Responsive working capital funds
Effectively break the budget allocation/cost-cutting cycle
The budget results demanded of agencies today are significant. Structural change through a more responsive working capital fund is one answer that is often overlooked as a way to break the cycle of government cuts and regenerating appropriations. By focusing on the cost dimensions of an agency’s financial posture, including how internal services are delivered, priced, and funded, agencies can interrupt this cycle and achieve sustainable reductions while preserving or even improving performance of agencies’ core missions.
Budget cuts are considered the best—if not truest—path to limit spending by public agencies. But does this axiom need to be challenged? After all, each new fiscal year provides agencies with obligational authority that effectively allows them to “start fresh.” Without structural financial management changes, agencies may reduce their budgets substantially yet still spend unsustainably as they work toward expected levels of mission performance.
A responsive working capital fund may prove key to breaking this cycle, potentially enabling agencies to pivot away from a preponderant focus on cost cutting to a more strategic spending management posture. This approach may also:
- Increase transparency of agency costs
- Better optimize agency assets
- Promote efficient spending behavior
- Elevate further reductions in overall spending
- Benefit agency missions and programs