4 best practices for your local government’s financial management policies

By Jean McGann, CPA

Policies provide the guidance in which your local government needs to operate. In other words, they’re critical. But when you have a full to-do list, it can be easy to put policies out of mind—especially when it comes to those relating to financial management.

Financial management policies, however, are a key component of your organization’s operations as well as its risk prevention. As a government entity, your organization is responsible to taxpayers to account for public funds. Having financial management policies properly in place can help you ensure all finances are appropriately handled.

To help you keep your organization’s policies in top shape, here are four best practices to consider.

1. Ensure you have the right policies in place.

At a minimum, local governments should have the following financial management policies:

• Budgetary and financial control policy
• Capital asset policy
• Cash management policy
• Debt management policy
• Electronic payment policy
• Fund balance policy
• Investment policy
• Post-issuance compliance policy
• Purchasing policy

2. Review your policies annually.

Statutes and regulations can and do change, sometimes quickly. If you aren’t regularly reviewing and updating your policies, your organization could fall out of compliance with its policies, which could elevate your risk.

For instance, if your organization’s capital asset policy is outdated, its depreciation thresholds could be incorrect. This could lead to a number of issues, including paying too much for insurance.

To make sure your organization’s financial management policies reference the most up-to-date state and federal guidance, consider reviewing them each year.

3. Compile your policies into a financial management handbook.

Once you’ve reviewed your organization’s policies, consider compiling them into one document—i.e., a financial management handbook.

Your organization’s financial management handbook should be easily accessible by any staff member who needs to reference them. Aim to keep the handbook user-friendly; include a table of contents and make sure each policy is constantly formatted throughout (and consistent with one another). You could also create one-page “quick reference guides” for each policy to help staff members remember key guidelines.

Having a financial management handbook will make it easier for you to review and update your organization’s policies each year. It can also help to underscore the significance of these policies to both staff and council members, and make it easier for you to obtain council approval.

4. Provide training for your staff.

It’s important for administrative and financial staff members to understand your organization’s financial management policies as well as their responsibilities within them. Consider providing training for staff members to ensure everyone is on the same page.

Position your local government for fiscal success.

Having the right policies firmly in place can help your local government stay in compliance and operate more efficiently. If you have questions about creating, updating, or organizing policies, the team at Abdo Financial Solutions can help.

In addition to assisting you with putting together a financial management handbook, we can provide guidance on the types of financial management (and other) policies your organization should have in place.

To learn more about how we can light the way for your organization to thrive, contact us today.