If your grandma was anything like mine, you remember her cooking skills with a mix of pride and curiosity. She never used recipes, but somehow she pulled together tasty and satisfying meals with a pinch of this and a pinch of that.
If you asked her to teach you how to make her delicious dishes, she would leave you with more questions than answers. Which measuring spoon best represents “a pinch”? Why does she use radically different amounts of powdered sugar when baking similar pies?
Surprisingly, your grandma’s kitchen has a lot in common with managing business systems in the public sector: Organizational leaders have access to an overwhelming amount of data, and it’s up to them to decide how much to use and when to use it.
Gathering the Right Ingredients
The first challenge outside the kitchen is overcoming the pressure to measure for measurement’s sake. Could you imagine what dinner would taste like if your grandma had to use every ingredient in the pantry for every meal? That’s essentially what happens when government organizations are overflowing with data and unsure of how to prioritize it.
To bring order to your disorganized pantry of data, you must learn to consolidate your collection and understand how specific data and key performance indicators relate to specific outcomes. Tapping into the benefits of a cloud-based business intelligence solution can make this process a breeze by providing you with tools that easily determine and visualize your most pressing KPIs and boost your operational performance management.
As you sort through your operational pantry, here’s a look at some of the key ingredients that will grant you visibility into the following common goals:
1. Understanding Fiscal Health and Sustainability
One of the largest challenges facing municipal department heads and decision makers is that they often don’t have timely and accurate access to their budget and funds available. Many jurisdictions have to wait on hard-copy reports distributed throughout all the offices of an organization, and in many cases, the department leaders keep separate, offline reports to keep up with their available funds.
To understand a department’s fiscal health and sustainability, track the KPI for funds available as a comparison of each department’s current budget minus all encumbrances and expenditures to date. This metric is reported as a percentage of unspent (or, obligated) dollars over total budgeted, and that remaining percentage can be used as a KPI.
Key Ingredients: Available funds and budget dollars remaining (with the inclusion of encumbrances and obligations).
2. Supplier Contract Management
Accurate tracking of all open and closed contracts with a jurisdiction is important for two reasons: First, because a jurisdiction may have limits imposed on how many contracts (or the total value of contracts) it has with a single organization; and second, because it may be required by statute to contract with minority-owned organizations. Having a clear view into your supplier and spend data will drive efficiency in operations and better negotiations that result in cost savings.
For example, if a jurisdiction sets a goal to assign 10 percent of contracts to minority-owned businesses, it is crucial that it tracks every contract (and their dollar amounts), calculates the percentage of different types of businesses, and reports this calculation as a KPI.
Key Ingredients: Number of contracts and dollar values by vendor type.
3. Fund Balance Reporting
All local governments must set aside emergency funds for extraordinary circumstances, such as natural disasters. But while it may be clear that these funds are not for daily expenses, governments require operational intelligence to know when they should and shouldn’t tap into them — and, if the balances get large enough, how much of those funds could be diverted from disaster contingencies to other extraordinary uses like settling debts.
Cloud-based reporting solutions can help with creating and managing this KPI, pulling together operational overviews, and providing the government with automatic reconciliation of liabilities, calculations of fund balances in real time, and projections of cash flow based on past data. Each function provides a key bit of intelligence that can help an organization identify when to use its cash reserves.
Key Ingredients: Actual and projected unrestricted fund balance, and total annual budgeted expenses.
4. Comparing Revenue Budget to Actual Revenue
Keep in mind that property taxes, sales taxes, income taxes, fees and fines, and other revenue sources need to be tracked separately according to their own collection schedules. Any disruption in collections can cause a budget shortfall for the current fiscal year. For example, property taxes are collected once a year, while sales taxes are collected monthly. Combining these revenue sources into one single comparison could skew the KPI dramatically.
Key Ingredients: Budgeted tax revenue and actual collected revenue by collection period.
5. Debt Affordability
Debt affordability is a jurisdiction’s future ability to pay down debt. Even though this metric is difficult to evaluate because future financial resources are closely linked to growth in a jurisdiction’s tax base, its population growth, and other factors, it’s a crucial part of priority-setting because it’s entirely possible for a government to take on a debt it can’t repay while staying well below its legal debt limit.
Key Ingredients: Local economic factors and projections such as population, employment, property values, sales tax projections, and financial liability status obtained and analyzed by a qualified financial provider.
6. Public Pensions Tracking
Pensions are front and center in the ongoing fiscal dramas of many jurisdictions, but they’re only part of the story. Many governments also offer their retirees subsidized health insurance, life insurance, and other benefits without setting aside the resources they’ll need to cover those other post-employment benefits.
Actuarial accounting firms typically calculate public pension funding, but policymakers need to understand how these costs are incurred and measured, and what they can do about the long-term viability of the programs.
Key Ingredients: Actuarial accounting analysis and financial liability status.
7. Workforce Planning
Many organizations are facing major changes to their workforces. Statistics show that the public sector’s employee base is rapidly aging, with many people set to retire within the next five years. Between this and the fact that organizations will also face budget cuts, there is more pressure than ever to focus on workforce succession planning — looking not just at the numbers, but also the shape of the workforce and how it integrates with strategic planning and budgeting.
Key Ingredients: Strategic priorities, outcomes, budget, retirement eligibility, demographics by department, plus performance and talent.
The sheer amount of operational data being collected requires every organization to manage millions of possibilities. But with a careful mix of ingredients and a cloud-based solution that manages your data, it’s possible to track and achieve unique KPIs and create outcomes that are organizationally and strategically aligned.