Page 7 - FY 2020-21 Blue Book Volume I
P. 7

FOREWORD


                                        CITY OF LOS ANGELES BUDGET SYSTEM

               The City's budget system is the means of allocating resources to meet our citizens' need for public services.
               The budget system used  by  the City has evolved over  the years to  incorporate innovations in budgeting
               theory.

               The most basic of the budget systems is termed  line-item, or object of expenditure, wherein planned
               expenditures are categorized according to the goods or services to be secured. The budget document
               states appropriations in line-item terms, such as salary and equipment accounts, and provides the basis
               for financial control during the fiscal year.  This basic system is essential, but lacks features to measure
               service levels.

               The City modified its budget concept to place  primary emphasis on services and their attainment by
               incorporating selected concepts of  program budgeting. Programs are defined within the framework of
               City departments, such as parking services provided  by the Department of General Services or traffic
               control provided by the Police Department, rather than interdepartmentally. This approach permits a higher
               degree of accountability for the attainment of services.

               The City additionally uses a functional budget approach wherein programs are grouped into functions
               and sub-functions (also referred to as activity groups and categories), to enable interdepartmental analysis
               at this higher level. This level of differentiation is determined on the basis of the services provided and not
               on the basis of organizational or geographic units. Currently, all of the City’s programs fall within one of six
               functions and 49 sub-functions, as shown in Section 6 of the Proposed Budget.

               The City’s performance budget element is based in departmental work programs. Performance budgets
               use statements of mission, program goals, and/or objectives to explain why the money is being spent. It is
               a way to allocate resources to achieve specific objectives based on program goals and measured results.
               Performance budgeting permits qualitative and quantitative performance measurements of services
               provided for a given amount of resources. As part of the City’s performance budgeting system, metrics
               associated with  each program are  included  in  the  budget  documents and used to evaluate progress
               towards achieving priority outcomes and to compare effectiveness between programs.

               The City’s current budget system  establishes the prior year as the baseline for decisions to add new
               services or to expand, supplement, or revise resources for existing services in the program year  (also
               known as incremental budgeting). This strategy streamlines the decision making process by focusing on
               changes. This approach, however, assumes that the current baseline-services are of higher priority than
               new or expanded  services that may be proposed. Moreover,  it assumes that the current baseline
               resources are appropriate to accomplish the service objectives. Therefore, the City incorporates certain
               elements of zero-base budgeting to allow for an examination of the historical baseline budget and staffing
               of existing programs that are proposed to be enhanced.

               Thus, the City's budget system may be described as a modified program budget, which incorporates the
               elements of line-item, program, functional, performance, and zero-base budgeting.

               The City's  concept of the budget system includes the traditional orientation  of budgeting as a plan  of
               financial operations, providing an estimate of proposed expenditures for a given period of time or purpose,
               and the proposed means of financing them.  Therefore, budgeting consists of a management program, a
               decision-making program, and  a financial  program. The City's  budgetary system  is a  constant and
               continuing flow of planning, decision-making, accomplishment, and control.  The development of the
               annual budget document is only one part of the system for each fiscal year and, despite its intensity of
               focus, should not detract from the continuing aspects of the overall system.
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