The Case for Outsourced Finance Services in Local Government

In recent years, finance departments of local governments across the country have faced a convergence of challenges. Seasoned professionals with decades of institutional knowledge are retiring in waves. And a shortage of talent (exacerbated by budget constraints) is making it increasingly difficult to attract and retain qualified replacements. Meanwhile, compliance requirements grow more complex each year.

These are real-world issues that already affect many municipalities, particularly smaller local governments. The symptoms of these issues often appear gradually — missed deadlines, compliance issues, budget preparation challenges and so on. Left unchecked, they can quickly grow into significant challenges.

Such challenges aren’t isolated; they represent fundamental shifts in the municipal finance landscape. Amid this daunting environment, there’s a clear need for innovative solutions.

Enter outsourced finance services for local governments. At James Moore, we developed our Municipal Finance Support Services (MFSS) team to directly address these evolving challenges. Rather than simply offering temporary staffing solutions, MFSS provides comprehensive financial expertise tailored to each government’s unique needs — whether supplementing existing teams or providing complete outsourced financial management services.

In this guide, we’ll explain why outsourced finance services have become increasingly necessary for local governments, explore the specific benefits they provide and discuss how to evaluate whether this approach might be the right solution for your municipality.

The Growing Need for Outsourced Finance Services

The finance department of any local government serves as its fiscal backbone, yet many municipalities face unprecedented challenges in maintaining this critical function. Several factors are combining to create a situation that’s quickly becoming unsustainable for many municipalities.

Overcoming Knowledge Gaps

Local governments often lose irreplaceable expertise when long-tenured staff with vast institutional knowledge retire. Without proper succession planning (a common deficiency in local government), departures create immediate operational vulnerabilities. This issue of continuity in government finance staffing doesn’t just apply to retiring employees; health issues, new career opportunities or personal matters can all see key employees leave their roles.

Recruitment and Retention Roadblocks

Municipalities struggle to attract qualified finance professionals due to the limited compensation packages they’re able to offer compared to larger government entities. Ongoing professional development opportunities may be limited, and many municipalities have an extremely small pool of local talent to choose from.

Post-COVID Workforce Dynamics

The aftermath of the pandemic has exacerbated recruitment and retention challenges. Return-to-office mandates have triggered staff departures, further eroding institutional knowledge and resources.

Specialized Government Finance Expertise

Local government finance requires specialized knowledge of fund accounting, governmental reporting, budget laws and compliance regulations. This specialization creates a steep learning curve for professionals transitioning from other sectors and makes it difficult for smaller municipalities to maintain comprehensive in-house financial expertise.

In practice, these challenges cause delayed financial reporting affecting bond ratings, budget errors leading to misallocated resources, audit compliance issues, and cash flow disruptions. Municipalities also struggle with implementing accounting standards and maintaining proper controls, increasing fraud risk and fiscal instability (and ultimately compromising both service delivery and public trust).

All told, as these factors compound, traditional approaches to staffing municipal government finance departments are becoming increasingly insufficient. This leads many municipalities to consider working with an outsourced government accounting solution.

Key Benefits of Outsourced Finance Services

Outsourced finance services offer local governments a strategic alternative to traditional staffing models that directly address the evolving challenges in municipal finance. As municipalities contend with the issues outlined above, a partner like James Moore’s MFSS team provides a flexible approach that transforms potential vulnerabilities into opportunities for enhanced financial management.

The most effective outsourced arrangements deliver several critical advantages:

• Continuity and stability: These services provide essential stability, ensuring budget preparation, financial reporting and compliance activities continue without interruption — even in times of turnover. This continuity helps municipalities avoid missed deadlines that directly impact funding.
• Specialized expertise and best practices: Outsourced finance teams bring specialized knowledge from working with multiple municipalities. This extensive experience creates deeper expertise in government accounting requirements, regulatory compliance and financial reporting standards, as well as an awareness of what best practices currently look like across budgeting, reporting and more.
• Cost-effective access to advanced skills: Outsourced services provide access to experienced government finance professionals on a fractional basis, allowing municipalities to secure expertise that would otherwise be financially out of reach.
• Customizable support models: Outsourced government finance services don’t replace existing staff; they augment them. At James Moore, our solutions range from providing comprehensive financial management for smaller municipalities to specialized support for complex projects and initiatives.

Together, these benefits enable local governments to transform financial challenges into strategic advantages. Municipalities gain not just operational stability but also enhanced capabilities that improve fiscal management, compliance and (ultimately) public service delivery.

Learn More: Overcoming Common Concerns About Outsourced Finance in Government

Evaluating and Selecting an Outsourced Finance Provider

If you’re considering working with an outsourced municipal finance service, approach the decision methodically to ensure the best possible outcome. The right partner will support your municipality for years to come. So it’s important you understand where your local government needs support and how to find it.

Before seeking external support, municipalities should work to clarify exactly what financial functions require assistance. Some organizations understand precisely where gaps exist, while others simply recognize they need help but can’t identify specific areas of concern.

If you’re not sure where to start, our team can help. We liken this process to a medical consultation. You might go to the doctor with a headache, but you don’t know the underlying cause. To figure it out, your doctor will ask some questions, examine you and run some tests. A treatment plan will only be presented once the underlying cause has been determined.

Your approach should be similar. Before you fix whatever ails your municipal government, you need to first understand and be able to articulate the challenges you’re facing. Once you’ve accomplished that, you’ll be far better placed to evaluate potential service providers and structure appropriate agreements.

Finding the Right Government Finance Partner

Municipal governments typically explore outsourced finance services through several channels:

• Requests for proposals (RFPs): This process allows for structured evaluation of multiple service providers. While this approach ensures transparency, its effectiveness depends on how well the municipality defines its requirements. Vague RFPs typically result in proposals that don’t address your needs.
• Recommendations from auditors: Municipal auditors can provide valuable guidance about specific needs and potential service providers based on their experience with multiple local governments.
• Peer networks and professional associations: Professional networks like the Florida Government Finance Officers Association (FGFOA) offer valuable resources for municipalities seeking outsourced finance solutions. Consider using resources like listservs to solicit recommendations from peers who have faced similar challenges.

When evaluating potential partners, prioritize those with a track record of advising municipal governments, a well-qualified team, and a flexible approach to building the service model most appropriate for your municipality. Request references from similar municipalities to understand real-world experiences with the provider.

The ideal service provider demonstrates both technical competence and cultural compatibility with the municipality’s approach to public service and fiscal responsibility.

James Moore: Your Partner in Municipal Financial Excellence

The financial landscape for local governments continues to evolve, presenting both challenges and opportunities. As municipalities face increasing pressure from retiring professionals, compensation constraints, and specialized knowledge requirements, outsourced finance services offer a sophisticated yet budget-friendly solution.

At James Moore, our Municipal Finance Support Services team provides far more than just routine government accounting functions. Rather, we aim to deliver continuity, specialized expertise for complex governmental requirements, and customizable support that integrates with existing teams.

For local governments experiencing knowledge gaps, staffing transitions, budget difficulties or compliance concerns, James Moore’s team of municipal finance specialists stands ready to discuss specific challenges and develop tailored solutions.

The path to financial stability and excellence begins with a conversation. Contact James Moore today to explore how we can strengthen your municipality’s financial operations and provide peace of mind for your community’s fiscal future.