Defining financial strength and stability enables a government to build its individual financial principles and strategies, which will guide the organization's staff and governing body. The process can be supported by citizen surveys, official community plans, and elected officials.
Finance officers in local governments have to navigate a number of complexities, from citizen expectations to organizational structures that include airports; water and sewer delivery systems; bridge, road and infrastructure development; and fire and policing services. Providing guidance as to what a well-run organization should look like helps build a foundation that allows jurisdictions to provide the services, infrastructure, and amenities required by its citizens, today and in the future.
KELOWNA'S GOVERNING PRINCIPLES
The City of Kelowna, British Columbia, hired an experienced consultant to help its elected officials determine what financial strength and stability meant for its community. After a series of workshops, the government agreed on a definition: that financial strength and stability is "the ability to acquire and manage a portfolio of financial and physical assets that meet the current and future needs of our community." This is Kelowna's end goal, which all of its policies and activities are designed to produce.
Kelowna's leaders think of the city's financial principals and strategies as essential tools in determining how the jurisdiction will achieve and maintain the community's vision. Of course, determining the specific principles that are essential to an individual organization is a challenge; government leaders have to find the middle ground between too many choices, which leads to redundancy, and too few choices, which leads to ineffective decision making because the scope is too wide and the boundaries ill-defined.
Kelowna honed in on five financial principles, which are to focus on:
Providing sufficient revenues and expenses.
Making pragmatic decisions.
Being flexible about opportunities and changing circumstances.
Maintaining transparency in financial decisions.
Balancing service levels based on what is affordable and appropriate.
Principle I: Sufficiency. The city's revenues and expenses must support its service levels and long-term goals. According to a 2015 citizen survey, Kelowna residents value the high-quality services they receive and expect. To meet these service standards, the city needs to ensure that the budgets for operations and infrastructure are sufficient and that revenues will meet long-term investment needs.
Principle 2: Pragmatism. Pragmatic financial decisions require that appropriate service levels are protected when measured risks are taken. There will be occasions when assuming some degree of risk is advantageous, allowing the city to take advantage of opportunities or to meet the needs of a changing population. These risks must be carefully measured to make sure the potential effects on delivery of services are well understood.
Principle 3: Flexibility. Financial policies must allow for...