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Policies and Procedures

Fiscally Ready Communities Best Practices
Policies and Procedures

These best practices criteria assess a community’s financial structure by evaluating the policies and procedures that have been set in place. These policies and procedures help to reduce the risk of inefficiencies and fraud. Having clear purchasing, investment, and receipting policies ensures uniformity across departments, simplifying accounting procedures. Additionally, it is important for the local unit to review their financial position regularly to address changing circumstances as they occur. For example, it is important to note the differences between the budgeted and actual expenses and evaluate whether the budget needs to be amended. Sound budgeting is important because any activity that exceeds budgeted expenditures is a violation of Public Act 2 of 1968, as amended.

General Policies and Procedures

Expectations

  • The local unit has set in place strong cash controls.
  • The local unit has a Capital Improvements Plan (CIP).
  • Every local unit shall adopt an ethics policy.
  • Organization charts should be developed, and job descriptions should be maintained.
  • The local unit shall have a grants policy.
  • Every local unit shall have a technology policy.
  • Every local unit shall have a vehicle use policy.
  • The local unit shall ensure that all financial transactions are recorded in the accounting records and can be substantiated with evidence (Department of Treasury, 2007).

Purchasing Policies and Procedures

Expectations

  • The local unit shall set in place strong purchasing policies and procedures.
  • The local unit shall establish a comprehensive written investment policy, which should be adopted by the governing body.
  • The local unit shall adopt a credit card policy (Department of Treasury, 2007).
  • The local unit shall have an electronic payments policy and limit ACH authorization.
  • Wire transfers should be limited.
  • Checks must be restrictively endorsed (stamped for deposit only) at the point and time of collection.

Budget Policies and Procedures

Expectations

  • The local unit shall monitor their debt and prioritize debt payments.
  • The local unit shall complete a comprehensive formal budget, as required by PA 2 of 1968, as amended.
  • The local unit shall create a 5-year budget forecast.
  • The local unit shall create a budget-to-actual report and present the report to its governing body on a quarterly basis (Department of Treasury, 2007)
  • The local unit shall have a plan in place for managing costs related to retiree healthcare and/or OPEB.
  • The local unit shall establish a formal policy on the level of unrestricted fund balance that should be maintained in the General fund.
  • Treasury recommends that the local unit has an unrestricted fund balance of no less than 2 months of regular General fund revenues or expenditures after it considers its own circumstances.