Magazine article Government Finance Review

Budgeting for Shared Services

Magazine article Government Finance Review

Budgeting for Shared Services

Article excerpt

Sharing services can improve the efficiency of service delivery and sometimes allow jurisdictions to offer increased levels of service, but there are also logistical and financial challenges--not the least of which is developing an initial budget. Being prepared for challenges and addressing them early in budget process can prevent financial, service delivery, and even political problems down the road. This article examines the consolidation of the City of Macon and Bibb County, both in Georgia, into Macon-Bibb County, exploring some of the issues organizations are likely to encounter in developing a shared-services budget and provides strategies for successfully working through them.

BACKGROUND

There are many ways to share services, with differing levels of complexity and shared authority. The most common form is a simple service reciprocity agreement, such as for snow removal or fire protection. A government agrees to provide services to another government as needed (typically infrequently). The jurisdiction that receives the service pays the other jurisdiction for the actual costs it incurs, or a predetermined price, so budget development concerns for this type of service sharing are relatively minimal.

When service sharing involves regular and sustained financial commitments, determining an appropriate budget becomes more complicated, such as when one local government provides a service for one or more neighboring governments. Under this scenario, the government that provides the service retains budget development authority, often with consultation from its partners. Another form of service sharing occurs when two or more governments jointly provide a service. In this case, financial oversight would be managed through a board or committee that includes representatives from all participating governments. Within these two general models, local governments negotiate a variety of oversight, budgetary control, and payment relationships.

On January 1, 2014, the City of Macon and Bibb County officially consolidated to create Macon-Bibb County. This unusual event mandated immense change and reform, including approval of a new, six-month operating budget to cover the remainder of the government's fiscal year, which ended June 30. The process of drafting the inaugural budget highlighted questions, both organizational and financial, that apply to more traditional service sharing arrangements as well. In resolving these issues, the new county worked out issues ranging from communication to planning, revenue generation, and budget integration.

GETTING STARTED: COMMUNICATION

To ensure success, those who are preparing the budget need to communicate frequently with the department director who will be directly providing each key service. Servicing a new area raises many budgetary questions about issues such as staffing numbers, work space, equipment, and even operating supplies. We all know that developing a budget requires regular communication between the finance office and other departments, but with shared services, communication needs to include the finance staff from the partner government. In instances where one government is providing services for another, it will be helpful to know the historical costs for providing that service and whether the delivery area has cost idiosyncrasies such as a being relatively more expensive to serve than one would initially think. Having some understanding of how costs are accounted will help prevent confusion about the budgeted and eventual actual cost of service provision and appropriate payments.

ANALYZING THE CHANGES

Beyond these seemingly straightforward budgetary details, other issues are likely to arise. The governments involved in the service sharing agreement will need to consider all the costs and look carefully at how these changes will affect the organization, especially the department that will be providing the expanded service. …

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