Performance-Based Budgeting: The Devil is in the Detail
A note of caution for court managers: There is today a consensus that a court’s performance measures should provide critical information for developing and justifying budgets. The need and rationale for performance-based budgeting are not in dispute. However, there are serious concerns about how it can be done.
Need and Rationale Are Indisputable
Budgeting is a rational and systematic way of estimating and allocating resources. Performance based budgeting or results-based budgeting, and related approaches like activity-based budgeting (ABB) and activity-based costing (ABC), are methods of budgeting that link resource estimates and appropriations to outputs and outcomes (see September 28, 2005 Post, “A Preference for Outcome Measures”). For many court managers, making their budget process more performance-based is the primary motivation for developing court performance measurement systems (CPMSs).
The major elements of performance-based budgeting are defining goals and objectives, developing measures of performance aligned with those goals and objectives, linking spending decisions to results, and accountability for results. Performance-based budgeting has been around for over forty years. The early approaches focused mainly on the relationships between inputs and outputs. In recent years, the emphasis on outcomes -- the benefits of the programs for its recipients and participants -- has made performance- based budgeting a "hot" topic for courts.
In many ways, the need and attraction of performance based budgeting comes from the obvious shortcomings of the traditional budgeting process: a negotiation between court managers and funding authorities over some relatively small percentage change over last year’s budget (or the budget of a court in the same class) -- a negotiation that rarely reaches issues of efficiency and effectiveness. Further, standard accounting principles only prevent court managers from stealing money, but they do little to stop them from wasting it.
But Obstacles Exists
It is hard to refute the theory of performance-based budgeting. Unfortunately, not much is known about how to do it in practical terms. Can it be done? Can it be done well? Is there a functioning system of performance-based budgeting that is available or proven? Even if it is not true that no one knows how to do it, it is at least true that there are substantial obstacles to implementing performance-based budgeting including: (1) identifying and developing the right court performance measures and indicators; (2) developing accounting systems to support performance-based budgeting; and (3) creating incentives for decision-making based on performance.
Using performance measures for budgeting is a big challenge for all government, not just courts. According to at least one expert, Phillip Joyce, assistant professor in the Maxwell School of Citizenship and Public Affairs at Syracuse University, performance-based budgeting is “unambiguously desirable but quite complicated to carry out in practice.” Further, he states, "the task of developing measures pales in comparison to the challenge inherent in trying to use performance measures as a basis for budget decision making."
What To Do?
As the saying goes, get on the bus or be hit by it. Better yet, drive the bus. Clearly, the field has moved beyond proof of concept. Court managers are not likely to resist performance-based budgeting by refuting its desirability. Instead, they should embrace the need, desirability and rationale for performance-based budgeting, and take an active part in its design, development, testing and implementation. However, like with any innovation that shows promise but has yet been demonstrated in practice, they should be cautious and seek answers to practical questions such as:
1. What are the operational definitions of concepts and principles of the performance-based budgeting process? (For example, how would “programs,” “subprograms,” “services,” and “activities” be defined for courts?)
2. Are the precise steps of the process well documented, or is there an expectation that court staff will work out the details based on general principles and concepts?
3. If a particular approach to performance-based budgeting has not been demonstrated in comparable courts, can a functioning system in other parts of government be identified from which useful “benchmarks” can be drawn for courts?
4. Is the approach largely a planning process done as part of the budget preparation process – this is the general understanding of activity-based budgeting (ABB), for example -- or is it conceived as a modification to accounting systems that track costs during the year? (The latter usually involves expensive changes to accounting system software to capture the required source data and to enhance reporting and may require a significant investment in training of staff.)
5. How are (should) the performance-based budgeting process align with strategic planning efforts or initiatives to build a court performance measurement system (CPMS)? (Which should come first – performance measures, plans or performance-based budgets?)
6. Finally, beyond unfunded mandates to implement performance-based budgeting, what resources – including software, training and support – is available to design, develop, test and demonstrate, and implement it?
Copyright CourtMetrics 2005. All rights reserved.
Need and Rationale Are Indisputable
Budgeting is a rational and systematic way of estimating and allocating resources. Performance based budgeting or results-based budgeting, and related approaches like activity-based budgeting (ABB) and activity-based costing (ABC), are methods of budgeting that link resource estimates and appropriations to outputs and outcomes (see September 28, 2005 Post, “A Preference for Outcome Measures”). For many court managers, making their budget process more performance-based is the primary motivation for developing court performance measurement systems (CPMSs).
The major elements of performance-based budgeting are defining goals and objectives, developing measures of performance aligned with those goals and objectives, linking spending decisions to results, and accountability for results. Performance-based budgeting has been around for over forty years. The early approaches focused mainly on the relationships between inputs and outputs. In recent years, the emphasis on outcomes -- the benefits of the programs for its recipients and participants -- has made performance- based budgeting a "hot" topic for courts.
In many ways, the need and attraction of performance based budgeting comes from the obvious shortcomings of the traditional budgeting process: a negotiation between court managers and funding authorities over some relatively small percentage change over last year’s budget (or the budget of a court in the same class) -- a negotiation that rarely reaches issues of efficiency and effectiveness. Further, standard accounting principles only prevent court managers from stealing money, but they do little to stop them from wasting it.
But Obstacles Exists
It is hard to refute the theory of performance-based budgeting. Unfortunately, not much is known about how to do it in practical terms. Can it be done? Can it be done well? Is there a functioning system of performance-based budgeting that is available or proven? Even if it is not true that no one knows how to do it, it is at least true that there are substantial obstacles to implementing performance-based budgeting including: (1) identifying and developing the right court performance measures and indicators; (2) developing accounting systems to support performance-based budgeting; and (3) creating incentives for decision-making based on performance.
Using performance measures for budgeting is a big challenge for all government, not just courts. According to at least one expert, Phillip Joyce, assistant professor in the Maxwell School of Citizenship and Public Affairs at Syracuse University, performance-based budgeting is “unambiguously desirable but quite complicated to carry out in practice.” Further, he states, "the task of developing measures pales in comparison to the challenge inherent in trying to use performance measures as a basis for budget decision making."
What To Do?
As the saying goes, get on the bus or be hit by it. Better yet, drive the bus. Clearly, the field has moved beyond proof of concept. Court managers are not likely to resist performance-based budgeting by refuting its desirability. Instead, they should embrace the need, desirability and rationale for performance-based budgeting, and take an active part in its design, development, testing and implementation. However, like with any innovation that shows promise but has yet been demonstrated in practice, they should be cautious and seek answers to practical questions such as:
1. What are the operational definitions of concepts and principles of the performance-based budgeting process? (For example, how would “programs,” “subprograms,” “services,” and “activities” be defined for courts?)
2. Are the precise steps of the process well documented, or is there an expectation that court staff will work out the details based on general principles and concepts?
3. If a particular approach to performance-based budgeting has not been demonstrated in comparable courts, can a functioning system in other parts of government be identified from which useful “benchmarks” can be drawn for courts?
4. Is the approach largely a planning process done as part of the budget preparation process – this is the general understanding of activity-based budgeting (ABB), for example -- or is it conceived as a modification to accounting systems that track costs during the year? (The latter usually involves expensive changes to accounting system software to capture the required source data and to enhance reporting and may require a significant investment in training of staff.)
5. How are (should) the performance-based budgeting process align with strategic planning efforts or initiatives to build a court performance measurement system (CPMS)? (Which should come first – performance measures, plans or performance-based budgets?)
6. Finally, beyond unfunded mandates to implement performance-based budgeting, what resources – including software, training and support – is available to design, develop, test and demonstrate, and implement it?
Copyright CourtMetrics 2005. All rights reserved.
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