Budget Formats
Current perspectives on what constitutes prudent fiscal policy differ considerably from those of the past. The appropriate role of government in providing public facilities and services as a "driving engine" for societal change has come under considerable scrutiny. These shifts in perspective have both emerged from and resulted in changing attitudes toward budgeting in the public sector. It is possible to identify three successive stages of budget reform. In the first stage, dating roughly from 1920 to 1935, the emphasis was on developing adequate mechanisms for the control of public expenditures. The second stage began with the New Deal of the Roosevelt administration and reached its peak in the fifties with the introduction of performance budgeting and provided a focus on fiscal management considerations. The third stage began in the sixities and is manifest in current efforts to link strategic planning and budgeting in a multipurpose budget system. As Charles Beard once observed, "Budget reform bears the imprint of the age in which it originated."
Evolving Perspectives on the Budget
A budget can serve as a fiscal control mechanism, a management tool, and an important component of financial planning. As a control mechanism, a budget seeks to assure financial integrity, accountability, and legal compliance--this is the traditional role of the budget. As a management tool, a budget can be used to achieve operating economies and performance efficiencies. As a component of financial planning, a budget must reflect public goals and objectives and the overall effectiveness of government programs in meeting public service needs.
For trivia fans, the word budget is derived from the French word "bouge," meaning leather bag. The Lord of the Exchequer would bring to Parliament a document which the government proposed be adopted as its fiscal commitments for the coming year. This document would be carried in a small leather bag or bougette, and thus the document eventually took on the name of the container used to transport it.
Historically, the fiscal control aspects of budgeting have received the greatest emphasis both in practice and in the literature of public budgeting. The budget has been viewed primarily as an extension of the accounting and management control system, in which expenditure estimates for various programs are reviewed in monetary terms. Under this approach, budget requests are supported by detailed objects of expenditures--tabulations of the myriad items required to operate each program, including salaries and wages, rent, office supplies, travel, equipment, and other inputs. The validity of budget requests is judged primarily through comparisons with previous levels of expenditures.
By the early 1920s, the object-of-expenditure approach was wide-spread in its public application. This budget format, with its detailed recording of spending requirements and subsequent commitments, provides a most effective basis for fiscal control. The expenditure of budget allocations can be controlled within relatively narrow, predetermined limits. Financial accounting systems--developed in parallel with the object-of-expenditure budget--admirably support the objectives of fiscal control. This period in public financial management was marked by a pre-occupation with forms and detailed procedures for budgeting and accounting.
As more reliable systems of accounting were installed, the budget was gradually freed from its primary role as fiscal watchdog. If the main function of budgeting is to keep spending in check, then program outputs are seen primarily in terms of limited and fixed values. However, if program accomplishments are examined in terms of benefits, the task of budgeting must be redefined to include a more effective marshaling of fiscal and other organizational resources to achieve those benefits.
In the late 1930s, the budget began to be recognized as an important tool of management--providing a focus on operating economies and performance efficiencies. These efforts culminated in the concept of performance budgeting which had its heyday in the late forties and early fifties. In 1949, the Hoover Commission called for a budget approach that would:
focus attention upon the general character and relative importance of the work to be done, or upon the service to be rendered, rather than upon the things to be acquired, such as personal services, supplies, equipment, and so on. These latter objects are, after all, only the means to an end. The all important thing in budgeting is the work or the service to be accomplished, and what that work or service will cost. [13]
Performance budget format seldom is discussed in any detail in contemporary texts on public budgeting, being relegated for the most part to a historical footnote. Nevertheless, many of the attributes of performance budgeting have survived to become important, integral parts of modern budgeting systems.
The principal objective of a performance budget is to help administrators assess the work efficiency of operating units, by (1) casting budget categories in functional terms and (2) providing work-cost measurements to encourage more efficient and economical performance of prescribed activities. Performance budgeting derives much of its conceptual and technical basis from cost accounting and the precepts of scientific management.
The innovation in the budget process that received the greatest attention in recent years is the Planning-Programming-Budgeting system (PPBS). PPBS was brought to full public attention in August, 1965, when President Lyndon B. Johnson announced that all federal departments would adopt the budgeting system that had been used for some years in the Department of Defense. PPBS represents a "top-down" budget format, wherein decisions and directives flow from the policy levels to the operating levels of the organization.
PPBS was an outgrowth of program-based budgeting techniques that had been developed earlier in business and industry. [14] The basic objective of PPBS is to present budget requests in terms of program "packages" rather than the usual object-of-expenditure format. A conscious effort is made under PPBS (1) to state end objectives, (2) to seek a wide range of program alternatives, and (3) to link program and financial plans. In short, PPBS recognizes that planning and budgeting are complementary processes.
The need for planning, programming, budgeting, and scheduling arises from the indissoluble connection between the allocation of resources and the formulation and conduct of govern-mental policy. When undertaken in the proper "mix," these processes constitute the means by which objectives and resources--and the interrelations among them--are taken into account to achieve a more coherent and comprehensive program of action. . . . [15]
PPBS sought to focus attention on aggregates of expenditures--broad program classifications that may cut across agency lines of responsibility. Such a focus was intended to facilitate the evaluation of alternative courses of action in terms of costs and benefits (or effectiveness). As with many innovations introduced by dictum, however, inadequate groundwork was laid for the development of PPBS at the federal level, and even less at the state and local levels. Although PPBS received enthusiastic support from proponents of a more rational and comprehensive approach to financial management, it was met with corresponding skepticism by many who had experienced previous experiments with performance and program budgeting. The emphasis of PPBS on long-range planning to the near exclusion of the financial planning and control functions proved to be disorienting to both operating agencies and policy-makers. A fairly successful technique for evaluating Defense Department weaponry systems, PPBS proved to have only limited immediate application in other public agencies.
For over seventy years, budget reformers have criticized the lack of coordination and the neglect of important values in traditional budget-building procedures, suggesting that they produce only small, incremental changes in the status quo. Such procedures, they argue, are arbitrary and irrational in that short-term results from previous allocation decisions are accepted as the primary criteria for future decisions. Existing programs are continued into the future, often without intensive re-examination. A comprehensive analysis of previously allocated resources--the budget base--seldom is undertaken under the incremental approach.
Therefore, such incremental budgeting is suspect as to its ability to limit the growth of governmental appropriations or to allocate scarce fiscal resources in the most economical, efficient, and effective manner. As E. Hilton Young observed in 1924:
It must be a temptation to one drawing up an estimate to save himself trouble by taking last year's estimate for granted, adding something to any item for which an increased expenditure is foreseen. Nothing could be easier or more wasteful and extravagant. [16]
Zero-base procedures were first adopted at the federal level in 1962 as part of an experiment in the preparation of the budget request of the U.S. Department of Agriculture for FY 1964. The instructions issued by the Office of Budget and Finance of USDA stated:
All programs will be reviewed from the ground up, and not merely in terms of the changes proposed for the budget year. . . . Consideration must be given to the basic need for the work contemplated, the level at which work should be carried out, the benefits to be received and the costs to be incurred. The fact that certain activities have been carried out for a number of years will not, per se, adequately justify their continuation nor will the fact that programs are prescribed by statutory law necessarily be a controlling consideration. [17]
The results of the USDA experiment with zero-base budgeting revealed certain disadvantages or problems with the process. A major factor limiting the application of zero-base budgeting is the increased workload, often resulting in the diversion of effort from regular programs. The USDA found that analyzing budget requests from the "zero base" did not significantly improve program efficiency or effectiveness, but did produce overwhelming amounts of paperwork. The experiment was abandoned after one year.
As Governor of Georgia, Jimmy Carter became interested in ZBB through an article authored by Peter Phyrr that appeared in the November-December, 1970 issue of the Harvard Business Review. Phyrr spent a year in Georgia helping to design and implement the first year of zero-base budgeting for the entire state government in conjunction with the reorganization of the executive branch. Upon his election as President, Carter sought to install ZBB techniques at the federal level, and in April of 1977, the Office of Management and Budget published the official federal instructions on zero-base budgeting.
Although zero-base-analysis techniques have received the greatest publicity at the federal and state levels, they may have even more significant potential in application at the local level. The basic objective remains the same--to circumvent the shortcomings of incremental budgeting. However, current applications of ZBB have taken a somewhat more modest and more realistic approach as compared to earlier efforts in the mid-1960s. The detailed analysis of programs "to the zero base" has been replaced by the concept of levels of effort. ZBB requires agencies "to examine their budgets below the base; the base being their current level of expenditures. . . . Zero-base budgeting requires each agency to specify--on paper--as part of its regular policy submission--possibilities for spending less money than the current year." [18]
The past twenty years have been a period of experimentation in the processes of public budgeting. At the federal level, PPBS--the major budgetary reform of the mid-sixties--gave way to zero-base budgeting under the Carter administration, only be replaced by mission budgeting and supply-side economics in the 1980s. Each of the approaches represent an attempt to provide a more comprehensive and longer-range perspective to the budget process--to incorporate a planning perspective.
Need to Integrate Planning and Control Objectives
An evident shortcoming of these new budgetary approaches has been the failure to fully integrate these more systematic procedures with the other basic components of financial management. In particular, more recently developed budgeting techniques--such as program budgeting and zero-base budgeting--have not been well aligned with appropriate accounting procedures. These new budgetary formats tend to emphasize the planning function. Far less attention is given to the equally important techniques and procedures for financial control. As a result, these new approaches, in many cases, have failed to produce the desired improvements in terms of more efficient, economical, and effective governmental operations.
Introduction of these budgetary techniques in the private sector has usually been accompanied by parallel improvements in accounting procedures--in particular, the fuller application of managerial and cost accounting techniques. Applications of managerial accounting in government are still in the formative stages.
Each of these budget formats arose from the financial management needs at a particular point in time; each reflects varying decision-making capacities; and each has varying management information needs and output capacities (see Exhibit 1).
Characteristic | Objects of Expenditure | Performance Budget | PPBS/Program Budget | Zero-Base Budget |
Control | Central | Operating | Operating | Operating |
Management | Dispersed | Central | Supervisory | Dispersed |
Planning | Dispersed | Dispersed | Central | Central |
Role of Budget Agency | Fiduciary | Efficiency | Policy | Effectiveness |
Information/Decision Flow | Bottom-Up Aggregative | Bottom-Up Aggregative | Top-Down Disaggregative | Iterative |
Information Focus | Objects | Activities | Programs | Decision Packages |
Decision Basis | Incremental | Incremental | Programmatic | Programmatic |
Key Budget Stage | Execution | Preparation | Analysis | Analysis |
Personnel Skills | Accounting | Administrative | Economics | Management |
Appropriation/Organization Linkages | Direct | Activity-Based | "Across-the-Board" | Budget Units |
Adapted from: Allan Schick, "The Road to PPB: The Stages of Budget Reform," in Planning Programming Budgeting: A Systems Approach to Management, ed. Fremont J. Lyden and Ernest G. Miller (Chicago, Ill.: Markham Publishers, 1968), p. 50.
Fiscal Control and Accountability
Under the line-item/objects of expenditure approach, budget requests are supported by detailed listings of the categories of expense required to operate each program (see Exhibit 2). Projected expenditures may be backed up by a personnel schedule which identifies the specific positions (i.e., by job titles) to be authorized and the anticipated salary commitments of each position (see Exhibit 3).
Budgets based on objects of expenditure are readily understood by legislators and other public elected officials, which is one important reason why this approach has survived so long. It is relatively easy to grasp the fiscal significance of a proposed increase of 10 percent in printing or data processing, or a salary reclassification for a specific position or salary class. Therefore, governing bodies can review the budget and alter the minutiae of proposed expenditures. Larger issues of efficiency and effectiveness that should be examined through the budget process, however, often remain buried in the detail of object classifications. Such classifications cannot provide a basis for measuring the performance of an agency or program or the progress made in the implementation of a particular set of objectives or activities.
The object-of-expenditure budget has two distinct advantages over other budget formats:
(1) Management control--Personnel requirements are closely linked with other budgetary requirements. The control of authorized positions can be used as leverage to control the whole budget.
BUDGET COMMENTS |
As a result of the reorganization of the Police Department, it is requested that the staff of the Division be increased by three persons. The budget request shows an increase of 18.35% or $225,205 over the current budget period. Personnel Services shown an increase of $142,165 (17.7%). This increase is the result of four new employees and a five percent salary increase for all city employees. Increased emphasis is placed on the purchase of drug information. This increase is shown under object code 1250. Additional data process and laboratory equipment has been requested. |
Object Classification | Last Fiscal Year | Current Budget | Next Fiscal Year |
Personnel Services | |||
1110 Salaries | $737,223 | $802,975 | $945,140 |
1120 Wages | 0 | 0 | 0 |
1130 Overtime Payments | $36,861 | $40,150 | $47,260 |
Subtotal: Personnel Services | $774,084 | $843,125 | $992,400 |
Contractual Services | |||
1210 General Repairs | $398 | $440 | $505 |
1220 Utility Services | $996 | $1,100 | $1,265 |
1230 Motor Vehicle Repairs | $2,520 | $2,750 | $3,165 |
1240 Travel | $1,000 | $1,100 | $1,210 |
1250 Professional Services | $4,408 | $6,600 | $7,920 |
1260 Communications | $795 | $880 | $1,010 |
1270 Printing | 1,000 | $1,100 | $1,210 |
1280 Computing Services | $3,523 | $3,900 | $4,540 |
1290 Other Contractual Services | 0 | 0 | 0 |
Subtotal: Contractual Services | $14,640 | $17,870 | $20,825 |
Supplies and Materials | |||
1310 Office Supplies | $4,806 | $5,290 | $5,820 |
1320 Fuel Supplies | $6,540 | $7,195 | $7,915 |
1330 Operating Supplies | $2,667 | $2,935 | $3,230 |
1340 Maintenance Supplies | $1,988 | $2,190 | $2,410 |
1350 Drugs & Chemicals | $7,896 | $8,685 | $9,555 |
1360 Food Supplies | 0 | 0 | 0 |
1370 Clothing & Linens | $8,012 | $8,815 | $9,700 |
1380 Education & Recreation Supplies | 0 | 0 | 0 |
1390 Other Supplies | 0 | 0 | 0 |
Subtotal: Supplies & Materials | $31,909 | $35,110 | $36,630 |
1410 Office Equipment | $0 | $1,500 | $3,000 |
1420 Electrical Equipment | 0 | 0 | 0 |
1430 Motor Vehicles | $30,000 | $45,000 | $40,000 |
1440 Highway Equipment | 0 | 0 | 0 |
1450 Medical & Lab Equipment | 0 | $400 | $800 |
1480 Data Processing Equipment | 0 | $5,000 | $8,500 |
1490 Other Equipment | 0 | 0 | 0 |
Subtotal: Equipment | $30,000 | $51,900 | $52,300 |
Current Obligations | |||
1530 Rental Charges | 0 | 0 | 0 |
1540 Insurance | $3,700 | $4,000 | $4,500 |
1550 Dues & Subscriptions | $30 | $40 | $50 |
1560 Electrostatic Reproduction | $500 | $1,000 | $1,150 |
1590 Other Obligations | 0 | 0 | 0 |
Subtotal: Current Obligations | $4,230 | $5,040 | $5,700 |
Employee Benefits | |||
1610 Retirement & Pension Benefits | $73,722 | $88,325 | $118,140 |
1620 Social Security Contributions | $50,500 | $55,005 | $67,575 |
1640 Group Insurance | $14,744 | $16,060 | $18,905 |
1650 Medical/Hospital Insurance | $103,211 | $114,825 | $137,990 |
Subtotal: Employee Benefits | $242,178 | $274,215 | $342,610 |
TOTALS | $1,097,040 | $1,227,260 | $1,452,465 |
(2) Accountability--object classifications establish a detailed pattern of accounts that can be controlled and audited. Each object of expenditure is subject to a separate documentation. Object classifications show in great detail what is purchased, but not why, i.e., the nature of organizational programs and accomplishments anticipated under those programs.
The personnel schedule (Exhibit 3) for the Investigations Division of the Rurbana Police Department clearly shows that the proposed staffing increase would add a sergeant, an inspector, and a detective to the ranks of the Division. Each of these new positions presumably would be funded at the entrance level of the salary range. Therefore, of the $117,085 budget increase requested for salaries, $78,000 can be attributed to the three new positions and the balance to the proposed 5% across-the-board increase for all city employees. The possible linkages between the proposed staff increase and the 12 percent increase ($6,955) in the operating costs (exclusive of equipment) shown in Exhibit 2, however, is not evident from the object of expenditure budget.
Position Title | Current Authorized Personnel | Requested Personnel | Monthly Salary Range | Current Budget | Next Fiscal Year |
Lieutenant | 1 | 1 | $2,700-$3,200 | $36,000 | $37,800 |
Laboratory Supervisor | 1 | 1 | $2,500-$3,000 | $32,000 | $33,600 |
Sergeant | 2 | 3 | $2,300-$2,800 | $60,000 | $90,600 |
Inspector | 3 | 4 | $2,200-$2,700 | $86,750 | $117,500 |
Detective | 15 | 17 | $2,000-$2,500 | $425,000 | $494,250 |
Photographer | 1 | 1 | $1,800-$2,300 | $23,000 | $24,150 |
Property Clerk | 1 | 1 | $1,700-$2,200 | $22,000 | $23,100 |
Laboratory Technician | 1 | 1 | $1,600-$2,100 | $21,600 | $22,680 |
Photograph Technician | 1 | 1 | $1,400-$1,900 | $18,500 | $19,425 |
Secretary | 1 | 1 | $1,200-$1,700 | $17,940 | $18,840 |
Clerk-Steno | 4 | 4 | $1,100-$1,600 | $60,185 | $63,195 |
Totals | 31 | 35 | $802,975 | $945,140 |
A budget built on objects of expenditure frequently is called a line-item budget, since the proposed expenditures are detailed with great specificity, resulting an array of lines within the budget document Technically, "line item" refers to the manner in which appropriations are made to agencies within the budget structure. Appropriations may be made on a lump-sum basis, leaving considerable discretion to the agency regarding the specific categories of expenditure permitted. Or the funds may be allocated according to specific line items, whereby the agency must receive legislative approval for any deviations from the initially authorized appropriations (usually beyond some predetermined range, for example plus or minus 10 percent).
Line items can be specified at several levels of detail. Funds might be appropriated, for example, for personal services (salaries, wages and staff benefits) and nonpersonal services (all other operating expendi-tures). Under this approach, agencies might be permitted to shift dollars from other operating categories to salaries and wages but might not be authorized to shifted funds from salaries and wages to operations. In effect, appropriations for salaries and wages are encumbered, and any unexpended funds in this line item revert to central appropriations. This approach is used to prevent agencies from holding positions vacant to generate more operating dollars (for example, for "windfall" equipment purchases). Such line itemization can also specify appropriations for various personnel categories (for example, professional staff versus technical-support personnel) or for specific object codes (for example, equipment or travel).
Accountability Through Object Codes
Objects of expenditure are the fundamental elements of an organization's operations in terms of the goods and services procured. Object codes--three-digit or four-digit numbers--can be used to budget and record expenditures in considerable detail (see Exhibit 2). These object codes (or class codes) are common to all government agencies and provide across-the-board uniformity in the tracking of expenditures through financial accounting procedures. Object codes can be further subdivided into sub-object classifications--for example, 1200 contractual services can be broken down into: 1210 general repairs; 1220 utility services; 1230 motor vehicle repairs; 1240 travel; and so forth. Categories of contractual services can be further enumerated; for example, 1240 travel might be organized as follows:
1241: Mileage (use of private vehicles)
1242: Automobile rentals
1243: Fares for airlines and other public conveyance
1244: Tolls and parking
1245: Lodging and subsistence
1246: Convention & educational expenses
Objects of expenditures, in turn, can be aggregated under broad expenditure characteristics such as for current operations, capital expen-ditures, and debt service. They can also be assigned to and recorded as the expenditures of a specific organizational unit, activity classification, program or subprogram, and/or basic function of government. For example, the following sixteen-digit code:
23-01-105-1245-45301
might be used to record a travel expenditure for meals and lodging (1245) of a staff member from the Police Department (105) under the public safety function (23) in conjunction with an out-of-town investigation on a specific case (45301). The code 01 might be used to designate the funding source (general funds) to which this expenditure is to be charged. The five-digit project code might also be used to designate the program or subprogram (45xxx) and the activity classification (xx30x). The activity classification in this instance might represent a felony involving bodily harm to the victim. Using such multi-digit codes, accounting entries can be retrieved and sorted to meet a variety of fiscal management and reporting purposes. The capacity to monitor and to "crosswalk" expenditure data for various financial planning and control purposes will be discussed in further detail in a subsequent section.
Recent developments in the field of budgeting have emphasized the planning aspects of the resource allocation process. Unfortunately, some of these applications of budget reforms have abandoned or have signifi-cantly altered the management control features of more traditional budget approaches. In part, this counter swing is a reaction to perceived short-comings of the line-item/objective-of-expenditure budget. It also is a consequence of a more centralized, "top-down" approach to budgeting which seeks to improve the rationality of public decision-making through both structural and procedural changes. Techniques and procedures to increase the efficiency and effectiveness of resource allocation decisions must be incorporated in any financial planning and control system that is responsive to these demands. By the same token, the mechanisms of accountability and control must be retained in a balanced approach to budgeting.
Performance Budgeting
The budget objective of efficiency and economy derives much of its conceptual and technical basis from cost accounting and the precepts of scientific management. Three components distinguish performance budgeting from other budgetary approaches:
(1) Identification of work programs that are meaningful for management purposes,
(2) Delineation of performance units within each work program, either in terms of activities or by specific end-products, and
(3) Efforts to fully measure performance costs.
While these components represent particular strengths of performance budgeting, in another sense, they also reflect the basic shortcomings of this approach in terms of its implementation. Work programs relate to particular functions or programs carried out by public agencies. Very few functions of government, however, are conducted by only one agency or department. While functions may cut across organizational lines, in application, work programs were usually identified within the established agency structure. Programmatic gaps and potential conflicts and inconsistencies in this approach limited its application as an aid to decision-making at the policy level.
To illustrate the performance budget format, the data for the Investigations Division of the Rurbana Police Department, presented in Exhibit 2, have been translated into a work program and related effort and cost distributions in Exhibit 4.
Exhibit 4. Effort and Cost Distribution for Activities of the Investigations Division |
Work Program |
The Investigation Division is responsible for the follow-up on criminal cases initially handled by patrol officers. The Division is organized to handle specific types of crime or clientele. The Division investigates cases, arrests violators, and prepares evidence to assist in legal prosecutions. Crimes investgated include felonies and misdemeanors, crimes involving moral turpitude, gambling, and substance abuse, and crimes involving minors and the mentally ill. The Divisions laboratories provide scientific assistance to all types of investigations. |
Last Fiscal Year | Cur -rent Fiscal Year | Next Fiscal Year | |||||||
Activity Description | Units | Staff Hours | Cost | Units | Staff Hours | Cost | Units | Staff Hours | Cost |
Felony Cases | 797 | 33,600 | $710,815 | 855 | 34,880 | $773,065 | 1015 | 38,570 | $888,125 |
Misdemeanors | 408 | 10,070 | $212,930 | 445 | 10,310 | $243,430 | 535 | 13,375 | $326,350 |
Licenses | 250 | 1,120 | $17,286 | 260 | 1,130 | $17,585 | 380 | 1,615 | $26,695 |
Lab Examinations | 4897 | 5,860 | $85,797 | 4,980 | 7,865 | $117,825 | 5,075 | 8,120 | $119.535 |
Forensic Investigations | 260 | 560 | $14,903 | 275 | 560 | $15,030 | 285 | 570 | $14,250 |
Evidence Procurement | 8580 | 1,859 | $22,734 | 8700 | 1,870 | $23,170 | 8800 | 1,760 | $26,400 |
Impounded Autos | 865 | 185 | $2,375 | 935 | 200 | $2,590 | 985 | 250 | $2,705 |
Miscellaneous Property | 890 | 185 | $2,292 | 915 | 190 | $2,375 | 900 | 180 | $2,115 |
Photography | 18,600 | 2,125 | $26,070 | 18,900 | 2,150 | $26,620 | 19,200 | 1,920 | $28,800 |
Firearm Registration | 82 | 25 | $290 | 115 | 35 | $415 | 125 | 40 | $500 |
Lecturers | 20 | 100 | $1,548 | 66 | 330 | $5,155 | 20 | 100 | $1,500 |
Audio-Video | 0 | 0 | $0 | 0 | 0 | $0 | 4 | 700 | $15,490 |
TOTALS | 55,680 | $1,097,040 | 59,520 | $1,227,260 | 67,200 | $1,452,465 |
Activity classifications or descriptions seek to relate specific activities to the responsibilities of distinct operating units. The term "activity" can be applied under various circumstances to mean process, project, or purpose. A process approach would list as activities the various steps in carrying out the work program of a budget unit. A project approach might list the individual projects (often involving fixed assets and capital facilities) that go to make up the total activity areas of an agency. A purpose classification might group activities according to broad functions or by clientele groups. In the case of the Investigations Division, activities are classified by levels of crime--misdemeanors and felonies--and the supporting scientific investigations carried out in the laboratory. This activity classification is essentially by purpose. The principal focus of the performance budget is at and below the departmental level, where the work-efficiency of operating units can be assessed. A performance unit can be described as a team of staff members responsible for carrying out a specific task or series of tasks. Work-cost data are reduced into discreet, measurable units to determine the performance efficiency of prescribed activities.
Performance costs are those costs directly associated with carrying out these activities. The aggregate costs associated with each activity classification are shown in Exhibit 4 for the previous fiscal year, the current fiscal year, and the level of support requested for next fiscal year. A significant increase (18.7%) is projected in the number of felony cases to be investigated, and a slightly lesser increase (16.9%) in the number of misdemeanors. The staff hours to be devoted to the investigation of felonies are projected to increase by only 8%, whereas the staff hours devoted to the investigation of misdemeanors are projected to increase by 19.3%. Misdemeanors are investigated initially by uniform patrol officers, and therefore, cases that are referred to the Investigations Division tend to be more time consuming. A modest increase in the case load is likely to result in a proportionately greater increase in the staff hours required for these investigations.
Last Fiscal Year | Cur -rent Fiscal Year | Next Fiscal Year | |||||||
Activity Description | Units | Staff Hours per Unit | Cost per Unit | Units | Staff Hours per Unit | Cost per Unit | Units | Staff Hours per Unit | Cost per Unit |
Felony Cases | 797 | 42.16 | $891.86 | 865 | 40.32 | $893.72 | 1,015 | 38.00 | $875.00 |
Misdemeanors | 408 | 24.68 | $521.89 | 445 | 23.17 | $547.03 | 535 | 25.00 | $610.00 |
Licenses | 250 | 4.48 | $69.14 | 260 | 4.35 | $67.63 | 380 | 4.25 | $70.25 |
Lab Examinations | 4,897 | 1.20 | $17.52 | 4,980 | 1.58 | $23.66 | 5,075 | 1.60 | $23.55 |
Forensic Investigations | 260 | 2.15 | $57.32 | 275 | 2.04 | $54.65 | 285 | 2.00 | $50.00 |
Evidence Procurement | 8,580 | 0.22 | $2.65 | 8,700 | 0.21 | $2.66 | 8,800 | 0.20 | $3.00 |
Impounded Autos | 865 | 0.21 | $2.75 | 935 | 0.21 | $2.77 | 985 | 0.25 | $2.75 |
Miscellaneous Property | 890 | 0.21 | $2.58 | 915 | 0.21 | $2.60 | 900 | 0.20 | $2.35 |
Photography | 18,600 | 0.11 | $1.40 | 18,900 | 0.11 | $1.41 | 19,200 | 0.10 | $1.50 |
Firearm Registration | 82 | 0.30 | $3.54 | 115 | 0.30 | $3.61 | 125 | 0.32 | $4.00 |
Lectures | 20 | 5.00 | $77.40 | 66 | 5.00 | $78.11 | 20 | 5.00 | $75.00 |
Audio-Video | 0 | 0.00 | $0.00 | 0 | 0.00 | $0.00 | 4 | 175.00 | $3,872.50 |
Unit cost measures aggregate all relevant costs associated with the delivery of a particular service and divide these costs by the total units of service provided. Workload measure relate to the volume of work performed during some time period. When workload or output measures are related to unit costs or input measures, the resulting index often is called a performance measure.
Workload and unit cost measures for the Investigations Division of the Rurbana Police Department are shown in Exhibit 5. As these data suggest, the unit costs for felony cases are anticipated to decrease as the number of units increases, whereas the unit costs for cases involving misdemeanors are projected to increase in the coming fiscal year.
Performance measures often are used as indicators of operating efficiency--for example, the cost per patient-day of hospital service; the number of cases successfully prosecuted per law enforcement officer; or the response time involved in providing paramedical services. As may be seen from these examples, not all performance measures are expressed in cost terms. Performance measures provide basic information on program economics, that is, such measures can reveal important relationships between initial resource allocations (inputs) and the delivery of services (outputs).
An overemphasis on performance measures in administrative decision-making, however, may result in pseudo-efficiency. Performance measures can be overstated. Or units may resort to "creaming"--doing the easy assignments first and deferring or neglecting the more difficult ones--in order to meet such measures of efficiency. If, for example, the forensic laboratory is evaluated in terms of the number of tests performed, priority might be given to the relatively simple tests, leaving the more involved ones until the "volume" tests have been completed. Thus, there is need for careful review of performance data by disinterested third parties--often the responsibility of internal auditors.
Performance budgeting introduced a broader use of program information in the formulation of budget documents and the subsequent accounting of expenditures. Workload and unit cost measures and the concept of performance levels have been incorporated into many contemporary management applications which seek greater efficiency and economy in the allocation of limited financial resources.