At the 2013 Summmit of Leading Practices, the Center for Priority Based Budgeting presented five key actions that all local governments should be doing to ensure the "fiscal health" of their organizations.  These actions are critical for all of us to do and include:

1.  Practice spending within your means.  Instead of asking your staff "what do you need in terms of expenditures for next year's budget,"  make sure that staff  understands the financial resources you will have available in the coming budget year and make budgetary decisions to work within those resources.

2.  Establish and maintain a reserve.  It is critical that local governments put money aside for unanticipated  expenditures, emergencies, or that proverbial "rainy day."If we are fortunate enough to be able to establish a reserve, make sure that you identify the appropriate amount and indicate to the public how those funds will be used if necessary.  It is just good business practice, but sharing information on it will also help you to avoid questions and concerns from your citizenry.

3.  Understand the variances in  anticipated/budgeted revenues/expenditures and those  collections/expenditures that actually occur.  Too often, we simply are "happy" when revenues are higher than anticipated or "sad" when our revneues projections miss the mark.   You should understand why there is a difference, not just that there was a difference in anticipated revenues or expenditures and those that are actually incurred.   Understanding why the variance occured is critical to fully understanding your financial position in both the short and long term.   

4.  Be transparent about your true cost of doing business.  You should fully understand the cost of providing any service.  That will allow you to make quality decisions as to budgeting and in meeting the goals of the community.  If you have a recreation program that is supported by your public works or public safety staff and you are not factoring those costs into the cost of the program, you don't fully understand what the program is costing you.  Further, you are also not accounting for all the services being provided by public works or the safety forces and are overestimating their costs. We need to understand what programs and services cost, especially those that "special" programs serving a small segment of the community. 

5.  Conduct economic analysis and long term planning.  A big part of effective budgetary planing is to understand the environment around you.  Such an "environmental scan" will help you to understand the "economic factors" that are impacting not only your community, but neighboring communities and  your region as well.  If a nearby metropolitan city is experiencing rapid decline, the impact of that will eventually impact suburban communities.  Understanding that and appropriately planning for it will better position your organization for the future.

The Center for Priority Based Budgeting is a leading practice service provider for the Center for Management Strategies.  It has identified these types of activities as "essentials" to maintain fiscal health.  It is critical work that should be undertaken before proceeding to the Priority Based  Budgeting model which can assist your organization in clearly defining goals and objectives, then lead it in a process that prioritizes spending to align with those goals.