1. Financial Policies: Policy Development Reserve Policies Capital Asset Management Policies October 3, 2013

2. Financial Policies... 1.Are guidelines for operational and strategic decision making related to financial matters 2.Should be adopted by the governing body 3.Are VERY IMPORTANT to credit rating agencies 4.Clarify and crystallize the strategic intent for financial management 2

3. Financial Policies... 5.Define limits on the actions staff can take 6.Promote long-term and strategic thinking 7.Manage risks to financial condition 8.Should comply with established public management best practices 9.Are needed by all sizes of governments 3

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5. Policies vs. Procedures 1.Policies are (overarching) guidelines or principles of financial management decisions; procedures are detailed steps. 2.Policies are written down in an authoritative document and are approved by the governing body; procedures may or may not be written down and are not adopted by the governing body. 5

6. Policies vs. Procedures 3.Policies should be concise; procedures can be lengthy. 4.Policies are written toward a broad audience; procedures are staff-level directives. 5.Policies are developed through a process; procedures are often practices that have evolved over time. 6

7. Control vs. Flexibility Generally, the more control, the lesser flexibility Should have more control ▫To maintain fairness ▫To remove discretion ▫Ensure integrity ▫For areas often associated with areas of risk of mismanagement or fraud, such as debt, procurement, and investments 7

8. Control vs. Flexibility Should have more flexibility o To meet performance goals o When the public is involved o To determine details on a case-by-case basis User Fees 8

9. Steps to Developing Financial Policies 1.Establish a vision and values for financial condition 2.Define the problem the policy will address 3.Draft the policy 4.Executive team should review the draft 9

10. Steps to Developing Financial Policies 5.Present to elected officials informally 6.Have a public comment period? 7.Formally consider and adopt the policy 8.Put the policy into practice 9.Monitor and maintain the policy 10

11. Effective Policies Are... Explicit, in writing, easy to understand, and are formally adopted Current and relevant Literal – mean what they say and are written in plain language Easily accessible – on website, in budget document, known to staff Concise yet comprehensive 11

12. Where do I Start? 12

13. Essential Policies Fund balance and reserves Operating budget Capital budgeting and planning Debt management Long-range financial planning Investment 13

14. Highly Advisable Policies Accounting and financial reporting Revenues Internal controls Expenditures Purchasing Risk management Economic development 14

15. Financial Management That Affects Credit Quality 1.Revenue and expenditure assumptions 2.Budget amendments and updates 3.Long-term financial planning 4.Long-term capital planning 5.Investment management policies 6.Reserve and liquidity policies 15

16. General Fund Reserve Policies 16

17. Reasons to Adopt a Reserve Policy 1.Plan for contingencies 2.Maintain good standing with rating agencies 3.Ensure cash availability 4.Avoid interest expense 5.Generate investment income 6.Create a better working relationship between the governing body and staff 17

18. Level of Constraints on Reserves Committed – at highest level of decision making (i.e. resolution or ordinance) Assigned – earmarked for intended use Unassigned 18

19. Step 1: Set the Target A.How to define the target ▫As a percentage of regular operating revenues ▫As a percentage of regular operating expenditures ▫Number of month’s worth of revenues or expenditures ▫Fixed amount 19

20. Step 1: Set the Target GFOA recommends no less than 2 months of regular general fund operating revenues (or expenditures, whichever is less volatile) as unrestricted fund balance 20

21. Step 1: Set the Target Standard and Poor’s View on Reserves Rating Range of Available Fund Balance LowBelow 0% Adequate1% - 4% Good4% - 8% Strong8% - 15% Very strongAbove 15% 21

22. Step 1: Set the Target B.Consider Risks ▫Vulnerability to extreme events (natural disasters) and public safety concerns ▫Revenue source stability ▫Expenditure volatility ▫Leverage ▫Liquidity ▫Other funds’ dependency ▫Growth ▫Capital projects 22

23. Step 1: Set the Target C.Identify the Drivers ▫Commitments or assignments ▫Budget practices ▫Government size ▫Borrowing capacity ▫Outsider perceptions ▫Political support 23

24. Step 2: Draft the Policy Policy elementEssentialImportantDiscretionary Definition and purpose of reserves X Reserve target levels X Funding the target amount X Conditions for use of reserves X Authority over reserves X Replenishment of reserves X Excess reserves X Periodic review of targets X 24

25. Capital Asset Management Policies 25

26. Areas of Capital Asset Management 1.Capital improvement planning (CIP) 2.Capital budgeting 3.Capital project management 4.Capital asset maintenance 26

27. Capital Improvement Planning Policy elementEssentialImportantDiscretionary Scope X Project identification X Participants X Selecting projects X Balanced CIP X Funding strategies X Operating budget impacts X 27

28. Criteria for Selecting Projects  Results of formal needs assessment  Alignment with goals  Expected useful life  Implications of project deferral  Feasibility of implementation  Operating budget impact  Regional benefits/linkages  Enhancements to quality of life  Economic impact  Environmental impact 28

29. Funding Strategies Debt financing Capital reserves One-time resources Earmarking portions of regular revenue streams Establishing entirely dedicated revenue streams 29

30. Capital Budgeting Allocating funds Budget period – current fiscal year or life of the project? Budget to actual comparisons are generally since the start of the project, and not by fiscal year What happens if bids are over budget? What happens to excess if project comes in under budget? 30

31. Capital Project Management Role of a project manager ▫Prepare the project proposal ▫Ensure required phases are completed (on schedule) ▫Authorize all project expenditures ▫Ensure compliance with all laws and regulations ▫Periodically report project status 31

32. Capital Asset Maintenance Policy elementEssentialImportant Inventory and physical condition X Establish standards by asset class X Evaluate infrastructure and set priorities X Develop maintenance funding policies X Monitor and communicate progress X 32

33. Contact Information Diane B. Allison, CPA, CGMA, CGFO Director of Business Services Ascension Parish School Board diane.allison@apsb.org Office: (225) 391-7073 Donaldsonville, LA 33