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September 2# 199)
THE HONORABLE CITY COUNCIL
palo Alto, Calito~nia
IlUUO!! DR:tV?!I Bl!DGlrUIfG, PRO!!R"SS REPOl\T
Members of the Council:
laport. in Brt .f
This is an informational report ana no Council action is required~
The purpose of
progress with
revieWed by the
this report
implementing
Council in a
is to brief the council on staff's
the Mission Driven Budget (MDB),
study session on June 1, 1993.
After receiving conceptual approval from the Council to proceed
with imple=enting the KOB, a steering committee was formed which
includes representative~ from all City departments. The detailed
work of the steerinq comroittee was assigned to subcommittees, which
rE:port back to the steering cOlIUIlittee every two weeks. senior
manaqement is briefed every week on the work of the various
cOlllllittees.
Depart.ents have beeJ] spending considerable time preparing their
budgets using the MDB concept. Information sharing occurs at the
subcommittee and steering committee levels, as 'Well as through
weekly written progress reports prepared by each department and
distributed at the Senior Management Group (SHGJ meeting. A full
day $KG retreat on MOB was held on August 16, followed by two half
day sessions on August 23 and August 30.
Each department will present its proposed MDB structure to the
Council in study sessions scheduled for September through ~cember
1993. The format for the study sessions and an updated calendar
for MDB implementatlon are also included in this report. staff
CIiR: 463,93
o
will also be returning to council during the september-to-December
time period, with information and recommendations on citywide
issues rela~ed to MOB.
1As;'iqround
At the direction o.f the City Manager, staff from the Finance
Department, in January 1993, began explorinq the concept of
developing a budqet based on a ·proqram" concept, which put primary
emphasis on services and performance measurements, rather than the
traditional line-item orientation. Sta.f! from the Police Depart
ment joined the effort, to ensure that the ~proqram" concept which
evolved could actually be implemented meaningfully in a line
departD6nt. A key decision in the creation of the new budget was
that the primary audiences for the information in the budqet
document should be the council and the public. utilizing the model
of Reinventing Goyernment~ Police and Finance staff constructed a
model for the Police Department which embodied the "proqram"
concept and later evolved into "~ission driven budgeting.-This
involved identification of the following:
Q The depart:ment's "mission" -the primar:r premise under
which a department provides servi~esi
o The departaent's customers to whom services are provided;
o The major
de.partment
public and
activities
in achieving
the Counci 1 i
and services provided by the
its mission, as perceived by the
and
Q Impact measures related to the successful performance. of
major activities which would be Meaningful to the public
and the Council.
Attachment A is a schematic diaqram of the MD8 concept; Attachment
B defines the HDB terminology; and Attachment C summarizes the
process for-implementing MOB that came out of the prototype
exercise with the Police Deparcment.
On March 22, the MOl concept was reviewed by .5MG at an all-day
retreat. Comments and r-ecommendations were incorporated into the
pr-ototype, and Police and Finance staff then undertook a series of
individual ~epartment meetinqs desiqned to brief key staff on the
concept and to receive their criticism and feedback. The Council
reviewed the MDB proposal at a study session on June 1. 1993. and
qave its conceptual approval. All City depar-tments have since
begun to construct an MDB structur-e for the services they provide.
The Finance Department is providing assistance to all departments,
as well as actinq as the conduit for sharing of information between
departments.
CMR:463:93 2
•
¥pI steet!»; CQlaitt •• '8U»Cc .. itt •••
After receiving conceptual approval from the Council to proceed
with implementing a Mission Driven Budget, a steering committee was
tormed which included repreaentatives from all city departments.
The detailed 'Work of the steering committ~e was assigned to
subco~~ittees, which report back to the steering committee every
two weeks. Subcommittees include: cross-depa~tment~l programs;
budgat presentation and document format; budqet controls; budgeting
and accounting for allocated costs; savings and incentives;
employee timekeeping/impact measures £ystem requirements; and
buagetinq for capital projects~ The charge given to each subcom
mittee and the issues on which they are focussinq are discussed in
detail below. It is anticipated that the work of the subcommlt-cees
will be co.pleted in st~qes over the next 12 to 18 months, and that
recommendations will be reviewed with the council as a part of the
MD8 implementation process.
The Cross-Department Programs SUbcommittee was given thE:! assignment
of establishing a comprah~nsive list of all functional areas (with
mission statements) and/or major activities within the City which
would be highlighted by special presentation in the budqat
document. Procedures for coordinating consistency of missions and
impact measures and development of a format for presenting these
proqt:a_s in the budget document are included in this Subcommittee's
assiqnm.ent.
The tentative ~efinition for a cross-department program requires
that it involve at least three departments and cumulatively cost at
least $500,000. The priorities which Council selects for itself
with each two-year budget: will automatically becOlTie cross-depart
IRent programs.
At this point, the following have been tentatively identified as
cross-department programs:
o CUbberley
o Environmental Protection and Compliance
o Spe~ial Events
o Parking Management
o Development Review Processing
o Emergency Response
CKR:463:93 3
..
o council Priorities {selected during the two-year budget
proces9'J
o Traffic ManageMent
o code Enforcement
o Automated. Systems Development
o Graffiti
It is anticipatEd that only actual costs for cros.s-department
programs will be accumulated in the first year ot implementation of
MOB, &nct that budgets will be included in the second ana all
succeasive ~ears, onc@ steff has some experience with how cross
departaantal programs work~
The charge to this subco1!'\l:Uittee was threefold: to d.evelop a policy
on use of budget savin95 which provides incentives for saving; to
develop a proposed policy and related procedures on carryover of
budqet savings; and to develop a policy on hase bUdgets which is
compatible with policies ror budget savings and carryovers.
The Subco!mittee ha.s been doinq extensive research to see how other
cities with similar-programs administer savinqs and carryover-so
Cities interviewed: include Fairfield, Visalia, and porterville,
California; Chandler and Phoenix, Arizona; and St. paul, Minnesota.
~licit in the proposal of any policy to allow departments to use
savings and/or to oarry them over from year to year is simultaneous
implementation of a base budget that has been analyzed t~ ensure
that savings achieved are the result of efficiencies and innovation
rather than budgeted appropriations in excess of requirements. The
baSI! budget for implementing MOE and a methodology for updati"n'I the
base every t~o years will be established. Other iss.ues being
explored by the savings/Incentives Subcommittee include:
o Types ot expenditures that would be eligible for savinqs
(salarie.s, non-salaries, certain allocated costs. capital
expenditures, etc.J;
o Guidelines for eligibility (impact mc~su"!"e achie· ... E:lUent,
whether revenue-producing programs should have special
rules, etc.);
o The percentaqe of savinqs that could be used or carried
over; and
C!IR:463:9J 4
o What restrictions should be placed upon how savings would
be used or carried over.
Budget cODtrolsl
The Budget controls Subcollmlittee was asked to develop propos-ed
rules tor moving funds and personnel between functional areas and
between major activities. The Subcommittee will also be responsi
:ble for drafting municipal code changes necessary to implement MDB.
Issues under review by the subcommittee include the levels of
approval that vould be required for transfers ot funds and
personnel allocated to functional areas and their related major
~ctivities and impact meas:_ure3. CUrrently the municipal code
requires the council to approv~ any movement of full-time equ~va
lent positions (FTE's) and monies between departments. In
addition, the hudget is adopted at the major object category of
expenditure by d.ivision ""ithin each department. Rather than the
traditional line-it~ presentation, it is proposed that the budq~t
show only three cateqor ies of expenditures by major activity:
salaries" direct non-salary expenditures, and allocated costs.
Regular FTE's would also be shown by major activity. Control
issues being explo~ed include:
o Expenditure categories for control purposes.
~ Required approval level for movement of salary and non
salary dollars and, FTE's between functional areas;
o Required approval level for movement of salary and r.on
salary dollars and FTE's between major activities;
o Required approval level for movement of monies between
salaries and non-salaries; and
o Required approval level for changes to impact measures.
staff is discussing a quarterly reportinq system that will require
departments to summarize and justify any movement of funds and/or
FTE'S, and which would be an integral part of the overall control
IZystem.. Since the Council 'Will also be receiving quarterly reports
on budget progress I statf intends to tailor the management
reportinq system to be compatible with the council" s reports.
Stafr expects the Council to reviEW proposals for budqet controls
early in 1994 ..
Thi.s Subcommittee's charge is to develop sta.ndard formats and
procedures .for MDB presentations (visual and written) to the
CI!R:46J:93 5
Council; to develop the format for the new MOB document; and to
develop ways to educate and :t"eceive feedb:)ck from the public on
MDB~ Its initial work is being incorporated into the council study
session presentations. Budget document work will commence after
feedback from Council is received.
capital xaprov_eat Proqraa:
Initially, integration of the Capital Improvement Program {eIP)
into the HOB concept was felt to be an overly ambitious undertak
inq, and was postponed pendin9 tull implementation of the ~perating
budget. However l it became clear that the CIP is such an integral
part of some departments' -mission r w that another subcommittee was
formed to investigate the feasibility of incorporating the CIP into
the Mission Driven Budget.
Issu~s being worke6 on by this subcommittee include:
o Mlether capital expenditures should be incluoed in the
operating budqet as separate major activities or func
tional areas, reflectinq the total costs of service
provision;
o Whether the format of the current CIP document requires
revision to i~plement MOB;
00 Limiting the flexibility departme.nts would have,. if
capital expenditures are a part ,of the operatln~' budqet,
to move funds froa CIP projects into operating programs;
o Whether rules should be established for elP project
carryovers or use of savings from elP projects.
Allceated costs:
The Allocated Costs Subcommittee was ask~d to establish guidelines
for allocating cos~s between departments and within each depart
ment, and to identify costs which are appropriate for allocation
rather than direct charqing.
To this point, the work of the SubcoZlmlittee has focused on
allocation of administrative costs within the depar~ent4 Finance
staff is working to ensure that the accounting system can accommo
date proposals for administrative cost allocations.
~ia.k •• pinq/~pact ~e.sures:
The assignment to the TimekeepinqlImpact Measures Committee was to
analyze timekeeping requirementD for MOB impact measure establish-
CHR:46J:93 6
, . . '-.
menti to evaluate appropriate methods for collection of timecard
data; to develop policies and procedures for a] 1 t imekeeping
rel~ted is&u~s; to coordir.ate development or recordxeepir.q systems
for i:npact measures; and to develop a management information
reportinq system for MOB. The wor~ of this subcommittee will play
a pivotal role in the required capabilities of the new pay
roll/personnel system~
:MOB will
reportinq.
require considerably more detail in terms of time
Issues being addressed by this Subcommittee include:
o Chanqes to the accountinq system, e.specially the chart of
aCC01Jnts, necessary to accoDlJllod.3te MDBi
o Exploration of exception time reporti:ng, "paperl'Elss
reportinq, and automatic time-~eeping tools;
o Integration of impact measure recordkeeping requirements
with timekeeping requirements;
POraat tor 'tu4y S.asions
The Council study sessions are schedul~d for the regular Finance
Committee meetings from September 14 thr-ouqh December 14, shoW'41
below:
September 14
Septelllber 28
OCtober 12
october 26
November 9
November 23
December 14
Police
Finance, Planning
CAO's, rnforma,tion Resources~
Human Resources
public W~rks
Fire
utilities
community Services
Each study session presentation will take one hour. The Council
Presentations Subcommittee is developing standardized. cClMputer
generated slides for presentinq each department's proposed MDB
structure.. Departments will provide the Council 'With a report
prior to each meeting which summarizes the rationale for each MDB
model. Departments .. ill also provide detailed handouts on proposed
impact measures~ Because the time available at the stUdy session
is limited, all of this material will be given to Council Members
in advance, so that the focus of the study sessions can be on
questions about the proposals rather than formal presentations.
Staff will take the feedbaclc provided in the stUdy sessions and
revise MDB structures as appropriate~ I'mpact measures can be
finalized. as 'Well, after Council review~ staff ""ill then prepare
a prototype MOB document for the Council, without numbers, in
conjunction with the 1994-95 Budqet.
CMR.:463:93 7
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september 21
October
Kare!> 1994
April 1994
May H94
Late M!:y 1994
Septeaber 1994
october 1994
January 1995
Karch 1995
April 1995
April 1995
Res~ct£ul1y Submitted,
fA tLu<-Q ~ !Il\RRISON
Director of Financ~
a!R:46J:9J
1994-95 Budget Guidelines to Finance
COMmittee!
Final Guide1ines to Council
CIP document produced and distributed to
Council, Utilities Advisory commission
and Planning Commission
One-year 1994-95 Operatinq Sudget to
Finance committee
Budget Issues to COuncil
KDB prototype document to Council
1995-97 Budget Guidelines to Finance
C01!Wittee
Final Guidelines to council
Propose4 Municipal Croe Chanqes for
Implementinq MOB
capital Improvement Program dc.cument
produced and distributed (see above)
Budqet Issues to council
First HOB document for 1995-97
a
'.., :
Attachments:
Attachment A
AttacMlent 8
A ttac:Juoent C
CMR:463:93
Oeparts~nt Mission Statement
Mission Driven Budqetir..q Dfofinitions , Example
Mission Orive~ Budgeti~g Proce~s
9
ATTACHMENT A
[D~~ar!;ent Mission Statement)
I
J I I
Functional Functional Functional •
Area wi Area wi Area wi
Mission Mission Mission
Statement Statement Statement
----1"---I /-.........,
Major Major Major Major Major Major
Activity Activity Activity il.ctivity Activity Activity
1 I T "
I I I
Imp",' Impac! Impacl ImpllCt Impact Impact
Measures Measure Measures Measures Mr:a.sures. Measure.s
(l)~_ 0) __ (l)~_ (1)~_ (1) __ (1) __
(2)~_ (2)~_ (2)~_ (2) __ (2) __
(3) __ (3) __ (3) __ (3) __
~
(4)~_ (4) __
Functional Area
Functional Area
Goal/Mission Statement
Major Activity
Impacl Measures
ATTACHMENT B
MISSION DRIVEN BUDGETING
DEFINITIONS AND EXAMPLE
DEHNITIONS
A major area of seNice provision; this
is the level al which Council will
approve resources.
What are we trying to accomplish in Ihis
Functional Area? What is our purptlse
for service provision?
Groupings of programs perfonned
under each functional area; this is the
level at which we will maintain salary
and non-salary infomlation for impact
measures.
These are the quantifiable results we are
aiming to achieve in each Major Activity
area. They can be expressed as dollars.
percentages. efficiency/effectiveness
measures. etc. Workload measures
should be avoided. however.
EXAMPLE
Community Education!
Crime Suppression
To reduce the likelihood of citizens
becoming victims of crime through
public education campaigns and
proactive law enforcement in
targeted areas.
Bicycle TI,eft Program
% decrease in bicycle theft
% increase in lost/stolen bicycles
returned fO owners
..
..
@'J
.-1,
, 'i~l
"TlACIIllEKT C
Mission Driven Budgeting Process
• List all the activities you currently perform.
• Determine who your customers are.
• Agree to put out of your mind the way YOIl are currently organized.
• Divide the activities you've identified into primarylbasic functional areas.
• Develop mission statements for each functional area. A mission statement articulates
the purpose for the service that you're providing -what you want to accomplish. This
should tie in to your departmental mission statement (once it's developed).
• IdentifY major activities under each functional area. Major activities will be the level at
which salary and non-salary detail will be kept for impact measures, so it will be
important to keep major activities at a high enough level to avoid excessive
recordkeeping.
• Develop a mission statement fOT each major activity. (The major activity mission
statements should lie in to the Functional Area mission statement, as well as the impact
measures).
• Develop impact measures for each major activity. (The impact measures should lie to
the mission statements for each Major Activity.)
• Determine the department's mission.
•
. ! ;ex, '::'.'