3.4 Coordinating Financial Matters
Similar to the actions of meeting, deliberating, and decision-making, the management of an agency’s finances is also typically associated with specific administrative procedures. In the following we will outline some common sets of administrative practices regarding financial management and will describe how these practices might impact coordination efforts.
3.4.1 Budgeting Considerations
Governments at the local, state, and federal level have different procedures for creating budgets and spending funds, but most follow a formalized set of steps. In general, budget committees for agencies meet months or even years before the beginning of a fiscal year to propose annual budgets, which must then be deliberated and authorized by the agency’s governing body.38 Designating funds for specific projects may require an additional vote, and money cannot be spent until the start of the fiscal year. Furthermore, funds are often appropriated for a specific amount of time – such as one or two years – meaning that money must be obligated or spent before a certain date.
Agencies that are coordinating on financial matters may therefore need to plan and formally propose any projects that require funding well in advance of the start of the project. A common complication for this process involves the different budgeting timelines of the coordinating agencies, such as the start of their respective fiscal years. For example, the federal U.S. fiscal year begins on October 1, while many state fiscal years begin July 1. Towns or other local governments may match their state’s fiscal year, may match the calendar year (Jan 1), or might operate based on another date entirely.
Different fiscal years or other budgetary incongruities between coordinating agencies need to be considered to ensure smooth project implementation. Agencies may need to incorporate their partners’ different fiscal years into their project planning so that everyone is aware of when funds will and will not be available. Understanding the different fiscal year systems is also important for securing matching grant funds on time and for accurate grant reporting. If the financial components of projects are not adequately planned – or if unforeseen circumstances cause interruptions to plans – the consequences to a project may be significant. Projects may be forced to exceed time or budget projections, payments to contractors may be substantially delayed, negotiated agreements could be nullified, and funding sources may expire before they were able to be fully utilized.
3.4.2 Constraints on the Use of Funds
Depending on budgeting processes and funding designations, agencies may have different constraints on the ways they can spend money (see Box 3c). Some agencies may have access to general funds, while others might have access only to funds that have been set aside for a specific purpose. For example, agencies that receive funds through appropriation bills often have specific guidance on what projects those funds can or cannot support. Other agencies may have more flexibility, especially if they have the authority to raise funds through methods such as taxes, tariffs, or the sale of natural resources (e.g. timber sales).40 Raising these funds may need approval, such as through a congressional bill, a town warrant, or a public vote. Any associated revenues may or may not have restricted uses. Coordinating agencies need to carefully consider which partners can contribute funds, for which purpose, and under what constraints for successful project planning.
Box 3c. Rules Influencing Finance Management – Example Londonderry’s Conservation Fund
The Town of Londonderry, New Hampshire dedicates a certain percentage of revenues collected via the Land Use Change Tax (a tax generated sporadically by land development) to the town’s “conservation fund.” Per New Hampshire law (NH RSA 36-A), money from a town’s conservation fund must be used for the protection and proper utilization of the town’s natural resources.39 The law specifies that expenditures from the conservation fund must be authorized by the town’s Conservation Commission and provides further guidance on the activities for which conservation fund dollars can be used. For example, the law indicates that funds can be used for the acquisition, maintenance, or improvement of open space.4 Therefore, the Conservation Commission is able to use conservation fund dollars to contract with a professional land manager (e.g., a forester) to maintain the town’s open spaces. However, even though it is legally and administratively permissible to use the funds to employ a land manager, the Commission is unable to directly employ one using conservation fund dollars because the sporadic nature of land development projects leads to an intermittent revenue stream. Inconsistent availability of the tax revenue impedes the ability to guarantee wages for a staff member.40
3.4.3 Approval Processes and Spending Rule
In additional to incorporating each agency’s budgeting processes and spending constraints into project planning, cooperating agencies may also need to consider each group’s approval processes and rules for spending their funds. This is because agencies often have specific sets of requirements to approve of major purchases or to hire contractors. Some may have rules for selecting vendors or contractors intended to promote agency goals or to lower total project costs. For example, some agencies are required to receive bids from at least three contractors to ensure a competitive price and may be required or incentivized to include bids from specific groups such as veteran or minority-owned businesses.40 Other agencies may simply require majority approval from their governing body to select a contractor, while others may authorize certain employees to make decisions on the agency’s behalf.
Another financial factor to consider is the variation in billing and payment procedures between different agencies. For some agencies, bills from contractors or other major purchases need to be approved during a meeting and then sent to a specific person with the authority to make payments (e.g., the treasurer). Depending on billing cycles, the frequency of regular agency meetings, and the schedule of the person with payment authority, bills may take several months to process between the date they are received and the date they are paid.40 Therefore, coordinating information regarding billing cycles can be important to ensure contractors are paid in a timely manner and to accurately estimate the timeframe when funds will be removed from an account. Agencies may also have different restrictions on the use of funds for certain items or circumstances. For example, an agency may have a specific rule against using funds to purchase alcohol or gifts. These restrictions might apply only to the funds from certain accounts or may apply agency wide. Another circumstance that may be associated with special restrictions or procedures is the use of advanced payments. Paying in advance for a service – such as paying the fees to apply for a required permit before a management activity can begin– can cause administrative challenges because a service has not yet been rendered.40 Some agencies may have restrictions on the use of advance payments, while others may require special permissions, specific forms of payments, or may have no extra steps or considerations. Sharing an understanding of these restrictions is important to make sure funds are spent in an appropriate manner according to each cooperating agency.
Lastly, agencies often have different degrees of flexibility to engage in deficit spending, which occurs when expenditures exceed revenues within a given fiscal year.38 Some agencies, particularly at the federal level, are allowed to run deficits to ensure that funds are available quickly to respond to emergencies or acts of war. In contrast, agencies at the state or local level are typically required to balance their budgets every year. Some government groups can issue bonds to cover additional expenses, while others are unable to spend money unless it has already been raised and specifically appropriated for their use. An agency’s ability to engage in deficit spending may be important in a variety of circumstances, such as when planning the potential magnitude of a long-term project.