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Beyond outsourcing: For governments, managed services unlock hidden value

October 19, 2022

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When you hear the term outsourcing, you may think of farming out mundane administrative or financial tasks to someone who can perform them cheaper and more efficiently. Many governments and government agencies employ the managed services model — which goes beyond outsourcing — to bring expertise and experience to their teams. Using a managed services provider has the potential to unlock an array of benefits and often costs the same or less than what you are already paying.

A tailored approach

There’s no cookie-cutter approach to managed services. Rather, these services should be tailored to meet the specific needs of a government or government agency and its constituents. Depending on the government’s size and resources, managed services may range from a supervisory role — providing the entity’s staff with a higher level of oversight than might otherwise be possible — to a comprehensive solution that replaces the entire finance department.

Functions performed by a managed services provider might include:

  • Financial planning and strategy
  • Budgeting
  • Accounting and financial reporting
  • Grant and contract management
  • Procurement
  • Payroll
  • Accounts payable

Depending on the government entity’s needs, these services can be provided on- or off-site. In either case, however, a good managed services provider will integrate these services seamlessly with the entity’s other departments, offering complete transparency from the perspective of the entity’s constituents and other stakeholders.

Strategic benefits

Like other types of outsourcing, managed services offer valuable efficiencies and economies of scale. The government entity is relieved of the need to invest in the technology, equipment, training and other resources necessary to deliver the outsourced services. A good managed services provider will have the bench strength needed to provide uninterrupted services in the event an employee misses work or leaves the job.

Keep in mind that the benefits of managed services go much further, enabling government entities to gain significant strategic advantages. It provides them with access to professionals who not only understand the complexities of government accounting, but also possess a breadth and depth of experience, in a variety of governments and markets, unavailable to the typical government employee. By tapping this experience, a managed services provider can identify strategies and opportunities an entity might not have uncovered on its own.

For example, one of Rehmann’s managed services clients is a school district. Based on the Firm’s experience with organizations in other industries, Rehmann’s finance professionals recommended that the school district self-fund its health care costs — a strategy that saved the district half a million dollars a year. The concept of self-funding is unfamiliar among many local school districts, and it’s unlikely that the district would have considered the strategy on its own.

Another important benefit of managed services is scalability. The government entity gains access to high-quality professionals for as much or as little time as necessary and, unlike employees, the entity is not responsible for the time they spend on training or other nonproductive activities.

Meeting the challenges

Although the benefits of the managed services model are significant, adopting this approach is not without its challenges. For example, it may require some cultural adjustments, particularly if the provider’s staff works remotely rather than onsite. Getting used to conference calls, Skype meetings and other digital collaboration tools may take some time.

It’s also important for governments to recognize that engaging a managed services provider does not relieve them of their oversight responsibilities. The provider is responsible for the quality of its services, but it’s not undertaking an audit of the function being outsourced.

Challenges aside, the managed services model can be a powerful tool, shifting financial and administrative functions to outside professionals and allowing governments to focus on their core mission: serving their constituents.