How Dutch Municipalities Hardenberg and Ommen Utilize Financial Models for Effective Policy and Budget Management

The Dutch cabinet is implementing three transitions in the social domain: the introduction of the Participatiewet (the participation act); the transition of youth care; and the migration of the AWBZ (the general act for extraordinary sickness costs) and personal care to the WMO (the social support act). The integrated approach that the cabinet has in mind will ensure that professionals from different agencies coordinate their provision of social support for individuals and families. Dutch municipalities are preparing for the crucial role they will play in all this. And that includes the municipalities of Hardenberg and Ommen, which, through a joint department known as the Ommen-Hardenberg administrative service, are working on the implementation of these transitions.

Coherence

Annette Wittich has a financial background and is department head of the Maatschappelijk or ‘social’ Domain (known as MD) at the administrative department (‘Bestuursdienst’). “The challenge we faced was how we as municipalities could realize budgetary benefits and efficiency gains by taking a different view of the existing problems,” she says. “We are responsible for huge amounts of money and are expected to hit major targets, so the choices we have to make cannot be based solely on experience. In what is essentially a politically sensitive environment there is a pressing need for good-quality, well-founded decision-making, with sound coherence between the various policy areas.” It’s difficult to keep track of a lot of what this involves for the municipalities, particularly in financial terms. “That’s why we were looking for an instrument that will enable us to provide good support for the two municipalities in our policy choices,” she adds.

Wittich was familiar with Zanders’ services and she recognized the affinity between the models that Zanders works with and the financial repercussions of the transitions. So she contacted consultant Charles Zondag to sound him out on the financial challenges and the possibilities of applying a calculation model to the transitions taking place in the social domain.

These transitions are difficult for municipalities to quantify, there was a need for something new, something outside the ‘old’ box.

Charles Zondag, Business Associate at Zanders.

Together with fellow consultant, Sylvia Temminck, Zondag discussed the matter with Wittich and her colleagues. Plans for constructing a model capable of mapping the whole complex situation started taking shape.

Better informed decisions

As a councillor of the municipality of Hardenberg, René de Vent embraced the MD’s ideas. “These social domain transitions will mean that municipalities will have a lot on their hands,” he cautions. “We want to know exactly what and who we are talking about, which is why we decided to tackle it with this social domain transition project. Using a form of social database we want to establish the various areas and how they correlate with each other. This will then make it clear which policy-influencing ‘knobs’ we can adjust and what the consequences will be.” It will enable both municipalities to make better-informed decisions. Ommen councillor Ko Scheele was also quick to see the potential of the initiative: “The transitions will give municipalities more room for their own interpretation of the policy. To a much greater extent than before, we’ll have to know exactly what we’re talking about. We’re now taking stock of the complete situation so we can make more informed decisions. Measures pertaining to the social domain often affect one another; if you remove something in one place it pops up in another form somewhere else. We want the calculation model to make things clear so we can define a well-thought-out policy for our citizens.”

De Vent adds: “We don’t just want to do things well; we also want to do the right things. This is important because it concerns policy that affects people very directly and often vulnerable groups too. It has to be handled carefully. If we organize the information properly, we’ll be optimally placed to define the policy so that we can exploit the opportunities and possibilities that these transitions offer municipalities. We’ll then be in a position to steer them more effectively.” Both municipalities mainly want a model they can adjust to their own needs and one that will help them make informed decisions without requiring specific external knowledge.

New approaches

The next step is for the model to map out the financial repercussions in several policy areas for a change in one of them. “A cut in education spending, for example, could lead to more youth unemployment and thus higher costs in benefits and allowances,” explains Temminck. In other words, a saving in one area can mean having to spend more in another. Zondag says: “Developing this kind of dynamic calls for a combination of substantive knowledge of the relevant policy areas and technical modeling. That’s the cool thing about this project: it bridges two often-contrasting disciplines that are rarely associated with one another. For both the municipalities and for Zanders this project goes far beyond ‘taking a peek in the neighbor’s kitchen’.”

The model will eventually have to accommodate a total of 20 different areas of social services. During special workshops policy staff will provide input for the calculation model, both for their own and related disciplines. Then as it fleshes out it will grow in complexity, and be extended to other areas. This summer saw the development of the model’s ninth area. The end result cannot yet be exactly predicted.

“However, the results so far are already making a positive contribution to the solution for the problem,” says Wittich. “The framework has been put in place, we liaise on a regular basis and there is already a first spinoff: we’re getting questions from all sorts of new perspectives. I think this has everything to do with the workshop approach. We’re taking smaller steps and paying attention to details that a municipality sometimes misses. Thanks to this modeled approach employees are being confronted by the repercussions of their own activities - and thinking about them differently.” This last factor, according to Jaap van Middelkoop, who leads the social domain transitions project on behalf of the administrative service, is exactly what differentiates it from all previous initiatives carried out within the municipalities. “Many municipalities are looking in this direction so as to get a good all-round picture,” he says, “but this working method helps us stand out. We’re going into specific detail and talking to our people to learn about their work. They, in turn, get a keener sense that they are part of a larger whole and that their work is not isolated. This is a big help in finding links between the different parts and defining an integrated policy.” Moreover, rather than focusing exclusively on cuts, the project tries to apply policy changes as intelligently as possible, given a tighter budget. “Employees are enthusiastic about this innovative approach to extrapolating changes,” says Middelkoop. “They are more committed and, what’s more, they don’t just focus on their own expertise, but come up with ideas and new approaches for all the transitions.”

In terms of interpreting the model, Wittich sees it as an advantage that Zondag and Temminck, as external advisers, are relatively unfamiliar with council work. “It draws you further out of your comfort zone and enables you to make more reasoned and objective assessments. We are often asked surprising questions that really get us thinking.”

Act quickly

The model’s various areas differ from one another in depth and complexity. “Before investigating a particular area, there’s no way of knowing how deep it might go,” says Temminck. “You don’t know how many links there will be either, although it does become clearer with time.” Examples of the areas concerned include minimum-income policy, debt counseling, and transport. Van Middelkoop notes: “Transport is a good example of an area that pops up across the board. We treat it as a connecting area. Areas like WMO and WSW (the sheltered employment act) each have their own transport component. The aim is to work more effectively and make substantial collective savings on all transport components.”

“With an area like transport it’s important that you can see the connections because relevant measures need to be taken quickly,” adds Wittich. The transitions will start in 2015, but we must take a number of measures in 2014. From January 1, 2015, municipalities will assume responsibility for all transport, with the exception of patient transport that is, because the government has decided we can do it better and cheaper. But we’ll need to act quickly because ongoing contracts with external parties are affected and they will have to be checked and acted on in a timely manner. Later in the year we want to use the calculation model to demonstrate to municipal bodies how we see the transitions, along with their associated cross-linkages.”

The link between social databanks and the calculation model will also become clearer. “We’ll be able to correlate the model’s results with the social databanks, even at district level. It fits in well with what we need to know in that area,” says Ingrid Schepers, an employee working on the social domain transitions project.

Dialogue with other municipalities

One of the problems the administrative service anticipates is how to achieve a nuanced focus on the deluge of decisions that will have to be taken if austerity targets are to be met. A municipality has to contend with administrative elements to a far greater degree than a company does, for example. Finances, in conjunction with legislation, are what define the constraints. “But it’s not just a matter of dealing with constraints,” insists Wittich. “Investing in one project can also make other projects more efficient, and now policy makers will actually be able to demonstrate this.”

In Wittich’s view, working with the model will also help in other areas of decision-making. “It will enable the council to present proposals in different, more transparent ways."Fwitii

Annette Wittich, department head of the Maatschappelijk.

With policy proposals, for example, ones that are substantiated on the basis of all sorts of variables, drawn from different scenarios. Whereas it used to be mainly down to the policy makers, executive employees are now much more involved. Policy makers still come up with the ideas, but now their financial repercussions are tested.” So thanks to the model, councillors will be able to take more-informed decisions. Wittich adds: “Councillors’ choices are based on their political leanings. Obviously, this will affect the available budget because it could mean you’d no longer be able to finance other important things. Now, thanks to the model, they will be confronted with those financial repercussions.”

This is why she feels it would be a good idea if other municipalities also used it. “The Dutch Home Office is actually a proponent of entering into dialogue with other municipalities about this. The formation of the Ommen-Hardenberg administrative service means that the MD department is working for two municipalities, each with its own political standpoints and preferences. By using this model, we are comparing two municipalities with each other in terms of implementation and standpoints. In conjunction with the social databases, the calculation model gives us a sounder and more objective basis for policy development.