Ensuring Continuity in Government Finance: The Hidden Risk of Employee Turnover

In years gone by, when a small local government needed a finance director, finding qualified candidates was relatively straightforward. But today, the market has completely shifted. Small municipal governments are facing a challenging hiring environment and competing against each other over an increasingly small pool of talent.

This growing crisis in government finance staffing isn’t just an HR headache; it’s a fundamental threat to small governments across the country. A city’s finance director is an unsung hero, operating tirelessly behind the scenes to keep everything running smoothly.

Many cities are reliant on dedicated servants who’ve occupied these financial leadership roles for decades. Sometimes it’s a dedicated finance director in a small department. Other times, it might be a town clerk who wears 20 different hats on a daily basis, one of them being oversight of the finance function.

But more often than not for small governments, it’s not until that person leaves that the importance of their work becomes apparent. The resulting void can trigger cascading problems that affect everything from regulatory compliance and state funding to public perception and service delivery.

If you’re preparing for the retirement of a key finance employee, dealing with employee turnover or just committed to building a more resilient city government, this guide is for you. We’ll explore the hidden risks of employee turnover, highlighting what could go wrong when key personnel depart and outlining how you can build a more robust approach to managing your city’s finances.

The Current Landscape: A Shortage of Financial Leaders

Let’s be clear: The shortage of experienced finance professionals isn’t a phenomenon limited to the local government sector. There’s a nationwide shortage of CPAs, and many industries are facing challenges in recruiting and retaining qualified professionals.

However, this wider shortage is hitting local governments hard. A significant generational shift is underway as experienced finance staff approach retirement age right when fewer accounting professionals are entering the government sector. The disparities in compensation between public and private sectors make it difficult to attract top accounting talent, with government positions increasingly unable to match corporate finance salaries.

Beyond these macro factors, there’s also the challenge of the level of complexity and nuance involved in government finance and accounting. A local government can’t just hire any finance leader; they need professionals who are familiar with the intricacies of government accounting. The demand for expertise across areas including fund accounting, extensive compliance requirements and state-specific regulations only narrows the candidate pool.

Smaller cities and towns face an especially difficult environment. While larger municipalities have multi-person finance departments that remove key person dependencies, many smaller towns and cities only operate with just one finance professional. This leaves them vulnerable to disruption if that person were to leave. Many municipalities face months of financial uncertainty while searching for a replacement (who may never materialize) with the same qualifications.

This concentration of critical financial knowledge represents a fundamental vulnerability in government operations that requires strategic attention before a vacancy occurs. Without proper succession planning or alternative structures, municipalities face significant exposure when their financial cornerstone departs.

The combination of retiring professionals, compensation constraints and specialized knowledge requirements has transformed a once-manageable hiring process into a significant operational risk for local governments.

Consequences of Finance Staff Turnover

Staff turnover in local government finance departments can create all manner of challenges that typically evolve and intensify over time. What begins as immediate operational disruptions quickly turns into deep organizational challenges and eventually threatens the fundamental viability of small municipalities.

Understanding this progression from short-term pain to long-term damage is essential for local government leaders seeking to proactively protect their communities from the hidden risks of personnel transitions in critical financial roles.

Short-Term Consequences of Finance Staff Turnover

Small municipalities face immediate challenges when finance personnel depart unexpectedly. Staff departures disrupt budget processes, while the loss of institutional knowledge can present challenges in the administration of essential financial operations (including accounts payable and payroll). Weakened controls during transitions also increase vulnerability to errors and fraud — putting local governments at risk of much more significant issues.

In Florida, challenges might become particularly apparent following the fiscal year-end, when the municipality has nine months to submit financial statements. If deadlines are missed, municipalities risk oversight from the Joint Legislative Auditing Committee (JLAC). JLAC can withhold critical state revenue sharing, triggering financial instability for communities already operating with limited resources.

Medium-Term Consequences of Finance Staff Turnover

As turnover challenges persist, a city government’s financial management can deteriorate across multiple dimensions. Reporting becomes unreliable, hampering effective governance. Financial planning for capital projects falters, delaying infrastructure improvements and increasing costs.

These issues frequently attract media scrutiny in small communities, damaging public perception and eroding trust in local leadership. If employee turnover challenges aren’t addressed, governments can face a negative cascade effect where remaining staff face unsustainable workloads. This can trigger additional departures and create a cycle that becomes increasingly difficult to break.

Long-Term Consequences of Finance Staff Turnover

As issues continue to worsen over time, the municipalities’ core functions start to come under increasing strain. Service delivery deteriorates as financial constraints tighten. The government shifts from proactive financial management and planning for the future to a state of reactive response.

With less available financial data and knowledge, critical decision points to help ensure the government’s long-term financial viability may be missed. If these issues continue unchecked, financial challenges may go unrecognized and result in future operational challenges. For instance, below-market utility rates that fail to provide sufficient funds for capital investment may allow a utility system to deteriorate beyond the point for affordable repair.

***

These compounding consequences demonstrate why finance staff turnover represents not just an administrative challenge, but a fundamental threat to governmental operations and public trust in small local governments. That begs the question: What can local governments do about it?

A New Approach: The Outsourced Approach to Government Finance

The vulnerabilities exposed by turnover in a small government’s financial leadership underscore the importance of taking a new approach to government finance. Rather than relying on a single person, many municipalities are starting to turn to a team-based, outsourced model that provides both depth and continuity.

At James Moore, we’ve provided outsourced government finance services to small local governments through our Municipal Financial Support Services (MFSS). Our team is often brought in when a municipality is navigating employee turnover issues like those described above. This provides a sustainable solution to these challenges that ensures governments have everything they need to operate effectively.

Our outsourced approach resolves the dependency on a single individual. It provides local governments with access to a structured team of finance professionals at varying levels of expertise, from accomplished government finance leaders to accounting and bookkeeping professionals who excel in the day-to-day tasks required for smooth operations.

By transitioning to this approach, governments can remove their dependency on any one individual and benefit from the wider expertise of an entire team staffed with government accounting professionals. At James Moore, our government services team brings deep expertise specifically in governmental accounting. We thoroughly understand Florida-specific compliance requirements, from reporting deadlines to budgeting processes.

Build a More Robust Government Finance Infrastructure with the Support of James Moore’s Government Services Team

The finance staffing challenges facing small local governments aren’t going to go away anytime soon. With a generation of retiring professionals, a shortage of qualified professionals and the need for specialized knowledge, it’s becoming increasingly unsustainable for municipalities to rely on a single finance professional.

Forward-thinking municipal leaders are proactively addressing this hidden risk by transitioning to a team-based approach before vacancies create compliance issues or operational disruptions.

James Moore’s Government Services team provides precisely this solution — a dedicated team of governmental finance professionals who integrate with your operations at the right levels of expertise.

Whether you’re facing an immediate vacancy or planning for an upcoming transition our professionals can partner with you to ensure financial continuity while meeting all compliance requirements. Contact our Government Services team today to learn how we can help your municipality address the hidden risk of finance staff turnover.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.