Outcomes-based budgeting may be challenging to implement, but Tom Foster argues it has the potential to be a powerful financial planning tool in an era of scarce resources

Outcomes-based budgeting (OBB) is becoming an increasingly common topic of discussion in local government finance circles. There are a number of variations, but the most common definition is a system of budget setting that ensures scarce financial resources are allocated specifically to achieve priority outcomes, by drawing a direct link between how forecast expenditure is prioritised and the outcomes realised by that spend.

The starting point when adopting an OBB approach is to determine what outcomes a council wants to achieve, which is usually set out in the strategic priorities of the corporate plan, such as to improve homelessness. Then, determine how these outcomes can be measured and how current service activity is aligned to them.