Fiscal Literacy for Everyone on the Government Ladder

Facebooktwitterlinkedinmail

Imagine a small child tugging on his mother’s arm in a department store. The child is asking if he can buy the toy clutched in his hand. When the mother denies the child’s request, the child questions why. If the mother chooses to provide a response, she will likely say the toy is priced too high or that they do not have enough money to buy it. Now imagine the child advising the mother that if she cared about his wellbeing, all she needs to do is allocate the funds from the amount designated for the mortgage. Sometimes public opinion of government accounting is treated with the same degree of indifference.

Unfortunately, public sector employees often get a bad rap in the court of public opinion. They can be characterized as lazy in terms of service and spend-happy with public funds. It’s an easy sentiment to adopt without knowing the inner workings of public service, but in reality,public service employees are no different than private sector employees.[pullquote align=”right” cite=”” link=”” color=”” class=”” size=””] There are those who are conscientious about spending as if the funds were their own, and there are those who simply don’t care.[/pullquote]

Of those who don’t care, the culprit may be a lack of fiscal literacy.

 

Fiscal Literacy

Since not all public service employees work directly in a fiscal capacity, expecting non-fiscal employees to understand their impact on finance is a challenge. There are also those who work directly in accounting but may only see a small piece of the big picture. For example, one employee’s job may be primarily entering accounts payable with no awareness of the funding source to pay those bills. The next employee may be responsible for verifying payments were properly categorized by type of expense for budget tracking. Another employee ensures enough funds were appropriated for each expense. These are just the beginning links of internal controls in a long chain known as the government financial system. For those who are not involved in accounting, the thought of delving into these activities may provoke yawns and side glances for the nearest exit, but accounting can actually be fun! What?! Fun?! Doubtful, right?

[pullquote align=”left” cite=”” link=”” color=”” class=”” size=””]The key is fiscal literacy. Finance is ultimately a game of strategy and investigation.[/pullquote]

For those not directly involved in finance, imagine looking at money issues through the lens of a master chess player or a forensic detective. Every financial challenge has various angles, a myriad of steps, and opportunities for creatively managing projects, operational budgets, and capital assets.

Let’s revisit that child who wants a toy. Assume the toy falls into the general category of assets (for the record, this statement by no means implies that assets are toys; however, in the public safety community, this is often debated with considerable humor). The toy is considered a non-operating expense because operating expenses are things like payroll, utilities, and rent. The toy would not qualify as a program expense either (think summer piano lessons for local children).

If the mother says the toy costs too much, the underlying assumption is that the cost outweighs the value of the good. The strategist looks for a means to justify the cost by identifying all the benefits of the toy. If the mother claims there is not enough money to buy the toy, the assumption can be made that the toy has value, but there is not enough money in the budget to accommodate the purchase (the mother is denying the child appropriation authority). If the child wants to petition for a budget amendment, he must demonstrate that the value of the toy has priority over other assets yet to be acquired or could replace an existing asset at the end of its useful life. The detective investigates whether a toy of equal value can be obtained for less. If there are similar toys with varying features, the strategist and detective put their heads together to create a cost/benefit analysis by evaluating each aspect of this procurement.

 

Gaining Buy-in

The best way to gain buy-in and understanding from non-fiscal employees is to make them part of the collaboration process that leads to financial decision-making. This may not be feasible on a regular basis, but it is an effective way to cultivate mutual appreciation and understanding for one another’s responsibilities. Working collaboratively also affords organizations the opportunity to more effectively calculate their needs as well as risks.

[pullquote align=”right” cite=”” link=”” color=”” class=”” size=””]The era of bean counter versus the world is nearing the end.[/pullquote]

In prior decades, the chief fiscal officer of government agencies called the shots from some dark corner office regarding what could be purchased and how money could be spent for general operations. To non-fiscal employees, these decisions often appeared arbitrary and capricious whereas fiscal officers based their decisions on deductive reasoning. However, if the bean counter’s analysis did not include even an informal survey from the operational side of the house to better understand how expenditures are used (or where they rank in priority), all analysis is simply logic in a vacuum.

With technology freeing up employees’ time from the drudgery of manual computations and snail mail correspondence, the breadth of fiscal managers is expanding. Likewise, technology is affording employees of all kinds greater flexibility to perform their jobs and access to budgetary documents, which ultimately bridges non-fiscal and fiscal employees in making decisions that best serve their organization.

Suggestions for introducing fiscal literacy into an organization:

  • Develop realistic scenario-based exercises to increase awareness and collaboration. This can be particularly beneficial in making decisions pertaining to overtime staffing and small project management.
  • Create an informal glossary of commonly used accounting terms where employees generate the definitions and create relevant, work-related examples.
  • Take a moment to understand why local government writes those seemingly long and formal fiscal analysis reports by visiting the authority on the subject, the Governmental Accounting Standards Board at http://gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176163117935&acceptedDisclaimer=true
  • Collaborate with the local jurisdiction’s Auditor-Controller to host short accounting training sessions in a fun way (perhaps in game show fashion).

 

Making Accounting Approachable

The complexities of government accounting are too vast for even fiscal officers to comprehend inside and out. Before we can defend the use of public funds to taxpayers, or even dispel the myth that all public funds are derived from taxes, public service employees have the responsibility to understand their revenue sources and how best to use the funds they manage.

This summary of fiscal literacy for non-fiscal governmental employees is an intentional oversimplification to make accounting a more approachable topic. Terms such as accumulated depreciation, capitalization, and contingent liability were deliberately omitted to prevent the onset of reader comatose.

For an introductory yet more in-depth explanation of government accounting, visit the National Center for Education Statistic at: https://nces.ed.gov/pubs2004/h2r2/ch_4.asp

Facebooktwitterlinkedinmail

Leave a Reply