. The budget should also show the impact that spending makes, keeping in mind scale and relevance to the consumer of this information. For example, total number of police officers would probably be less informative than the number of officers per capita and both those may not be as useful as the average response times to calls. This is not to say that the number of officers is not relevant to the public. For example, if the number of officers per capita in the jurisdiction is going up and so is the response time, then that might raise important questions about how well resources are being used.  

When it comes to spending, external stakeholders may be more interested in budget information by geographic area. For instance, people may be more interested in their neighborhood school than the entire school district. Or they may be more interested in their neighborhood than the entire city. Budget communications could help the public understand the budget’s implications for salient geographic areas within the jurisdiction. However, for some local governments, geographic differences in how resources are distributed will cut right to the heart of distributive justice in budgeting. Therefore, the budget process will need to be able to produce wise decisions about how to allocate resources between and across different geographic areas. In some cases, spreading resources evenly may be a good answer; in other cases, it may not.  

For some local governments, there may not be enough interest in different geographic areas to merit spending time and energy on this information. The budget officer will need to consider the audience and judge how important these geographic distinctions are. 

External stakeholders may also want information about revenues, particularly changes in tax rates or fees. Again, putting this information on a scale that is relatable to nonexpert readers can be helpful. The size of a property tax bill for the average home or average sales taxes paid per person could help. The public will be more interested in learning if they can expect their tax liability to remain stable.

The GFOA Budget Presentation Award program goes into more detail and provides examples of what budget communications might look like. 

GFOA’s Fiscal Fluency Challenge also provides examples of effective graphical presentations designed to communicate information to nonexperts.

GFOA'S DISTINGUISHED BUDGET PRESENTATION AWARD PROGRAM

The budget is a forward-looking document. Providing confidence to stakeholders that savvy and wise decisions have been made must include proving that past decisions were savvy and wise. 

Using an annual comprehensive financial report (ACFR) for reviewing past decisions might seem reasonable; however, there are several reasons why an ACFR is not appropriate for reviewing past budgets: 

  • The ACFR is focused solely on revenues and expenditures. A wise budget focuses on value. A lookback on budget decisions must go beyond what was spent and address if that spending was effective for achieving some public good. 
  • An important audience for the ACFR is participants in the market for local government debt. This audience is typically less interested in the budget. This means the ACFR includes a great deal of information that is of interest to participants in bond markets but of little interest to the public or elected officials. 
  • The basis of accounting used in the budget and ACFR may be different. Because the reconciliation of the two is a highly technical exercise, it may lead to more confusion than clarity.

Instead, communication of the adopted budget should include a lookback at the results of last year’s budget to give stakeholders confidence the local government is making wise and savvy budget decisions. The questions that a lookback should address include: 

  • Is the local government on a financially sustainable trajectory? This includes whether or not the government ran a deficit last year, but it also should address long-term strengths or risks that are not obvious from looking at annual budget results. 
  • Are adequate services being provided? This could focus on the extent to which the community’s highest priority needs are being met or progress being made—the extent to which local government spending is making the community better off—and the adequacy of the service baseline. 
  • What are the major changes from previous years? Trend data is more informative than a single year’s data. Topics for a trend analysis might include: 
  • Where is spending or revenue materially greater or less than in the past? 
  • Are there areas of spending or revenue that consistently and materially miss targets? 
  • What direction are reserves trending? Reserves are the accumulated surplus or deficits of past budgets. How does the reserve level compare to policy goals?  
  • How is performance trending on topics of enduring or special interest?  
  • Given the above, what are the important planned and unplanned changes in the budget? What goals do the planned changes serve? How is government adapting to the unplanned changes? 
  • Are taxes and fees stable? Are they a good value? Taxpayers/ratepayers do not like large, unexpected changes to their tax liabilities. The budget lookback can describe how well the local government did in keeping taxes and fees stable. Taxpayers/ratepayers also want good value for their money. The budget lookback can provide measures of value. 

The traditional budget lookback consists of comparing last year’s budget to actual spending. Though unjustified overspending of accounts is not desirable, this perspective is not enough to address most of the questions describe above. 

Finally, budget communications do not necessarily have to be written. Communications could be audio, visual, graphical, or written, depending on which medium will be most effective for the audience and the message.