Top issues facing local governments in 2024

Q&A with Andy Berg

The issues facing local governments in these present times are wide-ranging, perhaps more so now than ever. Yet it’s not all doom and gloom. Despite challenges like inflation and staffing shortages, local governments are finding ways to thrive and spark new energy within their communities.

In order to rise above the storm you must see it coming. To help you get a 30,000-foot-view of what could impact your organization this year, we sat down with Andy Berg, a longtime Abdo partner and leader of the firm’s government group.

Andy has worked with local governments throughout Minnesota since 1994; it’s safe to say much has changed since then. One thing that hasn’t changed is Andy’s interest in helping local governments find their way through challenging situations.

Here are his thoughts on some of the top issues facing local governments in 2024.

What would you say is the most pressing concern local governments are experiencing right now?

Andy: For most local governments, their most pressing concern is maintaining tax levies and utility rates, as both serve as a significant funding source for infrastructure projects and operations. Inflation has made this a more complicated challenge, as cities are wondering how to pay for new streets and buildings while also funding all city departments.

It’s tough to plan for projects while reporting to a board or council that really wants to provide the best service for residents in maintaining costs of service. So, it often comes down to the push and pull of getting projects done without putting undue pressure on residents.

Conducting a utility rate analysis can help local governments stay on track. It’s also worth noting that a lot of the COVID funding from the American Rescue Plan Act of 2021 is falling off; a lot of governments are still in the process of spending it. Any ARPA funding will need to be spent or obligated by the end of this year.

One of the challenges nearly every organization faces is the need to be more efficient. Where do you see opportunities for local governments to operate more efficiently? 

Andy: There are two key actions local governments can take to become more efficient: review their current use of technology, specifically finance software, and leverage electronic workflow processes. The key is to evaluate their current technology needs as well as to identify areas of improvement within their processes. Then, they can assess the ever-changing technology that’s available.

Of course, with more technology comes added challenges such as cybersecurity and IT security. It’s important for local governments to make sure they have the appropriate trainings for staff and take appropriate fraud prevention measures.

Recruiting and retaining employees is certainly another big concern for organizations as well. How does this impact local governments?

Andy: Although staffing is a concern across all city departments, we’re seeing hiring difficulties show up most often in public safety (police officers and firefighters) and finance departments. As we CPAs know, fewer people are going into accounting and finance, specifically government finance, so the pool of talent is shrinking.

Given these challenges, local governments should be focusing on recruiting and retention efforts. This could include reviewing compensation structures and training programs to start. Knowing that turnover is an issue, governments should also consider documenting their processes to prevent loss of knowledge if an employee were to leave.

We all know regulatory requirements are a moving target. Which ones should local governments have on their radar for 2024?

Andy: The one at the top of my mind is GASB Statement No. 101, Compensated Absences. While Statement No. 101 may not affect some governments, those that are affected will need to change how they calculate their compensated absences liability.

Next is GASB Statement No. 103, Financial Reporting Model Improvements, which was issued in April 2024 and will be effective for fiscal years beginning after June 15, 2025. Statement No. 103 will primarily impact how local governments’ financial statements come together.

Another one to watch is the Office of Management and Budget (OMB) change to Uniform Guidance that is effective October 1, 2024. Among other things, this change will increases the single audit threshold from $750,000 to up to $1 million of federal expenditures.

Finally, which funding opportunities should local governments be looking into right now?

Andy: One opportunity that’s fairly new is the energy tax credits that are available to local governments through the Inflation Reduction Act. Generally, these apply to new buildings that incorporate the use of clean energy technologies.

The most important thing local governments can do is to plan for the future, specifically how they’re going to pay for capital improvement projects. Thankfully, there’s a number of ways they can do this.

At Abdo, we help local governments plan ahead by conducting rate studies, long-term financial plans, and compensation studies. Our Abdo Financial Solutions advisors guide local governments through implementing technology and evaluating processes. We’re always keeping an eye out for new regulations so we can make sure our government clients know how to comply with new requirements.

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To learn more about how Andy and Abdo can be a guiding light within your organization, head to our government industry page.