Financial policies are an essential tool of good financial management. They establish the boundaries for financial decision making and help institutionalize good management practices. According to GFOAs website statistics, Financial Policies is the most popular best practice (see sidebar).
However, GFOA's surveys show that financial policies are not as widely adopted as we might hope. For example, one important financial policy is a one-time revenue policy. One-time revenues are revenues you don't expect to receive again in the future, like proceeds from selling excess real estate owned by the government. A policy says one-time revenues should not be used to fund ongoing expenditures such as salaries for permanent staff. GFOA's surveys show that only half of GFOA members have this kind of policy in place.
The 2020 Financial Policy Challenge is a GFOA-wide initiative, where all GFOA members can work together to adopt and share financial policies that are essential to a strong financial foundation and a thriving community.
The potential benefits of the Financial Policy Challenge are considerable and have been well-documented by GFOA, but there has been less focus on the collective benefit of financial policies. One of the beauties of local government is that good ideas can be easily shared among governments. The other side of the coin, though, is that sometimes local governments will not adopt new ideas unless a critical mass of other governments are doing so. As an example, in my early career as an assistant city manager, I'd bring a new idea to the mayor along with a solid rationale for implementing it--to which the mayor would often reply, "yes, but are the other towns doing it?" The Challenge will allow all GFOA members to answer this question confidently in the affirmative for financial policies.
>>WHICH FINANCIAL POLICIES ARE THE SUBJECT OF THE CHALLENGE?
Ten policies form the core policies of the Challenge:
* Capital planning
* Debt (focused on affordability)
* Reserves (fund balance or working capital)
* User fees
* Economic development
* Structurally balanced budget
* Long-term forecasting and planning
* One-time revenues
The Challenge will last all year, so additional policies might be added to the list as as we get feedback from GFOA members.
>>HOW DO YOU WIN THE CHALLENGE?
Participants can visit gfoa.org/financial-policy-challenge to submit their policies. There are two ways you can win.
The first way to...