During financial challenges, such as a fiscal cliff, local governments face the daunting task of optimizing what limited resources they have while trying to maintain essential services and keep up with community priorities.
To navigate through these uncertain waters, they’ll need to steer away from traditional practices—such as incremental budgeting—where last year’s budget serves as the baseline for the next, with only minor adjustments. Although straightforward, this approach can cause budget inefficiencies and make long-term structural changes difficult to achieve.
Instead, local governments can adopt a more strategic and value-centric approach: performance-based budgeting.
In this blog, we’ll explore what performance-based budgeting is and how it can benefit local governments during times of financial uncertainty.
What is Performance-based Budgeting?
Performance-based budgeting evaluates the effectiveness of agency programs and reallocates resources based on outcomes rather than historical funding levels. This budgeting practice enables governments can assess the outcomes of their spending, making sure that funds are directed towards programs that deliver measurable results.
How Performance-based Budgeting Supports Governments During Fiscal Uncertainties
During periods of fiscal uncertainty, performance-based budgeting serves as a powerful tool for local governments by putting the focus on effective programs and tangible outcomes. Using this performance-based method allows agencies to make sure that limited resources are directed towards areas with the greatest impact to maximize value.
By leveraging data-driven decision-making, local governments can pinpoint opportunities to save on costs and optimize the use of resources, adjusting as needed to maintain essential services.
Additionally, performance-based budgeting increases transparency and accountability, as agencies can clearly demonstrate how funds are allocated and spent. This openness helps foster public trust and reassures the community that their needs are prioritized even in financially challenging times.
3 Ways Purpose-built Tech Can Enhance Performance-based Budgeting
To get the most out of performance-based budgeting and reap its benefits, local governments need to look no further than purpose-built budgeting software.
Here are three ways purpose-built software—like Euna Budget Professional—makes performance-based budgeting a breeze:
- Improved Data Accuracy: Automate calculations for precise financial data, supporting reliable performance metrics for informed decision-making.
- Streamlined Processes: Reduce manual tasks, speeding up budgeting cycles and allowing focus on analysis and strategy.
- Enhanced Transparency: Get real-time financial insights, fostering trust and accountability by making performance data accessible to stakeholders.
Ultimately, purpose-built budgeting software makes performance-based budgeting more effective and efficient for local governments, paving the way for more informed decision-making and responsible financial management—even in the toughest fiscal times.
Schedule a demo to explore how Euna Budget Professional can empower performance-based budgeting and help your agency navigate fiscal uncertainties with greater precision and confidence.