This section lists the specific set of skills, knowledge, and abilities that budget analysts need in today’s environment. The first category lists the specific knowledge that budget analysts need of their government’s processes and finances. The next two categories list specific fundamen- tal skills that budget analysts should possess. These fundamental skills are categorized into people/interpersonal skills and analytical skills. The last category lists specific budgeting and management innovations with which budget analysts should be familiar.5
Knowledge of Government’s Finances and Operations.Budget analysts should have knowledge of the specific processes and financial structure of their government. They should understand their govern- ment’s budget process, its accounting system, revenue and expenditure structure, and financial management system. They should also have knowledge of the operating departments that they are responsible for. Specifically, a budget analyst should possess the following:
• Understand the government’s budget process and procedures outlined in its budget manual.
• Understand the government’s goal-setting and policy formation process.
• Understand the government’s expenditure and revenue struc- ture and debt financing.
• Familiarity with governmental fund accounting, government’s chart of accounts, and government’s internal and external finan- cial reports.
• Proficiency with government’s financial management system and desktop applications.
• Knowledge of the operating departments that the analyst has re- sponsibility over (e.g., mission, financial structure, program- matic structure, strengths, constraints, organizational structure, and personalities).
• Knowledge of the legal and regulatory impacts and constraints regarding revenues, expenditures, and the budget process.
People/Interpersonal Skills.The budget process not only includes numbers and data, but even more so includes people. Thus, budget ana- lysts should have strong “people skills”. They should understand the political environment of the budget and people’s behavior in that envi- ronment. In addition, they should possess a broad array of communica- tion skills such as interpersonal skills, persuasion skills, negotiation skills, interviewing skills, and oral and written communication skills. Specifically, a budget analyst should possess the following:
• Interpersonal skills—Ability to work with and develop a rapport with operating departments and program leaders. Because many of the individuals who a budget analyst contacts do not formally report to him or her, good interpersonal skills are im- portant to obtain cooperation. Excellent networking skills are also necessary since cooperation may be required from employ- ees across the entire organization.
• Persuasion/marketing skills—Ability to make a case to the chief ex- ecutive, elected leaders, and oversight bodies.
• Political savvy—Understanding and responding appropriately to the individuals and groups with a stake in the budget;6under-
standing budget games that might be used by operating depart- The Staff of the Budget Officen57
ments when obtaining funding for a new program, maintaining or increasing an existing program, or resisting budget cuts. • Negotiation skills—Ability to negotiate with operating depart-
ments regarding budget requests.
• Interviewing skills—Ability to ask questions which elicit useful data or assumptions.
• Conflict resolution skills.
• Oral and written communication skills.
Financial and Policy Analysis Skills.Budget analysts should be able to think analytically. In other words, they should be able to break a complex problem into its component parts, look for patterns in data, and find the distinguishing characteristics between alternatives. Spe- cifically, budget analysts should possess the following skill set:
1. Understand analytical concepts. a. Adjusting for inflation.
b. Time value of money and discounting to present value. c. Unit cost.
d. Sunk cost.
e. Opportunity cost. f. Fixed and variable cost. g. Differential cost.
h. Marginal cost.
i. Basic statistics (average, median, standard deviation, correla- tion, scatter plots, etc.).
2. Proficiency with analysis tools and techniques.
a. Basic techniques for comparing alternatives: decision tables, expected value tables, weighted score tables, decision trees. b. Advanced analytical techniques: break-even analysis, net
present value analysis, return on investment analysis, cost-benefit analysis, fiscal impact analysis, cost-effectiveness analysis, sensitivity analysis.
c. Expenditure and revenue analysis and forecasting. d. Budget variance analysis.
e. Financial condition analysis (e.g., ICMA Financial Trend Monitoring System, 10 point test of financial condition).
f. Performance measurement—Developing performance mea- sures and analyzing performance measurement data.
g. Performance auditing—Assess a program’s efficiency and measure the extent to which it meets its goals and objectives. h. Program evaluation—While performance measurement is
systematic, regular, and government-wide, program evalua- tion is focused on a particular program, in-depth, and ad hoc. i. Management analysis—Analyze work methods and organi-
zation of operating departments.
j Capital improvement programming—Assess capital needs, assess financial capacity including debt capacity, evaluate potential capital projects, plan projects and funding, develop capital budget, implement and monitor capital budget. k. Cost accounting and cost analysis—(e.g., cost finding, indi-
rect cost allocation, activity-based costing).
Familiarity with Innovations in Budgeting. Budget analysts should be familiar with best practices and innovations in state and local budgeting. Several of the most important innovations include:
1. NACSLB recommended practices 2. GFOA Budget Awards program 3. GFOA Recommended Practices
4. Long-term financial planning, multi-year budgeting, budgeting for structural balance
5. Strategic planning
6. Alternative budget formats (e.g., program, performance, and zero-base budgets).