Manage municipal budgets with greater transparency, efficiency

The City of Wiesbaden uses SAS® to manage its finances, deliver forecasts for fiscal decisions

Wiesbaden is one of Europe's oldest spa towns. The cityscape today is a clear reflection of its history, leading Hesse's capital to apply for recognition as a UNESCO World Heritage Site. But this modern, vibrant city of 227,000 is clearly focused on the future. While other municipal economies are in disarray from the global financial crisis, Wiesbaden remains a model of effective municipal financial management.

Business need

Make sound fiscal decisions based on accurate, insightful financial forecasts.

The administration of the City of Wiesbaden manages seven departments and 30 municipal offices. It prepares a budget for each of them and is responsible for seeing that each department and office stays within its budget throughout the year. The city also plays the role of an Opting Local Authority, and therefore is the authority responsible for the long-term unemployed under the terms of Germany's Social Code (SGB II). Income and expenses stemming from this responsibility also flow into the city's budget.

Wiesbaden started using SAS solutions for budget management in the mid-1990s. In 2007, the city switched to double-entry bookkeeping, with its budget expanding to cover assets and liabilities as well as revenues and expenditures. In today's budget, for example, rental income from city-owned real estate is offset against depreciation and other costs. This system provides transparency and allows the city to determine whether investments of this nature are viable.

The need for a comprehensive overview of the city's finances required an IT solution that could analyze all available financial data and could be used to prepare financial forecasts for future management.

Objective

Make reporting more efficient and budget management more transparent.

Ideally, Wiesbaden's financial departments were looking not only to incorporate existing databases and financial applications, but also to continue using the Excel format to which they had become accustomed.

The goal was to find a business analytics solution that would allow the city to maintain the existing controlling model and, at the same time, satisfy the requirements of double-entry bookkeeping.
The city also wanted to prepare annual budget forecasts that would assist each of the financial departments in improving budgetary oversight.

Today we have come to expect certain trends and are better equipped to forecast the budget as a whole.

Helmut Müller
Mayor and Treasurer

Solution

For its budget-management needs, Wiesbaden uses SAS Business Analytics.

SAS collects and processes data from a host of existing systems. The operative SAP system functions as the database, and the master data is partially mirrored in SAS.

The current budget is analyzed and compared to the forecasted figures for the year, thus serving as a continuous budget controlling mechanism. If any differences are found, the system automatically highlights them in red, yellow or green. This traffic-light coding system provides an indication of how well budget guidelines are being followed.

The analysis goes a step further to point out the details responsible for the differences and the consequences down the line. For example, if electricity and water prices are expected to increase, then that would affect school spending, so the traffic lights would indicate yellow or red. The responsible financial planning office therefore gains a valuable tool for identifying bottlenecks at an early stage and is able to compensate by saving elsewhere.

The traffic light function is also linked to specific measures. "For example, if the light shows red one month in a particular office, then no new positions will be approved here," explains Helmut Müller, the city's mayor and treasurer. In short, the budget management system is an effective tool that facilitates the tasks involved in forecasting, controlling and overseeing Wiesbaden's overall budget.

"We were surprised by the sheer range of information that the system produces," Müller notes. "For example, today we can closely predict how business tax revenues will develop over the year. Companies pay business tax in advance. Once the actual sums have been submitted, the city can calculate the difference.

"These figures fluctuate dramatically and, in the past, depending on the economy, it was not uncommon for us to have a difference ranging in the double-digit millions. Today we have come to expect certain trends and are better equipped to forecast the budget as a whole."

Benefits

  • The city's entire administration benefits by being able to closely adhere to the budget.
  • Excellent annual forecasts allow the overall budget to be prepared more accurately.
  • Trends and forecasts enable forward-looking budget management.
  • Greater financial transparency is achieved, thanks to immediate, monthly reports on operative budget data with variance analysis.
  • Administrators and department heads have the tools they need to respond quickly since they can now recognize the need for early action.
  • Direct access to Excel and PowerPoint makes the system easy to use.

About the project

Using SAS, the city's finance departments analyze raw data in SAP format. User-friendly reports and reliable forecasts significantly improve the ability to evaluate the overall status. SAS makes it easier for managers in Wiesbaden's administrative offices to make informed financial decisions. "Every decision maker in our administration receives an analysis of their department's activities throughout the month," Müller explains. "With it, they can clearly see their current financial situation, giving them the ability to compare budget figures with actual figures."

Target figures are calculated from preliminary monthly calculations based on the values from the previous year. Analysts in the controlling department then compare these to actual entries from the SAP data-processing system.

The two sets of values are then used to prepare a forecast for the following month, so decision makers can assess whether to approve – or put on hold – planned purchases.

"SAS provides us with a strategically and analytically ideal solution that we can use to quickly review all existing data, while at the same time giving us the most recent figures and a precise overview of all of our expenditures," Müller says.

Wiesbaden's finance departments anticipate further system enhancements. "We want to introduce a new key data model which will make potential deviations from the planned budget even more obvious," Müller says. "This will assist us in focusing more strongly on our performance as a whole."

Challenge

Manage municipal budgets with greater transparency, efficiency.

Solution

SAS® Business Analytics

Benefits

  • Wise spending decisions
  • Sound budget management

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