Introduction
Financial management is critical to public safety agencies as it ensures that they can be financially effective and achieve their long-term goals. However, with the current political and economic climate in America, many public safety agencies are experiencing financial challenges that affect their ability to achieve the desired levels of performance. Therefore, for public safety leaders, having extensive knowledge of financial problems and strategies is essential to ensure effective management of their agencies. This project will seek to analyze the importance of public safety finance, key challenges, and strategies for successful financial management in public safety organizations. In addition, the project will also reflect on the vital role of public safety leaders in financial planning, budgeting, and forecasting.
Public Safety Landscape
The landscape in which public safety agencies operate is rather complicated, with many challenges and concerns faced by public safety leaders. Public safety finance largely depends on these challenges, as the successful implementation of financial planning, budgeting, and forecasting can help agencies to meet the safety demands of local communities more efficiently.
Texas Public Safety Threat Overview provides a comprehensive look at the critical challenges faced by local public safety agencies. The Texas Department of Public Safety explains that the key threats to public safety in the state include “terrorism, crime, motor vehicle crashes, natural disasters, public health threats, industrial accidents, and cyber threats” (2). Such a wide range of threats is evident in most developed countries and creates a constant need for public safety leaders and employees to apply best practices to their work, as well as to use resources appropriately.
Public safety landscape is also affected by the political and socioeconomic environment of the country. Public policy and new legislation can affect the work of public safety agencies both positively and adversely, depending on the nature of changes. For instance, the economic crisis that affected the United States and rest of world in 2008 caused a chain of budget cuts; according to a survey performed by the National Criminal Justice Association and the Vera Institute of Justice (NCJA and Vera), 75% of public safety employees noted a significant reduction in government funding (1). Public safety organizations’ reliance on government funding can become a major concern for public safety leaders due to the need to balance public safety requirements and the agency’s financial resources.
Therefore, the current social, political, and economic factors affecting public safety create critical financial challenges. Responding to these issues is crucial for agencies to provide a high quality of services and achieve their goals. Public safety finance thus becomes a major cause of concern for public safety leaders and requires them to improve financial literacy and use effective strategies for financial management.
Key Challenges in Public Safety Finance
Budget Cuts
Budget cuts are by far the most prominent financial problem experienced by most public safety agencies today. The decrease in budgeting is affecting all types of agencies, including but not limited to the law enforcement, fire departments, and the various agencies within the U.S. justice system. Even local public health departments have experienced budget cuts and program reductions between 2009 and 2013, with over 26% reporting reduced budget and over 40% suffering program reductions due to reduced financing (Ye et al. 130-131). Shrinking budgets are commonly associated with a decreased quality of service provided, as well as organizational problems, including understaffing, employee dissatisfaction, and more.
A similar situation can be observed in public safety agencies that are nonetheless affected by budget cuts. A report by the NCJA and Vera investigates the prominence and effect of budget cuts on public safety agencies (1). The study showed that 60% of organizations reported a decrease in financing by 10-50% in 2010-2013 (NSJA and Vera 2). Moreover, employees noted that budget cuts had a significant effect on staffing, as well as on the quality of services provided. For example, 55% of respondents reported a pay freeze, while 66% were concerned about the reduction in staffing (NCJA and Vera 2). Most importantly, budget cuts were reportedly associated with the decrease in services provided to the public (66%). Preventing shrinking budgets from affecting service provision or quality is an essential task for public safety leaders.
Increasing Costs
Together with budget cuts, many public safety agencies face rising costs. With the growing number of public safety threats and new goals ahead of public safety agencies, an increase in costs is justified by the need for new staff, training, equipment, or resources. As noted by Orrick, human resources comprise between 75 and 80 percent of police departments’ budgets (2). Operating expenditures, such as supplies, services, and equipment, are also essential for public safety organizations and account for increased costs when the demand for the law enforcement services is on the rise (Orrick 6). A similar pattern can be observed in other public safety agencies, including fire departments, emergency management organizations, and more. Managing increasing costs is essential to public safety leaders as it helps to ensure that the organization does not experience long-term financial difficulties.
Financial Illiteracy
Financial illiteracy is an important factor in addressing financial issues in public safety finance. Many public safety leaders have limited knowledge of financial tools and strategies that could potentially aid them in improving financial management in their agency. Consequently, they utilize ineffective methods of cost-cutting and budgeting, which often result in further financial difficulties and hurts performance.
Financial literacy refers to the individual’s ability to gather, understand, and analyze information relevant to successful financial decision-making (Taylor and Wagland 103). Financial literacy of the public is considered to be an important factor influencing the country’s financial security, which has become a crucial concern in the aftermath of the 2008 economic crisis. When it comes to public leaders, financial literacy is even more important as it determines the success of financial decision-making. Consequently, financial illiteracy is a growing problem in public finance that has an impact on many organizations.
Farmer argues that public leaders often underestimate the effect of certain financial actions on their organizations’ future, which might lead to drastic outcomes. The author states that “Failure to understand financial outcomes, even when combined with good faith, is more dangerous to states and localities than it has ever been” (Farmer). Therefore, financial illiteracy of public leaders affects their ability to make effective decisions and can be particularly harmful in the current political and economic climate.
An example of public leaders’ failure to understand the consequences of financial decisions can be seen in the study by Greene and Barsky, who describe the recent budget proposed by the 65th Montana Legislature (1). Budget cuts proposed by the new budget affected many areas, including public safety. In a state that is significantly affected by fires during the Summer season, cutting down the firefighting budget was a poorly-informed decision. Greene and Barsky explain that the state’s firefighting budget was drained by July and “by September, the state was out of funds and FEMA provided its first grants” (2). The reductions in firefighting budget led to the insufficiency of resources for firefighting, which affected the safety of people and future financial performance of the state (Greene and Barsky 2). Increasing public safety leaders’ financial literacy can aid them in improving decision-making and help agencies to succeed in protecting the public.
Strategies for Success
Financial Forecasting
Financial forecasting is a crucial tool for public safety agencies as it can help them to forecast costs and estimate budget needs. However, it is important to perform financial forecasting correctly to avoid unrealistic figures. Nurgaliyev et al. describe a scientific approach to financial forecasting that uses local crime patterns and its impact on the organization, state, and community (543). This approach can help leaders to estimate long-term budgets. However, it is also crucial to address operating expenses as part of financial forecasting.
Orrick provides an excellent guide to forecasting operating expenses in four steps (6-7). After establishing a baseline for operating expenditures based on the previous year, it is critical to evaluate current needs, such as new programs and changes to service delivery schemes (Orrick 6). Evaluation of the cost of adjustments can be performed using other agencies’ experiences with similar programs and changes. However, it is also useful to critically evaluate the cost of processes internally, as this can offer more insight into unnecessary costs (Orrick 6). The final step is to include the operational expenses forecast in the general budget forecast to get realistic numbers (Orrick 7). Although the strategy proposed by the author is rather complex, it can help public safety leaders to improve the budgeting process and enhance the financial performance of their agencies.
Budgeting
Successful budgeting strategies present opportunities for public safety agencies to allocate and use financing efficiently. Successful budgeting decision-making can help the agency to respond to environmental and policy changes affecting funding and performance (Rubin 29). Depending on the agency type, as well as on its needs and goals, different types of budgeting can be used. However, because public budgeting is affected by a variety of external forces, it is critical to ensure that budgeting is segmentable and interruptible by gathering related processes into decision clusters (Rubin 29).
Performance budgeting is another option for public safety leaders, as it allows linking performance outcomes with the agency’s funding levels (Kelly 11). By providing valuable insight into the effectiveness of the agency’s financial operations, performance budgeting can help agencies to be more efficient in financial management by reducing spending on processes or operations that do not result in performance improvement. Furthermore, it offers a chance to estimate budget requirements based on the desired levels of performance, which makes it useful in financial forecasting.
Ackah and Agboyi recommend the use of the Medium-Term Expenditure Framework (MTEF) for public budgeting (7). The framework consists of three main components: “top-down estimates of aggregate resources available for public expenditure consistent with macroeconomic stability; bottom-up estimate of the cost of carrying out policies, both existing and new; and a framework that reconciles these cost with aggregate resources” (Ackah and Agboyi 7). Thus, the MTEF can help public safety agencies to adjust to the external changes and remain effective even at times of budget cuts or crime growth.
Strategic Leadership
A strategic approach to public safety finance can assist leaders by providing flexibility in reacting to external changes while at the same time ensuring that the financial activity of the organization is consistent with its goals. As noted by Prowle et al., strategic leadership is often defined in terms of its situational dimension (37). Indeed, strategic leaders translate external and internal processes affecting the organization into strategic planning for company success. Using a similar framework when it comes to public safety finance can improve the organization’s response to new policies. In addition, strategic financial management is useful in linking the agency’s finances to its strategic goals, thus enhancing the efficiency of operations and developing financial plans that contribute to future success.
Results
An interview with a financial officer of a local public safety agency was conducted to clarify the findings obtained from research. Open-ended questions on which the interview was based considered the principal areas of the project, including financial challenges, the role of public safety leaders, and the landscape of financial decision-making in public safety. In general, the subject’s responses were in line with the research findings. For instance, the subject noted that her organization was influenced by recent budget cuts, which were also linked to impaired performance. The participant also agreed that financial forecasting is among the primary strategies that can help public safety leaders to be successful in financial decision-making. Moreover, the subject confirmed the vital role of leaders in public safety finance, stating that they can “promote best practices in financial management, thus helping their agencies to move forward with their goals”. However, the subject also reported that her agency’s leaders had limited knowledge of performance budgeting and the MTEF, which impaired their actions in difficult times. The participant confirmed that most public safety leaders rely on cost-cutting strategies that are not always effective in relieving the agencies’ financial struggles and can be harmful to performance. Overall, the subject confirmed the importance of improving financial literacy among public safety leaders and highlighted the practical impact of the issues discussed in the project.
The Franciscan Tradition
The issue of public safety finance is relevant to the Franciscan Tradition by connecting with Franciscan values of service, integrity, and learning. First of all, as shown above, ineffective management of financial problems can hurt the agency’s role in serving the public. Using best practices in financial planning, forecasting, and budgeting can help public safety leaders to advance the performance of their agencies, thus improving the services delivered to the public.
Secondly, by emphasizing the value of financial literacy and effective budgeting strategies, successful financial strategies also promote integrity. Maintaining honesty and transparency in financial operations is critical to organizations that are willing to achieve their goals, and public safety leaders should uphold these values by applying them in their work. Finally, the Franciscan Tradition values learning and personal development. The need to improve financial literacy and the understanding of public safety finance by leaders is among the main provisions of the project, which also connects it to the Franciscan Tradition.
Conclusion
Overall, it is clear that public safety leaders play an important role in the financial management of their agencies. The current landscape of public safety organizations provides for a wide variety of financial issues that can affect their performance. Besides, financial illiteracy and lack of strategic knowledge can lead to poor financial decision-making, contributing to further difficulties. Ensuring effective financial management of public safety organizations can assist in responding to external policy or funding issues while maintaining a high quality of services provided to populations. Therefore, developing financial literacy in public safety leaders is critical for improving the safety of local communities.
Appendix 1
Experiential Learning
Introduction: Hello, my name is (*) and I want to talk to you about public safety finance and the role of public safety leaders in successful financial management. Your identifying information will not be available to third parties, and the interview is fully confidential.
What are the forces affecting financing in your organization?
Note: The answer can help to verify if public safety finance is largely affected by political and economic factors, as well as crime rates.
The government’s budgeting decisions are the key factor affecting my organization and other public safety agencies. In the past few years, we have experienced an increase in demand for our services, which also affects our use of resources.
What are the effects of political and economic factors on your agency?
Note: According to research, budget cuts affect nearly all public safety agencies. The answer can help to verify this claim.
Budget cuts have an increasingly negative effect on my agency and on many other public safety organizations. It is difficult for us to serve the public when there are not enough resources for daily operations and new programs, which is why budget cuts are a major issue.
How is your agency coping with financial challenges?
Note: Research shows that strategic planning, financial forecasting, and effective budgeting strategies can be used to improve financial management in public organizations. I would like to know if the respondent can recommend any other strategies.
Cost-cutting is the main way for us to adjust to shrinking budgets. Our budgets are constantly revised to determine any expenses that could be reduced, which helps to avoid going over the budget.
Does your agency use financial forecasting? If so, how does it help in financial management?
Note: Financial forecasting is among the best practices for managing public safety finance in the law enforcement (Orrick 5-6). I want to determine if this practice can be extended to other public safety agencies.
My agency only uses financial forecasting when planning a budget. However, I think that it could also be useful in managing the costs and tailoring the budgets to current public safety challenges if used appropriately.
What is the role of public safety leaders in the financial management of their agencies?
Note: Overall, the findings suggest that public safety leaders have a crucial impact on financial management in their agencies. However, the respondent could have a different view.
Public safety leaders are an important part of the process, as they promote best practices in financial planning, thus helping their agencies to move forward with their goals.
Why do you think some public safety leaders are struggling to make effective financial decisions?
Note: Financial literacy was highlighted as a crucial problem by Farmer, so the question was designed to determine if the respondent’s experience is similar.
Public safety leaders rarely have proper training in financial management. They often choose to delegate financial management tasks to employees that are more experienced in finance. To improve financial decision-making in public safety, it is important to increase the financial literacy of public leaders and raise their engagement in financial management.
What type of budgeting does your agency use? Have you had experience with performance budgeting of the MTEF?
Note: Performance budgeting and MTEF are recommended for public organizations, which is why it is interesting to know if the participant’s organization has experience with them.
Our agency uses a fixed budget due to the financial difficulties prompted by budget cuts. I believe our leader has limited knowledge of performance budgeting and MTEF, which is why we have never used those in practice.
What are the benefits and disadvantages of cost-cutting for your organization?
Note: Although cost-cutting is among the easiest remedies for financial issues, it might cause problems if not implemented correctly. This question serves to clarify the practical advantages and disadvantages of cost-cutting.
Cost cutting is relatively easy and widely used across the sector as it provides a quick remedy for shrinking budgets. However, it can lead to poor service quality and employee dissatisfaction if the staff suffers.
How could strategic leadership be used to improve public safety finance?
Note: Prowle et al. show that strategic leadership could help public organizations to address budgeting more effectively (37). I wanted to know the respondent’s opinion on the matter.
In my opinion, strategic leadership can help to cut down on processes that do not contribute to the organization’s performance. Moreover, it can be useful in financial planning following new policies or funding cuts.
How could improving the financial literacy of public safety leaders help your agency and similar organizations?
Note: The research shows that financial literacy is critical to successful financial decision-making and can aid agencies in achieving their goals. The response to this question will show if the respondent’s opinion is the same.
Improving leaders’ knowledge can help them to make well-informed decisions about budgets, cost-cutting, and other financial management components. Thus, it would contribute to the financial performance of public safety agencies and help them to achieve better results.
Appendix 2
Annotated Bibliography
Ackah, David, and Makafui R. Agboyi. Budgeting as a Tool for Enhancing Financial Management in Local Government Authorities. GRIN Verlag, 2014.
In this book, the authors investigated the effect of budgeting on financial management of local authorities. Using a collection of previous research, the authors used a qualitative methodology to study the use of budgeting by local governments in Ghana. The book offers a useful overview of different budget types, particularly the Medium-Term Expenditure Framework (MTEF) that is highly recommended for local public budgeting.
Farmer, Liz. “Financial Illiteracy: One of Government’s Biggest and Least-Discussed Problems.”Governing. 2014, Web.
This article introduces the issue of financial illiteracy in the public sector. Using a case study approach, the author presents examples of financial illiteracy and its effect on public policy. The article is useful for the project because it shows the scope of the problem and its consequences for the public.
Greene, Jeffrey, and Christina Barsky. “Montana: Budgeting and Policy in the Treasure State.” California Journal of Politics and Policy, vol. 9, no. 4, 2017, pp. 1-14.
In this article, the researchers focus on the recent budgeting issues in Montana that affected many public areas, including public safety. Using a mixed approach, the authors examine the sources of financial problems in the state and the possible negative consequences of its new budget. The article is relevant to the topic of financial illiteracy as it outlines the sources and outcomes of poor financial decisions.
Kelly, Janet M. Performance Budgeting for State and Local Government. M. E. Sharpe, 2015.
The present book focuses on performance budgeting and the various theoretical and practical aspects of its implementation. The author uses a range of case studies and research findings to illustrate their arguments, providing a useful overview of performance budgeting in the public sector. The book was chosen as the main source of information about performance budgeting, as it is used in many public organizations and could offer certain benefits when applied to public safety finance.
National Criminal Justice Association (NSJA) and the Vera Institute of Justice (Vera). The Impact of Federal Budget Cuts from FY10-FY13 on State and Local Public Safety. 2014, Web.
This report is a crucial source of information describing the effect of budget cuts on public safety organizations. The authors present the results of a quantitative study featuring over 1,000 respondents working in public safety agencies and considers their experience of budget cuts. This source is useful as it shows the correlation between budget cuts, insufficiency of resources, and impaired service provision.
Nurgaliyev, Bakhit Moldatyaevich, et al. “Budgeting of Police in the Context of Crime Cost: Some Consistent Patterns and Conclusions.” Life Science Journal, vol. 11, no. 6, 2014, pp. 543-547.
The authors of this research approach public safety budgeting from a scientific point of view, arguing that criminology should focus on predicting public safety costs based on crime patterns and the effect of crime on the community and the state. The researchers offer substantial information about this method and apply it to Kazakhstan using a qualitative methodology. The article is significant for the project as it explains the scientific methodology of financial forecasting, which could be beneficial for many public safety agencies.
Orrick, W. Dwayne. Best Practices Guide for Budgeting in Small Police Agencies. International Association of Chiefs of Police, 2015.
The publication by Orrick is part of the IACP’s technical assistance program for smaller police departments. Consequently, the author’s goal is to summarize and offer a practical implementation guide for useful budgeting strategies. The text is helpful as it offers a clear and concise introduction to forecasting, cost-cutting, and financial planning in the context of public safety.
Prowle, Malcolm, et al. The Importance of Strategic Financial Leadership in the UK Public Sector in a Time of Financial Austerity. ACCA, 2013.
This text is relevant to the project as it considers the effect of difficult economic conditions on the public sector in the UK. The goal of the authors is to describe and explain how strategic leadership could improve the situation using a qualitative method of analysis. The source was used to inform the recommendations for using a strategic approach to public safety finance.
Rubin, Irene S. The Politics of Public Budgeting: Getting and Spending, Borrowing and Balancing. CQ Press, 2016.
In this book, Rubin provides a comprehensive overview of public budgeting, covering topics such as revenues, costs, sources of influence, and more. The author uses a case study methodology to represent key points. The book was chosen for research because of its full coverage of the topic and useful examples.
Taylor, Sharon, and Suzanne Wagland. “Financial Literacy: A Review of Government Policy and Initiatives.” Australasian Accounting, Business and Finance Journal, vol. 5, no. 2, 2011, pp. 101-125.
The aim of the study was to determine the effectiveness of financial literacy programs employed in New Zealand and Australia. The authors used a qualitative methodology based on previous literature analysis and evaluation, which also provided essential information about financial literacy in developed countries. The source stresses the importance of financial literacy for informed financial decision-making, which is why it was used in the project.
Texas Department of Public Safety. Texas Public Safety Threat Overview. 2017, Web.
The document was released by the Texas Department of Public Safety in 2017 to inform the public about the current threats to public safety that the state’s agencies perceive as significant. Apart from summarizing the threats, the document also presents a brief needs analysis that reflects the requirements for different agencies in combatting each threat. The document is useful as it illustrates the complexity of public safety landscape and the increasing pressure on public safety leaders.
Ye, Jiali, et al. “Reductions of Budgets, Staffing, and Programs Among Local Health Departments: Results from NACCHO’s Economic Surveillance Surveys, 2009-2013.” Journal of Public Health Management and Practice, vol. 21, no. 2, 2015, pp. 126-133.
In this article, the authors study the effects of financial difficulties experienced by local health departments after the 2008 economic crisis. Using a quantitative methodology, the researchers found that budget cuts and program reductions affected the provision of health services to populations. The source was chosen to depict how budget cuts affect various public agencies.