Navigating the Budget is More than a Numbers Game

The ultimate goal of budgeting is to ensure reliable operations for the coming fiscal year, so that the mission can be achieved. Of course, budgeting is a continuous cycle of analyzing, adapting, and trying to get ahead of changes and challenges. All too often, it’s also about making hard choices to prioritize “must haves” and “nice to haves” while making certain that end users get the services they require.

Each of us have more than 20 years of hands-on experience as Army and Navy comptrollers, so we know that agency budgets are affected by any number of factors, from political priorities to leadership changes to new regulations. In an ideal world, we’d know our precise budget at the beginning of the fiscal year, and appropriations would support agency spending until the end of September.

The reality, of course, is that unforeseen challenges, whether from standing up new programs to dealing with the continuing impact of COVID-19, require reevaluating expenditures to support new or revised missions.

It’s Always Budget Season

The budgeting process “officially” runs from the time we receive the comptroller guidance published in May, until budgets are submitted in the fall, but the truth is that reviewing the budget is a year-round obligation. We have to know our “must pays” as well as how much it has historically cost to run a department or location, and need to know what costs have changed radically. From there, we have to prioritize everything else.

Understanding the Trade-offs

Execution drives budgeting as much as budgeting drives execution. At the Defense Health Agency (DHA), where we support the financial operation division, the agency balances the needs of Military Treatment Facilities (MTFs) with headquarters’ requirements to support the entire military health system. Of course, situations are always in flux—machines break, costs increase, personnel come and go. When local or regional circumstances shift, HQs must pivot creatively to ensure that essential services are not interrupted.

Changes in administrations and governance often mean changes in top-level priorities. But how long it takes to appropriate the funds can vary wildly, and when “missions without money” happen, it’s up to the financial team to ferret out internal offsets. This is where budgeting becomes an art as much as a science.

The key to finding those offsets is a thorough understanding of not only the requirements but the impact of the funding. Can something that’s currently done in-house, such as medical imaging, be outsourced? If so, what would be the impact on costs—could we initially save a substantial amount by eliminating the equipment and facilities expenses, but end up spending even more by outsourcing? It’s crucial to understand all of the effects of such a decision, especially on the availability of a necessary service.

Accurate Data is Essential

Without accurate, timely, complete data, the entire process is hampered. Systems such as GFEBS, which most of the Army and Navy use, deliver updated data in real time, while other systems may take until the next day to refresh. But one organization might register cleaning services in a different category than another. Part of the analyst’s job is to learn how each operation is tracking their expenditures so that costs can be correlated and compared.

Typically, agencies will see under-execution at the beginning of the fiscal year and an end-of-year bump-up because of reprogramming—and new programs can add unintended consequences to the process. A prime example is the Military Health Service’s Genesis program. Genesis is designed to be a centralized electronic health record system, but it doesn’t yet integrate with the existing system that drives performance-based accounting.  This means that financial analysts may only have access to older data, which can’t help them validate assumptions for buying decisions—this leads to a ripple effect on planning for future purchases.

Understanding the costs of change is a critical part of the budget planning process. It’s also a key reason to bring in specialized support.

Industry Partner

A skilled industry partner can help improve fiscal discipline by working with the agency’s in-house team to understand the entirety of costs as they relate to strategic priorities. As business processes change, understanding the requirements and looking for efficiencies becomes more complex. Your industry partner must be able to support and guide you through every step of the journey.

That’s the value MDC brings to our agency partners. We can identify gaps and see areas of opportunity. Much of the planning involves rightsizing the agency’s capabilities, but a lot is also restructuring when budgeting takes place. Even something as simple as adjusting periods of performance can lead to savings as a fourth quarter (Q4) strategy. Reducing your current fiscal year liability to accommodate budget constraints can yield a two-fold benefit, as the current year costs are reduced, and the follow-on renewal no longer starts in Q4, which improves execution and projections for the next fiscal year.

Your industry partner’s role is to help you find the most effective use of the limited budget you have. To do that, it requires not only an understanding of finance, accounting and applicable regulations, but the business that your agency is in. What makes MDC a valued, trusted partner is our knowledge of your industry. We understand healthcare and MTFs, workflows, IT and how the private sector interacts with agencies. That means we speak the language of everyone in the value chain and have the experience of dealing with complex processes and budget cycles.

MDC’s expertise in financial management and budgeting within government agencies means we’re ready to support you from day one, with original thinking and expert insights that can help your agency maximize value from your budget while delivering the service your stakeholders need, expect, and deserve.

Learn how MDC can help your agency navigate even the most complex budget process.  Contact us today.

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