Top 10 GFOA Budgeting Best Practices

The Government Finance Officers Association (GFOA) recently hosted a Budgeting Best Practices webinar where they reviewed 35 recommended budgeting strategies. Incorporating GFOA best practices into our budgeting software is a top priority for ClearGov, so we were excited to attend and learn. 

In case you missed it, here are what we consider to be the top 10 best practices shared in the webinar (plus the full list of 35 at the end) and how you can apply each of these to your local government’s budgeting process. 

#1 – Establishment of Strategic Plans

Strategic planning is now a mandatory criterion for the GFOA Distinguished Budget Presentation Award, making it a priority for local governments wanting to submit their budget books for consideration.  

Governments should identify critical issues, problems, and needs as well as agree on a small number of broad goals. Then it’s recommended to create an action plan for tackling those goals and establish performance measures (also another mandatory criterion!) to monitor your progress.

The GFOA recommends the following best practices as part of strategic planning. You can read the full guidelines here:

• Use some form of strategic planning
• Include these essential steps of a sound process
  • Initiate the process
  • Prepare a mission statement
  • Assess environmental factors
  • Identify critical issues
  • Agree on a small number of broad goals
• Develop strategies to achieve broad goals
• Create an action plan
• Develop measurable objectives
• Incorporate performance measures
• Review or adopt the plan
• Implement the plan
• Monitor progress
• Reassess the plan

#2 – Long-Term Financial Planning

For governments focused on transparency, long-term financial planning fosters civic engagement and trust. Citizens appreciate when they can see how their tax dollars are being used many years down the road. It’s recommended to show projections and assumptions (and explain their significance) as well as provide a narrative summarizing your findings and adding context to the numbers.

The GFOA recommends the following best practices as part of long-term financial planning. You can read the full guidelines here. 

• Forecast 5-10 years into the future
• Consider all appropriated funds; don’t just focus on the General Fund
• Update long-term planning activities as needed

• Consider what content to include:
  • Financial environment
  • Revenue and expenditure forecasts
  • Debt position and affordability analysis
  • Strategies for achieving financial balance
  • Plan monitoring mechanisms
• Have an effective means to communicate information

#3 – Budgeting for Results and Outcomes

Budgeting by Priorities (BP) and including a budgeting process overview helps citizens understand the overall process and precisely how their tax dollars are being spent to achieve results in the community. Instead of starting with the prior year’s budget, governments that use this strategy leverage a bottom-up approach to allocate funds and resources to the services and initiatives that are most important to citizens.

The GFOA recommends the following best practices as part of budgeting for results and outcomes:

• Determine how much money is available
• Prioritize results
• Allocate resources among high-priority results
• Conduct analysis to determine what strategies, programs, and activities will best achieve desired results
• Budget available dollars to the most significant programs and activities
• Set measures of annual progress, monitor, and close the feedback loop
• Check what actually happened
• Communicate performance results

#4 – Performance Management

Performance management plays a key role in transparency. Local governments hold themselves accountable by allowing citizens to easily see if goals are being met – or not. The GFOA recommends that your performance measures directly relate to goals. This ensures that your decisions are more timely and accurate, and helps create a more dynamic and better policy making process. 

The GFOA recommends the following best practices as part of performance management. You can read the full guidelines here. 

• Ensure all information, measures, goals, priorities, and activities are relevant to the priorities and wellbeing of the government and the community
• Confirm that all information related to performance, decisions, regulations, and processes is transparent (easy to access, use, and understand)
• Ensure decisions and processes are driven by timely, accurate, and meaningful data
• Verify that practices are sustainable over time and across organizational changes
• Align goals, programs, activities, and resources are with priorities and desired results
• Establish a performance management process that helps to transform the organization, its management, and the policymaking process

#5 – Effective Budgeting of Salary and Wages

Because salaries, wages, and benefits make up a large part of the overall budget, it’s important to have a very clear picture of your personnel budget. Forecasting strategies that result in more accurate personnel projections help local governments maintain tighter control over their budget. 

The GFOA recommends the following best practices as part of performance management. You can read the full guidelines here. 

• Utilize a personnel tracking system
• Include vacancy adjustments
• Consider collective bargaining agreements
• Take into account the impact of inflation
• Identify your optimal staffing level
• Consider various compensation approaches
• Use personnel categorization to view how positions affect the operating budget
• Monitor your personnel budget throughout the year

#6 – Presenting Official Financial Documents on Your Government’s Website

A key component of transparency is presenting your official financial documents front and center on your website – don’t hide them. Put them on your homepage or finance department page, and make sure they are easy to open, easy to view, and easy to understand. 

The GFOA recommends the following best practices as part of presenting official financial documents on your government’s website: 

• Ensure the digital and hardcopy are consistent
• Ensure legibility (font size and page layout/direction)
• Include pagination and a table of contents
• Ensure the file size is not too large and is compatible with all software and web browsers
• Protect the document from unauthorized or accidental changes
• Place predominantly on your government’s homepage or finance page
• Include features such as zooming, bookmark, facing pages and search

#7 – Accurately Displaying Total Expenditures in Budget Presentations

Expenditures tend to be overstated or double-counted. If you do double-count items, include a footnote to explain what is net versus growth.

The GFOA recommends the following best practices as part of accurately displaying total expenditures in budget presentations. You can read the full guidelines here.

• Identify items that may be appropriated twice (e.g. interfund transfers, internal service funds)
• Determine whether there are statutory requirements or state and provincial guidance for reporting the total budget

• Determine the presentation preference for the organization
• Be transparent and consistent in presentation

#8 – Department Presentation in the Operating Budget Document

Paint a clear picture of each departments’ role within the government. Keep it brief, discuss the departments’ services, and include an org chart. As part of the strategic planning process, link performance measures to departmental goals or overall goals on individual department pages.

The GFOA recommends the following best practices as part of the department presentation in the operating budget document. You can read the full guidelines here. 

• Strive for brevity, clarity, and consistency
• Use graphics and charts for comprehension
• Include a description of services or functional responsibilities for each department
• Explain any challenges, issues, or opportunities
• Disclose any fees or charges that the department generates as revenue. 
• Include expenditures and an analysis in a broad manner
• Include an org chart or brief schedule summary of headcount
• Link performance measures to department goals or government-wide strategic plan

#9 – Capital Budget Presentation

A long-term capital budget presentation helps citizens understand how their tax dollars are spent on large projects and major expenditures, and how the costs are allocated in coming years. Include a narrative about your process for evaluating, prioritizing, and deciding which initiatives are adopted. 

The GFOA recommends the following best practices as part of the capital budget presentation. You can read the full guidelines here. 

• Have a multi-year capital improvement plan
• Define capital expenditure
• Place in a distinct section of the document
• Focus presentation on financial sources and uses for both upcoming budget year and for multi-year plan
• Communicate the decision-making process
• Identify projects as recurring or non-recurring
• Include detail for each major project

#10 – Budget Monitoring

Finally, if you’re not measuring it, you’re not managing it! It’s essential to have a process in place for comparing your budget to actual results. 

The GFOA recommends the following best practices for budget monitoring. You can read the full guidelines here.

• Decide what elements should be reviewed (revenues, expenditures, operations, capital, economic trends, performance measures)
• Decide how the elements should be analyzed (root cause, time frame, requirements, basis of comparison)
• Decide at what level of detail should the analysis be conducted
• Outline roles and identify who is responsible for each part of the analysis
• Identify tools or software needed for conducting the analysis
• Communicate the budget monitoring reports with internal and external stakeholders
• Take action on the reports to improve operational efficiency

Create Your Own Award-Winning Budget Book

The goal of these GFOA best practices is to help local governments prepare budget documents of the very highest quality. Governments that strive for greater transparency and civic engagement know that implementing these best practices into their budget books ultimately improves their relationship with their community. 

And hey, you could even win a shiny award for your wall! The GFOA Distinguished Budget Presentation Award Program exists to recognize excellence in government budgeting. To see a good example of best practices, check out the Digital Budget Book created by El Mirage, AZ that recently earned them the award. If you’ve never submitted your budget presentation for consideration, you can find all of the best practices and award criteria on the GFOA website.

If you have submitted your budget for award consideration, be sure you’re aware of changes to the criteria that went into effect in 2021. You can find a recap of those changes in our GFOA Budget Awards Criteria: 2020 Revisions eBook.