It is budget season again at Lake County, and it is time for me to probe into the merits of the existing budget "process".
This analysis will focus on "workload measurements" for the Departments in Lake County, and how they should affect budget decisions by the Board.
My philosophy is that local government should practice the same type of management techniques as business.
One of those practices is the responsibility to ensure that government tracks and measures work and project performance like business.
This is important because Government is a monopoly and is mostly not...
subject to competition to keep costs in line. Essentially, Government figures out how much tax and other revenues (grants, loan proceeds) they will get, then they allocate it among various departments to spend.
Corporations usually have at least TWO sets of books. One is the financial statements in required formats if they issue stock, which are subject to financial audits by external CPA firms. The OTHER set of records are a revised version of the same data, but presented in a cost accounting format where ratios are run (such as cost per service) comparing the resources (dollars, manhours, etc) to the amount of units produced. This helps ensure costs do not get out of control, and helps ensure the firm is competitive in costs vs their competition. These cost accounting methods are provided to ALL accounting majors in their 2nd or 3rd year of college, but it seems that people who slept through those classes are the ones hired by government agencies.
There is no such cost or performance tracking mechanism for government. Their "financial statements" follow an arcane system called "fund accounting" that is only understood by fund accountants and Merlin the Magician. Then the government will report expenditures in a "line item" budget report that might compare year to date spending and revenues to the original budget or plan. There are no operating ratios, percentage ratio analysis or separate management reports that clearly identify business efficiency.
So, how does the Lake County budget and accounting system compare to the business type systems described above (very briefly - I have not even started to discuss labor efficiency analysis and other methods)?
Well, they are not even close. Lake County uses a line item fund accounting report method where they go over one fund at a time and listen to forecasts of possible revenue, then approve line item totals for various activities. It is amazing to watch body language at Board budget sessions, because several Board members will not be able to identify the total spending by department since revenues and related expenses are split among several funds, and they get frustrated (if they even understand it).
Then, does Lake County use some type of cost accounting or resource performance ratios to track how EFFICIENT or how EFFECTIVE a department is at providing a service.
Not really.
Lake County DOES report some "workload measurements" in the annual "Operating Budget by Department" section of the annual printed budget (and you can get an electronic version HERE ). Hardly any of the workload measurement sections described the total cost or unit cost of the services listed on a line. But, they just show activity statistics, such as these examples from the fiscal year 2008-2009 budget report:
- Economic Growth Dept: 30 "industry visits" without specifying the RESULTS for those visits. Thus you don't know whether the visits were effective, or should be discontinued.
- Economic Growth Dept: Number of Jobs Paid for by JGI Funds (incentives): 25 - but then later the newspapers reported those figures (or similar ones from the MOEDC ) were not correct, and the report did not describe the cost per "job". Couldn't we have spent the funds on two WELL paid business recruiters rather than blow it on subsidizing 25 jobs, which in turn put other businesses at a disadvantage?
- Facilities management completed 3,854 maintenance work orders, but did not specify average cost in dollars or labor hours for completion, average time for start and completion (i.e. backlog hours). Were the maintenance orders in line with estimates, or did they even prepare estimates first to compare to actual figures.
- Environmental Utilities: Field Analysis Performed by the Water Resource Lab - 8,762 - but no cost ratio or description of which are mandated and which are "nice to have" services. If they don't provide an accurate total cost and unit cost, the Board cannot evaluate a desirable trend to reduce unit costs over time. Thus there is NO EXPECTATION to track efficiency of services and expect a trend of reduced average costs over time.
- Facilities Development & Management - has 46 positions and a budget of $6-8-million. They are organized into 7 divisions, including Facilities Maintenance which reported 3,902 preventative maintenance work orders, but no average cost per order in dollars or labor hours. BUT, this is the first department to show time budgets, such as 95% pulled by the "due date", and other that were 5 or more days late. I assume these are routine, scheduled work orders. Since they do not list the total cost or work order average cost, you cannot identify improvements or lapses in efficiency (which should be measured monthly against a standard). NOW, there were only about 6-8 workload measurement lines for the entire Facilities Dept. This would lead me to question just what the rest of the staff does if they don't even measure it for the budget report. What did we actually get for $6+million?
- NO comparison of service volume to fees collected - Animal Services (part of the Public Safety Dept) provided 17,625 animal vaccinations, but no average cost or offsetting fees are shown in the statements. Are all of these FREE, or if their is fee income, how do you tell if the cost was higher or lower than the total fees collected?
Conclusion:
Lake County Government is a monopoly and does not use cost control methods anywhere like businesses. Board members should NOT approve continuing budgets without ensuring businesslike cost tracking ratios (aka "Workload Measurements") are implemented for every department on a monthly, quarterly and annual basis. We don't know if the Board has authority to require the same of the Constitutional officer (Sheriff, Court Clerk, etc) but they should also adapt such procedures.
There are examples on the internet of much more well developed "program budget" formats used by other government agencies, and the County should know what they are and be moving towards better cost management by adopting some of them.
Vance Jochim
www.FiscalRangers.com
