Without such data, it is impossible to know if city costs are competitive with those in the marketplace or how scarce tax dollars could be best allocated to serve citizens. By attaching explicit costs to individual activities, and measuring the costs versus the efficiency and effectiveness of service outputs, ABC systems can provide an important tool for controlling costs and increasing productivity in the public sector. ABC brings to light costs which previously were hidden allowing managers to determine where they need to get costs down. ABC systems also lead to more accurate cost comparisons between in-house and contracted services when governments bid out services. Entrepreneurial, Performance-Based Budgeting.
Poor outcomes lead to more inputs, rather than an improved process.
Managers submit five strategic objectives and are held accountable for achieving these outcomes. Rather than measuring the number of road crew workers, for example, the Road Maintenance Department is judged according to the smoothness of the streets. For performance budgeting to work, mayors and governors must hold the line on spending by freezing or capping budget allocations to each department. Capping spending growth helps create a culture where managers see their purpose as maximizing their accomplishments with available resources rather than trying to grow their budgets. Focusing on Core Businesses.