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Financial Management Policies and Resources

MRSC, in partnership with the State Auditor’s Office Local Government Performance Center, has developed this series of online resources to help local governments in Washington State develop and adopt effective financial policies and procedures.

Governments and their policy needs vary considerably due to differences in size, scope of activities, organizational and staffing structures, contractual and program structures, technology, and the governing body’s values and priorities. Financial policies should be designed by each government according to its needs.

Disclaimer: These resources are presented for informational purposes only and do not represent criteria for legal or audit purposes. They are intended to provide governments with background information, key questions to consider, examples, and links to helpful resources. They are not intended to supplement or replace existing prescriptive guidance in the BARS Manual, issued by the State Auditor’s Office.

Overview

Most local government decisions are driven by the entity’s fiscal health. Citizens expect their cities, counties, and special purpose districts to deliver essential services such as public safety, transportation, and utility services well into the future.

To fulfill these expectations, local governments must invest in infrastructure, reserve funds for pension obligations, and take steps to assure their financial wellbeing for years to come. Effective financial policies can help elected officials, management, and staff make the right decisions for their citizens now and in the future.

What Are Financial Policies?

Financial policies provide written guidance for how local government management and staff should approach fiscal issues and core financial areas.

Effective financial policies, which are adopted by the legislative body, are essential to a local government’s fiscal health. They provide stability and continuity over the years as staff and elected officials turn over by establishing what actions are acceptable and unacceptable, identifying who is responsible for taking certain actions, and providing standards to measure your jurisdiction’s performance.

Financial policies will also be used during state audits to assess compliance, by credit ratings agencies to help determine your jurisdiction’s fiscal stability, and by other financial professionals as a basis for providing services.

Benefits of Financial Policies

Among many benefits, financial policies can:

  • Outline a clear vision of how your jurisdiction will manage its financial resources to provide the best value to the community
  • Increase accountability and minimize confusion by identifying who can take what actions
  • Support good bond ratings and reduce the cost of borrowing
  • Promote long-term and strategic thinking
  • Manage and reduce risks to your jurisdiction’s fiscal health
  • Protect staff and management in case something goes wrong (as long as the policy was followed)
  • Help your jurisdiction comply with established best practices identified by organizations such as the Government Finance Officers Association (GFOA) and the State Auditor’s Office.

Key Components of a Comprehensive Financial Policy

Financial policies and procedures can include a wide variety of topics, but some are more critical than others and should be considered essential to your jurisdiction’s financial health. Some jurisdictions adopt one comprehensive financial policy addressing many different aspects, while others adopt separate policies focusing on narrower topics.

Below is a list of fiscal policies/procedures that are considered essential to a local government's financial health. MRSC has created guidance for each area, including best practices, key questions to consider, and examples from local jurisdictions:

Other financial policy areas that are considered a best practice include:

Financial policies and procedures require a significant level of planning to efficiently draft, adopt, and implement. Here is a sample of a “financial planning policy” that may help guide your entity through this process:

Sample Comprehensive Financial Policies

Below are some examples of comprehensive financial policies from local governments in Washington, covering a wide range of financial topics. Sometimes these policies are adopted separately from the budget, while other times they are adopted annually or biennially as part of the budget.

For narrower policies focused on a specific topic such as asset management, debt, fund balances and reserves, investments, etc., see our pages on those topics.

Cities Under 10,000 Population

Cities of 10,000-20,000 Population

Cities of 20,000-50,000 Population

Cities Over 50,000 Population

Counties

Special Purpose Districts

Recommended Resources

Below are some useful documents from the Government Finance Officers Association (GFOA) and other sources to help you create your financial policies.


Last Modified: May 02, 2017