COVID-19 has deepened many citizens’ relationships with their local governments. In the United States, citizens focus on both the response of the federal government and that of their local governments, which have had a great influence on the overall response to the pandemic in any given part of the country. In the short term, this focus has resulted in increased public confidence. Yet while times of crisis might momentarily build trust between citizens and government, local governments cannot count on this public trust to last for long without additional effort.
For example, while many governments saw public confidence rise at the onset of the coronavirus pandemic in 2020, a global survey by Deloitte shows that in January 2021, confidence in the government fell by 8 points, highlighting challenges to maintain confidence for a long time. periods.
This lack of confidence is not just a theoretical concept; it has real-world implications. This can directly affect a government’s long-term goals, including re-election and the implementation of policies that were promised in the election. Yet the confidence of citizens is strongly influenced by how governments use their tax dollars. That’s why the COVID-19 pandemic has highlighted the need for governments to rethink the way they plan and execute their budgets, with a new commitment to transparency. So how can governments change their approach to budgeting to create new layers of transparency and maintain public trust?
From reactive budgeting to proactive budgeting
First, state and local governments will need to adopt a more proactive strategy when it comes to improving budget transparency. The key is to implement an ongoing approach to financial management instead of just budgeting on an annual basis. Government organizations can start by preparing five-year and ten-year plans, emphasizing the impact of short-term decisions on those long-term plans. Ongoing budgeting is essential to ensure a strategic approach to public sector budgeting. This includes all of the activities that take place in a financial planning cycle: executing and reporting on financial plans, adjusting those plans, and repeating the process. This allows for more informed decision-making and more transparency when reporting.
Technology in the form of budgeting and performance management software can help automate many tedious administrative processes while improving operational efficiency. For example, modern budgeting software can facilitate a virtual chart of accounts while providing access to every team member, allowing for greater collaboration during the process, no matter where the team members are physically located.
Forecast budgeting and scenario planning can help make budgeting more efficient
Forecast budgeting and scenario planning can be used to understand and measure the long-term impacts of government budgets. Once implemented, government units can then forecast the next five to ten years while accounting for changes in other variables.
For example, the tourism industry has been hit hard by COVID-19 related travel bans and many cities that depended on tourism have lost important sources of income. In such cases, the forecasting method, coupled with modern collaborative budgeting software, is particularly beneficial, as governments can quickly pivot, bring their forecast deficit under control, and quickly make the changes needed to accommodate anticipated revenue losses.
Scenario planning in uncertain times
With the ongoing pandemic causing so much uncertainty today, it is impossible to determine the trajectory of the economic recovery. Therefore, when it comes to budgeting, scenario planning will be essential. It is essential in helping governments identify plans to implement in times of crisis or during more stable periods. State and local governments need to start developing their own scenarios as well as action plans based on each scenario, such as another wave of COVID-19 and its impact on the economy. Then, if a crisis arises, they will be ready to respond quickly and appropriately to any scenario.
Having these scenarios and subsequent actions at hand will be vital for economic recovery in the short and long term. They can help make more informed responses instead of making reactionary decisions that lead to unnecessary leaves, layoffs, loss of livelihoods, all of which can have devastating consequences for surrounding communities, as well as reduced labor costs. public confidence.
Continuous and agile budgeting
Today, the documented lack of citizen trust in local government clearly highlights the urgent need for governments to change the way they conduct financial planning. Implementing a strategic approach to government budgeting, which emphasizes scenario planning and continuous, proactive and agile budgeting, will help ensure increased transparency and ultimately improve performance. commitment and confidence of citizens.
Charlie Francis has over 40 years of municipal financial management experience in the public and private sectors, including 20 years of experience as a Chief Financial Officer (CFO). Prior to his current role at Questica, he held positions in the city of Colma, California, and the towns of Indian Wells and Sausalito, California, and Treasure Island, Florida. Francis has also taught government accounting and budgeting at the University of California, Riverside Campus, and has published extensively on municipal budgeting and finance.