A survey sent to city and state auditors found that two-thirds of those surveyed use performance measurement (PM) systems. Generally, governments are satisfied with their PM systems in measuring inputs and outputs, but definitely less satisfied with measurement of outcomes and efficiency.
The complexity of today's business environment has created a greater need for public agencies to look beyond traditional financial measures when reviewing performance. Governments do not have earnings as a measure of their success. Because public-sector entities lack a profit motive, they must prove themselves accountable in other ways. The Governmental Accounting Standards Board's (GASB) Concepts Statement No. 2, Service Efforts and Accomplishments Reporting, states that assessing the performance of a governmental entity requires not only information about the acquisition and use of resources, but also the outputs and outcomes of services provided, as well as the relationship between inputs and outputs.
* Input measures are the volume of resources used or total expenditures consumed to achieve a given output.
* Output measures are the quantifying of goods and services performed or delivered to customers.
* Effectiveness measures are the indices that assess how well a program achieved its goals and objectives.
* Efficiency measures are indices that assess how much output was achieved per unit of input.
* Benchmarking is the collection of baseline data of key operations to assess organizational performance.
Linking Strategic Plans to PM
Numerous state and local governments have linked their performance measurement (PM) systems with budgeting and strategic planning. For example, Oregon uses strategic planning to develop a consensus among legislators, agencies, county and local governments, and other groups. Agencies are required to develop results-oriented performance measures, and selected agencies use performance information in conjunction with budget and accounting systems. Statewide participation in the strategic planning process helps establish benchmarks that reflect the state's values and priorities. This involvement encourages state employees to work across agency and program lines to achieve common objectives. Also, Minnesota enacted statewide strategic planning, with selected agencies being required to develop results-oriented performance measures. Minnesota also initiated a restructuring of its human resource management system, in part to support strategic planning and performance measurement reforms. This restructuring focused on evaluating employees on how they accomplished objectives that contributed to agency goals.
Governments using some form of performance measurement have a common objective: to make their governments and agencies more results oriented. Setting performance measures and implementing a system can be a difficult process. Since PM systems set up in various governments are relatively new initiatives, their overall success cannot be fully determined. This issue can present problems for governments wishing to establish a PM system. Increased pressure from the federal government as well as from private citizens will force more state and local governments to adopt PM systems.
Survey of States and Cities
The authors designed a survey to gather data from city and state auditors/accountants on "Extent of Use," "Satisfaction," and "Audit" of PM systems. A total of 105 surveys was sent in early 1998 to National Association of State Auditors, Controllers, and Treasurers (NASACT) members in all 50 states, Guam, and Washington, D.C. The second group surveyed consisted of city auditors in 193 cities, all of whom were members of the National Association of Local Government Auditors (NALGA). Cities surveyed ranged in size from under 25,000 people to more than 1 million. The responses received were predominantly from cities between 50,000 and 1 million residents. …