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Financial Policies Overview

This page provides an overview of financial policies for local governments in Washington State, including benefits, resources to help write policies, and examples of comprehensive financial policies.

It is part of MRSC’s Financial Policies Tool Kit, created in partnership with the State Auditor’s Office Center for Government Innovation.

Benefits of Financial Policies

Financial policies, which are adopted by the legislative body, provide written guidance for how local government officials and staff should approach fiscal issues and core financial areas.

Most local government decisions are driven by the entity’s fiscal health. Citizens expect their cities, counties, and special purpose districts to deliver essential services such as public safety, transportation, and utility services well into the future. To fulfill these expectations, local governments must invest in infrastructure, reserve funds for pension obligations, and take steps to assure their financial wellbeing for years to come.

Effective financial policies are essential to this fiscal health and can help elected officials, management, and staff make the right decisions for their citizens now and in the future. They provide stability and continuity over the years as staff and elected officials turn over by establishing what actions are acceptable and unacceptable, identifying who is responsible for taking certain actions, and providing standards to measure your jurisdiction’s performance.

Among many benefits, financial policies can:

  • Outline a clear vision of how your jurisdiction will manage its financial resources to provide the best value to the community
  • Increase accountability and minimize confusion by identifying who can take what actions
  • Support good bond ratings and reduce the cost of borrowing
  • Promote long-term and strategic thinking
  • Manage and reduce risks to your jurisdiction’s fiscal health
  • Protect staff and management in case something goes wrong (as long as the policy was followed)
  • Help your jurisdiction comply with established best practices identified by organizations such as the Government Finance Officers Association (GFOA) and the State Auditor’s Office.

Financial policies will also be used during state audits to assess compliance, by credit ratings agencies to help determine your jurisdiction’s fiscal stability, and by other financial professionals as a basis for providing services.

For financial policies to be effective, it is important for the policies to be realistic, achievable, and tailored to your own jurisdiction’s unique financial situation and needs. In other words, local jurisdictions should not just copy and paste another jurisdiction’s language or policy choices without careful consideration and evaluation.

MRSC recommends reviewing and updating your financial policies as part of the pre-budget process, to make sure your policies are still relevant and meet your jurisdictions' objectives.

Financial Policy Topics and Guidance

Financial policies can include a wide variety of topics. Some jurisdictions adopt one comprehensive financial policy addressing many different aspects, while others adopt stand-alone policies focusing on narrower topics.

Some jurisdictions adopt financial policies every year as part of the budget document itself. Other financial policies (such as credit card use or expense reimbursement) may be incorporated into other policy documents, such as a personnel policy or elected officials’ handbook.

MRSC recommends reviewing and updating your financial policies every year as part of the pre-budget process, to make sure your policies are still relevant and meet your jurisdictions' objectives.

MRSC has provided detailed policy guidance and key questions to consider for the following financial policy and procedural areas:

Other policy areas that are considered a best practice include:

Example of Financial Planning Policy

Financial policies and procedures require a significant level of planning to efficiently draft, adopt, and implement. Here is an example of a “financial planning policy” that may help guide your entity through this process:

Examples of Comprehensive Financial Policies

Below are just a few examples of comprehensive financial policies adopted by local governments in Washington. As noted earlier, jurisdictions should tailor their financial policies to their own unique financial needs and should not just copy and paste language from another jurisdiction’s policies without careful consideration and evaluation.

Cities Under 10,000 Population

Cities of 10,000-20,000 Population

Cities of 20,000-50,000 Population

Cities Over 50,000 Population

Counties

Special Purpose Districts/Utilities

Recommended Resources

Below are some useful documents from the Government Finance Officers Association (GFOA) and other sources to help you create your financial policies.


Last Modified: August 12, 2024