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Consolidating a village and town's financial functions: a success story from Ossining, New York.

Consolidation, becoming more widely used by leaders in government, is nothing new in corporate America--many companies have merged or consolidated their operations in an attempt to reduce operating costs. Neither is the concept new to governments, as many governmental entities have discussed consolidation for years. It was not until recently, however, that a spate of meaningful consolidations have been attempted on the public side.

Why are consolidations being attempted now? The answer is quite simple: economics. It makes sense economically to consolidate similar functions in order to eliminate duplicate efforts. Most governmental entities provide the same types of services, such as police protection, sanitation, public works and tax collection. By consolidating similar services, one can expect savings through economies of scale. It was this type of thinking that led officials in the Town of and Village of Ossining, New York, to undertake consolidation of their financial departments.

Background: The Town and the Village

The Town of Ossining encompasses three municipalities: the unincorporated area of the Town of Ossining (called "Town Outside"), the Village of Ossining and the Village of Briarcliff Manor. In total, approximately 34,728 people live in the three municipalities. The Town of Ossining is governed by an elected supervisor and four council members, who comprise the town board. The town government administers state and federal elections; collects town, county and school taxes; and appoints advisory boards.

The Village of Ossining is a chartered village and is administered under the manager form of government. The board of trustees is an elected body and consists of a mayor and four trustees. It adopts laws, establishes policies and makes various appointments.

The Village of Briarcliff Manor was incorporated in 1902 and is governed by a mayor and four trustees. It also uses the manager form of government. Its functions are the same as that of Village of Ossining board. Because the Village of Briarcliff Manor lies in two different municipalities, officials chose not to be part of consolidation at this time.

What made the undertaking of consolidation in Ossining slightly unusual is that towns normally are much larger entities than villages and usually are dominant. In this case, however, the Village of Ossining was the larger entity and was better suited to assume the financial responsibilities of both municipalities.

The Village of Ossining had three main operating funds: general, water and sewer, as well as debt service. Its budget for those funds totaled approximately $20 million. The Town of Ossining had a town general fund, town outside fund, a highway fund and various sewer district funds. Its budget totaled approximately $6 million.

The Town of Ossining employed a controller who was responsible for the financial operations of the town. The position was a political appointment made by the supervisor and the town board. The town's books were all kept on manual ledgers except for payroll, which was performed on a computer.

The village, on the other hand, had elected treasurers since its inception. In the general election of 1988, the last elected treasurer ran on a platform to make future treasurers appointed rather than elected. The reason was that the village had grown to such an extent that financial operations were becoming increasingly complex and it would be better served with a professional accountant responsible for them.

The main factor that led to consolidation of the town and village was economics: the goal was to save taxpayers money. As is the case with most communities, political leaders in Ossining were under heavy pressure to reduce the burden on local taxpayers. Since personnel services constituted the major expenditure, the way to mitigate higher taxes was to consolidate functions and reduce the number of personnel in the process. The idea clearly was not to fire current employees, which would have been difficult under civil service regulations in any case, but to reduce staff through attrition and retirements.

Consolidation: How It Took Place

Since neither governmental entity was interested in giving up its political control, it was critical that the new finance department establish a system of controls that would ensure that town and village funds would not be commingled. They had to preserve the separate entity status, and both village and town would continue to use their own federal and state tax identification numbers.

In order to ensure that the finance department knew all of the tasks that would have to be performed under a consolidated system, detailed lists of every financial function were prepared. It was critical that nothing slip through the cracks. These lists also were important in determining the amount of work that the new finance department would take over and how the work would be distributed among staff members. These lists were then reviewed thoroughly and streamlined to ensure better efficiency.

Internal Controls and Computer Systems. The next step was to establish a system of internal controls that would ensure that funds were not commingled, while still meeting the requirements and standards set by generally accepted accounting principles and generally accepted auditing standards. This was probably the most difficult and time-consuming task, primarily because it contained the greatest amount of exposure: Had any commingling of funds occurred under any circumstances, opponents of consolidation would claim that, although the concept of consolidation was a good one, it was not achievable.

After having established a system of internal controls that would meet the goals of both entities, the finance department's next step was to decide whether the existing computer system was large and efficient enough to handle both the town and village financial operations. It also had to determine how the computer system could be utilized to do more of the work that previously had been performed by the town and village staff, since the town financial operations staff of two and a half people had been usurped by the village with one staff person.

Through a thorough review of both village and town computer systems it was clear that the existing system would not be able to handle the increased workload. In addition, both village and town systems were more than five years old and in need of replacement. The decision was made to purchase a UNIX-based system which not only had greater capacity and memory but was approximately one hundred times faster than the computer system then in place. The advantages to this are obvious: faster systems reduce down time, which leads to increased productivity. The most pleasant surprise was that, due to technological advances, the maintenance on the new system was so much cheaper than on the old system that the cost savings would pay for the new system in just two and a half years.

Once the new system was in place, controls were established that virtually eliminated the possibility of commingling of funds. Two separate directories--one for the village and one for the town--were established, and village and town funds were given different fund numbers. Parameters were established in each directory that would not allow an incorrect fund or account to be entered into an incorrect directory. For example, if a revenue for the village general fund was incorrectly entered into the town directory, the system would alert the computer operator that this information cannot be entered into this directory.

Account numbers for village and town accounts were standardized to make data entry simpler, and voucher and purchase order forms were standardized and color coded by jurisdiction.

Benefits of Consolidation

A great deal of time, effort and hard work was necessary in order to make consolidation of the village and town finance departments a reality, and it proved to be extremely successful. The first area of success was in the reduction of cost. Even with the cost of the new computer system, the consolidation of the village and town finance departments saved approximately $75,000. This is a significant savings of more than 20 percent; the total budgets for the village and town finance departments before consolidation was approximately $325,000. This was accomplished primarily through the reduction in staffing levels by one and a half persons.

Economies of scale were responsible for other savings. Consolidated purchasing, for example, increases volume, leading to volume discounts. Also, instead of paying for maintenance and support for two computer systems, there is only one, much smaller cost for a far better system.

Because such great attention to detail was paid to the streamlining of operations, the staff reduction of one and a half persons has worked out very well. The village/town finance department expects to have additional retirements during the next two years. At this time, it is anticipated that those positions will not be filled, thereby increasing the cost savings.

It also should be noted that, although cost savings are of primary importance, they are by no means the only benefit to consolidation. By combining the two departments, the new finance department has been afforded the luxury of cross-training staff so that, if one employee goes on vacation or is out of the office for an extended period, the operation does not cease because other staff members are unfamiliar with what he or she does.

Lessons Learned

Although it is difficult to imagine anyone not being in favor of a cost-savings program such as consolidation, there were in the Town and Village of Ossining many critics who did not believe it could be done. Some even did their best to set up roadblocks to impede the process. The first lesson learned was the importance of not letting critics stop the process. It was imperative to stay focused on the ultimate goal, saving the taxpayers money.

The second thing to be kept in mind is that the process is a long-term one. Consolidation does not happen overnight; there will be many modifications to the original plan. Officials must be prepared for many meetings and presentations to both boards and to the public before a program is in place.

Third, it is critical to have good people in charge of the operation; the program's success rests with them. Professionals will command higher salaries for the additional responsibility that they will be assuming, but their knowledge and professionalism will pay much greater dividends than the few extra dollars of their salaries.

The consolidation of any department requires a great deal of time, effort and patience. If it is done correctly, however, consolidation will lead not only to major cost savings but also to a better final product.

PASQUALINO D'IMPERIO is treasurer for the Village of Ossining, New York, and has assumed responsibility of town controller. He is a CPA with private- and public-sector experience and is a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants.
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Title Annotation:Ossining, New York
Author:D'Imperio, Pasqualino
Publication:Government Finance Review
Date:Oct 1, 1993
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