3 key considerations for developing financial management policies for your local government

By Justin Nilson, CPA

There are lots of moving parts within your local government’s finance department. There are invoices to pay, employees to manage, and capital projects to track, to name a few. Having policies that spell out these financial management processes can help your organization—regardless of its size—operate more effectively and efficiently.

But crafting written policy statements can be difficult, especially if you and your staff are already feeling stretched. It can also be hard to know where and how to begin.

To help your department create or improve its financial management policies, here are a few things to consider.

1. Identify financial management policy authors.

It’s one thing to have internal processes for executing financial management functions. It’s another to have them as a finished product approved by governance.

Written policies not only help to keep members of your department on the same page about expectations and job duties—they also are important for keeping your organization’s institutional knowledge intact. (This is why written policies are especially important for smaller organizations.)

Often, when an organization lacks financial management policies, it’s simply because no one has been tasked with writing them. Hence an important first step in creating financial management policies: Identify the individual(s) who will serve as the authors.

Considerations for selecting financial management policy authors

Policy authors should be…

• Highly familiar with the processes—and staff members—involved in carrying out the function.
• Knowledgeable of applicable state statutes.
• Committed to facilitating regular policy updates to ensure compliance with current statutes and changes within the organization.

2. Focus on specifics.

Financial management policies should be succinct and to the point. In most cases, 2 to 5 pages of text is plenty. To achieve this, authors should focus on the specifics of what the policy aims to accomplish.

Specificity is also necessary when it comes to the staff members involved. Authors should reference job titles instead of names, and detail each position’s role in the process(es).

3. Request input and approval from others.

In order for a financial management policy to be effective, it must make sense to everyone who follows it. With this in mind, policy authors should take care to request input from administrative staff and even members of other departments in the drafting policies and procedures, when it makes sense to do so.

Once a policy is drafted, it should be formally approved by the organization’s governance.

Bring clarity to your financial management policies

Crafting financial management policies for your organization can feel like a significant undertaking, and we know it can be challenging to take the first step. But having written policies your staff members can reference is critical for your department’s consistency and continuity.

For more on the financial management policies your local government should have in place and best practices for their upkeep, read up on this article from my colleague Jean McGann.

If you’re unsure of the best way to tackle your organization’s financial management policies, the team at Abdo can help. For expert guidance on financial management policies for your local government, contact us today.