Budgeting for Government Agencies: 4 Considerations

Two woman working on government budgeting on laptop

Local governments play a critical role in addressing the social, economic, and public health challenges endemic in their communities. By enacting outcome-focused policies and allocating funds to high-impact programs, decision makers can create an infrastructure that supports a high quality of life for 
their residents.

One of the most impactful ways government leadership can enable these goals is by understanding that budgeting is about more than crunching numbers and moving money. Done well, a local government budget is a strategic plan that drives growth and ensures the community’s highest priorities receive the resources they need. 

Unlike traditional line-item budgets that base new budgets on past decisions—regardless of their continued relevance or success—taking a priority-based approach to preparing and implementing your budget puts current community needs and requirements front and center.

Let’s take a high-level look at how a typical government budget is prepared, then take a deeper dive into four key considerations that help these budgets evolve into strategic plans.

The Government Budget Preparation Process

Of course, every local government will tailor its workflows to match its specific needs, but in general, the budget preparation process can be distilled into four main stages: 

1. Preparation

Before a single dollar can be allocated, the budget office must identify the budget objectives and collect requests from every department. The chief executive or city manager and finance team review the requests before drafting a proposed budget and submitting it to the local legislative body. 

2. Approval

Once in the hands of the legislative body and relevant oversight committees, the proposed budget is reviewed in detail and released for public hearings, input, and review. Once the feedback period closes, the local legislature will approve the final budget and prepare for implementation.

3. Implementation

The new budget goes into effect at the start of the fiscal year. Department heads initiate their approved budget spending, appropriations for services are released, and budget monitoring systems are activated to monitor spending.

4. Auditing and Reporting

In the final step of the annual budgeting process, an independent auditor examines the city’s financial records and accounting systems to determine whether the local government’s financial statements accurately reflect its real financial state and operational conditions.

Download the 2022 Annual Impact Report to explore the future of government  budgeting. >>>

Four Things to Consider When Drafting a Local Government Budget

With the stages of the budgeting process in mind, let’s go a step further and explore how that budget becomes a strategic plan when you factor in community input and priority-based decision-making.

1. Resident Engagement

Government leaders don’t always have a finger on the pulse of what’s important to the community. The most effective way to align the budget and community needs is by engaging with residents and soliciting their input.

Be prepared to approach this in a variety of ways to maximize feedback. For example, you may try public information sessions, surveys, roundtable discussions, or even gamifying data collection to gather valuable data from residents about the community’s priorities.

2. Community Adoption

Once you know what programs and services your community wants and you have allocated funds to support them, the next step is creating accountability at the top to ensure the resources are accessible to those who need them.

However, community adoption isn’t guaranteed. If a program or service doesn’t bring the level of value to the public that you anticipated, be sure to address it during the next budget review cycle. After all, if something isn’t working, why keep funding it?

3. Data-Backed After-Action Reviews

After-action reviews are essential in a successful priority-based budgeting strategy because they allow the budgeting office to compare the intended outcome with the actual outcome of a service or program.

This data makes it easier to align budget decisions to the true cost of providing a service and how much each service contributes to the priorities identified in the strategic plan. As we discussed above, sometimes community input differs from community adoption, and a robust feedback loop helps keep everything in check.

4. Communication and Transparency

Although local government financials are public record, many residents don’t know where to find that information easily. This perceived lack of transparency can breed distrust in how government funds are being used. 

Publishing regular financial updates in a visible, publicly accessible forum will give residents insight into how budgetary funds are allocated. This information also reassures the community that their voices were heard and their input was put into action.

Priority-Based Budgeting in Action

Creating an effective budget for government agencies requires synchronizing many moving parts, including leadership, legislature, finance teams, and the community. When the objectives, funding, and priorities of each component align, your community will reap the benefits of highly targeted services, well-funded programs, and impactful outcomes.

Want to see priority-based budgeting in action? Read some of our success stories in the 2022 Annual Impact Report.

Discover how organizations of all sizes benefit from priority-based budgeting

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