The big picture: evaluating financial practices and policies.(Solutions)

It makes sense to find and fix financial weaknesses before a "hunch" becomes a "headline." It is also a good idea to periodically put aside the focus on day-to-day problems to assess the "big picture" of how a finance operation is working and to evaluate whether long-term improvements can be made. Unfortunately, many local governments do not have the luxury of setting aside their day-to-day responsibilities to evaluate their own operations through the lens of an objective expert. Finding itself in this very position, one public organization engaged GFOA to perform an assessment of its financial practices and policies.

An association of county government commissions, this organization had been actively pursuing a larger effort to help its local government members improve their operations, reassure stakeholders about their administrative procedures, and make the most efficient use of their resources in achieving strategic goals. As part of this effort, the client asked GFOA to assess the financial management practices of the member governments. Specifically, GFOA was asked to: (1) assess the finance functions of county commissions and identify opportunities for improvement; (2) focus particularly on the areas of financial planning, staff capacity, reporting capabilities, and policies related to encumbrances, reserves, and contract management; and (3) develop a preliminary action plan based on the results of the assessment.

GFOA consultants used several methods to meet the client's requirements. First, we conducted interviews of commission executives, finance managers, and other individuals involved in, or knowledgeable about, the financial activities of a select group of county commissions. The interviews included questions on financial processes and procedures, internal controls, accounting, auditing, financial reporting, budgeting, and financial planning. Second, we analyzed the results of a written survey of financial practices and policies. The survey covered accounting tools, budgeting and accounting practices, financial reporting, and financial policies and responsibilities. Finally, we reviewed the financial documents of a select group of county commissions. The documents included annual and interim financial statements, annual reports, budgets, strategic plans, performance reports, and policy and procedure manuals.

Based on the information collected using these three methods, we assessed the commissions' financial practices and policies compared to "best practices" in government financial management. GFOA brought to bear its knowledge of best financial practices used by other governmental agencies. We benchmarked the information we collected to accepted standards for financial controls, financial reporting, compliance, and accountability. We also evaluated commission policies, practices, and procedures using GFOA's recommended practices and publications.

FINANCIAL MANAGEMENT ASSESSMENT AND ACTION PLAN

GFOA's financial management assessment covered several major areas of public financial management, including budgeting, financial planning, accounting, auditing, financial reporting, and contract management. For each area, GFOA provided a summary of best practices, presented key findings from our assessment, and proposed action items to improve financial management. We also included a discussion of key issues that presented significant opportunities and threats to the commissions' ongoing success. For each key issue, we presented the best practices related to that issue and proposed actions for addressing it. These key issues included:

* Financial management staff capacity