The intricacies of the financial budgeting process can require several months of work and become increasingly complex due to ongoing discussions with department leads and collection of budget data from external service providers. The Regional District of Nanaimo serves as an example of how adoption of a centralized budgeting software solution can significantly reduce the complexity and difficulty of municipal financial budgeting, which leads to increased efficiency and stakeholder buy-in.
Located on the eastern shore of Vancouver Island, the Regional District of Nanaimo is the fifth largest regional district in British Columbia with a population of 155,698. The Regional District was incorporated in 1967 and contains four incorporated municipalities and seven electoral areas. The largest community in the Regional District is the City of Nanaimo with a population of 90,504. A Regional District is a structure of local government that provides smaller rural communities with access to the most commonly needed services, such as water services and public transport. They are designed to provide services to communities that would normally not be able to afford them by pooling resources to pay for a specific service, thus lowering the cost of operation across the larger population. Regional districts also provide rural residents with an effective form of local government, while also representing municipal residents on regional issues. They are a common form of government within British Columbia and have a distinct funding model that differs from traditional municipalities in the rest of Canada.
Like all local governments, the Regional District of Nanaimo is responsible for delivering services to its residents while balancing fiscal priorities. The process of financial budgeting can be difficult and time-consuming, necessitating governments to explore innovative solutions. In 2014, the Regional District of Nanaimo procured and implemented Citywide Budgeting (formerly, Financial Managers Workbench); a software solution that significantly reduces inefficiencies and the time commitment required to produce the annual budget, while also creating opportunities for enhanced interdepartmental engagement around the budget.
“… because the Citywide Budgeting program was able to do much of the heavy lifting of combining independent service budgets, substantive efficiencies were recognized, and data reliability was enhanced. Staff no longer had to manually calculate each independent service entity’s budget to be rolled up into the Regional District’s master budget for the year.”
Municipalities can spend six months of the year on the budgeting process in order to properly prepare, analyze, and present the budget documents for the upcoming year. The intricacies of the process can require several months of work with multiple iterations of spreadsheets and continual manual updating of actual year to date and forecasts to year end. In addition, ongoing discussions with department leads and collection of budget data from external service providers adds increased difficulty to the process. Budgeting complexity can change depending on the structure of the organization, however, many of the principal issues are common across municipalities and regions. The Regional District is faced with many of the primary issues experienced throughout the budgeting process, such as:
While the Regional District looks to overcome traditional budgeting challenges experienced by a municipal organization, they also must contend with the complexity of processes and procedures related to being a regional district.
Within a traditional municipal structure, for each service provided by the municipality, an operating budget will be generated that details the expenses and revenues that pertain specifically to that service. In many cases, a capital budget is also generated for that service to detail the required capital investment to replace the capital asset at the end of service life. At the end of the year, municipalities may have services that do not generate enough revenues to cover the expenses that occur over the course of the year. These budget deficits are often mitigated by a general surplus account, which is made up of other service revenues, property tax revenue, or provincial and federal funding.
In some cases, the budget deficit of a service can be intentional as the service would not be sustainable otherwise – public transit systems are a common example as the operating costs cannot be feasibly recuperated from service charge increases. In the case of the Regional District of Nanaimo and all regional districts, the potential for service subsidization is eliminated as each service offering is independent from one another, such that a surplus created from one service cannot be used to offset a deficit created by another.
The Regional District engages in an even more complicated budgeting process for two overarching reasons. First, each service provided by, or funded through the Regional District has an independent budget; therefore, transfers between service areas are not possible. Budgetary flexibility is then limited, because a surplus in one service area cannot offset a deficit in another service area. The limited flexibility is also applied to the area rated tax collection system. Unlike most property taxes collected by a municipality, funding received through area rates is specifically allocated to a service and funds cannot be transferred between service areas.
Second, there is no single tax requisition for the Regional District. In a traditional municipality, tax requisitions can change based on changes to the tax rate. Therefore, within a traditional municipal structure, an increase to the property tax rate by two or three percent, will increase the tax requisition and fund the services required of the municipality. For the Regional District, tax requisition is dependent on the area and the applicable services provided to that area. Rates cannot easily change to address these deficits and forecasting the effects of proposed rate changes can be a complex and cumbersome process.
The implications of the budget process are widespread across municipal organizations. When staffing resources are limited, opportunities to correct budget data errors are scarce. Therefore, detailing the operational budgets of services provided by the municipality is reliant on the cooperation of service managers to ensure that the recorded information is accurate and up to date.
In the case of the Regional District, data accuracy is imperative as each service provided by or funded through the Regional District has an independent budget.
Manvir Manhas, Manager of Capital Accounting and Financial Reporting at the Regional District, explained the struggles of data accuracy and time efficiency before the implementation of Citywide Budgeting: “When using Excel for this type of budget process, there is a requirement to share and merge Excel spreadsheets across different departments. This creates large opportunities for error because the files might not merge properly, or the latest spreadsheet might not have been the one that was sent.” She emphasized that this process reduced data reliability, which in turn caused budgeting to become inefficient, time consuming, and tedious.
The former budgeting process also caused additional challenges in establishing and maintaining stakeholder buy-in as the majority of the financials were managed through an accounting software program and then extrapolated into Excel for analysis and budgeting functions. The Finance Department acted as the liaison between the accounting software and department managers to extract, condense, and provide the requested information resulting in delays for service managers to access the financial information.
In early 2014, in an effort to increase the capacity of the Finance Department and improve overall efficiency, the Regional District decided to investigate alternative budgeting software applications for enterprise-wide use. After a formal procurement process, the Regional District settled on acquiring PSD Citywide Budgeting Operating Plan.
Insight 1: Streamlining budget processes and collaboration provides significant efficiency and data reliability gains
When the Regional District acquired PSD Citywide Budgeting for their operational budget planning, their overall budgeting process changed only slightly. Data was collected in the same method as before and the accounting software housed all the actual financials for the Regional District. However, because the PSD Citywide Budgeting program was able to do much of the heavy lifting of combining independent service budgets, substantive efficiencies were recognized, and data reliability was enhanced. Staff no longer had to manually calculate each independent service entity’s budget to be rolled up into the Regional District’s master budget for the year. Instead, PSD Citywide Budgeting provided users with a centralized database that integrated financials from the accounting software and allowed for straightforward processes and calculations to take place, which has provided extensive time savings.
Insight 2: Better and faster reporting leads to greater staff buy-in
Gaining staff buy-in across an organization for budgeting and financials can be a difficult task. One of the indirect benefits that the Regional District noticed shortly after the implementation of PSD Citywide Budgeting was the ability to gain department manager buy-in by making the information accessible at a much earlier time. Manvir Manhas stated:
“A huge improvement from the implementation of PSD Citywide Budgeting was the time at which the budgeting information is available. When we used Excel, all of the same information was available, but it took months for us to condense and provide the various departments with updated reporting and information related to the budget. With PSD Citywide Budgeting, this same information is much more easily accessible at a much earlier time. This allows the departments to better plan as they have a better understanding of how much of the budget has been utilized. Departments can track actuals vs. budget now at any time and understand if they are on budget or if changes need to be made in order to keep within the budget.”
Since 2014, with greater access to financial information and budgeting data, staff engagement has increased. For example, the Regional District’s Recreation & Parks Services department manages multiple recreational facilities and their performance is measured and tracked based on key performance indicators as they relate to the investment cost per capita and hours of use available to the public. The PSD Citywide Budgeting program allows the Recreation and Parks Services department the ability to establish the investment costs and forecast the required operating expenses in order to provide the level of service desired by the Regional District.
Reporting for the Regional District has improved and become standardized. Manhas also commented on the gains in staff buy-in related to reporting. She explained that departments no longer have to worry about formatting their budgets and adhering to a specific format within Excel. Instead, much of the formatting is standardized for them, which ensures consistent and reliable information when producing reports. The reporting changes have also allowed the Regional District to produce financial reports in a timely manner to identify the status of the Regional District and each service on a monthly basis. “This was a tedious process when we relied primarily on Excel. Now, department managers have access to this information monthly and this has allowed significantly greater ownership of departmental budget performance.”
After the efficiencies were recognized upon the conclusion of the 2014 budget, the Regional District elected to acquire the Capital Plan module of the PSD Citywide Budgeting software.
Capital planning can become challenging for project managers when budgets span over multiple years. Keeping inline with the projected annual totals is increasingly complex based on the time delay of reporting.
When Citywide Budgeting Capital Plan was implemented, it provided project managers with the ability to compare budgets and actuals for each year of the project as well as the projected forecasted budgeting for future years. Manhas outlined how this has been helpful to project managers: “Project managers can use PSD Citywide Budgeting to understand if the forecasted budget is correctly allocated, or if adjustments need to be made. This allows managers to track their projects better.”
The Regional District indicated that they currently do not use the capital project prioritization feature of Citywide Budgeting Capital Plan. “We don’t utilize the project prioritization feature of Citywide Budgeting, but that is less to do with us having a different prioritization method and more to do with the fact that we provide 106 distinct services and the prioritization of their projects is independent from one another.”
The Regional District has made considerable strides towards maximizing efficiency given the limitations faced in managing so many individual budgets. Overall, the Regional District has managed to significantly reduce inefficiencies, maximize resources, and improve interdepartmental accountability for financial management. These achievements are significant and illustrate how adoption of a centralized budgeting software can act as an instrumental method to improve financial and operational outcomes within a municipal organization
Plan better and maintain operations within budget.