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Budget Dilemma Meets Fiscal Responsibility

A note for our readers: the views reflected by the authors do not reflect the views of ASPA.

minch mayBy Minch Lewis

Snow is piling up fast in a middle-sized rust-belt city. Alex, a long-term ASPA member and a dedicated manager in the public works department, just greeted the crew at the end of their shift. The question to deal with the unanticipated snowfall is over-time or outsourcing? Over-time is not politically popular; the City Council eliminated Alex’s over-time budget. But in Alex’s town, a contractor will do less and cost more. What is Alex’s fiscally responsible decision?

Fiscal responsibility is budget compliance:

The term “fiscal” relates to monetary resources. Citizens pay governments to secure public benefits. “Responsibility” implies a sense of duty and ethical behavior. The budget approved by the governing body sets the foundation for the use of taxpayers’ money. For governments, the budget is the law. So “fiscal responsibility” means budget compliance. There is little room for ethical management options outside the budget.

Budget compliance is linked to the financial management system:

The record of budget compliance is found in the financial management accounting system. Compliance is determined objectively by comparing the actual financial results with the budgeted plan. The financial management accounting system is the link between the budget and financial accountability.

The dilemma:

The public expects its administrators to be fiscally responsible. The ASPA Code of Ethics challenges officials to “advance the Public Interest” and to respect laws, while seeking to improve them to promote the public good. But the budget and financial management systems both have structural problems.

Budget system problems hinder fiscal responsibility:

  • Budgets are political documents and short on transparency.
  • The process mixes financing, lobbying, spinning and raw power.
  • The world changes, but budgets don’t change easily.
  • Budgets are short-term when a multi-year perspective is needed.
  • Legislative intent may not coincide with executive prerogative.
  • Budgets often ignore strategic questions.

So the budget you end up with is not always best.

Financial management system problems hinder fiscal responsibility:

So you can’t always count on the financial management system.

But the budget variance report trumps the problems:

With all their flaws, the budget and financial management systems still rule the fiscal responsibility day. The determination about fiscal responsibility is reported in the “Statement of Revenues, Expenditures and Encumbrances—Budget and Actual,” commonly known as the budget variance report. It is part of the government’s basic financial statements. The report itself is at a high level of detail, but for every variance, there is an audit trail that leads back to the invoice or time-sheet that crossed a manager’s desk.

A sample report can be found on Page 73 of the Basic Financial Statements for the City of Syracuse, N.Y.

Recommendations to improve fiscal responsibility:

Recognizing the issues, administrators can take proactive actions to improve the outcomes for fiscal responsibility by strengthening the budget and financial management systems.

1.     Own the budget.

Managers should have a comprehensive understanding of the department’s budget, its assumptions, political trade-offs and legislative history. Administrative staff should develop alternative routes to achieving the goals set by the budget. With a fuller understanding of the budget, a manager will be able to make the case for fiscally responsible budget decisions, both during the preparation and the implementation phases.

2.     Synchronize front and back office systems.

The financial management system should be taken more seriously. Front-line managers should reach out to the back office. The goal is to integrate their personal desktop tracking systems to the main-line systems. The latest trends in information technology recognize the value of both systems but call for synchronizing the data. So managers should work with the accountants and IT staff to obtain reliable real-time information.

3.     Ask accounting questions.

Managers can add the financial statements to their reading lists. They should search out the details for their functions and ask questions. This is the time to call on the accounting staff to get answers.

4.     Share management expertise with elected officials.

City councilors who are involved in the budget process should get “street-level” feedback, either directly or indirectly through the department hierarchy. That management experience should be transmitted to improve the public policies that are buried in the budget process.

5.     Build tactical communication.

A key tactic is to communicate outside the budget process. “All politics is local.” There is nothing more local than constituent services. And there is no better way to build a working relationship with elected officials than to satisfy their constituents. Public administrators should maintain active but neutral political communication.

6.     Be proactively engaged.

The public good should be pursued proactively. Budgets are planning tools that direct administrators to take specific actions. But everyone should follow the three-step rule:  Do it. Check it. Improve it. Those improvements can be incorporated into the budget process to achieve the public interest more effectively and more efficiently—more benefit and less cost.

7.     Above all, exercise professional judgment.

“Professional judgment” should be high on the priority list. It is a requirement for fiscal responsibility. Professional judgment will utilize the budget and financial management systems with all their short-comings to achieve the highest degree of public interest in daily decisions. To emphasize the importance of professional judgment and its ethical context, a fiscally responsible administrator might frame a copy of ASPA’s Code of Ethics , or the Athenian Oath.

The conclusion:

After a short ethical deliberation that pits budget compliance against public benefit, Alex sends the crew home and picks up the phone to call the approved snow-removal contractor. Then she resolves to take a much more proactive role in the future to promote “fiscal responsibility” by strengthening the budget and financial management systems.


Author: Minch Lewis is a part-time instructor at Syracuse University’s Maxwell School. He served as the elected city auditor in Syracuse, N.Y., for nine years. He has extensive experience nationally in developing and installing financial management systems for the affordable housing industry. He earned his master’s degree in Public Administration at the Maxwell School. He holds a certificate from the Association of Government Accountants as a certified government financial manager.  He can be reached at [email protected].

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