Government Efficiency and Accounting Systems

Yes, It’s Boring but Important

According to a quick internet search, I found that Americans do not like talking or thinking about accounting systems, finding them horribly boring and difficult. Some would prefer a dental root canal to reading about accounting systems or “number crunching” in general. I would surmise that some loyal readers of this blog will not get past the title. Nevertheless, this past month many Madisonians have been filled with fear and loathing after opening up their latest property tax statement or been advised by their landlord that their rent must increase to cover property taxes. That’s a reason to think about accounting systems.

Local Government Financial Responsibility and the Importance of Efficiency

We could spend hours and pages complaining about our state legislature’s devotion to reliance on property taxes for schools and municipalities, about why the 2026 elections are critical to changing the composition of the Assembly and Senate, about why our entire state needs a fairer revenue sharing formula and a local sales tax. That doesn’t relieve our county, city, and school governments from maintaining financial integrity, budgetary prudence, and operating efficiency.

Some of the big decisions affecting our property tax burden are made at the Madison Common Council, Dane County Board of Supervisors, and school boards – adding or deleting services or deciding on the timing of new facilities and added manpower to support a growing population. There is a range of opinions about whether the City of Madison made the right decision in delaying the adoption of police body cameras, adding the eastside Reindahl Imagination Center, contributing to the multi-decade Madison Lakeway project, and contributing operating funds to the new men’s shelter or even adding another ambulance.

Maintaining or improving efficiency and productivity is at least as important. Measuring efficiency and discovering opportunities to improve efficiency without degrading services is not easy. The hard work has to be done by staff, including front-line employees, and, to some extent, by boards, commissions and committees. The good news at a high level is that the City of Madison is becoming more efficient. One measure that avoids the bias of inflation is the ratio of city employees to the population. In a city that allows bureaucratic bloat, the number of employees per 1,000 population would be rising. In Madison, the ratio is falling. If that ratio in 2014 stayed the same, Madison would have at least 217 more employees today.

For several years, Madison has been leaning on efficiency in the annual budget. This has been done by first computing the “cost to continue” current services, then asking departments to propose a budget that cuts that cost by at least 1%.

Hunting Efficiencies and the Accounting System – Performance-Based Budgeting

State statutes establish many of the requirements for local government accounting systems. Mandated accounting controls on individual transactions help identify human errors and even intentional fraud. Accounting systems that meet state requirements do not necessarily support improving efficiency.

There are a variety of tools for discovering opportunities for greater efficiency. One of the powerful tools developed decades ago by industry and subsequently improved, focuses on analyzing processes and looking at approaches to simplification and the elimination of waste and redundancy. A related tool identifies bottlenecks and ways to eliminate them. In the end, the success of these tools needs to be visible in the accounting system, and the system itself may be able to highlight opportunities. Accounting systems that do this have come to be called “performance-based accounting” or “performance-based budgeting”. Transitioning to such a system is daunting, but the payoffs can be huge. 

Essentially, “performance-based budgeting” establishes a system of accounts that are based on the major services that each department provides. That’s different than just accounting for several categories of revenue, payroll, contracted services, and other expenses. Then for each service, we develop metrics/measures that track the certainty and efficiency with which those services are delivered. The City of Madison began implementing such a system in 2024 as part of the “Results Madison Initiative”. Last week, Finance Director Dave Schmiedeke provided alders with a progress update, which I would like to share.

Good Morning Alders:

Many of you are aware of the Results Madison initiative and efforts to develop a performance-based budgeting process. Agency staff have been working diligently to establish the foundation for this work. As we look ahead to 2026, we are planning how to continue this citywide work effort and take the next steps on performance-based budgeting. This email summarizes next steps you can anticipate in the upcoming budget cycle. 

Goal #1: Identify service indicators for all City agencies 

• What has been accomplished? Over half of all agencies have completed a “data engagement,” which is a process for identifying service indicators for their activities and collecting data on performance metrics. These indicators include inputs, outputs, outcomes, and equity measures.  
• What is planned for 2026? All agencies that have already completed the data engagement will work on updating their annual indicators. Agencies that have not yet completed this step will begin the process in 2026.  

Goal #2: Incorporate service indicators in budget development process 

• What has been accomplished? The 2025 budget marked a significant accomplishment with the implementation of an updated Chart of Accounts service structure. These new services were designed by staff teams to be more understandable and relatable to residents and will be the foundation for outcome budgeting – helping the Mayor, Council and agency staff deliver the results that residents expect. For the 2026 budget, we published the City’s first digital operating budget book, which presents these services in an accessible, web-friendly format. 
• What is planned for 2026? The 2027 budget process will begin in March/ April 2026 with the operating cost to continue exercise. All agencies will incorporate service indicators throughout their budget planning process. The goal will be to publish a selected subset of indicators in the 2027 executive budget.  In the longer term, these indicators will help guide decisions on budget planning and resource allocations. 

In concert with these goals, we are working to support agencies in building data analytics capacity through a data training program, developing tools to improve data sharing, and reviewing our data governance policies and practices. We are also continuing to refine our five-year operating budget outlook. This five-year projection was first published in the 2025 budget and updated in the 2026 budget. We are working on finalizing the 2026 adopted budget book, but you can find an overview of the long-range budget plan in the executive budget summary.

We will provide updates to the Finance Committee and Common Council throughout the year as the budget development process advances.

Thank you.

Dave Schmiedicke

Congratulations!

You have reached the end of this blog and can now consider yourself an honorary budget nerd. Yes, I thought it was boring too, and, yes, it’s important.