1. Agency Strategic Planning and Service-Based Budget Richard D. Brown Director Department of Planning and Budget

2. 2 1980: Program Budgeting 1995-96: Agency strategic planning and Performance Measures 2005: Service Planning & Performance -Based Budgeting Virginia’s budgeting system is evolving

3. 3 Previous Budget Structure Program structure Level of control Function Subfunction Program Subprogram Element Cost center Object of expenditure Central budget control (by fund, by positions) Agency budget control

4. 4 Previous Performance Budgeting Process

5. 5 The Task At Hand

6. 6 Why Change? A Mandate for Change HB2097(03) (affecting § 2.2-2681 - 2.2-2687) “… each agency shall develop and maintain a strategic plan for its operations ” defined in the legislation as “ the systematic clarification and documentation of what a state agency wishes to achieve and how to achieve it. The objective of strategic planning is a set of goals, actions steps, and measurements constructed to guide performance. ” HB1838(03) (affecting §2.2-1508) “ The Executive Budget document is to include a statement of “ major goals, objectives, and specific outcomes related to expenditures for programs ” in each agency. ”

7. 7 Process Design – Strategic Plan Service area structure is key: Generally, “service areas” are what agencies do for the citizen or for other agencies They consist of allocations of resources toward a specific objective Each service area forms the basic unit of both budgeting and of planning Principal objectives of these plans are: To provide agencies with a tool to assist them in self- management To give decision makers uniform and dependable data for budgeting and accountability To link state resources to results To eliminate current fragmented processes of strategic planning, budget development, workforce planning, capital planning, and technology planning

8. 8 Current Structure  Programs/Subprograms = Future Structure  Service Areas = Budgeting Accounting System Budgeting Accounting Strategic Planning Performance Measurement Activities = Strategic Planning Virginia Results Service Area Structure

9. 9 Current Programs/Subprograms Recommended Service Structure Proposed Services = “*”Current Activity Planning, Budgeting, and Evaluation Services (71500) Budget Development and Execution Services (715 02) Budget Development and * Budget Execution Services* Budget Development and Budget Execution Legislation and Executive Order Review Service * Legislative Review Service Performance Management Service Forecasting and Regulatory Review Services* Regulatory Review Service Program Evaluation Service * Program Evaluation Service Federal Budget Service Executive Orders Service Administrative Services (71598) Administrative Services *Support Service

10. 10 Budget Bill Display

11. 11 Process Design

12. 12 Agency Strategic Plan Content

13. 13 Legislators X objectives and measures submitted to DPB/VaResults X objectives and measures submitted to DPB/VaResults BUDGETPROCESSBUDGETPROCESS BUDGETPROCESSBUDGETPROCESS Program COVF Vision & Objectives Guiding Principles COVF Vision & Objectives Guiding Principles Agency Selects X objectives and measures Agency Selects X objectives and measures Program DPB Data Repository DPB Data Repository Agency Strategic Plan Agency Strategic Plan Agency Budget & Performance Measures S E R V I T C I E D A R T E O A B S U T D R G C E T U R E S E R V I T C I E D A R T E O A B S U T D R G C E T U R E Service Area Budget Performance Service Area Budget Performance Old New Integrating Planning and Budgeting

14. 14 The Revised Budget System Will Foster Transparency By Linking Together Expected Results, Funding, and Actual Performance For State Government Service ProductContents Agency Strategic PlanEstablishes strategic and operational plan for the agency and its service areas Service Area PlanArticulates expected results (objectives) for each service area and defines performance criteria to measure progress toward expected results (sets baseline and target data for results). Budget BillAllocates funding among the various service areas of state agencies Budget DocumentBrings together and begins to explain relationships between expected results and proposed funding in the budget for service areas and state agencies Budget ExecutionAccounts for actual spending by service area and monitors accomplishments and results though reporting system for performance measured data.  The Service Area is the link between all of the above.  It is the common unit at which strategic planning, funding (budget), and performance information (results) is presented.

15. 15 General Planning Submission Calendar Agency Plans are submitted to Secretaries / DPB in mid-summer (consistent with base budget) Plans are updated in September to ensure consistency with budget decision packages Plans are updated in January to ensure consistency with Governor’s submitted budget (Dec. 20) Plans are updated in May to reconcile with Appropriation Act (General Assembly action, veto session, etc.)

16. 16 Process Design

17. 17 The Council for Virginia’s Future Impaneled by Code of Virginia 2.2-2684 to advise the Governor and the General Assembly on the implementation of the Roadmap for Virginia's Future process, which is: –developing a set of guiding principles that are reflective of public sentiment and relevant to critical decision-making; –establishing a long-term vision for the Commonwealth; –conducting a situation analysis of core state service categories; –setting long-term objectives for state services; –aligning state services to the long-term objectives; –instituting a planning and performance management system consisting of strategic planning, performance measurement, program evaluation, and performance budgeting; and –performing plan adjustments based on public input and evaluation of the results of the Roadmap.

18. 18 Long-Term Objectives for Virginia The Council on Virginia’s Future has articulated eight long-term objectives for the Commonwealth. These objectives constitute the backbone for all executive branch planning and budgeting activities. All agency plans are reviewed to ensure that agency missions, goals, and objectives align with one or more of these statewide objectives.

19. 19 Long-Term Objectives for Virginia 1.Be recognized as the best managed state in the nation. 2.Be a national leader in the preservation and enhancement of our economy. 3.Engage and inform citizens to ensure we serve their interests. 4.Elevate the levels of educational preparedness and attainment of our citizens. 5.Inspire and support Virginians toward healthy lives and strong and resilient families. 6.Protect, conserve, and wisely develop our natural, historical, and cultural resources. 7.Protect the public’s safety and security, ensuring a fair and effective system of justice and providing a prepared response to emergencies and disasters of all kinds. 8.Ensure that Virginia has a transportation system that is safe, enables easy movement of people and goods, enhances the economy, and improves the quality of life.

20. 20 Agency Plans: Mission Statement The mission is a statement of an organization’s purpose and the legislative intent for the agency. A mission statement should be broad enough to provide organization-wide strategic direction, yet specific enough to communicate the reason for the organization’s existence to those not familiar with its work.

21. 21 Mission Statements An effective mission statement should meet the following criteria: It is clear, concise, and realistic. It can be understood by a wide audience of the agency’s constituents. It reflects the agency’s mandates. It identifies the basic needs and distinct problems that the agency was designed to manage. It serves as the foundation for agency direction. It acknowledges the expectations of the agency’s primary constituents.

22. 22 Agency Plans: Vision The agency’s Vision is a concise declaration of the direction that an agency intends to take in the preferred future. It is a description of the ideal future state of the organization. A vision statement describes the organization at its best, i.e., where the organization intends to be in the future or where it should be to best meet the needs of stakeholders. An effective vision statement should meet the following criteria: It is not bound by time. It depicts high-level and continuing purposes of the agency. It can be directly related to the agency’s mission and describes how the agency will operate as it fulfills its mission. It serves as a unifying foundation for the overall agency plan and service area plans

23. 23 Agency Plans: Values Values are the principles that govern behavior and the way in which the organization and its members conduct business. It is optional to include values in the agency strategic plan. Examples: Customer focus Integrity Continuous Improvement Personal Accountability

24. 24 The Executive Progress Report Current Performance Productivity Major Initiatives and Related Progress Virginia ranking Customer Trends and Coverage Future Direction and Priorities Impediments

25. 25 Background Information Overall, the Background Information section summarizes key information for reviewers and decision makers, and describes the overall environment in which the agency operates. This section explains and identifies: Why the agency exists Who the agency it serves What goods, services, or information the agency provides for its customers The partners and resources it uses to accomplish its mission. Contents: Statutory authority, Customers, Partners, Products/Services, and Resource Summaries (HR, Financial, IT, Capital Investments)

26. 26 Goals This section of the plan consists of the following elements: Required: Goal Goal summary and alignment Optional: Objectives, Measures, and Strategies Measure Information, including measure type, frequency, data source, calculation methodology, baseline, and target Strategies

27. 27 Goals A goal is a broad statement of the long-term results needed to accomplish the organization’s mission and achieve its vision. Goals will reflect the priorities of the agency. An agency’s set of goals should: Address issues faced by the agency, its customers, and its staff Be actionable and lend itself to being measured, but is not quantified Stretch and challenge the agency to better performance Be realistic and achievable Be easily understood by the general public Provide a clear direction for agency action

28. 28 Agency Strategic Plan Content

29. 29 Service Area Plans: Background Information The Background Information section is comprised of the following elements: Service Area Description Alignment Statutory Authority / Mandates Customers – including Customer Base and Anticipated Changes Partners (optional) Products and Services – including Current Products, Factors Impacting Products, and Anticipated Changes Resources – including Financial Summary and an optional Human Resources Summary All of these elements (except the first two) can be “rolled up” to the Agency Plan level.

30. 30 Service Area Plans: Objectives and Measures Where “goals” can be defined as broad, general statements of the long-term results needed to achieve the mission and vision, “objectives” are a bit more specific. Just as goals move the agency toward achieving its mission, objectives move an organization toward its stated goals. Frequently, an agency must pursue multiple objectives to address a single goal. An objective could have one or more of the following key characteristics. Describes results needed to accomplish the goal Measurable Usually begins with an action verb Supports multiple initiatives or strategies Collectively addresses key business areas Do not get hung up splitting hairs on definitions. The focus should be on consistency and alignment between the objectives, goals, mission, and overall organizational (statewide) objectives.

31. 31 Service Area Plans: Objectives and Measures Three types of measures currently used in state system: Input Measure: A measure that describes the amount of resources used to conduct an activity, produce an output, or provide a product or service, usually consists of a single numeric value (e.g. $2,000 spent on conference fees,); a type of workload measure. Examples: Number of hours used to analyze a new software package. Amount of money invested/spent. Output Measure: A measure that describes the amount of work completed or output produced; usually consists of a single numeric value (e.g. 47 people trained,); a type of workload measure. Examples: Number of service calls closed. Number of customer calls received. Outcome Measure: A measure that describes the results achieved by an activity compared to the activity’s intended purpose, the extent to which a service or activity has impacted its intended audience. Examples: Problem resolution rate. Customer satisfaction rate. Employee retention.

32. 32 Keys to Developing Good Performance Measures Make them important. If an activity is worth doing, it is worth doing well. Measure those things that we are going to rely on to judge ourselves as managers and as an agency. After developing our measures, we should be able to look at the list and be confident that, if we excel at everything on the list, we have been successful in meeting the needs of our customers and good stewards of resources. Make them outcome oriented. This would seem self-explanatory, but is easy to overlook. There are five basic types of measures: inputs, which look at resources expended; outputs, which look at the number of iterations of work; efficiencies, which look at the cost per client served (input per output;) outcomes, which look at the results of the effort; and quality measures, which indicate the degree of attainment of excellence (as defined by the customer). Make them singular. Consider the reason you are performing a task -- what is it your client really desires? It’s not just the production of the budget. It’s the production of the budget within a given time frame, with a given degree of detail, with a given degree of accuracy, with a given degree of clarity, etc. What is most important? Base your measure on the most important dimension, or set up several measures to capture the whole picture.

33. 33 Keys to Developing Good Performance Measures Make them measurable. Qualitative data are fine for learning about customer needs and feedback, but quantifiable information is required to really determine the degree to which we meet client needs. Make them valid. If we want to be judged on, say, the morale level of our staff, don’t agree to measure this dimension using, say, attendance rates. The two may or may not be correlated, but the latter is probably not an indicator of the former. Make them reliable. We must be able to track our performance in a consistent way over time. Measures don’t need to require complex measurement techniques or statistics. They do need to allow us to come back at a later point in time and review performance data in the same manner we do today. Make them manageable. If data collection to support a measure is extremely cumbersome, look for another indicator of performance. If none exists, perhaps the outcome that needs to be measured is whether we can develop the necessary information sources prior to the next submission.

34. 34 Performance Budgeting Funding is in part dependent upon the case the agency makes for the effectiveness of its provision of products and services. Clear measures, reliable data, aggressive targets, and concise strategies are key to communicating with the council, the legislature, and the public.

35. 35 Performance budget process integrates budgeting, planning, and performance measurement Strategic Planning Budget Development Performance Measurement

36. dpb.virginia.gov