Fire Department Funding The 4 Upcoming Critical Financial Issues That Will Rock Your World

The Fire Service will be undergoing a transformation in the next few years that will impact every single fire department in the U. S. These issues will separate the survivors from the perished.

Issue #1: People will be a lot more expensive.

It doesn’t matter if you are a paid, volunteer, or combination department. The costs of having fire fighters will be increasing at an alarming rate. And it isn’t just payroll, it is the total expense of having people fight your fires.

The four trends for the higher costs are:

  1. Payroll. If you pay your fire fighters, the cost of paying their salary will be increasing. Add to that the cost of insurance, workman’s comp, and payroll taxes, you have a explosive mixture just waiting to absorb your budget.
  2. Attraction Costs. If you don’t pay your fire fighters, you will spend more money finding and attracting volunteer labor. The facts are shocking. In Pennsylvania alone, volunteer fire fighters have declined from 300,000 in the 1970’s to about 75,000 today. While the population of the state has increased by almost 100,000 people. So, how do you get new volunteers? The volunteer culture has changed. The time demands of people have changed. What can you do to attract more volunteers? There seems to be no magic bullet out there but it will cost more to find a volunteer and entice them to join your department. Of course, if your fire fighter force falls below safe levels, your costs may increase because you have to hire paid fire fighters.
  3. Training. A brand new fire fighter requires much more training than ever before – just to fight fires. Add to that, specialized training such as confined space, rescue, water rescue, EMT, and other expertise that are being demanded of fire departments today and you get a large investment in your people – even if they are volunteer.
  4. Equipment. Protective gear and equipment is more safe than ever. But that safety comes with an ever increasing price tag. It seems just to provide those who serve to have the safest equipment available. But the cost will be rising to keep your people safe.

The good ol’ days of a bunch of guys leaving their jobs to fight fires for their community are long gone. And, along with those days, go the relatively cheap labor costs of having guys who fought fires out of a sense of duty, not because they needed to be enticed in some way – either by getting a paycheck or by other incentives to attract new volunteers.

The historical fire fighting labor business model is gone. No more free labor. So, savvy fire departments will begin to factor in these costs now and deal with them instead of getting slammed by the harsh new realities later on.

This issue will become more and more pressing over the next decade.

Issue #2: Revenues will harder to come by.

At the same time that the very expensive costs of adding fire fighters will be felt, the constraints of finding new sources of revenues will become more difficult. The historical sources of revenues such as fundraising or donations are in competition with a increasingly large group of organizations also fighting for the donations. There are a million “good” charities trying to get the attention of your donor – and they employ some sophisticated techniques to get their share of a stagnant donation pie.

Or, if you depend on government funds as your revenue source, be prepared for the upcoming budget struggles that all levels of government will face shortly. Most U. S. Federal, state and local governments have been running deficits over the past few years. That means they have been borrowing money just to keep the lights on. There will be less funds in the future for grants and large discretionary purchases.

On top of that, the current economic climate will depress tax revenues for some time and there seems to be a growing sense of taxpayer rage which all combines to limit tax growth for all levels of government.

It is critical to begin planning now with a tighter future budget in mind. For the best departments, it may only mean flat revenues instead of decreases. For the majority of departments, the reality will become that they are being asked to perform with less financial resources.

Issue #3: There will be more scrutiny over your financial records.

In the past, no one really cared to look at the financial records of volunteer departments or small districts. However, as the total amounts paid to these independent departments grow, there will be a growing call for careful examination of financial expenditures and use of the funds.

If you are a not-for-profit fire department, you are required (with few exceptions) to file an IRS form 990 to report your financial activities. This form is required to maintain your tax-exempt status. Some states, such as Pennsylvania, are becoming much more strict about financial reporting and compliance as they purchase new apparatus.

Cities, Townships, and Counties are requiring independent audits of department’s financial records to support the significant monies paid to departments.

There isn’t a 2 week period that doesn’t go by that a fire department isn’t the victim of an embezzlement in the U. S. Lack of quality financial controls are a breeding ground for potential financial crimes.

There is a brewing storm to make fire departments a lot more accountable for their funds than in the past. This will be quite a shock to most departments who have felt an independence about how they run and report about their departments. Forward thinking fire departments will begin to have quality financial information that is available for anyone to see. Anecdotally, there are a growing number of departments now posting their financial records on their web site.

So, be prepared to fully disclose your financial operations to your community.

Issue #4: Essential costs will increase faster than inflation.

Finally, the type of costs and purchases that fire departments need will far outpace the general rate of inflation over the next few years. The specialized equipment fire departments need is highly dependent on high quality raw materials. The prices of these materials will rise very fast in the near and medium term. Further, the costs of services such as insurance, utilities, and accounting (see Issue #3) are rising fast also.

Of course, many departments will offset these costs by delaying the purchases or shopping for inferior but cheaper services. While expected to help, the prepared department will begin to accept this premise and plan accordingly.

In summary, the upcoming years will provide a financial perfect storm for unprepared fire departments. With the squeeze of lower revenues and higher costs for manpower and everything else, departments must begin to plan today to meet these historical financial challenges or will be forced to consolidate with more efficient departments at the behest of the local governments.

Stay safe! John Hill, Apparatus Budgeting Consultant
Envizion Financial
Toll-free (877) 368-4946

Go to http://www.envizionfire.com/RR.php to see me in action.
Go to http://firefinanceexpert.blogspot.com for stories about fire department finances

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