2 part project

Knightsville Municipality Case Study

Introduction

In many situations, the budget that is adopted by the city councils are technically referred to as “City Manager Budget”, it is worthy to note that the municipality managers often depends on the other staff members in building as well as presenting the budgeting plan for the financial operations of the municipality. This is why from the case study provided, we see budgeting director foreseeing looming budget shortage in Knightsville municipality and presents this issue to City Manager. At this point the manager woud then consult with other stakeholders such as Robert, Warrick County Board of Commissioners who is proposing that Knightsville municipality should adopt state block grants or consider raising the service fees for the Department of Motor Vehicles. By doing this it would derive additional revenues and could also reduce wait times for patrons. There are two options are listed below and illustrated how they will affect the Knightsville municipality.

What types of relationships (complementary, supplementary, and adversarial) would these two choices applying for the grant and fee-for-service increases likely represent? Explain the quality of these relationships and how each choice relates to them and/or would likely affect them.

As from the case study, it is that Knightsville municipality is going to be overloaded with special purpose grants that are likely to be not adequately equipped and this may in one way or the other cause diversion from the main statutory tasks that the municipality is involved in. Many of these grants are likely to have distortionary impacts on the local priorities. Grants under these situations that Knightsville municipality tends to operate in is considered as complementary relationship due to the fact that it will mainly go into the upkeep of the proper maintenance of the activities of the municipality.

On the other hand, as its name implies, fee-for-service (FFS) can be defined as the payments that are made on the invoices for services delivered. When this system is adopted by the Knightsville municipality, it is that neither the municipality nor the locals have any certainty as to the service costs offered within the municipality. This is because the relationship in this situation is considered as adversarial since the FFS plan tends to pay the employees for each and every service needed to attend to the locals who want such services. Since on many occasions, some people require special services as compared to others who sometimes tend to require a wide range of services. Under such situations, the cost per person will vary based on the type of service one needs. FFS systems are usually associated with later interventions as far as municipality management is concerned (Schroede& Frist, 2013).

What types of challenges would you expect to ensue from pursuing each of these options, both from Warrick County as well as from the general public in Knightsville?

By pursuing the grants option, the Knightsville municipality will get into a situation where it does not receive the funds from external due to insufficiency in covering their full cost of service provision. From the presentation of Bulow & Rogoff (2010), a good number of municipalities tend to rely fully on such grants, and this makes them stop looking for alternatives in terms funding sources in running their activities in other areas. Due to such situations, these municipalities are “focusing primarily on providing new installations in low-income areas, while neglecting broader maintenance, renewals, and upgrades across the broader network”. Furthermore, the municipality confirmed that it is unable to implement water projects as required due to insufficient funds.

However, by choosing the fee-for-service could result into a situation that challenges the supplier-induced demand and ensuring efficiency. The Knightsville municipality should consider using the fee-for-service (FFS), client, incentive structure because it would make it easier for supplier-induced demand to occur. With this, pay for performance should be accepted by the Knightsville municipality to help increase both supplier-induced demand and could help with efficiency. Through this, Knightsville municipality can discourage or stop overuse of interventions and improve the quality of services. This will encourage the staff to enhance the quality of services delivered as compared to the actual quantity itself. By using this financial incentive structure, it may encourage the employees to recommend a higher number of services to the citizens that can help improve efficiency and bring an increase the revenues. At the same time, gain-sharing model can also be effective for the Knightsville municipality to increase supplier-induced demand and ensure efficiency. With using this model, it will allow the staff to work with other service providers and help deliver quality care by setting aside the individual incentives to induce demand.

Which of these methods do you personally think is the better option, assuming that both would equally address the financial shortfall? Why?

From my perspective, I prefer the fee-for-service option due to the fact that in fee-for-service, workers and municipalities got paid for each service they provided. This means that they could order an unlimited amount of services, and there were no limits on their engagement decisions. Employees and municipalities decided what they would charge for each service, making them a lot of money. Luckily, this plan is not widely used much anymore. There are various well organized and managed municipalities, all which offer quality services to their natives. These organizations are concerned with cost-effectiveness, so they limit choices by providing list workers of who your provider accepts. This is a downside to managed municipalities, but members can expand to full possible choices by paying more monthly. I believe properly managed municipalities with a fee-for-service are better that one that survives on grants (Gosden et al., 2014).

Conclusion

In many cases, the cause of municipal financial problems is due to management failures in revising management practices in an appropriate manner in response to factors of the environment. Even though the adverse environmental issues like the declining economy, natural disasters as well as political activities that are not ready to make political decisions that are unpopular but very important to the economy. When these factors are addressed amicably, the financial crisis within the municipalities is not likely to occur. On the other hand, sometimes the environmental factors tend to be very severe that financial crisis becomes unavoidable. in situations like that one, sound financial mismanagement is only capable of reducing the severity of the crisis so that the municipality can at least have a long-term plan as far as financial recovery is concerned. An effective system that municipalities can apply in monitoring their financial conditions permits the management to make identification of unfavorable financial trends in sufficient time so that they can take preventive actions in avoiding financial distresses.

References

Bulow, J.,& Rogoff, K. (2010): Grants versus loans for development banks. American Economic Review, 95(2), 393-397.

Gosden, T., Forland, F., Kristiansen, I., Sutton, M., Leese, B., Giuffrida, A., ... & Pedersen, L. (2014). Capitation, salary, fee‐for‐service and mixed systems of payment: effects on the behavior of primary care physicians. Cochrane Database of Systematic Reviews, (3).

Schroeder, S. A., & Frist, W. (2013). Phasing out fee-for-service payment.