HomeMy WebLinkAboutItem 04 Strategizing for Long-Term Fiscal Health AGENDA ITEM SUMMARY Meeting Date: 3/14/2016
Meeting Type: Work Session
Staff Contact/Dept.: Michelle Lewis, Finance Bob Duey/Finance
Staff Phone No: 541.726.3713
Estimated Time: 60 Minutes S P R I N G F I E L D
C I T Y C O U N C I L
Council Goals: Provide Financially
Responsible and Innovative Government Services ITEM TITLE: STRATEGIZING FOR LONG-TERM FISCAL HEALTH
ACTION REQUESTED:
Review three proposed financial policies for adoption at a regular session.
ISSUE
STATEMENT:
The City is beginning its third year using the methodology of priority-based
budgeting as a tool to help focus the allocation of available resources to those services that help most to advance Community and Council goals. For this annual
budget process to prove successful, it is important that the City has established long-term fiscal targets or performance measurements that support the long-term fiscal stability for both a consistent level of base services year after year and plan in
advance for expanded or new and innovative services. This second work session reviews three proposed financial policies concerned with defining the elements that make up a fiscally healthy organization. Council is being asked to review and
provide input on the proposed financial policies for adoption at a regular session.
ATTACHMENTS: Attachment 1: Council Briefing Memorandum
Attachment 2: Financial Policies Update PowerPoint
Attachment 3: Preamble to the Financial Policies Attachment 4: Proposed Reserve Policy
Attachment 5: Proposed Revenue Policy Attachment 6: Proposed Accounting, Auditing, and Financial Reporting Policy
DISCUSSION/ FINANCIAL IMPACTS
Transitioning from traditional to priority-based budgeting involves learning curves
for annual budgeting as well as strategic planning, performance measurement, and evaluating long-term fiscal health of the organization. The ultimate goal is to be
able to provide consistent services to City of Springfield citizens, now and in the
future. In order to realistically assess that possibility, the City needs to objectively identify and establish its long-term fiscal health goals for 5, 10 or 20 years into the
future.
This discussion, the second in a series on Fiscal Health, is intended to review three
proposed financial policies. Topics will include:
• Purpose of Updating Policies
• Rolling Schedule for Policy Updates
• Policy Impacts to Fiscal Health
o Categorizing Reserves o Diversifying Revenues o Seeking Excellence in Financial Reporting
Staff’s Goal: that Council review the proposed policies for adoption at a regular session.
M E M O R A N D U M City of Springfield
Date: 3/7/2016
To: Gino Grimaldi, City Manager COUNCIL
From: Bob Duey, Finance Director BRIEFING
Subject: Strategizing For Long-Term Fiscal Health MEMORANDUM
ISSUE:
The City is beginning its third year using the methodology of priority-based budgeting as a tool to help
focus the allocation of available resources to those services that help most to advance Community and Council goals. For this annual budget process to prove successful, it is important that the City has
established long-term fiscal targets or performance measurements that support the long-term fiscal
stability for both a consistent level of base services year after year and plan in advance for expanded or new and innovative services. This second work session reviews three proposed financial policies
concerned with defining the elements that make up a fiscally healthy organization. Council is being
asked to review and provide input on the proposed financial policies for adoption at a regular session.
COUNCIL GOALS/MANDATE:
Financially Responsible and Stable Government Services ______________________________________
BACKGROUND:
Financial Health in a Nutshell
A government is financially healthy if it can deliver the services its citizens expect, with the resources its citizens provide, now and in the future. Part of attaining financial health is having consistent treatment of
financial policies across the City departments.
A Lot Has Changed in 22 Years
Financial policies are central to a strategic, long-term approach to financial management.1 Currently,
City of Springfield has a three-page document representing the Financial Management Policies. This document has not been updated since before 1994. There have been major changes in Springfield’s economic and financial conditions in the last 22 years and it is time to update the City of Springfield
policies to reflect best and current practices.
This is also an opportunity to review and revise outdated policies. The current City policies have three different update characteristics; there are: (1) policies that conflict with current practices; (2) policies that
are simply out-of-date; and (3) policies that require clarification. Additionally, there are important
policies that are not currently addressed, as well as policies that are better left to administrative process2.
In keeping with best practices, the financial policies updates will introduce new policy sections: purpose
statement, applicability and scope, authority, definitions and acronyms, detailed outline of the policy,
1 Kavanagh, Shayne. Financial Policies. Chicago, IL: Government Finance Officers Association, 2012. 4. Print.
2 “Whereas financial policies are guidelines for financial management decisions, administrative procedures cover the detailed steps needed to accomplish [day-to-day] processes.” (Kavanagh 11).
Attachment 1 – Page 1 of 4
reference to related documents and references, quality control and quality assurance measures, and the
policy version. This policy style makes the policies discernible to a broad audience: elaborating details that may not be common knowledge and identifying the long-term intent of the policy.
What Can Changing Policies Accomplish?
Our objective is to update the financial policies in order to develop a strategic, long-term approach to: (1) minimize the cost of government and reduce financial risk; (2) maintain appropriate financial capacity for
present and future needs; and (3) ensure the legal use of financial resources through an effective system of
internal controls.3
Which Policies Are We Updating?
The Finance Department has identified 9 policies for potential revision. In this Council session, we are
presenting 3 new policies for Reserves, Revenues, and Accounting, Auditing, and Financial Reporting.
Next session, we will present the Expenditures, Long-Term Financial Planning, and Investment policies. Lastly, we will present the Operating Budget, Capital Asset Management, and Debt Management policies.
These policies are identified as essential or highly advisable policies by the Government Finance Officers Association.
Policy Impacts to Fiscal Health
Reserve Policy Highlights - Categorization
Reserves are the cornerstone of financial flexibility.4 As stated in the Purpose of the Reserve Policy:
The City of Springfield desires to maintain a prudent level of financial resources to guard
its citizens against service disruption in the event of unexpected temporary revenue shortfalls or unpredicted one-time expenditures. In addition, this Policy is intended to document the appropriate Reserve levels to protect the City’s creditworthiness.
Reserve levels represent a tug-of-war situation for financial management: balancing the delicate line between holding money in reserve and freeing up money to spend on current services. This Reserve Policy update serves to provide more clarity for maintaining reserve balances in the City’s Operating
Funds.
“What’s in a name?”5 Reserve categorization is paramount to fiscal health.
Reserve categorization accomplishes two things: (1) it helps the City (and bond rating agencies) identify
different financial priorities and (2) it helps the City determine whether there is enough (or too much)
allocated to those different priorities.
The Reserve Policy seeks to establish four primary reserves: reserve levels will be sufficient to cover
cash-flow requirements (Working Capital), emergency situations (Contingency), unanticipated revenue or expenditure fluctuations (Revenue or Rate Stability), and future needs (Unrestricted Reserves). The appropriate reserve levels are unique to each operating fund. This Council Briefing Memorandum
3 “[Proposed] Preamble to the Financial Policies.” City of Springfield Financial Policies. 2016.
4 Kavanagh, 53.
5 “… That which we call a rose / By any other name would smell as sweet.” Shakespeare, William. Romeo and Juliet, 2.2.1-2.
Attachment 1 – Page 2 of 4
discusses General Fund Reserve levels at length. If Council adopts the Reserve Policy, the Finance
Department will work to establish categorized reserves in other funds as well.
Working Capital
Working capital is a top financial priority: it represents the cash-on-hand necessary to pay bills as they
come due. The current policy provides that the City will maintain adequate reserves for working capital. The new policy seeks to quantify that amount: the General Fund would maintain a Working Capital
Reserve to cover cash-flow requirements for at least five months. This level will ensure that the City can
maintain services during revenue gaps, such as the delay from the start of the fiscal year in July until property tax payments arrive in November. It also signals to bond rating agencies that the City is solvent
and has adequate reserve levels.
Contingency
Only the General Fund has a dedicated Contingency reserve, for $600,000. For a real emergency, this
reserve level would only support General Fund activities for 4 days.6
Under the new policy, Contingency reserves for the General Fund would be 3% of General Fund operating expenditures. These funds are restricted to use for emergency expenditures. This level of
Contingency Reserve would support General Fund activities (like police and fire) for 7 days in the event
of a serious emergency.7
Revenue Stabilization
The Revenue Stabilization Reserve is used to guard against unanticipated fluctuations in revenues or
expenditures. This reserve stabilizes the peaks and valleys of unanticipated fluctuations, allowing the City time to make necessary adjustments and maintain service continuity. For the General Fund, the primary revenue source is property taxes, so the reserve amount will largely depend on a confidence
interval for property tax projections.
Unrestricted Reserves
The remaining reserve level is Unrestricted Reserves, used to plan for program development and future
needs to continue to deliver the community’s highest priority services. This reserve has the most flexibility for use and size. As programs develop and unmet needs arise, policy makers can rest assured that sufficient funds are available.
By categorizing reserves, the City can ensure that its top financial priorities are adequately funded.
Revenue Policy Highlights - Diversification
The City’s current revenue policy is “to decrease dependence on property taxes and to diversify the
revenue base.” This is still relevant today. Property tax revenue is the primary revenue source for the General Fund, accounting for 59% of revenues: this is an increase from 10 years ago. This increased
dependence puts a strain on taxpayers to support City services, whether those services have a citywide
benefit or not. A revised policy seeks equitable funding. “Services having a citywide benefit shall be
6 Contingency as a percentage of General Fund operating expenditures is roughly 1.7%, multiplied by 260 working
days in a year is 4.5 days.
7 Calculation assumes continued normal operations. Three percent times 260 working days in a year is 7.8 days.
Attachment 1 – Page 3 of 4
financed with revenue sources generated from a broad base . . . . Services where the customer determines
the use shall be financed with user fees . . . related to the level of service provided.”8
Revenue diversification and equitable financing work in tandem. The goal is not simply to raise fees: the goal is to maintain a good balance of revenue sources, each source growing to maintain that balance. For
example, if only property tax revenue increases and all other revenue sources have no growth, property
taxes will be necessary to pay for more services. In other words, property owners will be subsidizing more services. Using the concepts of revenue diversification and equitable financing, property taxes will
be allocated more to citywide services as other revenues support more individual-based services.
Equally important to consider is the extent to which costs to deliver services are outpacing current revenues. From Fiscal Year 2015 to Fiscal Year 2016, operating expenses in the General Fund grew by
6%. In that same time period, General Fund revenues only grew by 1.5%—property tax revenues for the General Fund only grew by 0.4%. In order to continue to deliver the services citizens expect, the City of Springfield will need to find and grow other revenue sources in order to fund services.
Accounting, Auditing, and Financial Reporting Policy Highlights – Excellence in Reporting
Updates to the Accounting policies were primarily for clarification. The revised policy cites to the
appropriate regulations and standards boards for Accounting Records and Reporting. It sets a standard for
producing financial reports for the City’s use. This is not outlined in the current policy.
For Auditing, the revised policy requires the excellence in reporting necessary to receive the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association.
This will ensure the City continues to present current, quality audit reports. The City of Springfield consistently receives this award, but this standard is not addressed in the current policy.
Finally, the Fund Structure policy has been revised. The current policy conflicts with current practices
and/or is ambiguous. The revised policy ensures that the City is only maintaining those funds that are necessary for sound financial administration. This will help to make reporting and accounting more
transparent and efficient.
What Can We Expect Moving Forward?
The Finance Department will continue to review, revise, and seek to implement updated financial policies
to bolster the City’s fiscal health.
RECOMMENDATION
The first step toward attaining fiscal health is to update the financial policies in order to develop a
strategic, long-term approach to: (1) minimize the cost of government and reduce financial risk; (2) maintain appropriate financial capacity for present and future needs; and (3) ensure the legal use of financial resources through an effective system of internal controls. Attachments 4-6 are proposed
financial policies. Staff would like to recommend that Council review the proposed Reserve, Revenue, and Accounting policies for adoption.
8 “[Proposed] Revenue Policy.” City of Springfield Financial Policies. 2016.
Attachment 1 – Page 4 of 4
Review
ReviseImplement
Financial Policies
Update
Financial Policies
Update
Attachment 2 - 1
Financial Policies Update
Achieving fiscal health by
delivering the services our citizens expect,
with the resources they provide,
now and in the future.
Attachment 2 - 2
Financial Policies Update
Years since Financial
Policies were last
revised
Total amount General
Fund has set aside for
emergency funds
Proportion of General
Fund revenues funded
by property tax
Attachment 2 - 3
Financial Policies Update
Minimize the cost of government and
reduce financial risk
Maintain appropriate financial capacity
for present and future needs
Ensure the legal use of financial resources
through an effective system of internal
controls
Attachment 2 - 4
Financial Policies Update
New Policies
Current policies will apply until they are replaced by updated policies.
Updating Now
Coming Soon
Future Development
•Reserves
•Revenues
•Accounting, Auditing, & Financial
Reporting
•Expenditures
•Long-Term Financial Planning
•Investment
•Operating Budget (Spring 2017)
•Capital Asset Management
•Debt Management
Attachment 2 - 5
Financial Policies Update
Working Capital
Contingency
Unrestricted Reserves
“What’s in a name?”
R
e
s
e
r
v
e
s
Attachment 2 - 6
Financial Policies Update
Attachment 2 - 7
Financial Policies Update
59%
10%
7%
7%
5%
2%1%0.3%
General Fund: Percent Revenue by TypeProperty Taxes
Internal Charges
In-Lieu-of-Tax Fees
Fees for Services
Franchise Fees
Fire Protection
State Revenue
Sharing Taxes
Building Code-
Related Fees
Fire Code-Related
Fees
Interest Income
School Res. Program
Business Licenses
Miscellaneous
Income
IGAs
ROW Fees
Fire License Facility
Inspection
Attachment 2 - 8
Financial Policies Update
Seek excellence in
Financial Reporting
Manage fund
structure for sound
financial
administration
Attachment 2 - 9
Financial Policies Update
Review
ReviseImplement
Fiscal Health Initiatives
Categorize reserves to
ensure adequate funding
Diversify revenues to reduce
strain on property taxes
Seek excellence in
financial reporting
Attachment 2 - 10
City of Springfield
Financial Policies
Preamble to the Financial Policies
1 | Preamble to the Financial Policies
I. Purpose
City of Springfield is accountable to its citizens for the use of public dollars. Its resources
should be used wisely to ensure adequate funding for the services, public facilities, and
infrastructure necessary to meet the community’s present and future needs. These
Financial Policies are intended to serve as a blueprint to achieve the fiscal stability required
to accomplish the City of Springfield Council’s goals and objectives. The policies set forth
principles that:
- Minimize the cost of government and reduce financial risk;
- Maintain appropriate financial capacity for present and future needs;
- Ensure the legal use of financial resources through an effective system of internal
controls.
II. Applicability & Scope
These Financial Policies apply to all City departments and all City Funds.
III. Authority
The Mayor and City Council are responsible for legislation, policy formulation, and overall
direction setting of the government. This includes the approval of financial policies that
establish and direct the operations of the City of Springfield. The City Manager is
responsible for carrying out the policy directives of the City Council and managing the day-
to-day operations of the executive departments, including the Finance Department. These
policies will be administered on behalf of the City Council by the City Manager and the
Finance Director.
IV. Definitions & Acronyms
A. Fund: a self-balancing set of accounts, segregated for specific purposes, including
compliance with laws and regulations or for special restrictions and limitations.
V. Policies
Reserves
Revenues
Future Policy: Expenditures
Future Policy: Operating Budget
Attachment 3
2 | Preamble to the Financial Policies
Future Policy: Capital Asset Management
Future Policy: Long-Term Financial Planning
Future Policy: Debt Management
Future Policy: Investment
Accounting, Auditing, and Financial Reporting
VI. Related Documents and References
A. Springfield Municipal Code
B. Administrative Regulations and Policies
VII. Quality Control & Quality Assurance
The City Manager is responsible to ensure the presence of procedures that provide
sufficient guidance to affected City personnel to fulfill the intent of these policies.
These policies will be updated on an as-needed basis.
VIII. Version
Version 1 (adopted xxx. xx, 2016)
Attachment 3
City of Springfield
Financial Policies
Reserve Policy
1 | Reserve Policy
I. Purpose
The City of Springfield desires to maintain a prudent level of financial resources to guard its
citizens against service disruption in the event of unexpected temporary revenue shortfalls
or unpredicted one-time expenditures. In addition, this Policy is intended to document the
appropriate Reserve levels to protect the City’s creditworthiness. This Policy establishes the
amounts the City will strive to maintain in its Operating Funds Reserves, how Reserves are
funded, and the conditions under which Reserves may be used.
II. Applicability & Scope
This policy applies to Operating Funds.
III. Authority
The Budget Committee and City Council will amend or approve the recommended Reserve
levels through adoption of the Adopted Budget. Unless otherwise noted, the City Manager
must give prior approval before any actions are taken under this Reserve Policy.
IV. Definitions & Acronyms
A. Adopted Budget: as referred to in this Reserve Policy means the budget approved by
Council and all subsequent amendments.
B. Operating Funds: includes the General Fund and certain other Special Revenue and
Enterprise Funds, which specifically track operating revenues and expenditures. This
definition does not include strictly accounting activities within the funds, which are used
to track resource inflows and outflows (e.g. sinking fund), but do not recognize
operating revenue or expenditures.
C. Reserve: the segregation of a portion of a fund balance to provide for cash-flow
requirements (Working Capital), emergency situations (Contingency), unanticipated
revenue or expenditure fluctuations (Revenue or Rate Stability), and future needs
(Unrestricted Reserves).
D. Structural Balance: a structurally balanced budget meets recurring requirements with
recurring resources. A structural imbalance occurs when non-recurring resources are
necessary to meet recurring requirements.
Attachment 4
2 | Reserve Policy
V. Policy
A. Reserve Levels
i. Determining Reserve Levels
Through the City Manager, and in conjunction with other department directors,
the Finance Director will recommend the appropriate Reserve levels for the
City’s Operating Funds. Reserve levels will be sufficient to cover cash-flow
requirements (Working Capital), emergency situations (Contingency),
unanticipated revenue or expenditure fluctuations (Revenue or Rate Stability),
and future needs (Unrestricted Reserves). Appropriate Reserve levels will be
determined by:
Cash-flow requirements to support expenditures;
Relative rate stability from year-to-year for enterprise funds;
Susceptibility of the fund to emergency or unanticipated expenditures;
Creditworthiness and capacity to support debt-service requirements;
Legal or regulatory requirements affecting revenues, expenditures, and
fund balances; and
Reliability of outside revenues.
ii. General Fund Reserve Levels
The City will maintain, at a minimum, the following Reserve levels:
A restricted Working Capital Reserve covering cash-flow requirements
for at least five months; and
A restricted Contingency Reserve of three percent (3%) of General Fund
operating expenditures for emergency expenditures; and
A restricted Revenue Stability Reserve to guard against susceptibility of
the General Fund to unanticipated fluctuations in revenues or
expenditures; and
Additional Unrestricted Reserves to plan for program development and
future needs to continue to deliver the community’s highest priority
services.
Attachment 4
3 | Reserve Policy
iii. Reserves in Other Funds
Other Operating Funds will maintain Reserve levels sufficient to cover Working
Capital, Contingency, and Unrestricted Reserves. Appropriate Reserve levels for
these funds will be determined in accordance with this Policy.
iv. Monitoring Reserves
During the course of the year, the Finance Department will closely monitor the
City’s revenues and expenditures to ensure Reserves are not used beyond any
planned. If, based on the staff’s analysis and forecasting, the target levels of
Reserves are not being met, or are likely to not be met at some point within a
five-year time horizon, then fund balance levels will be provided to the Mayor
and City Council. Should the projected year-end fund balances fall below the
minimum Reserve levels established by this Policy, a plan to replenish the
Reserves will be established based on the requirements outlined in this Policy.
B. Funding the Reserves
Funding of Reserves will generally come from excess revenues over expenditures or
one-time revenues.
C. Conditions for Use of Reserves
It is the intent of the City to limit use of Reserves to address unanticipated, non-
recurring needs. Reserves will not normally be applied to recurring annual operating
expenditures. Reserves may, however, be used to allow time for the City to restructure
its operations in a deliberate manner (as might be required in an economic downturn),
but such use will only take place in the context of an adopted long-term plan.
Use of Contingency Reserves should be infrequent: for unanticipated expenditures such
as costs associated with a response to a disaster, or to meet unanticipated increases in
service delivery costs. The City Council must authorize expenditure of any
Contingencies via a resolution.
D. Authority over Reserves
The City Council may authorize the use of Reserves. City staff will report both current
and projected Reserve levels to the City Council.
E. Replenishment of Reserves
In the event that Reserves are used resulting in a balance below the appropriate
Reserve levels established by this Policy, a plan for Reserve replenishment will be
Attachment 4
4 | Reserve Policy
submitted to the City Council. A replenishment plan will include: (1) the time period
over which the components of the Reserve will be replenished, and (2) the means by
which they will be replenished.
i. Time Horizon
Generally, Reserves should be replenished within one to three years. Factors
influencing the time horizon for replenishment include:
The budgetary reasons behind the Reserve targets
Recovering from an extreme event
Political continuity
Financial planning time horizons
Long-term forecasts and economic conditions
External financing expectations
ii. General Fund Replenishment
In the event Reserves are used resulting in a balance below two months
(roughly 16%) of General Fund operating expenditures, the General Fund will be
replenished with nonrecurring revenues, budget surpluses, or resources from
other funds, over a period of one to three years, with targets of 80% of target in
year one, 90% of target in year two, and 100% of target in year three.
F. Excess of Reserves
Target Reserve balances will be measured against three-year projections for the
Operating Fund. In the event Reserves exceed the target balance requirements, any
excess Reserves may be used in the following ways:
1. Fund accrued liabilities, including but not limited to debt service, pension, and
other post-employment benefits as directed and approved within the long-term
financial plan and the annual budget resolution. Priority will be given to those
items that relieve budget or financial operating pressure in future periods;
2. Appropriated to lower the amount of bonds or contributions needed to fund
capital projects in the City’s Capital Improvement Plan;
3. One-time expenditures that do not increase recurring operating costs and that
cannot be funded through current revenues. Emphasis will be placed on one-
time uses that reduce future operating costs; or
Attachment 4
5 | Reserve Policy
4. Start-up expenditures for new programs, provided that such action is approved
by City Council and is considered in the context of multi-year projections of
revenues and expenditures as prepared by the Finance Department.
G. Periodic Review of the Targets
At a minimum, during the budget process, the Finance Department will review the
current and projected Reserves to ensure that they are appropriate given the economic
and financial risk factors the City is subject to.
VI. Related Documents & References
Accounting, Auditing, and Financial Reporting Policy
VII. Quality Control & Quality Assurance
The City Manager is responsible to ensure the presence of procedures that provide
sufficient guidance to affected City personnel to fulfill the intent of this Policy.
This Policy will be updated on an as-needed basis.
VIII. Version
Version 1 (adopted xxx. xx, 2016)
Attachment 4
City of Springfield
Financial Policies
Revenue Policy
1 | Revenue Policy
I. Purpose
The City of Springfield will maintain a stable and diverse revenue system to shelter programs
and services from short-term fluctuations in any single revenue source.
II. Applicability & Scope
This Policy applies to Operating Funds.
III. Authority
Unless otherwise noted, the City Manager must give prior approval before any actions are
taken under this Revenue Policy.
IV. Definitions & Acronyms
A. Operating Funds: includes the General Fund and certain other Special Revenue and
Enterprise Funds, which specifically track operating revenues and expenditures. This
definition does not include strictly accounting activities within the fund, which are used
to track resource inflows and outflows (e.g. sinking fund), but do not recognize
operating revenue or expenditures.
V. Policy
A. Revenue Structure:
The City must be sensitive to the balance between the need for services and the City’s
ability to raise fees, charges, and taxes to support those services.
i. Diversification and Stabilization:
The City should strive to maintain a diversified mix of revenues in order to
balance the source of revenue amongst the taxpayers and to provide ongoing
stability and predictability.
ii. Equity
The City will strive to equitably, fairly, and adequately fund its programs.
Services having a citywide benefit shall be financed with revenue sources
generated from a broad base, such as property taxes and state aids. Services
where the customer determines the use shall be financed with user fees,
charges, and assessments related to the level of service provided.
Attachment 5
2 | Revenue Policies
iii. Relation to Economic Development
The City’s overall revenue structure should be designed to recapture for the City
some of the financial benefits resulting from City economic and community
development investments. The City will strive to keep a total revenue mix that
encourages growth and keeps Springfield economically competitive and a city of
choice for people to live and do business.
iv. Collections
The City will enforce its authority to collect revenue due the City, including
litigation if necessary. The City will strive to efficiently collect accounts
receivable, ensuring the largest possible margin of revenue-obtained to cost-of-
collections.
B. Non-Recurring and Volatile Revenue
The City will avoid using unpredictable revenue for ongoing expenditures.
i. Non-Recurring Revenues
By definition, non-recurring revenues cannot be relied on in future budget
years. Non-recurring revenues should only be used for non-recurring
expenditures and not for recurring expenditures. The best use of non-recurring
revenues is to invest in projects that will result in long-term operating cost
savings.
Departments will distinguish non-recurring from recurring revenues to assist
Finance in fiscal health and budget analysis.
ii. Volatile Revenues
Volatile revenues (recurring but unpredictable revenues) are highly dependent
on economic conditions outside of the City’s control and are susceptible to large
fluctuations (both positive and negative). Therefore, volatile revenues should
be used for non-recurring expenditures or to increase reserves for the inevitable
economic downturns. Refer to the Reserve Policy for further discussion.
C. Revenue Estimates
The City will conduct its operations from existing or foreseeable revenue sources.
The City will prepare revenue forecasts for all Operating Funds. The City will estimate its
annual revenues by an objective, analytical process. Since most revenues are sensitive
to conditions outside the City’s control, estimates will be conservative.
Departments will monitor and provide analysis regarding their revenues to Finance for
reporting and budgeting purposes.
Attachment 5
3 | Revenue Policies
D. Earmarking
i. Restricted Revenue
Restricted revenues will only be used for their legally permissible purposes.
ii. Property Taxes
The Oregon Constitution (see ORS § 310) imposes limitations on property tax
increases and distribution. As such, property tax allocation will be prioritized for
use to support essential City services that benefit and are available to everyone
in the community.
E. User Fees
The Master Fees & Charges Schedule will be updated at least annually to reflect cost-of-
living adjustments and other fee updates.
i. Goals of User Fees
(1) Tax dollars should support essential City services that benefit and are
available to everyone in the community.
(2) For services that largely or solely benefit individuals, the City should recover
full or partial costs of service delivery through user fees.
ii. Cost recovery
Charges for services that benefit specific users should recover full or partial
costs of service delivery, including all direct costs and overhead. User fee
pricing policies should take into consideration:
Whether the service benefits the community in general or only the
individual or group receiving the service;
Whether the service is provided only by the public sector, or also by the
private sector;
Whether imposing the full cost fee would impose a hardship on specific
service users;
Whether imposing the full cost fee would place the City at an economic
disadvantage;
Whether not imposing a full cost fee would cause an unrealistic demand
on the service.
Attachment 5
4 | Revenue Policies
iii. Review of Fees
In addition to the annual update to the Master Fees & Charges Schedule,
departments that impose fees or service charges will periodically prepare and
update cost-of-service studies for such services to ensure ongoing equity and
cost recovery ability. Departments will periodically examine new revenue
possibilities.
VI. Related Documents & References
A. Reserve Policy
B. Accounting, Auditing, and Financial Reporting Policy
VII. Quality Control & Quality Assurance
The City Manager is responsible to ensure the presence of procedures that provide
sufficient guidance to affected City personnel to fulfill the intent of this Policy.
This Policy will be updated on an as-needed basis.
VIII. Version
Version 1 (adopted xxx. xx, 2016)
Attachment 5
City of Springfield
Financial Policies
Accounting, Auditing, and Financial Reporting Policy
1 | Accounting, Auditing, and Financial Reporting Policy
I. Purpose
The City will maintain a system of financial monitoring, control, and reporting for all
operations and Funds in order to provide effective means of ensuring reliability, accuracy,
consistency, timeliness, and compliance with legal requirements.
II. Applicability & Scope
This Policy applies to all Funds.
III. Authority
Unless otherwise noted, any actions taken under these Accounting, Auditing, and Financial
Reporting Policy must be approved by the City Manager.
IV. Definitions & Acronyms
A. Accounting: is the process of assembling, analyzing, classifying, and recording data
relevant to a government’s finances.
B. Adopted Budget: as referred to in this Accounting, Auditing, and Financial Reporting
Policy, means the budget approved by Council and all subsequent amendments.
C. Financial Reporting: process of taking accounting data and providing it in usable form to
those who need it. It includes internal and external reporting (either special or general
purpose).
D. Fund: a self-balancing set of accounts, segregated for specific purposes, including
compliance with laws and regulations or for special restrictions and limitations.
V. Policies
A. Accounting Records and Reporting
The City will maintain its accounting records in accordance with state and federal law
and regulations. Budgetary reporting will be in accordance with the state’s budget laws
and regulations. The City will report its financial condition and results of operations in
accordance with state regulations and generally accepted accounting principles
(“GAAP”) applicable to governments as promulgated by the Government Accounting
Standards Board (“GASB”).
The Finance Department is responsible for producing timely and accurate financial data
reflecting the status of actual revenues and expenditures compared to the Adopted
Budget.
Attachment 6
2 | Accounting, Auditing, and Financial Reporting Policy
B. Auditing
The Finance Department is responsible for compiling and producing the Comprehensive
Annual Financial Report (“CAFR”) in conformity with state and federal law and
regulations and GAAP.
The City will annually seek to obtain the Government Finance Officers Association
(“GFOA”) Certificate of Achievement for Excellence in Financial Reporting. The CAFR will
be presented in a way designed to communicate with citizens about the financial affairs
of the City.
C. Fund Structure
The City will establish and maintain Funds that are necessary as a matter of law and
Funds that are necessary for sound financial administration. The Finance Director will
periodically review the Fund structure and recommend changes to the City Manager to
improve compliance with this Policy.
VI. Related Documents & References
This Policy affects all financial policies.
VII. Quality Control & Quality Assurance
The City Manager is responsible to ensure the presence of procedures that provide
sufficient guidance to affected City personnel to fulfill the intent of these policies.
These policies will be updated on an as-needed basis.
VIII. Version
Version 1 (Adopted xxx. xx, 2016)
Attachment 6