Fiscal First Aid

 Primary Treatments

Revenue Human Resources and Benefits
Audit revenue sources Evaluate overtime use
Improve billing and collections procedures Address health care costs & workers' compensation claims patterns
Explore fees for services Re-examine labor structures
Propose taxes with a strong nexus Assess organization structure
Conduct a tax lien sale Integrate human resources and financial systems
  Investigate risk management
Capital and Debt  
Improve capital project management
Start comprehensive capital project planning Financial Planning and Analysis
Refinance Debt for Lower Interest Rates
Evaluate financial condition & get benchmark data
  Inventory programs and ascertain their costs
Management Practices Audit certain recurring expenditures
Make managers manage Divest of loss-generating enterprises
Enhance purchasing practices Seek state, federal, and/or regional assistance
Pursue inter-organizational cooperation Identify sources of liquidity
Revisit control system  
Centralize financial management and human resources activities  
Develop cash flow reporting 
Establish a culture of frugality 
Recognize opportunities within crisis 
Manage perceptions 
Be willing to spend money to save money 
Network with peer agencies and individuals 


Audit Revenue Sources. Many revenues are remitted to government based on self-reporting of tax liability. Often liability is under-reported or reported as due to the wrong jurisdiction, i.e. sales tax for a large retailer located on the border of the community. Auditing can find new revenues. Personal property assessments beyond the minimum requirements of state law and utility taxes are two examples of revenues where audits can often pay off.


  • This is a fair way to raise revenues because it is intended to ensure that those liable are paying their rightful share.
  • This process ensures accuracy and consistency applied to all taxpayers and reduces inadvertent subsidies to others.
  • Net revenue available can vary depending on factors like the number of payers and the complexity of tax. For example, utility taxes are usually paid to the government by a relatively small number of utility companies (rather than by individual constituents), thereby limiting the number of payers to audit.


Improve Billing and Collections Procedures.
  • Standardize the billing procedures for all receivables including insurance claims, damage claims, rebates, and fees for service. Who is responsible for which aspect of the process and when will it occur? Ensure nothing falls through the cracks due to lack of communication between departments and staff – map out processes and find out where hand-offs between departments occur and ensure these are working smoothly. Diagram any exceptions procedures including who has the authority to approve exceptions and under what circumstances. For example, not shutting off utilities in extreme weather for low-to-moderate income households, with approval by the finance director.
  • Establish consistent and fair collections efforts. The government cannot ignore outstanding debt one year and then expect great success in collecting the following year without protest and even greater effort. Collections procedures must be clearly articulated, publicly available, and consistently applied to all similar types of receivables.
  • Coordinate collection efforts between agencies, particularly the courts and county agencies. In addition, different levels of government have overlapping revenue streams such as property and income taxes. Reconcile, to the degree allowable, filings in related agencies. For example, local income tax records should be verified against state and potentially IRS filings for non-filers. Property tax records can be confirmed against utility bills, other agencies property tax records, and court records.
  • Consider outsourcing collections to a private vendor.
  • Consider consolidating collections with a special purpose unit to achieve standardization and consistency.
  • Consider an amnesty program for past due fees. Amnesty programs must be well-planned for the best results. On large Midwestern city experienced good success from a parking ticket amnesty programs. Some of the reasons include:
    • The public had no expectation of an amnesty. The program was necessitated by a poor economy, and motorists were put on notice that another amnesty was unlikely in the near future. The expected long duration between amnesties contributed to the rush of persons wanting to participate in the program. There should be no expectation of a future amnesty program.
    • There was a vigorous public information campaigns. Press conferences were an important component, but they were usually combined with additional efforts, including radio, television, and print outlets.
    • Use more aggressive enforcement along with amnesty. Use the stick to encourage people to take the carrot.
    • Consider carefully who is eligible. Don’t lose money if collections are already good on certain revenues.
    • Have a dynamic communications program, including use of technology to inform people of balances, calculate amnesty rates, etc.


  • It is equitable. It ensures that those who incurred charges pay them.
  • Net revenue available will vary based on efficiency of past practice, but tightening up procedures will have continuing benefits past the current year. Revenue estimates will become more consistent and accurate over time.
  • Consistency will reduce liability for unfair practices allegations.
  • Documenting procedures, responsibilities, timelines, and authorities will assist with internal controls and ensuring revenues are followed through until collection.
  • Previously undetermined fees and penalties may be identified.


Rev Up Your Revenues, Treasury Management, May 2009

Revenue Recovery Program: Developing a Governmental Collections Unit, Government Finance Review, February 2009
BP Creating a Revenue Control and Management Policy (2007)
BP Revenue Control and Management Policy: Accounts Receivable Controls (2003 and 2007)
BP Revenue Control and Management Policy: Cash Receipts Controls (2003 and 2007)
BP Payment Consolidation Services (2007)
BP Use of Lockbox Services (2000, 2003, 2007, 2009) revised


Fiscal First Aid Quick Reference: Improving Billing and Collections Procedures 


Explore Fees for Services. First, make sure there are clear cost-recovery policy goals articulated at the highest level of the organizations (e.g., the governing board). Also, consider the definition of “cost” – are only direct costs considered or fully allocated costs? Then, verify any fees charged are meeting cost recovery goals. Compare fees with comparable and neighboring agencies, not just for reasonableness but also to see if your fee structure is having unintended consequences. For example, perhaps higher program fees for recreation are driving customers to other providers. Building, parking, and recreation fees are a good first place to look. A common and frequently controversial area where fees are undercharged are fees to auto and homeowner insurance companies for fire calls, especially false alarm, “jaws of life”, clean-up of hazardous materials, and non-emergency calls despite their nearly standard inclusion in most policies. Other fees include those for services rendered primarily to non-residents or businesses such as title searches, permit records, voter information, research, and “extras” on road construction or tree planting. Also, ensure that operating departments are incented to keep their fees updated; include a policy for regular reviews. Central user fee policies are an important first step, but other tactics like connecting operating budgets closely to program revenues can also help. Otherwise, departments may simply not give fees managerial attention or may actually be disinclined to raise fees (e.g., for fear of upsetting supporting constituents).



  • Fees are usually equitable – they allocate cost to those receiving benefits. Special consideration may be needed for vulnerable populations or to achieve social goals. Policy initiatives such as economic development can also be advanced through fee policy.
  • User fees are very efficient. Combine this technique with billing and collection first aid tactics to maximize efficiency.
  • The exercise of reviewing costs and fee composition requires accurate and careful internal scrutiny of procedures and practices, potentially identifying opportunities for expenditure adjustments.
  • Review encourages examination of impacts on customers, neighboring agencies, and related departments as well as economic comparability.

Establishing User Fees: Theory and Practice in Canada, Government Finance Review, February 2001
BP Establishing Government Charges and Fees (1996)


Fiscal First Aid Quick Reference: Explore Fees for Service 


Propose Taxes with a Strong Nexus. The public will often be more supportive of taxes that have a perceived close linkage to the benefit received. For example, a business improvement district that assesses a tax for upkeep of streetlights and sidewalks may be supported by local merchants. A 911 tax on local phones could help support police and fire. Taxes on electrical utilities could be used to support “green” programs.



  • Taxes are a very fair way to finance public services when tax burden is borne by those who receive the benefit.
  • Benefit taxes are among the most efficient type of tax.
  • There is a perceived greater control when taxes are restricted to specific and visible expenditure categories.
  • Restricted taxes remove flexibility in managing priorities and goals over time, particularly when taxes are voted on as specific issues and not in context of total budget priorities. 
  • If the community does not believe the government is efficient or is not a credible steward, then any new taxes are not likely to be well received.


Roanoke’s “Can New Taxes Work: the City of Roanoke’s’ Experience”


Conduct a Tax Lien Sale. Sell tax liens to private investors.



  • Derives revenues from those that have not paid their rightful tax liability in the past.
  • Converts non-liquid asset to a liquid one, but is not a dependable on-going source of revenue.
  • There may be a limited market or return on sale for such liens as well as a potentially negative public perception.

Fiscal First Aid Quick Reference: Conducting Tax Lien Sales


Human Resources and Benefits

Evaluate Overtime Use. What is the ratio of overtime to regular wages or wages and benefits? Can overtime be reduced by different patterns for scheduling or expanded use of part-time personnel? Are particular employees consistently working excessive amounts of overtime? Are there special projects that consistently create overtime and, if so, can the project be approached in a different way? Can work rules be modified to reduce over time – for example, does paid time off count towards overtime accruals? Are services provided at a “luxury” level, that could be cut back in order to reduce overtime?

Make managers manage overtime – for example, in one Midwestern county all overtime must be drawn from a central account that is shared by all departments, rather than each department having its own account. Managers must provide justification when they want to draw funds from the central account. This makes overtime spending much more conspicuous than it would otherwise be and creates pressure for organizations to manage their overtime.



  • Personnel are often the largest area of expenditure, so there may be significant savings in overtime.
  • Controlling overtime can reduce salary costs without adversely impacting those employees that don’t accrue significant overtime.
  • Looking at comparable agencies and reviewing scheduling practices may provide suggestions for changes to reduce overtime.
  • If overtime is a structural reality and reflects need for staffing, consider whether a full-time, benefitted position or two part-time, non-benefitted positions may better fulfill the service demand.

Fiscal First Aid Quick Reference: Evaluate Overtime Use


Address health care costs & workers' compensation claims patterns. Health care costs are a large and rapidly growing line item for many governments, making health care cost control vital to financial stability. Some health care cost reduction tactics include:
  • Reevaluate your cost drivers, especially for health care and disability claims, and develop complementary cost-containment tactics. For many, prescriptions are the driving cost - how much will more aggressive co-pays save you, how about generic vs. brand prescriptions, etc? Are there common injuries incurred on the job in specific departments that more aggressive training might reduce?
  • Manage the vendor. Work with the vendor to ensure cost effective practices are being followed. Also, consider rebidding if there hasn't been a rebid in some time.
  • Revisit employee cost sharing arrangements. Joint payment of premiums, co-payments, and co-insurance can all help defray the cost of a health plan. Revisit cost sharing arrangements to see if they are reasonable.
  • Seriously consider wellness options that will bring down costs in the long run at little to no expense such as health system promotions, health club memberships offered at a discount, etc.
  • Harmonize benefits between labor groups to reduce administration costs.
  • Verify participants by conducting an eligibility audit – it is not uncommon for dependents who no longer quality or for former employees to be carried on the plan inappropriately. Also, consider requiring that spouses with coverage from another employer use that plan as the primary plan for themselves, rather than the government's plan.


  • Health care is a significant and, importantly, growing cost. Addressing health care costs can pay immediate and future dividends.
  • Changes in the approach to health care that impact all covered employees spreads the burden of adjustment and increases awareness of benefits.
  • Health care design can affect participants' behavior, promoting cost reduction over time. Look at how rates, co-pays, and convenience affect participants' health care decisions. Health care plans can be tailored to address the unique combination of needs for employees and, if carefully crafted based on data analysis, can be designed to increase usable benefits while reducing costs.
  • Wellness programs can also be uniquely designed and range from no-cost to aggressive, individual case management. Many providers will include some level of wellness as part of their insurance package.

Maricopa County's Employee Health-Care Initiative, Government Finance Review, December 2008, p. 28
BP Communicating Health-Care Benefits to Employees and Retirees (2009) new
BP Strategic Health-Care Plan Design (2009) new
BP Health Care Cost Containment (2004)
Health-Care Cost Containment Strategies, Government Finance Review, April 2009, p. 41.


Fiscal First Aid Quick Reference: Reorganizing Health Care Coverage

Fiscal First Aid Quick Reference: Healing Health Care Costs – Ideas to Slow Spending


Re-examine Labor Structures. Since human resources are a major expenditure, review who is doing what with an eye toward finding lower cost alternatives.
  • Review all positions for duplication of duties, accuracy of job description, compliance with FLSA, etc. A review of human resources for budgetary purposes includes a review of salaries and vacancies, but also the accuracy and application of job descriptions, hiring, discipline and firing policies, and consistency of organizational structure between departments. Consistency will reduce legal expenses and overall operating costs.
  • Review the use of consultants and temporary staff. Frequently, they become quasi-permanent as information holders or habit rather than through a more deliberate strategy to provide the most efficient services. Is the consultant the best value for the organization’s needs? Sometimes outsourcing is not the best method for providing service nor necessarily the cheapest. However, a consultant or contract arrangement can be useful for less than full-time service if the demand does not warrant the cost of full-time employees or if the service is uniquely specialized beyond the capacity of the organization.
  • Use workload indicators to budget staff and identify targeted reductions. For example, if the anticipated number of building inspections is expected to decline, perhaps inspector staffing levels need to decline as well.
  • Consider expanding use of volunteers. However, be mindful that volunteers can present their own set of management issues and that volunteers still must be covered by worker's compensation and liability insurance. One Florida city uses volunteers in its police department for courier service, chaplains, information desk, parking enforcement, marine patrol, crime watch, and community patrol.


  • Alternative means of service delivery are crucial for coping with a structural deficit. Since labor is a primary cost driver for government, evaluating alternative should start with labor. The budget derives from the organizational structure which should be tailored to meet the established goals in the most efficient and effective manner possible.
  • Accuracy and consistency reduce claims of unfair practices, favoritism, and/or waste.
  • Volunteers, while requiring careful management, can enhance community engagement particularly when working in public access or tourism roles.

Fiscal First Aid Quick Reference: Re-Examining Job Descriptions
Fiscal First Aid Quick Reference: Using Citizen Volunteers
Fiscal First Aid Quick Reference: Increase Use of Part-Time Labor
Fiscal First Aid Quick Reference: Four Day Work Week


Assess Organization Structure. Organization structure can drive expenditures. Evaluate structure for savings opportunities.
  • Evaluate internal controls including the use of petty cash, approval levels for purchases, separation of disbursement and input roles, etc.
  • Diagram the decision making process and communication lines. What is the reporting structure, who approves what, and who is responsible for which aspect of collections including recording, billing, receiving, follow-up, etc? Are there hand-offs between different employees or departments where work is often lost or delayed, thereby increasing costs? Can certain tasks be done in parallel that are now done serially?
  • Consolidate departments where it makes sense to reduce overhead
  • Evaluate supervisor to front-line employee ratios. Explore ways to flatten the organization. Positions, and the size and complexity or the organization should drive the administrative structure of any department, not promotional opportunities for long-time survivors.


  • In some cases, like consolidation, restructuring can lead to immediate savings.
  • Restructuring can also be important for correcting systems that contributed to financial distress and may be required as a prerequisite for more far-reaching reform. For example, perhaps decision-making authority needs to be more centralized in order to make faster changes.
  • Empowering lower levels of management and front-line employees to make customer service decisions, within established guidelines, can enhance service quality, increase employee morale, and reduce the need for management.
  • Defining roles while providing flexibility and cross-training provides greater assurance to employees, management, and citizens on timeliness and accountability.
  • Eliminating habitual structures by digging into the purposes and reasons for the existing structure can reduce costs and create greater accountability. It also encourages review and revision of procedures and practices. Ask why something is done a particular way or by only certain people. In fact, one method of process improvement directs that one should not be satisfied with an explanation of the status quo until “why” has been asked five times. In other words, don’t just accept the first answer – keeping digging to uncover potential obsolete reasons for suboptimal processes.


Integrate Human Resources and Financial Systems. Since personnel costs are the largest expense classification, it only makes sense to have the most accurate personnel data integrated into the budget system. Payroll should be coordinated with position control, which should be coordinated with financial reporting, which should be coordinated with budget development, etc. Timely and accurate synchronization of payroll, benefits, and other human resources data is essential to accurate budget analysis.

  • According to GFOA's current research, lack of good information for decision making is one of the top causes of fiscal distress. Accuracy is the most essential component in making good decisions, especially in development and management of the budget. Integrated HR and financial data is vital to decision making.

Fiscal First Aid Quick Reference: Integrating Financial and Human Resources Information Systems


Investigate Risk Management (& workers' compensation claims patterns). Risk can be a significant source of expenditure, including insurance premiums and claims settlement. This can result from inadequate risk management practices, mismanagement, or even fraud. Review fraud policies to include damage and workers’ compensation claims. Consider the use of a third party administrator if claims seem excessive or staff is lacking in expertise to evaluate. Even in the short-term or on a temporary basis, this can change the attitude and approach to claims activity.

  • Reduced injuries and accidents can produce both short and long-term benefits, such as reduced claims and reduced overtime (for shift coverage)
  • Aggressive management of claims, both internal and external, through challenge, negotiation, and mitigation can reduce future claims as well as reduce payments for current claims.
  • Tools and techniques for risk management are well documented and widely available.
  • Improving risk management can get employees positively involved in combating fiscal stress by creating a safer work environment. Employees can be engaged employees though training, safety committees, and rewards for reduced incidents.

Public Risk Management Association
BP Creating a Comprehensive Risk Management Program (2009) new


Fiscal First Aid Quick Reference: Investigate Risk Management
Fiscal First Aid Quick Reference: Auditing Worker’s Compensation Claim Patterns

Capital and Debt

Improve Capital Project Management. In local governments with a significant capital program, capital projects have a huge impact on financial position. Improving capital project management and monitoring techniques can provide some near-term benefits. For example, it is not uncommon for the start of project with approved budget authority to be delayed. Aggressive monitoring of these situations and cancellation of projects that aren’t moving forward can free up funds for other uses. Project schedules may also be overly optimistic about how quickly a project will proceed, thereby routinely overestimating the rate at which project funding would be drawn upon. This could result in bonds being issued before funding is required, in larger amounts than is needed, and potential for interest earning rebates due to failure to meet bond arbitrage spend-down timing requirements. It could also result in premature allocations for pay-as-you go financing projects, thereby tying up scare funding needlessly.


Start Comprehensive Capital Project Planning. Foremost, get a firm understanding of all major capital projects on the horizon. Include non-CIP (Capital Improvement Program) items such as computers, small equipment in a secondary plan (e.g., a replacement schedule). Make sure to understand operating and maintenance costs of new assets. Even if the cost of acquiring an asset doesn’t impact operating revenues, its operating and maintenance will change expenditure patterns.


A fully realized capital plan can take sometime to realize. In the short-term, getting a handle on the major upcoming projects that could impact capital or operating budgets is important. Also, confront directly a policy propensity to build capital assets while underfunding maintenance. This could help redirect funding from new assets to operational activities to operate and maintain existing ones. 


  • Improving capital project management offers near and long-term benefits
  • The benefits will be proportional to the size of the capital program
  • This technique has synergy with the cash flow management technique – cash flow can be used to estimate the timing of inflows and outflows based on historical characteristics of similar projects and align financing accordingly.


Capital Project Planning and Evaluation, GFOA, 2008.

BP Multi-Year Capital Planning (2006)


Refinance Debt for Lower Interest Rates. Take advantage of lower interest rates to lower the cost of debt service. Also, evaluate your risk associated with any existing call or put options or variable interest productions. Warrant Buffet famously referred to derivative products as “financial weapons of mass destruction,” so know your exposure to potential damage.

  • The current market for municipal debt is uncertain especially for those without a top bond rating, so the ability to refinance debt in the current market is questionable.
  • A well-run existing debt management program may leave few opportunities for using this tactic.


Fiscal First Aid Quick Reference: Restructuring Debt



Financial Planning and Analysis

Evaluate Financial Condition and Get Benchmark Data. Compiling key indicators of financial condition and benchmarking data like employees per-capita, overtime spending ratios, benefit costs, claims costs, etc. can reveal areas of over-expenditure and generate ideas on how to reduce expenses or increase revenues. Just as importantly benchmarking data provides tangible proof of the need to change. For example, in one city in the southeastern United States, financial condition evaluation highlighted excessive benefit costs which lead to a realization that terminated employees weren’t being removed from the healthcare plan in a timely fashion (sometimes up to a three month lag), costing many thousands of dollars.



  • This technique aids in diagnosing the causes of fiscal stress.
  • The evaluation process can reveal previously unrecognized assumptions and priorities. What is behind “that’s the way we’ve always done it?”
  • It also can be used to frame / define fiscal stress by drawing attention to certain underlying causes.
  • Benchmarking also encourages dialogues with other communities that generate new ideas and options to modify operations for more efficiency or effectiveness.

"Leading the Way to Fiscal Health," Government Finance Review, December 2008, pg. 16
"Helping Users to Interpret Local Government Financial Statements," GAAFR Review series


Inventory Programs and Ascertain their Costs. Creating an inventory of programs illuminates what services government is in the business of providing and at what cost. Simply creating the inventory by itself may highlight unproductive or unnecessary programs that can be eliminated quickly and with little controversy. Even if no such programs are found, an inventory and sense of cost is a crucial pre-requisite to budgeting according to program priority. Budgeting according to priorities is essential to long-run fiscal health and should be a central mid-term goal for any distressed government.

  • According to GFOA’s current research, lack of good information for decision-making is one of the top five causes of fiscal distress. Understanding the programs offered and their costs is essential to making informed decisions.
  • Defining the purpose and priorities of any government creates a basis upon which to develop the organizational structure for service delivery and then the budget by which the structure is funded.
  • Underlying assumptions are often revealed through the inventorying process allowing the organization to better define its mission, procedures, and policies.
  • Programs and related costs can be used to help the organization and community recognize its own culture and communications dynamics.

Fiscal First Aid Quick Reference: Inventory Existing Programs


Audit Certain Recurring Expenditures. Many routine expenditures are based on underlying usage metrics that are monitored by the providing vendor. Slowly, over time these metrics can creep upwards, sometimes not for good reason. Savings can be had by auditing these types of charges and getting usage back to the right levels. Examples of expenditures to investigate include:
  • Retiree pensions and benefits. Ensure that only those entitled to benefits are receiving them. It is truly amazing when a new spouse of a deceased employee’s spouse is receiving health insurance and the pension payment at the government’s expense. Verify health coverage is coordinated with Medicare and other available coverage. Utilize positive re-enrollment procedures.
  • Cell phones, pagers, and landline usage. For cell phones, consider replacing cell phones with IRS compliant allowances budgeted at a lower level than annual cell cost and then re-qualify every user with stricter criteria. Negotiate pooled minute plans and compare rates with other agencies. Verify all lines and accounts on the bill are in use (and really are the government’s) and cancel unused accounts. For example, one local government found that of the 77 lines it was paying for 20 were not functional and 27 were not being used – meaning the entity was incurring $22,000 in unnecessary telephone expenses.
  • Purchasing habits for office and janitorial supplies. Determine average use per month in each department (perhaps on a “dollar per employee basis”), and compare across the organization. Of course, some departments (e.g., finance) will naturally use more than others, but this exercise can help establish a check for “reasonable” use.
  • Energy consumption. Audit energy consumption to find where uses is high and efficiency enhancing technology or techniques might be useful. Solutions don’t need to be exotic or high-tech to be effective – for example, better route planning can save fuel costs and timers or motion sensors for lights can save electricity.
  • Publications, travel, and memberships by employee. Review these to find out which are the most valuable to your organization and commit to those.


  • Even if these audits do not result in huge savings, they are effective for establishing a culture of thrift. Involving employees in this process can greatly affect the organizational culture, encouraging more frugal practices and personal accountability and scrutiny.

Fiscal First Aid Quick Reference: Auditing Recurring Expenditures – An Overview
Fiscal First Aid Quick Reference: Auditing Automobile Allowances
Fiscal First Aid Quick Reference: Auditing Cellular Telephone Expenses
Fiscal First Aid Quick Reference: Auditing Telecommunications Expenditures


Divest of Loss-Generating Enterprises. Over time, governments often get into business-like activities that end up generating a loss and, therefore, siphon general tax dollars away from general services. Examples are airports, golf courses, or nursing homes. Divesting of these activities can stop the losses and may even generate some revenue through sale of assets and/or putting property back on the tax roles. It also can put a stop to diversion of management's attention to the enterprise, away form core services.


  • Divestiture reasserts the basic services focus of government: “why are we here?”
  • Divestiture can generate political resistance from effected constituencies, but will often only impact a relatively narrow group of stakeholders. If the enterprise can be taken over by another organization such that service is still provided the political fallout may be reduced. 
  • Even if a divestiture is not successful, it can raise the issue of inefficient management and changes need to make the enterprise for financially sustainable.
  • Divestiture may generate useful discussion about the proper role of government in the community, prompting a renewed focus on core services.

Fiscal First Aid Quick Reference: Divesting of Loss Generating Enterprises


Seek State, Federal, and/or Regional Assistance. States sometimes have special legal provisions for distressed local governments that can provide relief from costly regulations, provide temporary grants and loans, and perhaps increase tax authority. Local services agencies within the state or federal government may also be able to provide suggestions, analysis, and access to help. Universities or regional consortia may be able to provide low-cost technical assistance.


Grants or other forms of financial aid may also be sought from the state or federal governments.
  • More intensive assistance programs for distressed local government may require the local government to surrender some measure of autonomy.
  • State or federal programs may be induce the locality to build projects or offer services that it might not have otherwise – and therefore which may not be sustainable after the grant ends. Therefore, consider using grants as a bridging tool to help stabilize the situation temporarily, rather than as a permanent fix.


Identify Sources of Liquidity. In a crisis cash may be in short supply. Identify potential sources of cash that can serve as life support until fiscal first aid techniques have their effect. State programs, enterprise funds, or local banks could all serve this purpose. Make sure to understand the policy and legal limits on cash outside the General Fund and to re-examine entity-wide reserve policies. Perhaps internal charges or contingencies are too high, thereby sequestering needed cash.
  • Bridge financing is often an essential ingredient to turnaround.


Fiscal First Aid Quick Reference: Identifying Sources of Liquidity



Management Practices

Make Managers Manage. Layers of control may have built up over time that are costly to maintain and of limited effectiveness. For example, budget analysts from the budget office should not be used to cajole operating departments into following their budgets. Managers must be held accountable for managing their budgets within expected guidelines. For instance, in one large Midwestern city, department heads that do not stay within budget must personally deliver a special report at a council meeting to explain why they are not within budget and must continue to provide updates until the situation is well under control. 



  • Establishing a culture of accountability and responsibility for financial health is critical. However, accountability and responsibility should be accompanied by autonomy for managers to get the job done within the parameters provided.
  • Although many department directors have not had to operate in a declining resources environment, they are responsible for the management of resources in their operations. Budget staff can assist them in analyzing the behaviors, trends, etc, i.e. the story behind the numbers, but should not be providing the decisions. The details that support the line item requests should be compiled by the department for better understanding of their operations and its financial impacts. For example, listing every membership, the position for which it is paid, and whether it is mandated as part of the job will complement the review of job descriptions and organizational structure, and require thought in determining the amount requested.


Enhance Purchasing Practices. A number of simple purchasing practices can reduce costs.
  • Identify bulk purchases. Identify the items that comprise the bulk of your purchasing and see if new quotes or suppliers can lower costs. Evaluate purchases organization-wide, not just by department. Encourage or require joint purchasing of similar items, especially office, janitorial, and communications supplies, by departments.
  • Standardize. Develop standard specifications for commodity items. This will allow for better terms to be negotiated with vendors and could also reduce operating costs down the line. For example, standardizing desktop personal computers results in lower upfront costs as well as lower maintenance costs for the IT department.
  • Renegotiate large contracts. Consider opening and renegotiating your largest supplier contracts. In an environment of fiscal distress, vendors may be willing to consider price concessions to keep the business.
  • Investigate prompt payment discounts. Governments in distress sometimes delay paying bills in order to conserve cash. As a result, prompt payment discounts may be sacrificed. Find out where such discounts are available and take advantage. This may require contacting suppliers and apologizing for past excessive payment delays and promising to do better.  Institute practices to ensure late payment penalties are avoided.
  • Inspect incoming purchases. Significant portions of orders received may be unneeded or unusable – both ultimately increasing costs and cash out the door. Hold suppliers accountable for providing goods in the right quantity and in good quality.
  • Long-term contracts. Develop multi-year contracts with vendors if they will offer and/or guarantee lower prices. This is especially true with construction related activities, landscape, printing, mid and heavy equipment. Energy may be particularly important from a long-term perspective.
  • Just-in-time purchasing. Put in place just-in-time purchasing for available products, particularly office supplies, auto parts, and janitorial supplies to reduce or eliminate warehouse and inventory costs. Many vendors will provide ordering software that controls the approval process and allocates the bill per the organization’s parameters at no cost.
  • Maintain competition. Reevaluate vendors frequently to verify value and accuracy. Too long with any provider may create complacency. This can be especially important for professional services as well as commodities. 
  • P-cards. Purchasing cards have advanced significantly in providing individualized controls for purchases. P-cards can help reduce the substantial overhead that is often involved in government purchasing and help establish a just-in-time purchasing environment.
  • Audit for held funds. Audit encumbrances and purchase orders for “held” funds. Investigate planned projects for which funds are carried over more than a year; even six months without spending requires some explanation. If the project is not realistic, perhaps it should be cancelled.
  • “Winning Compliance” strategies. Milwaukee’s purchasing department has cut its staff by nearly two-thirds (from 31 to 11.5 FTEs) and its budget by more than 55 percent by implementing “winning compliance” strategies:
    • Simplifying processes, increasing departments’ purchasing authority (with associated auditing by purchasing staff);
    • Posting simplified procedure manuals on an intranet to make it simple for departments to know the rules;
    • Using technology to speed up the procurement process.
    Now, purchasing staff, rather than being the procurement police, spend their time adding value by
    • Honing their negotiating skills,
    • Working with departments to broaden too-narrow bid specifications,
    • Constantly looking for new ways to save money and make it easier and faster for departments to get what they need to do the job.


  • Revising purchasing practices may be able to deliver savings within a short time period.
  • They help control expenditures without impacting personnel – so there is less internal resistance to them.
  • Positive communication of streamlined purchasing practices can help advance a more frugal culture and encourage accountability by employees and vendors.

2009 GFOA Award for Excellence - Johnson County, Kansas
National Institute of Governmental Purchasing
BP Purchasing Card Programs (1998, 2003, and 2008)


Fiscal First Aid Quick Reference: Enhanced Purchasing Practices


Pursue Inter-Organizational Cooperation. Cooperate with other organizations to gain economies of scale. Overlapping jurisdictions might be especially good potential partners since they have a very direct interest in NOT seeing overlapping governments in distress. Good opportunities include:
  • Joint commodity purchasing. Particularly common is purchasing office supplies, vehicles, computers, and operating supplies. State contracts, council of government, or special government pricing schedules provided by major vendors provide ready-made access to these savings. Look at already established cooperatives or work with others to develop a multi-jurisdiction cooperative.
  • Joint health benefit purchasing. Health insurance can be purchased with other agencies or through pooled insurance arrangements. Prescription purchasing, in particular, appears to be an opportunity for joint savings. Some larger agencies are utilizing employee clinics for more routine care and prescriptions; this can be an opportunity for neighbors to join in the cost savings as well.
  • Surplus inventory. Share surplus inventory with other agencies, or at least with other departments through an intranet or virtual warehouse system. Check with businesses in town who are refurbishing offices or renovating space; they may have furnishings of use to the government and might be happy to receive the tax deduction.
  • Support services. Partner with other agencies to gain economies of scale for support services such as fleet management, equipment services, purchasing, training, risk management, facilities management, etc.
  • Co-produce with not-for-profits. Work with not-for-profits to run or fund appropriate services (e.g., library, senior center, recreation, cultural institutions, etc.)


  • Inter-organizational cooperation is, conceptually, a very popular way for improving efficiency. However, the idea can be much harder to put into practice.
  • Start with limited goals and work within existing arrangements, where possible. 
  • Relinquishing control of specifications can be a major hurdle, particularly if joint purchasing is perceived as a means to merge departments; be realistic about what is necessary and what can be negotiated. 
  • Some cooperative methods take much longer than others to execute. For example, taking part in joint purchasing pool is easy and non-controversial. Providing joint services with another agency is more difficult.

An Elected Official's Guide to Intergovernmental Service Sharing, GFOA, 2007.
Sharing City Sales Tax Revenues with Local School Districts, Government Finance Review, February 2009
Denver’s Scientific and Cultural Facilities District: A Case Study in Regionalism, Government Finance Review, December 2000
Act 77: Revenue Sharing in Allegheny County, Government Finance Review, December 2000


Fiscal First Aid Quick Reference: Pursuing Intergovernmental Cooperation


Revisit Control System. The control system is essential for keeping a handle on the inflows and outflows of resources, especially cash. Review your control system to look for weaknesses. Below are five types of controls to review:
  • Budgetary variance - monthly variance reporting is crucial
    • Budget forecasting, using year-to-date and year-end projections, helps identify problem areas that need immediate attention. Then return to more aggressive, detailed projections for stabilization.
    • Support your analysis with comparison of forecasts to actual, not just budget to actual.
  • Responsibility accounting - managers must be held accountable for results.
  • Program costs – when true costs of programs are unknown it is very difficult to make decisions on how to size them.
  • Capital projects – Is there a full inventory of upcoming capital projects, are capital projects schedules adhered to, are estimates accurate, and are the operating/maintenance impacts of projects known and accounted for in financial plans?
  • Cash flow forecasting – reporting systems to show cash flows, bank balances, loans set to mature and any other events that impact cash position.
    • Short-term cash flow analysis can pinpoint triggers and provide guidance in future forecasting efforts.
  • Position control – keeping control over headcount is vital to controlling personnel costs.


  • Control systems should be easy to maintain and operate. If they are excessively costly or burdensome to administer they will likely fall into disuse or be circumvented.
  • If the government is in a dire emergency, control systems may not be the top priority. Control systems can be given more attention in a more stable (yet still distressed) situation. 
  • Basic documenting of systems and procedures can slow down financial hemorrhaging in crisis and provide foundations to allow for methodical adjustments ensuring long-term viability. 
  • Variance analysis and forecasting accuracy are essential to first aid.  Better estimates of cost and revenue are major “budget balancing” measures.

"Long-Term Financial Forecasting for Local Governments," Government Finance Review, October 2008, p. 60.


Centralize Financial Management and Human Resources Activities. In a severe crisis, it is important to have a firm understanding of and control over inflows and outflows of cash. This could mean personal review by the CFO (in a small government) or a centralized staff of all proposed expenditures until the emergency has passed. Not only will centralization slow the rate of expenditure, it will provide the CFO with a firm understanding of spending patterns and may illuminate some of the problems that lead to the emergency in the first place. Centralization can also improve working capital by rounding up cash from decentralized divisions and dormant bank accounts. After emergency has passed, responsibilities can be re-distributed to emphasize accountability and teamwork.

With respect to human resources, only the largest and most service diverse organization warrants human resources staff in individual departments to address grievances and administer needed process variances. Centralized HR will help create greater consistency in personnel policies and practices throughout the organization, which is especially important as fiscal distress may require personnel actions.


  • Centralization of financial management is most important in an emergency.
  • Centralization should be re-thought after the immediate crisis has passed to move towards a system of accountable, but empowered management and teamwork.
  • After the crisis has passed, use the “revisit financial controls” techniques to ensure there is no relapse.
  • Centralization relies on the CFO or local government manager to quickly establish a strong understanding of operations, financial demands, and cultural nuances. He/She must also quickly establish an expectation of well-documented explanations for purchases and outflows as well as revenue projections.



Fiscal First Aid Quick Reference: Centralize Financial and Human Resource Activities


Develop Cash Flow Analysis. Cash flow is a measure of the difference between cash sources and uses and is a key indicator of an organization's fiscal health. Cash flow analysis takes on renewed importance in a financial crisis. Cash is critical for short-term operations. It pays the salaries and buys the equipment that produces public services. A balance sheet may carry plenty of assets, but without cash a government is effectively bankrupt. Governments in a financial crisis should develop cash flow models that allow the organization to pinpoint its current cash position and provide insight into future position.

  • Cash flow analysis is essential in a financial crisis, especially where ability to pay bills is a real concern.
  • Cash flow analysis helps diagnose where imbalances in sources and uses are coming from.


BP Use of Cash Flow Forecasts in Operations (2005 and 2008) 


Fiscal First Aid Quick Reference: Cash Flow Reporting


Establish a Culture of Frugality. In a situation of severe financial distress, everyone needs to understand that that every dollar counts. Applying some of the more visible first aid treatments can send this message. Other visible tactics could include:
  • Terminate temporary help and redeploy existing staff to fill gaps
  • Cutback sharply on office equipment
  • Delay replacement of vehicles
  • Control travel and expenses
  • Engage employees in auditing small expenditures
  • Take action on big items or very visible issues such as management vehicles and other perks.


  • While a culture of thrift is necessary for overcoming financial crisis, it is not sufficient for creating real value for the public on an on-going basis.
  • A culture of thrift must evolve into a culture of results, where creation of value for the public (defined as results for an affordable price) is prized over growth. For example, improving public perceptions of safety and crime rates must become valued over increasing the number of officers. Changes in culture become institutionalized through credibility of those initiating the changes; Lead by Example without martyrdom. Professional development is essential for all employees, not just some, so adjust everyone’s access to opportunities.

Fiscal First Aid Quick Reference: Establishing a Culture of Frugality


Recognize Opportunities within Crisis. Organizations often respond to declines with a series of minor adjustments until a major event shakes the organization up. Look out for “game changing” events that can be use to break free of constraining past practices and habits. Examples of such events could include:
  • External intervention by financiers (e.g., a ratings downgrade)
  • Rise of external political opposition (e.g., threat of incumbents losing elections)
  • Actual change in top leadership (appointed or elected)
  • Recognition by management of problems
  • Scandals associated with fraud or misfeasance


  • Actual change in top leadership is the most powerful.
  • The nature of the event colors the resulting financial strategies. For example, a ratings downgrade would focus attention on the factors that were the most proximate causes of the downgrade.
  • Communication will greatly affect the organization’s ability to convert crisis to opportunity; build credibility with frequent, clear, and honest communication.

Fiscal First Aid Quick Reference: Recognizing Opportunities within a Crisis


Manage Perceptions. Frame the perception others have of the situation. How the situation is defined is crucial. Sharing information may help avoid rigid reactions and may keep both leaders and the organization open to different options for solutions. Within this, manage expectations. Be honest about what is achievable, particularly with citizens and the governing body; employees will take their cues from the ability of the organization’s leadership to credibly portray reality.



  • “Crisis is opportunity” is a well-worn phrase. However, crisis can also discourage innovation. If a “bunker” or “siege” mentality is adopted in response to a crisis then innovation will be stifled.
  • Sincerity is the foundation of effective communication. For example, employees who are asked for their opinions and suggestions will respond with creativity and ingenuity if there is belief that their suggestions will be heard and valued.


Fiscal First Aid Quick Reference: Managing Perceptions


Be Willing to Spend Money to Save Money. Sometimes is it is necessary to spend resources to spur cost saving innovation. Examples of worthy expenditures could include purchase of labor-saving technology, brining in outside technical expertise, and using a consultant to validate financial position and condition in order to increase credibility and build the case to act.



  • Have mechanisms to ensure value is received for the money spent. This could include deliverable-based payments or gain-sharing arrangements with the vendor. However, it is equally important to have mechanisms that apply to internal staff, who often must create value in conjunction with the outside vendor. For example, staff must learn how to use new technology and incorporate it into work processes.

We're All in IT Together,” Government Finance Review, June 2007, pg. 24.


Fiscal First Aid Quick Reference: Spend Money to Save Money


Network with Peer Agencies and Individuals. The best source of information and suggestions and potentially tangible assistance can come through peers who are or have been in similar condition.



  • The willingness of peer agencies to cooperate with each other is one of the public sectors must important advantages and should be used liberally when trying to manage fiscal decline.

Pool Department Resources. Savings can often be had by sharing resources more effectively across departmental lines. For example, perhaps a decrease in new construction reduces demand for building inspectors in the community development department, but an increase in foreclosures increases demand for code enforcement activities in the public safety department. Rather than incurring overtime in the code enforcement division, building inspectors could be temporarily seconded to pick up the slack. One county found that it could benefit by switching underutilized vehicles from one department with over-utilized vehicles in another department at the midpoint of the vehicles’ planned useful life in order to get the most from the investment.

  • This treatment will have the most potential in more decentralized organizations, but will also be hardest to implement in such an environment.