Financial Management of the Fire Service

1. 91-406 : Week 2 Financial Management of the Fire Service

2. Budget Methods & Practices • Budget message: • Chief’s introduction of the budget • Major conditions surrounding budget’s preparation • economic conditions • problems • service priorities • Sets a tone of “hard times”, “new beginnings”, or “new challenges” • Explains what goals matter or need attention • Presented orally and with the support of charts, graphs, pictures • Other staff members may also participate in the presentation

3. Budget Methods & Practices • Fire dept. budget message examples • “three legged stool”: emergency ops, code enforcement, public education • Explaining how goals of fire dept. need to be met to satisfy these important components of the mission (thanks to Dennis Compton, retired FD Chief and author) • “hard times, but significant needs” • Outgrown facilities, poorly situated fire stations; lack of equipment • “new challenges” • Emergency of new technologies, such as 700 mhzcommunications • New city codes need fiscal support to be effective (residential sprinkler systems)

4. Budget Methods & Practices • Challenges to budget preparation • Budget cuts • Service reductions yield recurring savings, but…. • Reducing certain costs of a program may not affect fixed costs • Example: Reducing fire prevention education programs result in more calls for service, placing more stress on manpower and equipment, adding costs in fuel used, overtime, and maintenance of equipment • Other than personnel costs • Price increases for supplies, equipment not considered capital and payments for consultants, rent, utilities or other activities rise 2-3% a year regardless of cost controls • Pension/health care costs • State & cities often don’t learn of these costs until after budget preparation has progressed far • Increased costs can be significant year to year

5. Budget classifications • Traditional budgeting • Good for control and accountability • Bad for decision making across multiple departments • Program budgets • Organizes expenditures around value to the public • Zero based budgeting • Supposedly developed without reference to prior year(s) • Might help cities rationally decide on fate of programs from year to year if it was actually practical

6. Budget classifications • Results based/performance budgeting • Outcome based • Prove a program, service or activity is worthy • Principles: • A strategic plan exists with measurable objectives • Performance measures provide a connection to determining if objectives are met • Example: Fire dept. activities include inspections, fire calls answered, arson investigations, educational programs given, and property value protected in a given area • Outcomes would be: deaths, injuries, dollar loss, ISO fire insurance rating, number of reported fires/unreported fires

7. References • Mikesell, J. L. (2011). Fiscal Administration: Analysis & Applications for the Public Sector. (8th ed,). Wadsworth. • Chen, G.C; Forsythe, D.W.; Weikart, L.A.; Williams, D.W. (2009). Budget Tools: Financial Methods in the Public Sector. CQ Press.