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Government Finance Officers Association | AUGUST 2021 

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contents AUGUST 

2021 | VOLUME 37, NUMBER 4 

24 

Is a State Bank a Useful 

Economic Development Tool? 

Exploring lessons learned from 

public banking initiatives and making 

a case for and against state banks. 

by Robert S. Chirinko 

36 

Financial Transparency in 

an Age of Too Much Data 

How Kansas City and the city of Los 

Angeles are educating and engaging the 

public through financial transparency 

by Debbie Chiu and Ron Galperin 

50 

Budgeting Bias 

Applying behavioral science to 

finance to better understand and 

improve the decision making 

environment 

by Linnea Gandhi and Shayne Kavanagh 

Data is no longer just about producing 

audits or reports for other decisionmakers 

in the city; it’s about conveying 

information through visualizations and 

connecting communities in new ways. 

RON GALPERIN, LOS ANGELES CITY CONTROLLER 

AUGUST 2021 | GOVERNMENT FINANCE REVIEW 1

contents 

56 

Strengthening Risk 

Management Before 

the Next Big Crisis 

A six-step guide for state and 

local government leaders 

by Mark Beasley, Al Chen, and 

Ericka F. Kranitz 

68 

Paving the Way 

Aligning the budget with 

your mission and vision 

by Celeste F. Baker 

74 

Against All Odds 

How Springfield, Massachusetts 

built a fiscally sustainable future 

by Timothy J. Plante 

Organizational leaders are convinced that 

complex and interrelated risks will continue to 

emerge—and stakeholder expectations for more 

effective risk oversight will continue to grow. 

6 Contributors 

8 From the CEO 

10 Rewind 

11 The Committee on 

Canadian Issues 

by Kate Southard 

and Craig Lesner 

13 The Committee on 

Governmental Budgeting 

and Fiscal Policy 

by John Fishbien 

14 Coronavirus State and 

Local Fiscal Recovery Funds: 

GFOA Guiding Principles 

by Mehreen Haroon 

16 Reaching Out: GFOA’s 

New Member Community 

by Timothy Martin 

19 Spotlight on GFOA’s 

2021 Scholarship Recipients 

by Genevieve Carter 

81 On the Art of Collaboration 

at Long Beach 

by Katie Ludwig 

86 Ch-Ch-Ch-Changes: 

Adopting GASB GAAP 

by Michele Mark Levine 

90 Improving Procurement 

Practices in the Wake of 

the Pandemic 

by Katherine Barrett & 

Richard Greene 

92 Q&A with David Erdman 

by Ryan Lawler 

96 10 Steps to Budgeting 

for Salary and Wages 

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Publisher 

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Editor in Chief 

Michael J. Mucha 

Managing Editor 

Marcy Boggs 

GOVERNMENT FINANCE REVIEW 

www.gfoa.org/gfr 

EDITORIAL 

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gfoa.org/gfr-ads 

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gfr@gfoa.org 

CHANGE OF ADDRESS 

gfoa.org/update-membership 

SUBSCRIPTIONS 

gfoa.org/gfr 

SUBMISSIONS 

GFOA encourages finance officers, scholars, 

private consultants, and other knowledgeable 

individuals to submit manuscripts to GFR. 

All manuscripts should conform to the Editorial 

Policy and Guidelines for Authors, which are 

available online at gfoa.org. Manuscripts should 

be submitted electronically to gfr@gfoa.org. 

CONTACT 

Government Finance Review 

c/o Government Finance Officers Association 

203 N. LaSalle Street, Suite 2700 

Chicago, Illinois 60601-1210 

Phone: 312-977-9700 

Fax: 312-977-4806 

GFOA EXECUTIVE BOARD 

Michael Bryant 

President 

Mecklenburg County 

Government, NC 

Marion M. Gee 

Past President 

Metropolitan St. Louis 

Sewer District, MO 

Terri Velasquez 

President-Elect 

City of Aurora, CO 

Laura Allen 

Town of Berwyn Heights, MD 

Lunda Asmani 

Town of New Canaan, CT 

Laurie M. Brewer 

City of Georgetown, TX 

Chris Daniel 

City of Albuquerque, NM 

Bruce H. Fisher 

Halifax Regional Municipality, NS 

Tanya Garost 

District of Lake Country, BC 

Anne P. Harty 

City of Rock Hill, SC 

Dan Huge 

Indiana Finance Authority, IN 

Rafiu O. Ighile 

Howard County Government, MD 

Sue Iverson 

City of Red Wing, MN 

William Jones 

City of Mequon, WI 

Brandon Kauffman 

Kansas Turnpike Authority, KS 

Matthew M. Lentz 

Upper Moreland 

School District, PA 

Margaret Moggia 

West Basin Municipal 

Water District, CA 

Kenton Tsoodle 

City of Oklahoma City, OK 

Chris Morrill 

GFOA 

GFR (Government Finance Review) (ISSN 0883-7856) is published bimonthly in February, April, June, August, October, and December. 

Subscription price is $35 annually. Opinions expressed herein are the viewpoints of the authors. They may differ from the policies and 

recommendations of the Government Finance Officers Association, its committees, and staff. Letters to the editor are welcomed. 

Copyright 2021 by the GFOA. Published by the Government Finance Officers Association, 203 N. LaSalle Street, Suite 2700, Chicago, 

IL 60601-1210. Periodicals postage paid at Chicago, Illinois, and additional mailing office. Postmaster: Please send address changes 

to Government Finance Review, 203 N. LaSalle Street, Suite 2700, Chicago, IL 60601-1210. 

4

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CONTRIBUTORS 

Celeste F. Baker is the fiscal officer for the Tiffin-Seneca Public Library in Tiffin, Ohio. 

For more than 20 years she has enjoyed a long and professionally progressive public sector 

career. Baker has accumulated a great deal of budgeting, forecasting, and general accounting 

experience, as well as a LEAN Six Sigma Green Belt “Plus” certification. She is passionate about 

worksite as well as individual wellness. Celeste began her career in manufacturing and has also 

worked in banking. Celeste was previously the director of budget for the North County Transit 

District in Oceanside, California. Before that, she was deputy clerk treasurer and then budget 

analyst for Lorain County Community College in Elyria, Ohio. 

Mark Beasley is a professor of accounting and director of the ERM Initiative at the Poole 

College of Management, North Carolina State University. As founding director, Dr. Beasley leads 

the ERM Initiative’s efforts to help pioneer the development of this emergent discipline through 

outreach to business professionals, with its ongoing ERM Roundtable Series and ERM Executive 

Education for boards and senior executives; research, advancing knowledge and understanding 

of ERM issues; and undergraduate and graduate business education for the next generation 

of business executives. He frequently works with boards of directors and senior management 

teams to assist them in strengthening their risk oversight processes. 

Al Chen is a professor of accounting, graduate faculty, Department of Accounting, at the Poole 

College of Management. His study of advanced manufacturing systems has led him into the 

emerging research of environmental cost management and supply chain management. He 

develops a value chain research theme through enterprise risk management and supply chain 

management, and he has expanded his research into accounting information systems with 

special interest in the US adoption of eXtensible Business Reporting Language (XBRL) and 

the role of internal auditor in helping companies adapt to the technology-enabled financial 

reporting mechanism. 

Robert Chirinko is a professor in the Department of Finance at University of Illinois at 

Chicago, a member of the Government Finance Research Center Faculty Advisory Panel, and a 

research fellow at the Center for Economic Studies in Munich. His research examines business 

behavior with a focus on financial markets, capital formation, corporate governance and finance, 

macroeconomics, and tax policy. He has held faculty positions at Cornell University (1982-1985) 

and the University of Chicago (1985-1992), and full-time visiting positions at Stanford University 

(1984-1985), the Federal Reserve Bank of Kansas City (1992-1993), and the University of Illinois 

at Urbana/Champaign (1993-1994). He was on the faculty of Emory University from 1994-2007, 

where he was the Winship Distinguished Research Professor in the Social Sciences. 

Debbie Chiu is the former budget operations manager for the City of Kansas City, Missouri. 

She got her start in local government as a mayoral aide, working for Mayor Mark Funkhouser 

as a community engagement liaison and a town hall coordinator. Debbie joined the Office of 

Management and Budget in May 2011 as a budget analyst, and she then assumed the role of 

budget operations manager. She led the budget development analysis team. Debbie also worked 

with the resident engagement component of the citywide business and planning process. 

Debbie was also a co-leader of the city’s 2018 GFOA Award for Excellence-winning initiative on 

engaging residents in the citywide business plan. 

6

Ron Galperin is the Los Angeles Controller and the taxpayers’ watchdog at City Hall, making 

sure public dollars are spent efficiently and effectively. He is also the elected paymaster, auditor, 

and chief accounting officer for the city of Los Angeles, California. Galperin oversees a team 

that conducts independent audits, manages city payroll and spending, prepares financial 

reports, pursues fraud and waste, and works to create a more transparent and accountable 

city for everyone. His reports are improving outreach and housing for those experiencing 

homelessness, street maintenance, arts funding, management of special funds, L.A.’s trees, 

emergency services and many other city functions. 

Linnea Gandhi is the founder of BehavioralSight, an ExecEd Lecturer at The University of 

Chicago, and a PhD candidate at Wharton. The BehavioralSight team has taught over 1500 

students and worked with over 50 cross-industry client partners, helping address challenges 

in human capital, marketing, product development, and strategic decision making. As part 

of their commitment to bringing clients like GFOA cutting-edge “pracademic” insight, they 

continue to train and collaborate with top experts in their field, including Richard Thaler 

(author of Nudge) and Daniel Kahneman (author of Thinking, Fast and Slow). 

Shayne Kavanagh is the senior manager of research for GFOA’s research and consulting 

center. He’s been a leader in developing the practice and technique of long-term financial 

planning and policies for local government. Shayne’s financial planning experience also drives 

his research at GFOA. He’s written a number of influential publications on financial planning 

and a number of articles on long-term financial planning, financial policies, budget reform, 

using technology to improve efficiency, and related topics for magazines including Government 

Finance Review, Public Management, School Business Affairs, and Public CIO. Before joining 

GFOA, Shayne was the assistant village manager for the Village of Palos Park, Illinois. 

Ericka F. Kranitz is a lecturer in the Department of Accounting in the Poole College of 

Management, working with the ERM Initiative and teaching accounting-related courses. She 

is also a lecturing fellow for the Fuqua School of Business, teaching a risk management course 

as part of the Master of Science in Quantitative Management business analytics program. 

Recently, she worked for Duke University as an associate director of the Ethics and Compliance 

Program, where she was responsible for compliance assurance reviews and managing ethicalrelated 

activities. Before that, Kranitz was with the University of Missouri System, where she 

was responsible for identifying, developing and delivering training for sponsored programs 

and other financial-related compliance requirements for all four campuses. 

Timothy J. Plante is the chief administrative and financial officer for the City of Springfield, 

Massachusetts, where he directly oversees the city’s financial functions and serves as the 

principal city management advisor to the mayor. Under his leadership, Springfield’s finance 

division received GFOA’s Distinguished Budget Presentation Award for a 13th consecutive year 

in May 2021. In his newly published book, Springfield Resurgent (available on Amazon), Plante 

recounts his 14 years of service to the city, during which time he and his cohorts overcame 

tremendous fiscal challenges and put Springfield on the map for strong financial management. 


FROM THE CEO 

Better Together 

Christopher P. Morrill 

Executive Director/CEO 

Collaboration is a key 

value for GFOA. It 

helps shape internal 

policy decisions and 

informs our guidance 

for members. It is the basis of GFOA’s 

Financial Foundations Framework, 

which requires that finance officers 

work with their peers throughout 

government to develop more effective 

solutions to pressing challenges. 

As an organization, GFOA is also 

stronger when it works with its peers. 

For years, GFOA has led the Public 

Finance Network, a consortium 

of associations representing local 

governments and other municipal bond 

issuers in Washington, D.C. We also 

rely on the strong relationships we have 

with our state, provincial, regional, 

and international associations, 

routinely working together to provide 

educational content, identify speakers 

for conferences, and get the word out 

about industry events like GFOA’s 

annual conference. 

Over the past year, GFOA has focused 

on broadening those connections by 

entering into strategic partnership 

agreements with several organizations 

outside of public finance industry. Each 

alliance brings unique benefits to GFOA 

members and helps GFOA work toward 

its mission of advancing excellence 

in public finance to build thriving 

communities. Our current strategic 

partners are: 

• National Institute for Governmental 

Purchasing (NIGP). NIGP provides 

certification, training, best 

practice guidance, and networking 

opportunities to the public 

procurement profession in the 

United States and Canada. Staff for 

the two organizations have been 

working on coordinating resources, 

Each alliance 

brings unique 

benefits to GFOA 

members and 

helps GFOA work 

toward its mission 

of advancing 

excellence in 

public finance 

to build thriving 

communities. 

developing joint training opportunities, 

and planning content for annual 

conferences. GFOA and NIGP will 

also be identifying opportunities to 

improve finance and procurement 

collaboration within local government. 

This strategic partnership also provides 

GFOA members with discounted rates 

at NIGP training events on contract 

management, construction, sourcing 

and solicitation, and more. 

• Engaging Local Government Leaders 

(ELGL). ELGL’s mission is to engage the 

brightest minds in local government 

by providing timely and relevant 

podcasts, blogs, webinars, social media, 

learning cohorts, and conference 

gatherings, all of which foster authentic 

and meaningful connections that are 

grounded in equity and inclusion. 

GFOA is working with ELGL to provide 

the PAFR Fellowship program, which 

connects local governments with 

graduate students to help create 

popular financial reports. 

8

©2021 MICHAEL AUSTIN C/O THEISPOT.COM 

• Institute of Public Works 

Engineering Australia (IPWEA). 

IPWEA is an association of more 

than 4,750 professional members 

who deliver public works and 

engineering services to communities 

in Australia, New Zealand, and 

Canada. As part of our agreement, 

IPWEA now offers its online 

Professional Certificate in Asset 

Management Planning at to GFOA 

members at IPWEA member rates. 

• National FORUM for Black 

Public Administrators (NFBPA). 

NFBPA is the principal and most 

progressive organization dedicated 

to the advancement of black 

public leadership in local and state 

governments. GFOA and NFBPA 

have agreed to joint marketing 

of events, cross collaboration of 

resources for conference events, 

and continued communication 

as both organizations work to 

promote diversity in the public 

finance profession. 

• Local Government Hispanic 

Network (LGHN). LGHN encourages 

professional excellence among 

Hispanic/Latino local government 

administrators. GFOA works with 

the network to promote diversity 

in the public finance profession 

through collaboration in learning 

and conference events. 

• National Civic League (NCL). 

NCL works to inspire, support, and 

celebrate civic engagement. GFOA 

and NCL collaborate on various 

projects, and NCL resources have 

been instrumental in helping 

shape GFOA recommendations 

and resources related to public 

participation in budgeting. GFOA 

staff serves on a panel to revise 

NCL’s model city charter, helping 

with additional emphasis on longterm 

financial planning. One of the 

benefits GFOA members receive from 

this partnership is complimentary 

access to NCL’s quarterly publication, 

the National Civic Review. 

• ProbabilityManagement.org. 

ProbabilityManagement.org 

is a non-profit dedicated to 

helping organizations work with 

uncertainty, using tools, standards, 

applications, and training. GFOA 

and ProbabilityManagement.org 

have worked together on 

numerous research projects, 

and ProbabilityManagment.org 

provides ongoing guidance to 

GFOA research staff as well as 

assisting with developing our 

approach to conducting riskbased 

reserve assessments. 

GFOA also works with other organizations 

and is developing other partnerships 

to advance excellence in public finance 

and to increase the benefits available to 

GFOA members. We urge you to find out 

more about GFOA’s strategic partners and 

the benefits available to GFOA members 

at gfoa.org/strategic-partners. 

Sincerely, 


REWIND 

rewind 

A look back at GFR in June 1990 

One way to improve 

revenues is to collect 

more of the taxes 

the government is 

owed. The idea isn’t 

to “nickel and dime” 

residents by aggressively going after 

small amounts they can’t afford, but to 

convince them to pay their fair share. 

The June 1990 issue of GFR tackled the 

underground economy of off-the-books 

economic activity in New York City. 

The campaign started in December 

1986 and aimed to recover part of the 

estimated $1 billion this kind of tax 

fraud was costing the city annually. 

The plan was straightforward, giving 

the Department of Finance additional 

tax auditors, investigators, collection 

agents, and support staff to initiate new 

enforcement projects or to enhance 

existing projects with new sources of 

information. The project would focus 

on unreported income from legitimate 

activities where the tax evasion of 

individuals or businesses was so 

blatant that it would allow for successful 

prosecution (leaving the illegal 

sector—drug sales, prostitution, 

illegal gambling—to the police). 

The underground economy program 

was made up of three major areas: 

computer matching, creation of 

specialized audit teams, and expansion 

of warrant collection. The city also 

made it easier for honest taxpayers to 

comply with its tax laws, answering 

more questions, resolving problems, 

and better educating and informing the 

public about their tax responsibilities. 

The program raised a significant 

amount of money, but the city felt that 

the compliance effect it produced was 

even more important: non-filers who 

had been caught were likely to continue 

filing returns in the future, which 

would continue to increase future city 

revenues. The city also reported an 

increased disenchantment with tax 

evasion, with more citizens expressing 

disgust instead of admiration. In other 

words, the program seemed to be 

convincing citizens that they needed 

to do the right thing. 


10

In Brief 

GFOA COMMITTEES | FEDERAL UPDATE | MEMBER COMMUNITIES | GFOA SCHOLARSHIPS 

GFOA COMMITTEES The Committee on 

The committee is made up of 12 

Canadian Issues (CCI) is 

members and one advisor. Its cochairs 

are Catherine Brubacher, 

The Committee 

unique among GFOA’s 

standing committees. 

general manager of corporate 

on Canadian 

It is tasked with helping 

services and city treasurer, City 

of Brantford, Ontario; and Tanya 

Issues 

Garost, chief financial officer, 

District of Lake Country, British 

Columbia. 

BY KATE SOUTHARD 

AND CRAIG LESNER 

GFOA meet the needs of its Canadian 

members, giving the U.S.-based 

association’s staff the guidance 

and input needed to better serve 

its international members. Just 

as GFOA’s strategic roles shift to 

meet the ever-changing needs of its 

membership, CCI’s role also shifts as 

our Canadian members’ needs evolve 

over time. CCI’s members, however, 

are always guided by a shared and 

sustained desire for: 

1. Providing Canadian context and 

perspective, 

2. GFOA-sponsored training on 

Canadian-relevant issues, and 

3. A unified voice to help inform 

Canadian fiscal policy. 

Providing Canadian context 

and perspective 

There are more similarities than 

differences when it comes to public 

finance in the United States and 

Canada, but it is not always obvious 

where things diverge. GFOA’s 

resources are made stronger by the 

Canadian context and perspective 

provided by members of CCI. 

Committee members are local 

government employees who also 

participate in local and provincial 


IN BRIEF 

The committee 

is exploring 

new avenues for 

strengthening 

GFOA’s impact 

in Canadian 

public finance. 

membership groups. They identify 

the resources and best practices that 

are applicable on both sides of the 

border and provide the terminology 

and context needed to make these 

critical resources useful for Canadian 

finance officers. With the committee’s 

input, GFOA is growing to serve and 

support Canadian public finance 

professionals—either directly, 

as GFOA members, or indirectly, 

through their association with one 

of our partner associations—with a 

more inclusive and broadly applicable 

library of materials. 

The committee is exploring new 

avenues for strengthening GFOA’s 

impact in Canadian public finance. 

CCI is considering new, Canadianspecific 

best practices, and is seeking 

out opportunities for joint research 

projects between GFOA and Canadabased 

peer organizations. 

The Canadian public finance 

officers who make up the 

committee also want to identify 

new networking opportunities 

that GFOA can facilitate among 

its Canadian members and their 

U.S.-based counterparts. We may 

be separated by miles/kilometres, 

but our goals are held in common: 

things like building resilient and 

thriving communities, striving 

for transparency and public 

engagement, and cultivating trust 

in public finance are not restricted 

by borders. 

GFOA-sponsored training on 

Canadian-relevant issues 

GFOA’s staff currently participates 

in Canadian associations’ 

conferences (such as GFOA of British 

Columbia; Municipal Finance 

Officers Association of Ontario) 

and often speaks at local events. 

GFOA’s staff continues to work with 

provincial and regionally based 

local government membership 

associations to help identify 

the questions asked by local 

governments. These are always 

changing, but staff have recently 

spoken about GFOA’s ethics 

initiative and building up trust with 

the communities they serve. GFOA’s 

growing focus on asset management 

means that GFOA staff have worked 

to connect governments from 

across North America to learn 

from and make use of each other’s 

experience and advice on how 

to make better infrastructure 

investment decisions. 

CCI is also exploring the potential 

for adding a Canadian module to 

GFOA’s newly redesigned Certified 

Public Finance Officer (CPFO) 

professional certification program. 

This would help Canadian finance 

officers who wish to receive official 

recognition for their skillset, and it 

would also help local governments 

in Canada identify job candidates 

with the ability to foster thriving 

communities. 

A unified voice to help inform 

Canadian fiscal policy 

While it hasn’t historically been 

an area of focus, CCI recognizes 

the need for a unified voice across 

provinces in advocating for issues 

that affect local government 

finance in Canada. With CCI 

helping to identify opportunities, 

GFOA and the committee can 

build relationships with peer 

organizations, provincial 

associations, media, and academia 

to create opportunities to advocate 

at the federal level about issues 

that affect local government 

finance. 

In 2020, GFOA partnered with the Canadian Network of Asset Managers 

to help build and support the Asset Management Competency Framework 

for Canadian Communities. The 12 competencies provide guidance for 

how to implement an asset management program for your organization. 

More information, including the full framework, can be downloaded at 

gfoa.org/materials/cnam-framework. 

12

The Committee on Governmental 

Budgeting and Fiscal Policy 

BY JOHN FISHBIEN 


GFOA’s Committee on 

Governmental Budgeting 

and Fiscal Policy advises 

and guides GFOA 

best practices and 

recommendations on a range of topics 

related to the budget process, financial 

policies, and budget presentation. The 

Budget Committee also provides advice 

on broader financial management 

topics. The committee has 25 active 

members, two ex-officio members, five 

advisors, and two GFOA support staff 

members. The committee is chaired 

by Scott Huizenga, director, Office of 

Management and Budget for the City 

of San Antonio, Texas. Its vice-chair is 

Judith Marte, chief financial officer, 

Broward County School Board, Florida. 

Committee members have a diversity 

of experiences and organizations that 

provide a well-rounded perspective 

in developing guidance for GFOA 

members and beyond and makes 

for interesting discussion at the 

committee’s twice-annual meetings. 

Best Practices 

The 35 best practices the committee 

has developed or been actively 

involved in are organized in four 

major categories: budget policies, 

budget process, budget document, 

and monitoring and performance 

management. These documents are 

meant to serve as checklists and 

practical advice that government 

professionals can use to evaluate 

current policies and processes. 

The committee is working on a new 

best practice on budgetary control, 

being developed jointly with the 

Accounting, Auditing, and Financial 

Reporting Committee. Some of the key 

items to be covered include: the intent 

of budget controls; primary methods 

for modifying budgets, including 

budget transfers and amendments; 

a system for implementing budgetary 

Measuring the cost of government services 

is useful for a variety of purposes, including 

performance measurement, comparative 

analysis, grant administration, disaster 

recovery cost documentation, establishing 

government charges and fees, and 

evaluating service delivery alternatives. 

controls; the inclusion of budgetary 

controls in financial policies; position 

control mechanisms; how changes are 

requested and who can make them; and 

movement to other classifications. 

Another best practice the committee 

is working on with the Accounting, 

Auditing, and Financial Reporting 

Committee involves measuring the 

full cost of government services. 

Measuring the cost of government 

services is useful for a variety of 

purposes, including performance 

measurement, comparative analysis, 

grant administration, disaster recovery 

cost documentation, establishing 

government charges and fees, and 

evaluating service delivery alternatives. 

Cost data can be extremely useful 

in identifying situations where 

governments should evaluate service 

delivery alternatives. The full cost of 

a service encompasses all direct and 

indirect costs related to that service. 

A third best practice, which will be 

going to GFOA’s Executive Board 

for approval, is Communicating 

the Budget. The traditional way 

of communicating the budget 

has focused on producing a large 

budget document. However, 

through newer technologies and 

better understanding of citizens’ 

needs related to understanding 

budget information, better 

methods have emerged. 

Communication strategies are 

always evolving, and a budget 

communications plan should 

include outreach for different 

audiences and diverse approaches. 

Finance officers need to find 

methods of communicating the 

budget processes, performance 

measures, and outcomes and 

results that engage stakeholders 

in ways that are natural to their 

communication styles. 


IN BRIEF 

FEDERAL UPDATE 

Coronavirus State and Local Fiscal Recovery Funds: 

GFOA Guiding Principles 

BY MEHREEN HAROON 

A 

year and a half into the 

COVID-19 pandemic, the 

devastating public health 

and economic impact 

has been felt nationwide. 

While the CARES Act launched the 

Coronavirus Relief Fund (CRF) in early 

2020 to provide immediate assistance 

for state and local governments in 

responding to the growing emergency, 

the American Rescue Plan Act of 2021 

(the ARPA, passed in March 2021) 

contained the important Coronavirus 

State and Local Fiscal Recovery Fund 

(CSLFRF), which shifted the focus of 

the federal funds toward providing 

response and recovery efforts. GFOA 

has provided some guiding principles 

for recipients to consider in using the 

new CSLFRF funds. 

It’s temporary 

While the covered period for using 

the CSLFRF funds goes far beyond 

the strict timeframe that had been 

set for the CRF, it’s still a temporary 

measure. The funds are nonrecurring 

and would be best used for 

expenditures that are also primarily 

non-recurring and for areas that 

require urgent assistance because 

of the pandemic. Examples include 

stabilizing households and businesses 

or providing immediate assistance 

to hard-hit industries such as travel, 

tourism, and hospitality. 

Recipients that are considering 

creating new programs or adding 

to existing programs that require 

an ongoing financial commitment 

need to determine in advance how 

the program will be funded when 

the CSLFRF expires. This doesn’t 

mean, however, that governments 

shouldn’t consider investments in 

long-term projects. Investments in 

critical infrastructure (as permitted 

within the eligible uses) should be 

given high priority because they would 

provide an ongoing benefit, especially 

when aligned with any pre-existing 

objectives. Recipients just need to keep 

the ongoing operating costs in mind. 

You might want to find a partner 

Communication at the state and 

local level is critical when applying 

federal funds toward services shared 

by residents. The glaring disconnect 

across different levels of governments 

stands as a crucial lesson to learn from 

as the public health emergency comes 

closer to the end, and partnership 

efforts can greatly assist in alleviating 

much of the existing burden. 

The rollout of the CSLFRF is a new 

opportunity for finance officials to take 

advantage of the additional flexibility 

added to the program’s eligible 

expenditures. Examples include a 

broad use of allowable spending on 

government service (to the extent of 

revenue loss) and planning for taking 

on larger infrastructure projects. 

Recipients have a range of areas with 

the potential to overlap in community 

efforts; therefore, governments should 

check for plans that include CSLFRF 

funds at all levels within the state, 

especially infrastructure projects. 

The Treasury encourages such 

collaborations in certain contexts, as 

stated in the Interim Final Rule on 

broadband infrastructure: “Treasury 

also encourages recipients to prioritize 

14

support for broadband networks 

owned, operated by, or affiliated 

with local governments, nonprofits, 

and co-operatives—providers with 

less pressure to turn profits and 

with a commitment to serving entire 

communities” (IFR, p. 21). 

Allowing for greater access to critical 

services is essential during this time 

of economic recovery. The IFR takes 

special note of aiding low-income and 

socially vulnerable communities; 

partnering with neighboring 

recipients could elevate the quantity 

and overall reach of services across 

communities. For example, an eligible 

use of funds noted in the IFR includes 

“housing navigation assistance 

to facilitate household moves to 

neighborhoods with high levels of 

economic opportunity and mobility 

for low-income residents, to help 

residents increase their economic 

opportunity and reduce concentrated 

areas of low economic opportunity” 

(IFR, p. 37). Recipients partnering 

for specific causes such as increasing 

opportunities for their lower-income 

populations could do more for their 

jurisdiction’s economic development 

than the entities could do separately. 

Don’t rush your decisions 

CSLFRF funding is divided into two 

tranches over the covered period of the 

program, which, with a few exceptions, 

runs from March 3, 2021, through 

December 31, 2024. Spending plans 

must be created and executed within 

this timeframe to enhance their overall 

budgetary and financial stability. 

Recipients should avoid rushed 

decisions about using the funds and, 

if possible, use alternate sources 

of funding first. This would save 

the federal funding for recovery 

initiatives that might be more relevant 

to the CSLFRF and would typically 

be ineligible under other assistance 

programs. 

Guiding principles of other 

ARPA programs 

Emergency Rental Assistance 

Program (ERA). The ARPA established 

a number of other programs to 

help state and local governments, 

and GFOA’s guiding principles can 

be of benefit with them as well. 

The ERA, which received an 

additional $25.55 billion under the 

ARPA, provides funding to support 

households that are unable to pay 

rent or utilities. This is also a limitedterm 

program—ending September 

30, 2025—and using ERA funding 

requires the same timing and careful 

consideration as the CSLFRF funds 

because the program gives priority to 

Investments in 

critical infrastructure 

(as permitted 

within the eligible 

uses) should be 

given high priority 

because they would 

provide an ongoing 

benefit, especially 

when aligned with 

any pre-existing 

objectives. 

programs that would assist vulnerable 

households with rent and utility costs. 

The Treasury also encourages 

partnership opportunities for the ERA 

that align with the guiding principle 

on partnering efforts. According to the 

program’s frequently asked questions 

section, recipients are encouraged 

to “develop partnerships with courts 

in their jurisdiction that adjudicate 

evictions for nonpayment of rent to help 

prevent evictions and develop eviction 

diversion programs.” Expanding 

outreach information about the ERA 

assistance program with court 

officials, legal services, and other 

housing stability services are steps 

grantees of the program can take 

to prevent evictions for nonpayment 

of rent. 

The Low-Income Housing Water 

Assistance Program (LIHWAP). The 

LIHWAP received an additional $500 

million in emergency funding under 

the ARPA. The deadline for obligating 

funds is September 30, 2023, and 

they are to be expended by December 

31. Grantees of the program— 

primarily states, territories, and 

tribes—may take their time and 

consider carefully when obligating 

the funding, particularly because 

LIHWAP funds give high priority 

to households that have the lowest 

incomes and pay a high proportion of 

household income for drinking water 

and wastewater services. As funding 

will flow through state, territorial, 

and tribal governments to local 

housing and community services 

departments, enhancing partnership 

efforts is strongly recommended as it 

will encourage a more collaborative 

approach between the grantees 

and subrecipients when funds are 

distributed throughout vulnerable 

communities. 

Conclusion 

As finance officials develop their 

spending plans, the CSLFRF, ERA, and 

LIHWAP funds will generate some 

important assessments and choices. 

The federally funded programs 

provide a great opportunity to recover 

from the public health emergency 

and to rebuild economic stability 

within communities. GFOA’s guiding 

principles lay out a broad framework 

to help you strengthen your strategic 

decision-making for short-term and 

long-term investments. 

Mehreen Haroon is a federal policy 

associate at GFOA. 

1 

Department of the Treasury, 31 CFR Part 35, 

the “Interim Final Rule” for Coronavirus State 

and Local Fiscal Recovery Funds. (govinfo.gov) 


IN BRIEF 

Reaching Out: 

GFOA’s 

New Member 

Community 

BY TIMOTHY MARTIN 

When Mikaela 

Rhoads, internal 

auditor for the 

City of Iowa 

City, Iowa, had 

a question about how to handle the 

city’s grants management process, 

she turned to GFOA’s new Member 

Community. Within a few days, she 

had responses from members across 

the country, offering input and sharing 

their policies. Mikaela is just one of 

many GFOA members who have joined 

the new community to network with 

their peers, and this is exactly the kind 

of engagement we were hoping for when 

we launched the platform back in April. 

I’ll talk more about communities in a 

moment, but first, we need to talk about 

the beginning of GFOA’s new digital 

journey—which really began more 

than two years ago, when we decided to 

overhaul the new GFOA website. 

All about the website 

By overhaul, I mean building from 

the ground up, not just throwing in a 

new template. As the process began, 

website consultants met with GFOA 

members face-to-face to get a good 

understanding of what they thought 

about our old site, why they visit, and 

what they would change. GFOA also 

dove into the data from the old website 

to see what the numbers showed. One 

clear theme emerged. While the old site 

was filled with important and useful 

information for members—like best 

practices and research—important 

connections were missing, which left 

visitors sometimes missing out. 

From there, GFOA’s new Materials 

Library was born. When the new 

gfoa.org launched in June 2020, it 

quickly became a popular feature. The 

library allows members to browse 

best practices, publications, research 

reports, past articles from Government 

Finance Review, and more by topic. 

We’ve also added member-only content 

to the library, with more on the way. 

Overall, the site gives GFOA new ways 

to bring you the latest information on 

public finance. The navigation at the 

top allows you to easily log into your 

member account, or browse the Events 

Calendar or Materials Library, or head 

to the new Member Community. Our 

drop-down navigation allows you to 

find membership information, best 

practices, advocacy updates, and 

more with just the click of a mouse. 

Need quick help? Use the “I Want To” 

16

BY THE NUMBERS 

3,331,090 

PAGEVIEWS 

GFOA’s new Materials Library 

allows members to search 

best practices, publications 

and research reports by topic. 

2,420,438 

UNIQUE PAGEVIEWS 

The member communities have provided me with 

the opportunity to learn how my peers respond 

to the accounting, managerial, and operating 

issues at their entities. Although we might work at 

different types of entities, I read posts which are 

quite relevant to the needs for my community.” 

– NORMAN ECKSTEIN, CHIEF FINANCIAL OFFICER & TAX COLLECTOR 

TOWNSHIP OF BOONTON 

drop-down menu to join GFOA and 

view resources such as the GFOA Job 

Board, register for training, apply to 

award programs, or ask about GFOA 

resources. Browse our front page to 

find GFOA’s latest updates in different 

display options, all designed to get you 

the information you need faster. 

The website’s first year has been a 

success. We’ve had more than three 

million page views, and more than 50 

percent of visitors scroll all the way 

down on the homepage. Other popular 

pages include the Jobs Board, Events 

Calendar, and awards programs. 

GFOA’s website was also built with 

considerations for integration. 

Members enjoy single sign-on 

capabilities between GFOA’s website, 

association management system, 

and Learning Management System 

(LMS). GFOA’s new LMS hosts GFOA 

webinars, e-learning courses, and the 

virtual conference and since its launch 

last summer has already been used by 

over 17,000 people. 

Member Communities 

Now back to communities. GFOA 

isn’t just working to build thriving 

communities across the country— 

we’re working to do it online as well. 

Members were continuously asking 

for a new way to connect with other 

members, and in April 2021, after 

months of planning, GFOA answered 

the call with the new GFOA Member 

Communities. This online engagement 

portal allows members to join forums, 

ask questions, upload documents, 

network with other members, and 

more. Members use the platform to 

HOW DO MEMBERS 

COME TO OUR WEBSITE? 

HOW FAR ARE MEMBERS 

SCROLLING ON THE HOMEPAGE? 

25% OF 

THE PAGE 

48% 

Organic search 

36% 

Directly by typing gfoa.org 

9% 

From an email 

4% 

From another website 

100% 73% 61% 

90% OF 

THE PAGE 

50% OF 

THE PAGE 

57% 38% 

100% OF 

THE PAGE 

75% OF 

THE PAGE 


IN BRIEF 

TOP 10 PAGES 

#1 

Home page 

352,924 PAGEVIEWS 

#2 Jobs 


#3 

#4 

#5 

Events Calendar 


Materials Library 


COA Award 


#6 Conference 


#7 CPFO 


#8 

#9 

#10 

Budget Award 


Best Practices landing page 


GFOA Scholarships 


build a network to help with everyday 

challenges in the public finance 

world. Since its launch, more than 

2,400 members have logged into the 

platform. Nearly 1,000 members 

have joined the General GFOA Forum, 

a place for members to discuss a wide 

range of finance topics. The COVID-19 

Forum has more than 700 members 

who talk about the challenges of the 

pandemic and brainstorm ways to 

spend new funding from Washington 

D.C. Communities have also been set 

up for members of GFOA’s affinity 

groups and for CPFOs. 

We’re also launching new communities 

that allow members to take their ideas 

a step further. In July, we kicked off 

the GFOA Test Kitchen Community 

for members who are interested in 

developing and testing new ideas 

and practices. While engaging with 

GFOA staff from the Research and 

Consulting Center in the community, 

the idea is to challenge the status quo, 

breakdown myths, cultivate and refine 

raw thoughts, and move beyond “this is 

the way we’ve always done it” to begin 

thinking about ways to evolve public 

finance for the future. 

This platform is free—it comes with 

your GFOA membership. To access 

it, just visit community.gfoa.org and 

log in with your GFOA username and 

password. 

On the social front, GFOA continues 

keeping members up to date every day 

through Facebook, Twitter, LinkedIn, 

and now Instagram. Combined, our 

accounts have more than 36,000 

followers—that’s triple the number of 

followers we had just four years ago. 

Understanding that members consume 

information at different times and 

through various mediums, we’ve also 

launched GFOA Podcasts. You can 

subscribe on iTunes or wherever you 

listen to podcasts. Topics include Week 

in Washington updates and episodes 

about leadership, trust, diversity, and 

inclusion. 

With all the new digital enhancements 

over the last year, we still see this as 

the beginning of a journey, and we look 

forward to continuing to improve and 

enhance the ways in which we provide 

information and engage with members. 

Timothy Martin is GFOA’s senior 

manager for member engagement. 

A side-by-side comparison of the gfoa.org home 

page in 2020 and 2021 during GFOA’s Virtual 

Conference. The home page was transformed for 

this year’s conference, with real time updates, an 

Attendee Portal, and more. 

18

SPOTLIGHT ON: 

GFOA’s 2021 Scholarship Recipients 

BY GENEVIEVE CARTER 

©2021 DAVIDE BONAZZI C/O THEISPOT.COM 

Each year, GFOA is proud to 

award more than $100,000 

in academic scholarships 

to students from across the 

country who are interested in 

pursuing careers in government 

finance. These students are at 

all stages of their education 

and careers, but they share a 

passion for local government. 

This year, we asked our 2021 

academic scholarship recipients 

a few questions about their 

goals for the coming year. 

Here’s what they had to say. 

JUSTIN CASANOVA-DAVIS 

The recipient of the $20,000 

Goldberg-Miller Public 

Finance Scholarship is Justin 

Casanova-Davis. 

Justin has been the assistant town 

administrator for the Town of Brookline, 

Massachusetts since October 2018. 

Before that, he was a principal budget 

analyst for the City of Cambridge, 

Massachusetts, Budget Department. 

He holds a bachelor’s degree in 

political science from Boston College 

and a Suffolk Graduate Certificate in 

Local Government, Leadership, and 

Management. Justin is seeking a Master 

of Public Administration degree at 

Suffolk University and will graduate in 

winter 2021. 

A CHAT WITH JUSTIN 

Why did you choose to study 

public administration? 

I am passionate about public service. 

Suffolk has a tremendous program, 


IN BRIEF 

SPOTLIGHT ON; GFOA’s 2021 Scholarship Recipients 

I’m passionate 

about the work 

that I do, and 

I have been 

preparing for 

the next step 

in my career — 

becoming a 

city or town 

manager.” 

– JUSTIN CASANOVA-DAVIS 

and I want to continue developing and 

acquiring additional skills that will 

help me be a better leader and public 

servant during my career. 

What are your career goals? 

I’m passionate about the work that I 

do, and I have been preparing for the 

next step in my career, becoming a 

city or town manager. I ultimately 

want to become an ICMA Credentialed 

Manager, which in my estimation, 

exemplifies a high standard of integrity 

and capability as a manager. Most 

importantly, I want to serve as a mentor, 

encouraging people to pursue careers in 

municipal government. I’m passionate 

about this mission, particularly about 

working on efforts to increase diversity 

within our profession. 

How will the scholarship you received 

help you achieve those goals? 

I am profoundly grateful and honored 

by the investment in my professional 

development by the Girard Miller 

Foundation and GFOA. This scholarship 

will allow me to complete my Master’s 

in Public Administration this fall and 

help me achieve my career goals. Part of 

any academic program has a financial 

burden. This scholarship will help me 

further my education and allow me to 

continue to grow and enhance my skills 

to be an even better public servant. 

EMMA BRANDT 

Emma is one of two recipients 

of the Frank L. Greathouse 

Government Accounting 

Scholarship; she will receive 

$10,000. 

Emma is the finance officer for the 

Lapeer County Road Commission in 

Lapeer, Michigan. Before that, she 

was the assistant finance officer for 

Lapeer County Health Department, 

and she’s also been the records 

clerk for the Lapeer County Sheriff’s 

Office. Emma holds a Bachelor of Arts 

degree in business administration 

from Baker College and is pursuing a 

Master of Business Administration 

degree with an accounting emphasis 

from the University of Southern 

Indiana; she will graduate in June 

2021. Since July 2019, Emma has 

volunteered as a coordinator for the 

Sheriff’s Office Victim Service Unit, 

where she helps respond to families 

that have lost a loved one to an 

unexpected death in Lapeer County. 

A CHAT WITH EMMA 

Why did you choose this field? 

I chose this field when I was a 

freshman in high school, after my 

first finance class. I am passionate 

about accounting and management. 


My future career goals right now 

are to become CFO of Lapeer County. 

I also have my eyes on management. 

How will the scholarship you 

received help you achieve those 

goals? 

It will help me finish my current 

master’s degree, and with the 

scholarship, I plan to get a Master 

of Public Administration degree. 

Not only does this scholarship help 

me reach my career goals, but I will 

graduate 100 percent debt-free! 

CONNIE HO 

Connie received the $10,000 

Minorities in Government 

Finance Scholarship. 

Connie Ho has been senior public 

affairs specialist at the Irvine 

Ranch Water District in California 

since April 2017. Connie is also a 

2020 Popular Annual Financial 

Reporting Fellow. Connie holds 

dual Bachelor of Arts degrees 

in English and International 

Studies through the University 

of California at Irvine, and she 

is pursuing a Master of Public 

Administration degree from 

California State University at 

Long Beach, with plans to graduate 

in June 2022. 

A CHAT WITH CONNIE 

Why did you choose to pursue 

an MPA? 

I am looking forward to taking 

classes related to public 

administration and government 

finance. These courses will focus 

on strategy, innovation, and 

leadership, providing students 

with an opportunity to discuss 

ways in which new ideas can 

be generated, evaluated, and 

implemented. The program’s 

guiding principles are serving the 

public good, advancing democracy, 

promoting social justice, and 

promoting diverse communities. 

20

What is your current job like, and 

where do you hope to work in the 

future? 

I have worked with the finance team 

at a special district to ensure that the 

website’s finance center webpage has 

the most up-to-date information about 

audits, statements, and financial 

reports. As a graduate student, I helped 

a local city government develop its 

popular annual financial report and 

learned how to research demographic 

information and numbers related to 

the local area to provide readers with 

more context on the essential work 

done during the COVID-19 pandemic. 

In these roles, I have been able to put to 

practice GFOA’s Code of Professional 

Ethics to strengthen trust with 

the public, modeling the values of 

integrity, honesty, and openness while 

displaying an appreciation of new 

information or ideas that continue the 

safety and vitality of the organization. 


A short-term goal is to receive a 

master’s degree to enhance my 

public administration and business 

administration skills. Long-term 

goals would be to work in a project 

management role, focusing on 

community partnerships to make 

the most impact with staff and the 

community, and to work on rebuilding 

trust in local government. 


received help you achieve your 

goals? 

I appreciate GFOA’s support and am 

so honored to be recognized in this 

year’s scholarship recipient cohort. 

Looking to the future, I plan to use 

my graduate coursework, along with 

my work experience, to help improve 

on the processes and procedures 

in government communication to 

continue cultivating and maintaining 

the public’s trust in government. Clear 

communication is a continual process 

with evolving possibilities, and I am 

excited for what the future holds. 

MEGAN LEE 

Megan Lee is one recipient 

of the three awards for 

the Jeffrey L. Esser Career 

Development Scholarship; 

she will receive $5,000. 

Megan is senior district office 

administrator for the North of River 

Sanitary District in Bakersfield, 

California. She is seeking a Bachelor 

of Business Administration degree 

from Columbia Southern University 

and expects to graduate in 2024. 

A CHAT WITH MEGAN 

Where are you working now, and 

where do you hope to work in the 

future? 

After completing my degree, my 

goal is to become a chief financial 

officer for a special district or local 

government agency. 


With my BBA and my eight years 

of government finance, I plan to 

search for a finance manager or 

administrative manager position, 

leading to my ultimate goal of 

being chief financial officer of a 

government agency. 


received help you achieve 

those goals? 

It will help tremendously with 

the financial burden that college 

tuition creates and relieve the 

financial pressures, allowing me to 

focus exclusively on my studies. 

KALINA MENDEZ 

Kalina was one of two 

recipients of the Frank L. 

Greathouse Government 

Accounting Scholarship; she 

will receive $10,000. 

Kalina has been the supervisor of 

finance for the Waukegan Park District 

in Waukegan, Illinois since September 

2017, and she’s been with the park 

district since January 2015. Kalina 

holds both an Associate of Science 

degree in business administration and 

a Bachelor of Business Administration 

degree from Robert Morris University. 

She is seeking a Master of Science 

degree in accounting and financial 

management from DeVry University’s 

Keller Graduate School of Management 

and will graduate in May 2022. 

A CHAT WITH KALINA 

Why did you choose this program? 

It includes prep courses to help become 

a Certified Public Accountant, which I 

have always aspired to earn. 

What is your current job like, and 

where to you hope to work in the 

future? 

I have worked for my local park district 

for six years, and I love it. I look forward 

to staying in the parks and recreation 

world. It is very rewarding to work 

within your community, so I plan to 

stay for as long as I can. 


After receiving my master’s degree, 

I plan to sit for my CPA exam, if I can’t 

take the different CPA exam sections 

immediately after the correlated prep 

course. Upon graduation, I look 

forward to moving into a management 

role within my local park district. 


IN BRIEF 

SPOTLIGHT ON; GFOA’s 2021 Scholarship Recipients 

It is very rewarding 

to work within 

your community, 

so I plan to stay for 

as long as I can.” 

– KALINA MENDEZ 

How will the scholarship 

you received help you achieve 

your goals? 

I am proud to receive one of the two 

Frank L. Greathouse Government 

Accounting Scholarships. It will 

help me immensely with my tuition, 

considering I am still paying toward 

my associate and bachelor’s degrees. 

Aside from the financial factor, 

the scholarship’s three-year GFOA 

membership, three complimentary 

trainings, and invitation to the Virtual 

Conference in July 2021 will provide 

me with significant opportunities 

for continued professional growth 

through training and networking. 

ANDRE MORRISON, JR. 

Andre received one of three 

Jeffrey L. Esser Career 

Development Scholarship 

awards; he will receive $5,000. 

Andre has worked with the City of 

Warrensville Heights, Ohio since 2015. 

He is seeking a Bachelor of Science 

degree in public administration from 

Southern New Hampshire University 

and plans to graduate in 2021. 

ALEXANDER ROCHER 

Alexander was one of four 

recipients of the Government 

Finance Professional 


he will receive $10,000. 

Alexander is an accountant at 

the City of Plantation, Florida, 

where he’s worked since 2018. 

Before that, he worked for Broward 

County Parks and Recreation. 

Alexander holds a Bachelor of Art 

degree in business management 

from the University of Central 

Florida, and he is pursuing a 

Master of Science degree in 

Public Accounting from Nova 

Southeastern University, which he 

will complete in winter 2021. 

A CHAT WITH ALEXANDER 

Why did you choose public 

accounting? 

I knew that I wanted to remain in 

governmental accounting for the 

rest of my professional career. 


I would like to use my degree and 

experience to someday become 

a finance/accounting director or 

comptroller of a city. 

How will the scholarship 

you received help you achieve 

your goals? 

This scholarship will allow me to 

finish my program, which will 

afford me the additional training 

and knowledge needed to progress 

in my professional career. 

ELIZABETH WHITT 

ELIZABETH WHITT 

Elizabeth received one of three 

Jeffrey 

Elizabeth 

L. Esser 

received 

Career 

one 

Development 

of 

Scholarship 

three Jeffrey L. Esser Career 

Development Scholarship 

awards; she will receive $5,000. 

awards; she will receive $5,000. 

Elizabeth has worked with Northwest 

Local School District in Ohio as an 

accounting supervisor since 2014. She 

will complete a Bachelor of Business 

Administration degree at Liberty 

University in December 2021. 

Elizabeth participates in several 

finance organizations including 

GFOA and the Ohio GFOA. 

A CHAT WITH ELIZABETH 


After I complete my degree, I will 

be obtaining my school treasurer’s 

license. My career goals are to 

become an assistant treasurer and 

eventually transition to a school 

treasurer position. 

BRANDON SAUNDERS 

BRANDON SAUNDERS 

Brandon is one of four 

Brandon is one of four recipients 

recipients of the Government 

of the Government Finance 

Finance Professional 

Professional Development Scholarship; 




Brandon has been an assistant 

regional supervisor and senior exam 

staff for the Texas Office of Consumer 

Credit Commissioner since May 

2016. He has more than a decade 

of experience in highly regulatory 

environments and government, 

supporting risk, compliance, and audit 

functions. Brandon holds a Bachelor 

of Science degree in finance from 

Southeastern Louisiana University 

22

and has certificates in Management 

Development and Project 

Management from the LBJ School 

of Public Affairs at the University 

of Texas at Austin. Brandon is 

pursuing a Master of Business 

Administration degree with a 

project management specialization 

from Louisiana State University, 

and he plans to graduate in 2022. 

A CHAT WITH BRANDON 

Why did you choose to specialize 

in project management? 

I’ve always had a natural ability 

and interest in ensuring that 

projects run efficiently. Project 

managers help organizations 

improve efficiency, and in times 

where we are asked to do more 

with less, effective resource 

management is paramount. 

Tell us about your job. 

Each day in my role is different, 

from developing new staff members 

to assisting in agency planning. I 

embrace the challenge and growth 

from every new task within my role. 


My future career goals include 

continuing to serve as an 

organizational resource while 

managing projects and people in 

financial regulation, compliance, 

and consumer protection. I’m 

confident that my government 

experience thus far will help me 

accomplish my professional goals. 

How will the scholarship you won 

help you achieve those goals? 

It will reduce the financial burden 

of the current graduate program I 

am taking, as well as allowing me 

to have the money needed to obtain 

and train for other developmental 

certifications. 

BRENDA WILLIAMS 

Brenda Williams is one is one of of four four 

recipients of of the the Government Finance 

Professional Finance Professional Development Scholarship; 

she Development will receive $10,000. Scholarship; 

she will receive $10,000. 

Brenda has served as deputy treasurer 

in the Unclaimed Property Division for 

the North Carolina Department of State 

Treasurer in Raleigh, North Carolina 

since 2013. She holds a Bachelor of Arts 

degree in communications from UNC- 

Chapel Hill and a certificate in Public 

Executive Treasury Management from 

the National Institute of Public Finance. 

Brenda will complete her Master of 

Business Administration from the 

University of North Carolina, Kenan- 

Flagler Business School this year. 

A CHAT WITH BRENDA 


Upon graduation, I plan to continue 

my service within state government. 

I intend to use the knowledge I gained 

through the MBA program to have 

a broader impact on the efficiency 

and effectiveness of programs and 

services provided to the public. 

JESSICA TAPIA 

Jessica is one of four recipients 

of the four awards for the 

Government Finance Professional 

Development Scholarship; she 

will receive $10,000. 

Jessica Tapia started as senior 

accountant at the Village of Lake 

Zurich, Illinois in June 2021. Before 

that, she was an accountant with the 

Village of Barrington, Illinois; she has 

also worked with the McHenry County 

Probation and Court Services as a 

court specialist in the Circuit Clerk’s 

office and then as a court monitoring 

program coordinator for the Probation 

Department. She holds a Bachelor of 

Business Administration degree from 

Elmhurst University and will complete 

her Master of Business Administration 

degree in December 2021. 

A CHAT WITH JESSICA 

Why did you choose to pursue a 

master’s degree? 

I have a passion for continuous learning 

and a quest for more knowledge. 


The first full-time position I held after 

graduating high school was as a court 

specialist, and I’ve remained in the 

public sector ever since. The experience 

of working in government, along 

with my undergraduate accounting 

coursework, ultimately led me to the 

financial public-sector career path. My 

goal is to one day be a finance director 

for a municipality, and completing an 

MBA is an essential part of that role. 


received help you achieve those 

goals? 

This scholarship provides me with 

the resources I need to finish a degree 

that will further develop the skills 

I need to become a financial leader. 

Genevieve Carter is a senior 

consultant in GFOA’s Research 

and Consultant Center. 

GFOA SCHOLARSHIPS 

GFOA Academic Scholarship 

applications open in October 

of each year. If you are interested 

in one of our scholarships, 

please visit gfoa.org/scholarships 

for more information. 


24

STATE BANKS 

Is a State Bank a Useful 

Economic Development Tool? 

BY ROBERT S. CHIRINKO 

LESSONS FROM PRIOR PUBLIC BANKING EXPERIENCES 

©2021 DAN PAGE COLLECTION C/O THEISPOT.COM 

Healthy banks and a robust 

economy tend to go hand in 

hand. Banks perform three 

basic tasks—creating money, 

facilitating transactions, and 

allocating credit—that are 

essential for a well-functioning 

economy. But there has been 

a longstanding concern as 

to whether private banks 

operating in private markets 

are serving the public interest. 

So far in 2021, four states have 

introduced legislation to create 

a state bank, and in 2019, 

similar legislation was enacted 

in the State of California for 

municipal banks. This concern 

has been amplified by the 

disproportionate economic 

impact the COVID-19 pandemic 

has had on small businesses. 

The Bank of North Dakota is a public 

bank that has been in existence for 

more than 100 years, and it is held by 

many as the prototype of a successful 

state bank. The states of Massachusetts 

and Illinois explored starting a state 

bank in 2010, and five states very 

recently introduced public bank 

legislative initiatives. Furthermore, 

public banks have been active in many 

countries outside the United States. 

Three states that had examined the 

merits of introducing a state bank— 

Vermont (2010), Maine (2011), and 

Hawaii (2012)—are not included in 

this review. Oregon (2010) is left out 

because the initiatives are somewhat 

dated and not as consequential as the 

others. Lastly, American Samoa has a 

state/territorial bank, but the island’s 

size and unique location suggest that 

its experience will not be instructive 

for, say, the State of Illinois. 

Bank of North Dakota, 1919 

The Bank of North Dakota (BND), the 

only state bank in the United States, 

was founded in 1919. At this time, 

agriculture was the dominant sector 

in North Dakota’s economy, and 

there was concern that the farmers 

were being exploited by out-of-state 

grain dealers, farm suppliers, and 

Chicago, Minneapolis, and New 

York banks. The BND was created 

to protect the farmers from these 

exploitive practices, caused by a lack 

of competition. 

The bank’s risk is borne by the State 

of North Dakota, “doing business as” 

the BND. Should the bank become 

financially distressed, all state assets 

would be vulnerable for providing 

financial support, especially since 

the deposits are not FDIC insured. 

But the bank’s funding model is 


STATE BANKS 

2.1% 

Bank 

of North Dakota’s return on assets 

(compared to 1.6% for federally chartered 

banks and 1.3% for state-chartered banks) 

Founded in 1919, BND is the only state bank 

in the country. The original headquarters in 

downtown Bismarck, above, was torn down 

and replaced by a new building in 2008. 

one of the reasons for its success: the 

BND is the depository for all state tax 

collections and fees. “And I would bet 

that that would be one of the most 

difficult things to wrestle away from 

the private sector—those opportunities 

to bid on public funds,” said former 

president and chief executive officer 

Eric Hardmeyer. In light of this, along 

with the concern that it would compete 

with private banks, the BND has 

maintained only one office (in the 

City of Bismarck). It also now has 

satellite lending offices in three 

North Dakota cities. 

The other key element of success 

is the bank’s lending policy, which 

has changed focus over time: farms 

and municipalities (in the 1930s), 

managing state investments and 

servicing local banks (in the 1940s 

and ’50s), and economic development 

and commercial loans (beginning in 

the 1960s). Again, Hardmeyer says: 

“But that’s only one portion of it. We 

take those funds and then, really, 

what separates us is that we plow 

those deposits back into the State of 

North Dakota in the form of loans. We 

invest back into the state in economic 

development-type activities. We have 

specifically designed programs to spur 

certain elements of the economy.” 

The BND does not originate most loans 

(except for student loans). Instead, 

it frequently partners with North 

Dakota banks, serving as a “bankers’ 

bank.” Its major role seems to be 

more as a supplier of capital rather 

than a lead lender, finding lending 

opportunities based on its knowledge 

of local conditions. It supports local 

banks with participation loans and 

access to the federal funds market 

and the discount window. The BND 

lends to borrowers viewed as key to 

spurring economic growth, a strategy 

akin to an industrial policy in which a 

government agency attempts to pick 

winners—which is difficult to sustain 

on an ongoing basis. For example, in 

2009, the BND favored investments 

in the energy sector. Over the past 

two decades this has been difficult 

to sustain, as the price of crude oil 

peaked in May 2008; in January 2020, 

it had fallen by more than 60 percent. 

Still, BND’s profitability has been 

notably robust for many years. Based 

on its total assets, the bank is about 

PHOTO: TWITTER.COM/BANKOFND 

26

the 200th largest bank in the United 

States. The return on assets is 2.1 

percent, substantially higher than the 

1.6 percent for federally chartered banks 

and 1.3 percent for state-chartered 

banks. Similar differences exist for the 

return on equity. 

Let’s explore two possible reasons for 

this impressive performance: the low 

cost of funds, or lending acuity. The 

first explanation is a prime suspect, 

as virtually all state funds must be 

deposited with the BND—but this 

conjecture doesn’t bear up under 

scrutiny. The bank’s interest expenses 

as a percentage of total liabilities are 

relatively higher than that of other 

banks. This is surprising, since 12 

percent of the BND’s deposits do not 

earn interest—although this effect may 

be counterbalanced by the absence 

of FDIC insurance and an added risk 

premium embedded in BND deposit 

rates. Moreover, the BND relies relatively 

less on deposits than commercial banks 

do. Low funding costs do not appear to be 

the reason for BND’s high profitability. 

The second reason for the favorable 

outcome relative to other banks may be 

prudent lending. An examination of the 

asset side of the balance sheets shows 

that the BND does not extend more 

loans than other banks. It is striking, 

however, that the funds set aside for 

loan losses are much larger for the BND. 

This may imply an aggressive approach 

to lending and the holding of a highrisk 

portfolio of loans. Consequently, 

the higher profits, net of expected loan 

losses, compensate for extra risk-taking. 

This interpretation, however, would be 

contrary to the conservative approach to 

banking mentioned in BND documents. 

An alternative interpretation is that the 

relatively high loan loss provision is 

consistent with the BND’s conservative 

banking policies. However, this 

perspective would not explain its high 

profitability, instead implying that 

profitability should be relatively low. 

What separates us is that we ... invest back into 

the state in economic development-type activities. 

We have specifically designed programs to 

spur certain elements of the economy.” 

ERIC HARDMEYER | FORMER PRESIDENT OF THE BANK OF NORTH DAKOTA 

A third possibility is that funds 

are set aside to cover expected 

losses in energy-sector loans. This 

interpretation is consistent with loan 

losses provisions becoming greater 

for the BND relative to commercial 

banks beginning in 2015. The BND was 

setting aside fewer resources for loan 

losses before that. 

The BND also holds very little cash— 

two percent of total assets—compared 

to five percent for national banks 

and 6.2 percent to 16.5 percent for 

state banks. The BND is a very large 

net purchaser of federal funds; 

these purchases are netted against 

the reported cash/assets ratio. In 

contrast, national banks are net 

buyers of federal funds. The difference 

seems to be traceable to the BND’s 

role as a “bankers’ bank” for North 

Dakota. According to its founding 

charter, the BND shall be “helpful to 

and to assist in the development of 

state and national banks and other 

financial institutions and public 

corporations within the state...” 

(Additional services provided to North 

Dakota banks include check clearing, 

liquidity management, and bond 

accounting safekeeping.) There isn’t 

enough information in the BND annual 

report to assess the profitability for 

the BND in its role as an intermediary 

between North Dakota banks and the 

federal funds market, but it may be 

an important channel explaining the 

BND’s enviably high profitability and 

in need of further investigation. 

Massachusetts, 2010 

Legislation enacted in 2010 

“... authorized a commission to study 

the feasibility of establishing a bank 

owned by the Commonwealth or 

by a public authority constituted 

by the Commonwealth.” The 

legislative commission’s report 

listed four potential benefits of 

a Massachusetts state bank: 1) 

stabilizing the state’s economy, 2) 

providing local businesses improved 

access to credit, 3) augmenting the 

lending capacity of community 

banks, and 4) helping fund state 

government through profits. 

The report also confirmed that the 

Bank of North Dakota helped support 

the lending capacity of community 

banks in the state. But it found that 

data did not support the other stated 

benefits: “The commission finds no 

compelling rationale, at this time, 

to establish a state-owned bank in 

Massachusetts.” 

Regarding placing state funds in a 

state bank, the commission expressed 

concern about the amount of equity 

capital needed to start the bank and 

the financial capacity of a bank to 

service the state’s transactions needs, 

especially concerning negative 

intra-day balances. The commission 

confirmed that small businesses 

faced difficulties obtaining credit, 

but it believed that those needs would 

be better serviced by other state and 

quasi-state agencies. 


STATE BANKS 

Illinois, 2010 

The State of Illinois explored the idea 

of establishing a state bank in 2010, 

contacting the University of Illinois 

Institute of Government and Public 

Affairs (IGPA) about the prospects. 

IGPA was not encouraging for several 

reasons: 

P 

P 

P 

P 

North Dakota is a thinly banked state 

where a state bank might add value. 

Illinois, on the other hand, has a 

broad and deep financial network. 

In many instances, small businesses 

had difficulty in obtaining credit, 

but those problems were linked to 

high levels of risk. There was no 

obvious market failure regarding 

small business lending. 

A state bank would likely compete 

with community banks, which 

would be expected to resist 

vigorously. 

The bank might be used for the 

political or personal advantage of 

public officials. 

Recent U.S. State Initiatives, 

2019 and 2021 

California. There is a great deal of 

recent interest by state legislatures 

in starting a public bank either at the 

state or municipal level. (The Public 

Banking Institute maintains a website 

with a wealth of current information. 

Visit publicbankinginstitute.org.) 

The State of California enacted 

legislation that repealed the state’s 

prior prohibitions on municipalities 

and counties from opening a public 

bank and from depositing their funds 

in such an institution. 

Public credit is not defined in the 

legislation, but it would seem to refer 

to the funds held by state agencies. 

According to Assembly Bill 857, 

October 2, 2019, the public bank is 

intended to undertake an aggressive 

lending program that helps local 

economies and communities, 

complementing those undertaken by 

credit unions and local community 

banks. Before submitting an 

application for a public bank, a 

study must be conducted to detail 

start-up costs, the required amount 

of initial capital, “a downside 

scenario that considers the effect 

of an economic recession on the 

financial results of the proposed 

public bank,” and “how the 

proposed governance structure 

of the public bank would protect 

the bank from unlawful insider 

transactions and apparent conflicts 

of interest.” The public banks 

authorized by this legislation are 

to be owned by municipalities and 

counties, not the State of California. 

New Mexico. Legislation was 

introduced in the State of New 

Mexico in February 2021 to create 

the Public Bank of New Mexico, 

which would receive a permanent 

Nine coastal cities and counties in 

California, including the City of Monterey 

pictured above, have approved 

resolutions to participate in a viability 

study for creating a regional Central 

Coast Public Bank under California’s 

Public Banking Act AB 857. 

deposit of $50 million from the 

state treasurer. These funds are not 

to be withdrawn and are, therefore, 

effectively equity capital. The 

state investment officer would 

also deposit $50 million from the 

severance tax permanent fund. 

The public bank would engage 

in normal bank lending, with 

an emphasis on supporting the 

economic development of small 

businesses—presumably ones that 

have had difficulty obtaining credit 

from private banks. This lending 

is meant to complement existing 

28

lending programs, not necessarily to 

pursue new credit initiatives. This 

entity would be distinct from the State 

of New Mexico, so the state wouldn’t 

be responsible for the bank’s financial 

liabilities. This separation could raise 

the cost of borrowed funds. 

The Public Bank Feasibility Study 

was undertaken by the City of Santa 

Fe in 2016. Some weaknesses in city 

financial management were addressed 

by changes in the Santa Fe Treasury 

Office, and because of this study, the 

city has a framework for establishing 

a municipal bank, but it hasn’t moved 

forward with it. 

New York. The State of New York has 

three bills pending in its legislature 

pertaining to the creation of a state 

bank, all very similar. (Here we focus 

on the text of A3309.) The mission 

statement and legislative intent are 

similar to those from other states 

in this article. New York explicitly 

acknowledges the potential of using 

“the state’s depository assets to 

generate additional benefit for the 

people and the economy of the state,” 

according to the bill, and expresses 

concern about “institutional safety 

and soundness” and the need for 

“insulation from political influence.” 

The public bank would invest in 

infrastructure; lend to students, 

businesses, communities, and lowincome 

areas; and partner with extant 

institutions. It would be funded by 

state deposits, and the default risk 

would be borne by the state. 

Washington. The State of Washington 

has a Senate bill pending. The bill cites 

market failure by private banks in 

meeting the financing needs of local 

and tribal governments and says the 

public bank/cooperative is intended 

to assist underserved communities, 

especially with regard to housing. 

The legislation is specific about the 

benefit of using state/local/tribal 

funds and is sensitive to the potential 

risks from a bank on state finances. 

Like New Mexico, the Washington 

state bank would be a government 

instrumentality. The bill explicitly 

creates substantial distance between 

the liabilities of the bank and state 

resources. Bonds couldn’t be issued in 

the name of the state of Washington, 

but the initial equity capital would 

come from a state appropriation, so the 

state will bear some distress risk. 

The city of Seattle commissioned 

a municipal bank study in 2018, 

but it was generally unfavorable to 

moving forward, especially given the 

complexity of the start-up process. 

ShoreBank, Chicago, Illinois 

Founded in 1973, ShoreBank was a 

mission-driven community bank that 

had a major positive impact in the area 

it served. Its mission was to invest in 

and revitalize inner-city communities. 

It focused its lending in the South 

Shore community in the southeastern 

part of Chicago. The area was in 

transition from predominantly White 

to predominantly Black residents 

and, while income was declining, 

the community was not in a perilous 

condition. Despite its social mission 

and thus occasional extension of credit 

to high-risk borrowers, ShoreBank was 

successful and apparently earned a 

rate of return on its assets comparable 

to similar financial institutions. 

This profitability was due in part to 

depositors attracted to its mission 

and, in part, to its superior knowledge 

of the community. 

ShoreBank was in business for 35 

years and had grown substantially, 

having assets of $2.6 billion prior to 

liquidation. There were two reasons 

for its financial distress. The bank 

had expanded from its original area 

to undertake similar mission-driven 

community banking in Chicago’s 

west side; rural Arkansas; the cities 

of Cleveland and Detroit; the Upper 

Peninsula of Michigan; the Pacific 

Northwest; and with affiliates in 

30 countries. The bank expanded 

beyond its competency. The 2008 

Great Recession was a second 

contributing factor. As with most 

recessions, communities of color 

were more adversely affected, which 

had a severely negative effect on 

ShoreBank’s cash flow. Its application 

for support from the federal Troubled 

Asset Relief Program was denied, and 

it was liquidated by the FDIC in 2010. 

ShoreBank’s expansion to the Pacific 

Northwest and other areas contributed 

to it’s financial distress and ultimately 

led to its liquidation in 2010. In this photo 

from 2006, Dave Williams, president of 

ShoreBank Pacific and Bonnie Anderson, 

vice president for real estate stand 

outside a development that ShoreBank 

Pacific helped fund in Portland, Oregon. 


STATE BANKS 

LESSONS LEARNED 

Six issues discussed here appear particularly germane to the 

issue of starting a state bank: 

1 

2 

3 

4 

5 

6 

DEPOSITS held by the state treasurer are an attractive 

source of funds, but not all state funds would be eligible 

for transfer to a state bank because of laws dictating 

how government funds can be invested. 

ECONOMIC DEVELOPMENT is a key motivating factor 

for starting a state bank. It takes the form of assistance 

to small businesses, students, and underserved 

communities, promoting infrastructure investments, 

or targeting critical sectors that will lead to sustained 

growth. 

RISK is inherent with any bank, and financial distress 

characterizes many state banking experiences. The 

legislation introduced in the State of Washington 

explicitly recognizes and emphasizes the inherent risks 

with a state bank and attempts to insulate taxpayers 

from the negative effects of a financially distressed 

state bank. Risk is impossible to avoid. Even in the 

Washington case, the initial equity capital injection by 

the state would be vulnerable and could lose value if the 

state bank becomes financially distressed. 

EQUITY is one way to attenuate (but not eliminate) 

distress risk by providing a permanent source of funds, 

but the equity required to start a bank might strain 

state finances. In 1919, the BND’s startup capital was 

$2 million. This figure corresponds to $364 million 

in 2020. For the State of Illinois, for example—since 

Illinois had a 2019 population that was 16.6 times larger 

than that of North Dakota—the comparable figure for 

an Illinois State Bank is $6 billion, which is 14 percent 

of Illinois’ 2022 proposed budget. 

MISSION CREEP AND POLITICAL INFLUENCE are 

ongoing concerns. The history of Chicago’s ShoreBank 

highlights how risk-bearing and mission creep can 

impede a state bank from fulfilling its original goals 

and can lead to financial distress. By contrast, the BND 

has an impressive record in this regard. Even though 

its board of directors comprises three state politicians 

(governor, agriculture commissioner, and attorney 

general), the BND has largely stayed on mission over its 

100+ year history. 

PRIVATE BANK COMPETITION is a potential concern. 

It can be attenuated by forming partnerships, focusing 

on underserved market gaps, and providing liquidity 

and other banking services (to small banks). 

Economic development 

is a key motivating factor 

for starting a state bank. 

30

PROS AND CONS 

THE CASE FOR A STATE BANK. There are 

several reasons why creating a state bank might 

improve economic performance. A state bank 

would be well positioned to understand the pool 

of potential borrowers and therefore enjoy a lower default rate 

than private banks. The availability of state deposits provides 

a substantial and low-cost source of funds. Both factors would 

lower the cost of loans. 

The resulting surplus could then be employed to support 

projects that would have a major beneficial impact on the 

community. A state bank would be positioned to undertake 

investments to start addressing the historic legacy of 

racism that creates large gaps in income and wealth in some 

underserved communities. The social return to these and 

other meritorious projects exceeds their private market return. 

A state bank like the BND could provide liquidity and other 

banking services to smaller banks. It could also reduce credit 

risk by pooling loans from different small banks. Small business 

underfunding is an ongoing concern. 

Creating a state bank would expand the competitive landscape. 

Households and firms seeking loans would have more banks to 

choose from, and the ability to access alternatives is important 

in securing a low-cost loan. The Bank of North Dakota presents 

an impressive model of how a state bank can work to the benefit 

of the citizens of its state. 

THE CASE AGAINST A STATE BANK. There is 

no obvious market failure on the part of private 

banks in allocating credit and extending loans. 

Whether a state bank has superior information 

that will allow it to enjoy a lower default rate remains 

unproven. Existing studies showing a lower default rate for 

mission-driven banks may not control for the less risky pool of 

borrowers that work with community banks. 

There are many meritorious projects that deserve support, but 

the advantage of pursuing these policy goals via a state bank, 

rather than direct legislation, has not been established. 

While state deposits would create a low-cost source of funds, 

they come with a hidden cost: the value of the services that were 

being provided by private banks. These costs must be quantified 

and considered in an overall evaluation of a state bank. 

The lending market, especially with the advent of electronic 

banking, is sufficiently developed that an additional bank will 

have minimal impact on the competitive environment. 

The political history of some states raises serious concerns 

about any activities where politicians might influence lending 

decisions in ways that aren’t related to economic criteria. 


STATE BANKS 

Moreover, a state bank would 

be tempted to direct funds to 

sectors or projects deemed to be 

critical for growth, effectively 

trying to pick winners and losers. 

Such industrial policies have 

had a mixed record of success. 

While state deposits 

would create a lowcost 

source of funds, 

they come with a 

hidden cost: the value 

of the services that 

were being provided 

by private banks. 

FINAL QUESTIONS 

Mission creep is a force that affects 

many institutions in the public and 

nonprofit sectors; the history of the 

Chicago ShoreBank is a worrisome 

example. 

While the sustained profitability 

of the Bank of North Dakota is 

impressive, the general applicability 

of this model is limited because the 

financial sector in many states is welldeveloped, 

and the state’s population 

of 762,000 residents is quite small, 

only seven percent larger than that 

of a typical congressional district. 

Are state banks a useful economic 

development tool with future promise? 

The issues affecting the advisability of 

creating a state bank seem to hinge on 

four questions. 

WHAT ARE THE TRUE COSTS OF 

STATE DEPOSITS? 

A crucial factor favoring the creation 

of a state bank is the transfer of the 

state deposits from private banks. 

These deposits are a sizeable and 

stable source of funds, and they 

are arguably the backbone of the 

success of the Bank of North Dakota. 

The pool of funds available in, for 

example, Illinois is extensive: 

$7.4 billion as of December 31, 2020. 

These funds are in the Illinois 

Public Treasurers’ Investment 

Pool, which the 2020 Illinois State 

Treasurer’s report describes as: “...a 

local government investment pool 

operated by the treasurer for state 

and local government agencies. This 

program provides a critical service 

for state and local agencies, enabling 

them to pool their money and invest 

in a safe, liquid investment vehicle 

that exceeds industry benchmarks. 

Created in 1975, The Illinois Funds was 

the first local government investment 

pool established in the nation. The 

Illinois Funds is comprised of over 

1,500 participating entities, holding 

approximately 3,000 accounts with 

net assets of approximately $7 billion.” 

These assets are invested in liquid, 

short-term assets, and the fund must 

conform to SEC Rule 2a-7, which 

stipulates that the average, dollarweighted 

maturity of the portfolio be 

60 days or less. As of the end of 2020, 

the average maturity of the Illinois 

Funds was 58 days, so the return 

will be close to the return on money 

market funds. 

These deposits, however, are 

not necessarily “free money.” If 

transferred to a state bank, they 

come with three costs: 

P 

P 

The provision of financial 

transactions services for the state. 

The foregone value of nontransaction 

services received 

from private banks in which state 

funds had formerly been deposited, 

less any fees paid by the state. 

However, private discussions with 


32

EXHIBIT 1 | LEGISLATION AND LOCAL EFFORTS BY STATE 

More than half the states have 

proposed legislation in support 

of publicly-owned banks. 

THE STATE OF PUBLIC BANKING IN THE U.S. TODAY 

According to the Public Banking Institute, more than 25 initiatives 

for public banks are actively being pursued across the nation by 

progressives and conservatives. 30 of 50 states have proposed 

legislation in support of publicly-owned banks, and over 50 

organizations are promoting public banks. 

Source: Public Banking Institute, publicbankinginstitute.org 

State/Territorial Public Bank Established 

Legislation Passed, Executive Order Given 

Bill, Feasibility Study, Task Force or 

Ballot Measure Introduced 2017-20 

Pending Legislation 

Organized Public Bank Community Groups/ 

Candidates with Public Bank Platform 


STATE BANKS 

EXHIBIT 2 | FACTORS DETERMINING THE COST OF LENDING 

Factors Discussion Advantages 

Operating Costs 

Loan Defaults 

Cost of Funds 

Many private banks would be larger than a newly established 

state bank. Economies of scale and scope suggest that 

private banks have a cost advantage. 

Lending is risky business, and loan defaults are expected. 

A state bank may be better embedded into neighborhoods, 

have superior knowledge about its customers, and therefore 

may suffer fewer loan defaults. The lower the expected 

defaults, the lower the cost of making a loan. 

This advantage may be attenuated if a state bank extends 

high-risk loans in underserved communities that are 

correlated with lower incomes. 

– Private Deposits There is no obvious advantage enjoyed by one type of bank 

over the other. 

– State Deposits In the course of discharging its routine tasks, a state 

generates a large amount of core deposits. They are usually 

deposited in a private bank. State deposits channeled to a 

state bank would be an important and inexpensive source of 

funds for a state bank. 

Transferring funds from a private to state bank may have 

an opportunity cost if the state receives banking and other 

services as compensation for the deposits. This opportunity 

cost would effectively raise the cost of state deposits at a 

state bank. However, private discussions with five financial 

officers in public institutions, private banks, and private 

businesses did not uncover any substantial benefits flowing 

from bank deposits. 

– Borrowed Funds Borrowings from investors in the form of certificates of 

deposit (CDs) or other financial instruments, or from other 

banks, would likely be backed either implicitly or explicitly by 

the full faith and credit of the state. Due to the fiscal stresses 

that exist in many states, the interest cost of CDs and other 

bonds would likely be higher than those for private banks. 

Independent of the risk premium due to fiscal stress, private 

banks, due to their large size, would also have access to 

borrowed funds at a relatively lower interest rate. 

– Equity It is frequently alleged that the amount of equity capital 

carried by private banks is a burdensome cost that a state 

bank can largely avoid, and there’s an element of validity 

to this concern. But the conclusion that private banks are 

disadvantaged does not bear up under closer scrutiny. 

Private 

State 

None 

State 

Private 

None 

Of the three main banking functions, allocating credit is the primary one in which 

a state bank might have a unique and constructive role to play. A state bank might 

be able to allocate credit at a lower cost than private lending to the existing pool of 

actual and potential borrowers. Profits from these projects would then be available 

to fund meritorious projects that can’t be supported by private lending. Absent a cost 

advantage for a state bank, extending credit to underserved communities or projects 

with a high social but low market return via cross-subsidization is not sustainable. 

The three factors that determine loan costs are operating costs, loan defaults, 

and the cost of funds, the latter further divided among private deposits, state 

deposits, borrowed funds, and equity (see Exhibit 1). The relative costs for private 

and state banks are discussed in column 2 and summarized in column 3. 

Our analysis suggests that a private bank may have cost advantages due to 

lower operating costs and a low cost of borrowed funds. State banks may benefit 

from lower default rates and greater access to state deposits, both of which lower 

its cost of making loans. 

P 

five financial officers in public 

institutions, private banks, and 

private businesses did not uncover 

any substantial benefits flowing 

from bank deposits. 

The destabilizing effects of 

withdrawing state deposits from 

private banks, especially smaller 

institutions with limited access to 

alternative sources of finance. 

Quantifying these three costs is 

important to confirm that state 

deposits are truly cheap money. 

When a full evaluation is completed, 

it is likely to show that there will be 

a substantial net benefit to the state 

bank from state deposits. With lower 

costs in extending loans, a state 

bank will be able to pursue social 

lending on a sustainable basis. 

HOW VULNERABLE ARE 

TAXPAYERS TO STATE BANK RISK? 

State banking is risky business; 

failure is frequent, and risk is 

omnipresent. The state faces three 

sources of risk: 

P 

P 

P 

Liability risk. To attenuate 

liability risk, the state might 

commit its resources to guarantee 

the state bank’s liabilities. 

This guarantee will lower funding 

costs, but the benefit must be 

balanced against the increased 

risk that the state and its taxpayers 

would now bear. 

Equity risk. Since the state bank 

is intended to be owned by the 

state, the initial equity capital 

must be provided by the state. To be 

comparable to the BND, an Illinois 

State Bank would need $6 billion 

of equity capital. This substantial 

sum is at risk, though the risk is 

capped by the value of the initial 

investment. 

Legal risk. The state bank faces 

legal risk if it is legally connected 

to the state, especially if it 

operates under the “doing 

business as” structure. 

The costs associated with these risks 

need to be evaluated and quantified. 

34

WHY WOULD A STATE BANK HAVE 

BETTER SUCCESS IN SUPPORTING 

UNDERSERVED COMMUNITIES? 

Perhaps the key motivation for a state 

bank is that it would be able to help 

underserved communities, especially 

in providing loans and credit. Offering 

such assistance has been an ongoing 

policy goal for at least five decades. 

In 1964, President Johnson initiated 

actions in his War on Poverty and in 

the Economic Opportunity Act. The 

latter created work-training programs 

(including the Job Corps) and 

urban and rural community action 

programs. This same set of policy 

concerns has faced the Community 

Development Financial Institutions 

Fund (created in 1994), numerous 

enterprise zones, and many other 

federal, state, and local government 

policy initiatives. Unfortunately, 

geographically targeted or place-based 

programs “often fail to benefit the 

places and people they are intended to 

aid” because they are poorly targeted 

and poorly tailored to community 

needs. Will a state bank be more 

successful in overcoming past 

obstacles, supporting underserved 

communities, and pursuing other 

meritorious policy goals? 

HOW CAN A STATE BANK BE 

INSULATED FROM POLITICAL 

INTERFERENCE? 

There is a substantial concern 

about the politicization of credit and 

“mission drift.” Political interference 

in public banks is widespread across 

the globe and leads to less growth and 

less development of the financial 

sector. In their chapter on “The 

challenge of keeping public banks on 

mission,” author Christoph Scherrer 

is somewhat pessimistic: “Placing the 

mission drift in this larger framework 

precludes any easy panacea for 

keeping public banks to their public 

purpose.” A bank-commissioned 

history of the BND notes that “The 

Bank of North Dakota is a financial 

institution, of course, but it is also a 

political institution.” Nonetheless, 

following are two possible approaches, 

one conventional and one radical. 

The conventional approach is to follow 

the lead of the Bank of North Dakota. As 

Hardmeyer said in an interview with 

American Banker: “If you are going to 

have a state-owned bank, you have to 

staff it with bankers. If you staff it with 

economic developers, you are going to 

have a very short-lived, very expensive 

experiment. Economic developers 

have never seen a deal they didn’t like. 

We deal with that every day.” It is still 

unclear how the politicians have been 

kept at bay in North Dakota. 

The more radical approach appeals 

to naked economic interests. A state 

bank is under consideration because 

there is the possibility that it will 

generate surplus funds that can be 

employed to address social issues 

outside the scope of private markets. 

The radical idea is to have several 

state stakeholders with a financial 

interest in maximizing the size of 

this surplus. Consider the possibility 

of creating a consortium of six 

independently created state banks for 

the Upper Midwest states—Minnesota, 

Wisconsin, Illinois, Indiana, Michigan, 

and Ohio—that would undertake 

lending activity in the following 

manner: 

1 Each state forms a state bank with 

the primary purpose of allocating 

capital via lending. 

2 The state banks are funded by 

state deposits and state-provided 

equity capital. Each state is 

assigned a share determined by its 

contribution of deposits and equity. 

3 At the end of each fiscal year, 

the profits of all six state banks 

are aggregated and distributed 

according to shares. In a given state, 

these surplus funds will be further 

divided between an additional 

contribution of X percent to 

equity (for example, retained 

earnings or accumulated surplus) 

and Y percent to a special social 

account that is segregated from 

the deposits and equity provided 

by each state. (n.b.., X percent plus 

Y percent sum to one, they are the 

same for all six state banks in a 

given year and can be changed in 

subsequent years.) 

4 Based on its contributed deposits, 

equity, and accumulated surplus, 

each state bank proposes lending 

decisions, but the loans must be 

approved by at least four of the six 

state banks. 

5 Each state bank can invest the 

special social account funds as 

they wish, perhaps in projects 

with a high social return but a 

low private return that would not 

meet the market test. The size of 

the special social account can be 

adjusted by altering Y percent in 

subsequent years. 

This approval process would 

provide financial incentives 

for states to reject substandard, 

politicalized projects because they 

result in a lower aggregate surplus 

and therefore lower shares to all 

states. Moreover, these questionable 

projects do not provide, to any 

important degree, political or other 

non-pecuniary benefits to those 

outside the state. The proposed 

approach may not deter corruption 

and mission creep fully. But some 

mechanism is needed if a state bank 

is to be sustainable and largely 

unaffected by political pressures, 

and hence a useful economic 

development tool with future 

promise. 

Robert Chirinko is a professor in the Department of Finance at University of 

Illinois at Chicago and a member of the Government Finance Research Center 

Faculty Advisory Panel. 

Read the full report at gfoa.org/state_banks 


FINANCIAL TRANSPARENCY 

Financial 

Transparency 

in an Age of Too Much Data 

In these two articles, authors Debbie Chiu and Ron Galperin 

look at what their governments are doing to address different 

areas of transparency. First, we’ll talk about engaging the 

public and educating them through financial transparency, 

including telling the story behind the numbers. Another part 

of the picture is data visualization—that is, finding ways to 

distill large data sets to help the public better understand a 

government’s finances. 

DEBBIE CHIU 

Former Budget Operations Manager 

for the City of Kansas City, Missouri 

RON GALPERIN 

Controller for the City of 

Los Angeles, California 

36

Kansas City Uses Data to Tell Its 

Budget Story and Engage Residents 

BY DEBBIE CHIU 

With a metro area 

of 2.1 million people, 

Kansas City spans 

319 square miles in 

four counties. 

Kansas City, Missouri, uses 

online transparency tools to 

educate the public about the 

city’s financial information 

and to get them involved in spending 

decisions. Using resident engagement 

initiatives, the Office of Management 

and Budget (OMB) links budget data, 

performance data, and storytelling to 

explain what’s behind these numbers. 

To tell the city’s story, OMB had a lot 

of dots to connect. Phase one of this 

journey started with long-term trend 

analysis of the city’s annual financial 

report and an internal departmental 

strategic planning process focusing on 

structural change management. But 

these processes weren’t connected; 

separate pieces from different 

departments and divisions were 

combined into the citywide business 

plan to “connect the dots.” The city 

went from having parallel but distinct 

processes to interlocking all these 

components into one cohesive, 

streamlined plan. 

BUDGET CYCLE. The budget’s cycle of 

life starts with the priorities laid out by 

the city council. The cycle is a whole 

year, starting May 1, the beginning 

of the city’s fiscal year. OMB starts 

off with a trends analysis, tying the 

council priorities with the citywide 

business plan, which is submitted to 

the mayor and council in early fall. 

That’s when OMB starts involving 

residents to give feedback—one of 

two opportunities they have to give 

feedback on the business plan. When 

the council adopts the business plan, 

by November 1, OMB starts the work 

that leads to the submitted budget, 

which is essentially a one-year 

snapshot of OMB’s business plan. 

At that point, residents are involved 

again through public budget hearings, 

where OMB receives feedback that it 

presents to the council. The final step, 

then, is when the council adopts the 

final budget. 

BUSINESS PLAN. The citywide 

business plan has three major 

components: the city strategic 

plan, which highlights the mission, 

vision, values, goals, objectives, and 

strategies; a financial strategic plan, 

which contains financial objectives; 

and a five-year planning model, 

which provides both the baseline 

and balanced scenarios needed to 

evaluate the city’s financial and 

operational alternatives through the 

planning and budget process. The 

business plan is a four-year strategic 

plan, essentially mimicking the 

council terms. 

PUBLIC EDUCATION. OMB educates 

the public via transparency 

initiatives and linkages to 

performance. The city has Twitter 

and Facebook accounts that it uses to 

engage residents, and these accounts 

become very active during budget 

season with live tweets and posts 

from events such as public budget 

hearings. OMB also likes to post a 

budget fact of the day, highlighting 

different departments’ programs 

and funding throughout the year. 

The city also has a portal called 

Open Data KC, where information 

and data—essentially a snapshot 


Things to Know about 

Kansas City, Missouri 

Kansas City, Missouri, has a 

population of a little less than 

500,000 and a metro area of 2.1 

million people. The city covers 

319 square miles in four counties. 

Kansas City has 20 departments 

with more than 300 programs 

with 7,100 full-time-equivalent 

employees. It is the only municipality 

in the nation that doesn’t have local 

control of its police department. 

The city council has 13 members, 

including the mayor. The city is 

divided into six council districts that 

are revised according to population 

at least every five years. The mayor 

and six city council members are 

elected at large, and the other six 

members are elected from within 

the districts they serve. 

Kansas City is known as a City 

of Fountains because it has 200 

fountains, second in the world after 

Rome. The city’s football team was 

the 2019 Super Bowl champion—go 

Chiefs! Another claim to fame: Two 

seasons of the reality show “Queer 

Eye,” along with its predecessor, 

“Queer Eye for the Straight Guy,” 

which ran from 2003 to 2007, were 

filmed in Kansas City. 

of budget-related files—can be 

downloaded by anyone who is 

interested. This includes, for example, 

311, performance data, and the city’s 

monthly auction that lists towed 

vehicles that will be auctioned. All 

the reports that OMB presents to the 

mayor, the council, and the public are 

archived here. Quarterly analysis, 

budget documents, and the city’s 

business plan are all made available 

for anybody who is interested in 

reading more about it (see Exhibit 1). 

The Tools 

OPEN BUDGET. Open Budget is an 

interactive tool that OMB uses to 

present the city’s budget in a visual 

and interactive way. It allows users 

to create and share customized links, 

and to download budget data. Exhibit 

2 shows the submitted budget and 

the adopted budget, as well as the 

actual budget from the previous year. 

The city’s departments, mayor, city 

manager, and residents can see how 

much was originally submitted for 

the budget, how much was approved, 

and how much was spent. 

REPORTING. The Office of 

Management and Budget and the 

Office of Performance Management, 

known as DataKC, present the 

business plan and reports on how 

the city is doing—if it is meeting its 

marks—and continually update the 

city’s performance dashboards (see 

Exhibit 3). 

NEXTDOOR. Nextdoor is a social 

networking site for neighborhoods. 

The city communications office and 

other departments use it to market 

and promote city events or release 

news because not everyone is on 

Facebook or Twitter. The idea is to use 

several platforms to reach as many 

residents as possible. 

CITY WEBSITE. Submitted and budget 

documents, anything related to the 

business plan and quarterly analysis, 

and other reports provided to the 

mayor and council are posted on the 

city’s website (kcmo.gov/budget). 

The site also provides a link to Open 

Budget, Balancing Act, and capital 

improvement programs. 

Engaging Residents 

STORYTELLING. The city’s visitor 

engagement efforts center on the idea 

of storytelling with budget data. This 

is one of many avenues the city uses to 

present financial data to the masses. 

RESIDENT WORK SESSIONS. Rather 

than the traditional annual budget 

public hearings that are held in the 

spring, OMB conducts resident work 

sessions in the late summer and early 

fall to present the citywide business 

plan to the public. This provides 

opportunities for participants to 

discuss the city’s proposed goals and 

objectives, to set long-term budget 

priorities, and to send direct messages 

to the city council. They also get to 

interact directly with staff and elected 

officials. 

Because Kansas City covers 319 

square miles, OMB divides the city 

into north, central, and south sections 

and locates meetings in all three areas 

to make sure there will be locations 

that meet everyone’s needs. Meetings 

are also convened in the evening, on 

a weekday, and on weekends to give 

residents as many opportunities as 

possible to participate. 

FOCUS GROUPS. OMB holds focus 

groups where it asks questions in a 

group setting to help engage residents 

and get feedback about how they would 

like the city to progress in the future. 

Sample questions include: What 

should be the city’s major priorities 

during the next three to five years? 

What, if anything, should the city do 

better or differently? What are your 

dreams or visions for the next five to 

10 years? (See Exhibit 4.) 

One of these sessions was focused 

on ranking seven of the city’s goals. 

(See Exhibit 5.) The customer service 

and communication departments 

simplified the language, making it 

easier for residents to understand 

38


EXHIBIT 1 | KANSAS CITY’S BUSINESS PLAN 

EXHIBIT 4 | QUESTIONS ASKED IN RESIDENT WORK 

SESSIONS 

This question focuses on all of the city’s goals. 

Which issue is a higher priority for you? 

City goal: Customer service and communication 

The business plan can be found at kcmo.gov under the 

Office of Management and Budget. 

EXHIBIT 2 | OPEN BUDGET 

To create an internal culture that focuses on the 

customer across all services provided by the 

city, supports essential internal and external 

communication, and fosters public engagement. 

Better and more consistent communication 

with staff and public 

Expanded resident engagement throughout 

the city 

Increased transparency 

Better internal and external customer service 

EXHIBIT 5 | SCORING PRIORITIES—THE CITY’S PUBLIC 

SAFETY GOAL 

Each person scores the following goals from 

1 to 5, based on their own priorities. 

EXHIBIT 3 | KC DASHBOARDS 

Public Safety 

Reduced crime, particularly in young offenders 

Improved patient outcomes in the emergency 

response delivery system 

Improved diversity, succession planning, and 

retention in KCPD and KCFD 

More effective and efficient municipal court to 

better serve the community 

Decreased animal-related threats and increased 

animal welfare 


City Goals 

Trend 

Analysis 

Department 

Strategic 

Objectives 

Adopted 

Budget 

CITYWIDE 

BUSINESS PLAN AND 

BUDGET PROCESS 

Submitted 

Citywide 

Plan 

Strategic Priorities 

The city council sets the overall 

policy for the city by adopting 

resolutions and ordinances, making 

appropriations and approving 

budgets for all departments, and 

conducting public hearings on 

city affairs. After an ordinance 

or resolution is passed or the 

budget is adopted, the city council 

continues to monitor the results 

of its actions through studies, 

surveys, and hearings. 

The city council’s six main strategic 

priorities are: neighborhood 

livability, healthy communities, 

governance, public infrastructure, 

economic development, and public 

safety. The city employs innovative 

strategies to: 

P 

P 

P 

Effectively and efficiently provide 

customer-focused services. 

Improve public safety. 

Develop sustainable, healthy 

communities where all 

prosper. We lead by inspiring, 

collaborating, measuring 

progress, and celebrating 

success. 

Submitted 

Budget 

the strategies for each objective. In 

this exercise, individuals choose the 

higher-priority strategy within the 

objective, which then allows the city to 

see what’s important to residents. 

The second part of this exercise is 

more of a conversation. Each person 

presents their rankings, which leads to 

a dialogue between residents and city 

employees, the mayor, council, and 

the Office of Management and Budget. 

OMB also asks residents two important 

questions: what they love about 

Kansas City and what keeps them up at 

night. These questions hone in on the 

same topic, allowing residents to talk 

about their priorities, and they also get 

people thinking. 

More than 100 residents participated 

in these focus group discussions in fall 

2019. The questions were designed to 

assess resident priorities, determine 

if residents have seen progress on the 

plan, and suggest strategies the city 

may not have thought of that should be 

included in the plan. 

SURVEYS. OMB surveys participants 

to see how the city is doing—and 100 

percent recommended these sessions 

Adopted 

Citywide 

Plan 

to their friends and colleagues. Some 

people also come back year after year 

because they want to stay involved 

with the city and provide feedback. In 

addition, 30 percent of respondents 

said they felt more connected to the 

city government after attending these 

sessions. 

PICK YOUR PRIORITY. This activity 

allows residents to choose programs 

based on head-to head tournamentstyle 

brackets with live instant scoring. 

(See Exhibit 6.) It’s like a game show 

where residents look at the programs 

and use a clicker to vote on which is a 

top priority. 

The Office of Management and Budget 

works with the city’s 20 departments 

to identify 16 programs that residents 

can vote for. They’re given $1 million 

to allocate to programs ranging from 

street resurfacing to bike lanes to 

sidewalk repair. Residents essentially 

pit their choices against those of the 

other attendees, and their votes show 

us their top priorities. 

ONLINE BUDGET SIMULATION. The 

City uses an online budget simulation 

tool (kcmo.gov/balancingact) that 

40


EXHIBIT 6 | PICK YOUR PRIORITY TOURNAMENT-STYLE 

BRACKETS 

EXHIBIT 7 | WHERE THE MONEY GOES 

Pick Your Priority 

Street 

Resurfacing 

Youth 

Programming 

Street Tree 

Trimming 

Increase 

Brush/Leaf 

Pickup 

Elite 8 

Elite 8 

Final 4 

Final 4 

Elite 8 

Elite 8 

Warrant Sweep 

Child Health 

Specialists 

Sidewalk 

Repair 

HHW Waste 

Drop Events 

Final 

Matchup 

Tax Auditors 

Re-purpose 

Vacant Parcels 

Body Cameras 

R-O-W Mowing 

Elite 8 

Elite 8 

Final 4 

Final 4 

Elite 8 

Elite 8 

BLS 

Ambulances 

Community 

Prosecutor 

Bike Lanes 

Comprehensiv 

e Plan 

EXHIBIT 8 | THE PUBLIC SAFETY PRIORITY 

EXHIBIT 9 | A SNAPSHOT OF THE ACTIVITY RESULTS 

The Public Safety Department is made up of the Fire 

Department, the Municipal Court Department, and the Police 

Department. In this Balancing Act category, participants can 

give these departments more or less money and submit their 

budgets based on their priorities. 

residents (or anyone else) can use to 

submit their budget choices. Exhibit 7 

shows a submitted budget. Residents 

are asked if they think this is how 

the city should be spending their tax 

dollars, and if not, how they would 

change the budget. Exhibit 8 shows 

Public Safety, which is made up of 

the Fire Department, the Municipal 

Court Department, and the Police 

Department. Participants can give 

these departments more money or 

less money and submit their budgets 

based on their priorities. Exhibit 9 is 

a snapshot of the results submitted 

through the online tool identifying 

changes to various city functions. 

OMB starts off with a balanced budget, 

so to increase the funding for a program 

or department, residents must decrease 

the money allocated elsewhere. For 

example, if a resident wants to give 

more money to the Health Department, 

Public Works, and Transportation 

Authorities, which consists of bus and 

streetcar services, they must reduce 

funding for something else by the same 

amount. The room gets amazingly quiet 

during this exercise because residents, 

who usually see just a snapshot of the 

budget, had never realized how many 

programs the city has. Playing with 

the budget and looking at the programs 

opens a lot of people’s eyes. 

Behind the budget 

numbers 

What does the city do with all the data 

being collected through the public 

budget hearings (the work sessions 

and social media outlets)? Exhibit 

10 shows results from resident work 

sessions in 2018 to 2019, focusing on 

the topics of neighborhood investment 

and youth programs. Dangerous 

building remediation was a topic of 

great importance, so in response, the 

city funded a two-year, $10 million 

bond program—this is the $1.3 million 

debt service shown in Exhibit 10— 

to help with the backlog of either 



EXHIBIT 10 | RESULTS FROM WORK SESSIONS—NEIGHBORHOOD INVESTMENT 

AND YOUTH PROGRAMMING 

P $1.3 million debt service for dangerous building remediation 

P $200,000 additional for Land Bank to add sixth mowing cycle 

P Transfer of solid waste collection to Neighborhoods and Housing Services 

P Additional positions for receivership program and public engagement 

P $300,000 to Housing Court home repair program 

P $200,000 for youth programming 

EXHIBIT 12 | FY 2020 TO 2021—RESULTS FROM RESIDENT INPUT 

P $327,000 for the creation of the Office of Tenant Advocacy Program 

– 2 Tenant Advocate positions 

– Consultation, mediation resolution services, outside attorney services 

P $200,000 to restore funding to the KC Film Commission 

P $250,000 to restore funding to Children’s Mercy Hospital 

EXHIBIT 11 | RESULTS FROM WORK SESSIONS—INFRASTRUCTURE INVESTMENT 

$162.6 million in capital improvements 

P $13.7 million for street resurfacing 

P $850,000 for Bruce R. Watkins Drive 

P $3 million to Paseo Gateway to match $30 million grant 

P $2 million for Urban Youth Baseball Academy 

P $24.2 million to advance shovel-ready projects 

P More than $10 million for fleet replacement debt service 

mediating dangerous big buildings or 

tearing them down if they’re deemed 

too dangerous to remediate. The city 

also provided $200,000 in additional 

Parks and Recreation funding for youth 

programs, which is especially important 

during the summer months, when 

young people don’t have anything to do. 

These programs are a direct result of the 

city’s resident and online engagement. 

Then there’s infrastructure investment. 

(See Exhibit 11.) In Kansas City, street 

infrastructure is consistently ranked 

as a top priority. Exhibit 11 provides 

some detail about the infrastructure 

improvements the city has made 

because of the feedback from our 

resident work sessions and the citizens 

survey. 

Several projects were included in the 

2019 budget because residents spoke out 

about them. (See Exhibit 12.) The city 

created an Office of Tenant Advocacy, 

which included several new positions, 

as well as funding for consultation, 

media resolution services, and outside 

attorney services. 

After the budget was submitted in 

February 2020, some other changes 

were made because of citizen input, 

as shown in Exhibit 12. One of the 

things residents strongly supported 

was restoring funding to the KC Film 

Commission, which had been cut from 

Award-Winning Resident 

Engagement Strategies 

P 

P 

ICMA’s 2019 Program Excellence 

Award: Strategic Leadership and 

Governance for governments with 

populations of 50,000 or more for 

“Connecting the Dots: The Evolution of 

KCMO’s Strategic Planning Process” 

GFOA’s 2018 Award for Excellence in 

Government for “Engaging Residents 

in KC’s Citywide Business Plan” 

42

EXHIBIT 13 | THE CITY’S TWITTER PAGE 

the previous budget, and to talk 

about why it should receive more 

funding. As a result, the city allocated 

$200,000 toward Seasons 3 and 4 of 

the popular reality show “Queer Eye” 

to help get it filmed in Kansas City. 

OMB hosted three of these public 

budget hearings with more than 100 

people at each session. It was exciting 

to see this engagement, with people 

coming out and talking to the mayor, 

council members, and staff from city 

departments about their priorities 

and what the city should be funding. 

(See Exhibit 13.) 

Lessons learned 

Two key takeaways about 

resident engagement and financial 

transparency are to start slow and to 

think realistically. Also, make sure 

your policies and tools relate to the 

government’s strategies and planning. 

P 

Solicit direct participation with 

your elected officials. Kansas City 

P 

P 

P 

was lucky to have a former mayor 

pro tempore and finance chair who 

pushed resident engagement to 

their colleagues, and to residents, 

explaining how important it was 

for residents to give feedback on 

how the city is doing. 

Kansas City has a number of 

success stories, but they weren’t 

accomplished instantly, or at 

the same time. There were also 

projects that would have been 

great but didn’t work out. Take 

the time to determine what your 

organization really wants to do. 

Plan carefully to determine what 

tools you’ll use and how they’ll 

help with policies and planning. 

Kansas City uses its tools to 

incorporate resident feedback, 

which helps determine residents’ 

priorities, and thereby the budget. 

Experiment with different 

tools—and expect to have issues. 

For every 10 things you try out, it’s 

likely that only one will work. 

P 

P 

P 

P 

Publish relevant and curated 

information. Instead of dumping 

data, make sure the information 

you publish has an impact on the 

entire organization. 

Communicate the importance 

of transparency to all your 

stakeholders. The residents of 

Kansas City are always hungry for 

more information on our social 

media, especially Twitter. Use 

the formats you have available to 

constantly communicate, provide 

feedback, and engage residents. 

Keep your information up to 

date! This has been especially 

important during the COVID-19 

pandemic. 

Communicate results. Use 

several platforms to provide 

the information about what 

residents have said. 

Debbie Chiu is the former 

budget operations manager for 

the City of Kansas City, Missouri. 


44


Visualizing Data for Residents 

of Los Angeles BY RON GALPERIN 

The Office of the Controller 

for the City of Los Angeles, 

California manages 

vast amounts of data— 

particularly open data and financial 

data. The team’s work is based on 

three Ts: Transparency, Trust and 

Transformation, with the goal 

of making Los Angeles the most 

transparent city in the United States. 

Years ago, organizations that rank the 

transparency of governments placed 

Los Angeles at the bottom of the list. 

Today, the city is ranked at the top. 

Greater transparency, which creates 

greater accountability, can help build 

the public’s trust, which is vital to 

continuing democracy. And then, 

of course, there’s transformation. 

Thanks to technology, the daily 

activities of city departments have 

changed and are changing radically, 

increasing efficiency in operations 

and in the delivery of vital services. 

We must continue to be innovative 

and bring technology to city 

government, along with different 

ways of thinking about it. 

Exhibit 1 illustrates the role of 

open data in local government. 

There’s a variety of uses for data, 

including modernizing operations, 

building awareness, and improving 

policymaking. Data is no longer just 

about producing audits or reports for 

other decision-makers in the city; it’s 

about conveying information through 

visualizations and connecting 

communities in new ways. 

When I was first elected to office in 

2013, I was surprised by just how 

technologically behind we were, so 

my goal was to bring the Office of the 

Controller into the 21st century. I had 

been told by colleagues that it would 

take two years and cost millions of 

dollars to launch an open data portal, 

but the first version was completed in 

a matter of months at a fraction of the 

expected cost. ControlPanel LA, as 

we now call it, is the city’s gateway to 

raw financial data, data stories and 

maps, and dashboards (see Exhibit 2). 

It has approximately 1,000 data 

sets, charts, graphs, maps, and more, 

including filters for all city funds, 

EXHIBIT 1 | ROLE OF DATA IN LOCAL GOVERNMENT 

The City of Los Angeles is a 

four-time recipient of GFOA’s 

Popular Annual Financial 

Reporting Awards . 



and, in some cases, it tracks data in real 

time. While financial data may not always 

be exciting to the public, this site has had 

millions of page views, which shows that 

people find this information useful. 

ControlPanel LA, L.A.’s first open data website, is a gateway to raw data, 

data stories and maps and data dashboards. 

EXHIBIT 2 | CENTRALIZING INFORMATION 

FILTERING RAW DATA 

Every purchase the city makes is shown 

in its virtual checkbook, CheckbookLA 

(see Exhibit 3), which includes details 

about many of those expenditures. Users 

can search by keyword, vendor, price, 

and more. While making this information 

public is vital to an honest government, 

it also provides an opportunity for more 

companies to bid on city contracts, thereby 

increasing competition and benchmarking 

the city against other jurisdictions and 

the private sector. 

It’s important to note that the nature of 

L.A.’s audits and reports has significantly 

changed in the last few years, along with 

the number of people who are engaging 

with them and the results we get. This is 

why the treasurer’s office works to find 

different ways to present information (see 

Exhibit 4)—to “bring it to life”—so people are 

actually learning something, because we all 

know that many government reports are not 

necessarily as engaging as they could be. 

The City of Los Angeles produces an annual 

financial report and, like many others, 

it’s a lengthy 430 pages. To make that 

information more accessible and engaging, 

we’ve created an interactive version of it 

that contains more than 60 charts, graphs, 

and metrics (see Exhibit 5). Over the years, 

we’ve seen how popular it’s been with the 

public, which goes to show that visual 

elements have the power to convey data and 

information in a way that would have been 

difficult even a few years ago. (View the 

Annual Financial Report at lacontroller.org/ 

financial-reports/cafr2020/). 

EXHIBIT 3 | FILTERING RAW DATA 

EXHIBIT 4 | VISUALIZING FINANCIAL DATA 

In addition to citizen engagement, it’s 

about holding individual city departments 

accountable and making sure we know what 

our own expectations are by visualizing 

performance metrics (see Exhibit 6). For 

example, data about library visitors and 

the number of materials checked out 

gives us insight into the department’s 

operations and what improvements, if 

any, could be made. Being able to visualize 

46

Transforming Local Government 

Data + Transparency = Good Government 

this information helps residents 

understand how their city operates 

and how it meets—or doesn’t meet— 

its goals. 

REVENUE FORECASTING 

One of the things the Office of the 

Controller is required to do, according 

to the city charter, is revenue 

forecasting (see Exhibit 7). The 

treasurer’s office’s annual Revenue 

Forecast Report includes information 

gathered from city departments, 

recent regional economic reports, 

and meetings with local economists. 

The report covers revenue estimates 

for the remainder of the current fiscal 

year and also includes projections 

for the coming fiscal year. Although 

forecasts inherently involve a level of 

uncertainty—as exemplified by what 

occurred as a result of the COVID-19 

pandemic—our report offers our best 

estimates based on the available 

information and seeks to promote 

practical and responsible budgeting 

in the year ahead. In addition to a 

written report, my office illustrated 

projections in an interactive way for 

the city council, the mayor’s office, 

and the general public. 

At the beginning of March 2020, we 

had a pretty good idea of what revenues 

were going to look like, and we had 

been consistently accurate over the 

previous few years. The pandemic 

changed those numbers completely. 

We issued a revised revenue forecast 

and updated our projections with lower 

numbers, as so many of the revenue 

sources that we depend upon were 

down significantly. Major industries 

like travel and tourism, retail sales, 

and many others were hit hard. 

The city went into the pandemic with 

strong reserves and several special 

purpose funds we could borrow from, 

if necessary, going into FY 2020-2021. 

Indeed, it was necessary for us to 

borrow and/or transfer from these 

funds to maintain city operations and 

provide critical emergency services to 

Angelenos. And in response to an everchanging 

revenue outlook, the city 

passed a “placeholder budget” to be 

revised throughout the year to match 

the city’s needs and actual revenues. 

Because of our adherence to reserve 

fund policies, and assistance from the 

federal government through President 

Biden’s American Rescue Plan, we 

were able to weather the storm and 

are now pushing ahead with several 

programs and initiatives aimed at 

promoting a strong economic recovery. 

MAPPING 

I also believe in harnessing the power 

of data in a different visual way that 

people don’t usually associate with 

numbers—mapping. My office uses 

maps to explain, pose questions, 

generate ideas and give answers. 

We use mapping to contextualize 

information we have in our possession 

that we need to tell people about (see 

Exhibit 8). For example, we created 

a map of all the LGBTQ+ resources 

in the city of Los Angeles, which is a 

way to connect LGBTQ+ individuals 



who need help with services, but don’t 

know where to look or start. We also 

have a map of the noise generated by 

Los Angeles International Airport, 

tracking every plane that takes off 

and lands, and noise emissions. The 

purpose of this was to change some of 

the conversation about noise, and how 

it’s possible to accommodate nearby 

residents while also maintaining a 

vibrant airport. We’ve also mapped 

locations for free tax preparation 

services, parking tickets, oil wells, 

affordable housing projects, summer 

youth programs, and more. 

Another important map we’ve created 

is Property Panel (see Exhibit 9). The 

city of Los Angeles government is the 

largest owner of real estate in the city. 

We own approximately 7,500 parcels 

including small lots, parks, municipal 

buildings, and commercial, industrial, 

residential, and even retail parcels. 

Property Panel maps every public 

property within the City of Los Angeles, 

including those owned by the county, 

the state, the federal government, the 

Los Angeles Unified School District, 

and the Los Angeles Metropolitan 

Transportation Authority. 

This was meant to really change the 

way that the city thinks about its 

portfolio of real estate assets. We have a 

great need for community development 

and for affordable housing for those 

experiencing homelessness, and one 

of the best ways to create more of it is 

to utilize our own properties. When we 

undertook this project, the city didn’t 

even know what it owned until we 

started mapping these properties. 

This information has been a catalyst 

for a conversation about how a 

new entity can be created to better 

manage this real estate and the vast 

opportunities these properties can 

provide. And Los Angeles isn’t the only 

city with a lot of real estate assets, so 

this is something other communities 

should also consider. 

When the pandemic hit in March 

2020, the Controller’s Office wanted to 

help Angelenos—especially working 

and low-income individuals and 

families—find useful resources to 

help them get by. Our first step in 

addressing this problem was to map 

EXHIBIT 5 | ANNUAL FINANCIAL REPORT 

EXHIBIT 6 | MEASURING CITY PERFORMANCE 

EXHIBIT 7 | REVENUE FORECASTING 

EXHIBIT 8 | DATA STORIES AND MAPS 

48

EXHIBIT 9 | PROPERTY PANEL 

EXHIBIT 10 | CONNECTING RESIDENTS TO SERVICES 

all the food banks, food pantries and 

emergency food distribution centers 

in the city. We then expanded that to 

all the resources in the county, and 

then in the state of California (see 

Exhibit 10). Ultimately, we mapped 

1,800 of these resources, which we 

are keeping updated, and this is the 

number one feature on our website 

to date. 

CONCLUSION 

Finance officers often don’t dabble 

with data visualizations because 

the process seems difficult or seems 

like it requires a lot of resources 

to get done. But this isn’t the case. 

Platforms, software and tools are 

available to make the process much 

easier than you might think. In my 

office, we’ve also engaged several 

student interns—young people who 

are interested in data and technology 

and want to provide their services for 

free to improve our city—and they do 

a very good job at tackling many of 

our data projects. This is something 

you can do without spending a 

lot of money, and it’s important 

because data and transparency 

lead to a better government that 

works for everybody. By running our 

governments well and using all the 

resources we have at our disposal, 

we can make that happen. 

Greater transparency, 

which creates greater 

accountability, can 

help build the public’s 

trust, which is vital to 

continuing democracy. 

Ron Galperin is the controller for 

the city of Los Angeles, California. 


Budgeting Bias BY 

LINNEA GANDHI AND SHAYNE KAVANAGH 

Designing for the 

Decision-Making 

Environment: Who 

People Are, Not Who 

They Should Be 

People are not rational, but we often assume they are. For example, 

classical economics is based on the assumption that people are 

rational maximizers of their self-interest. Recent Nobel Prize-winning 

scientific research, however, has shown that this is not true. Rather 

than thinking through decisions rationally and comprehensively, 

people use mental shortcuts to make decisions. Much of the time, this 

is harmless and even helpful, but sometimes our shortcuts backfire. 

Behavioral scientists have cataloged a number of these shortcuts and 

when they can go wrong. When these shortcuts fail, they are called 

“cognitive biases.” These biases can have a negative effect on all 

types of decisions, including budget decisions. But if we know these 

biases, we can plan mitigations. 

©2021 STUART BRIERS C/O THEISPOT.COM 

50

BUDGETING BIAS 

The Anchoring Bias 

An example of a common bias is called anchoring. 

This means that once we are presented with a 

number, we tend to stick close to that number for 

future decisions. This can be useful. For example, if 

you know the amount your neighbor recently got for 

selling their house, that information gives you a good 

anchor for negotiating the sale of your own home (and 

not selling for too little). But anchoring can backfire 

if your anchor isn’t relevant to the decision at hand. 

(See Exhibit 1 for a demonstration of how this works.) 

Let’s think about how anchoring could apply to budget 

decisions. Perhaps the most obvious example is 

incremental budgeting, where last year’s budget is 

the basis for next year’s budget. If revenues are stable 

and the service demands from the community are 

consistent from year to year, incremental budgeting 

may be a workable short cut for doing budgeting faster 

and more easily. But if the government finds itself 

in a situation where revenues are not stable and/or 

there are new challenges that government needs to 

confront, then the “anchor” of what was spent before 

may not be so helpful. One way to help overcome this 

problem might be to break departmental spending 

down into programs, which would shift the focus from 

what was spent on that department last year to which 

programs are most important for addressing current 

challenges. This is known as priority-based budgeting. 

EXHIBIT 1 | THE PHONE NUMBER-JELLY BEAN 

ANCHORING BIAS 

Seventy-seven GFOA members participated in 

a survey that randomly assigned them to two 

groups. Half were asked to provide the first three 

digits of their phone number (which averaged to 

473) and the other half were asked to provide 

the last four digits (which averaged to 4348). 

All participants were then asked to estimate the 

number of jelly beans in the jar depicted below. 

Of course, the phone numbers that the 

respondents provided were completely irrelevant 

to the number of jelly beans, but when we 

analyzed the average guesses, the people who 

provided the smaller number for their phone 

(the three digits instead of four) all provided a 

clearly lower guess on the number of beans. 

Learn more about priority-based 

budgeting by reading GFOA’s 

“Anatomy of a Priority-Driven 

Budget Process” whitepaper 

at gfoa.org/materials/ 

priority-based-budgeting. 

Anchoring can 

backfire if your anchor 

isn’t relevant to the 

decision at hand. 

LAST 3 DIGITS 

LAST 4 DIGITS 

744 

2010 



Another example of anchoring is when benchmark 

statistics from comparable governments are used as a 

basis for making decisions about reserves, rates, and 

more. Though having a reference point can be helpful 

in some cases, benchmarks can be a hindrance if they 

are not sufficiently relevant to your own government’s 

context. In a recent GFOA webinar, Natalie Morrison, 

manager of financial planning and analysis at 

WaterOne, shared a story about how this affected her 

firm’s ability to provide affordable rates to its customers. 

“For water affordability, it is very common to 

compare your rates to your neighbors and then 

also use a benchmark percentage for the average 

bill as a percentage of median household income. 

Everyone uses either their neighbors’ rates or 

this generic threshold to determine affordability— 

which may or may not actually mean the utility is 

affordable based on the specific demographics of 

the service territory. 

As WaterOne took a closer look at how our lowestincome 

customers might be disproportionately 

burdened by their water bill, we liked to use the 

analogy that “when we are buying shoes, we 

shouldn’t be measuring our neighbor’s feet”— 

meaning that we want to make decisions based 

purely on what is best for our rate payers and 

what our publicly elected board determines to be 

affordable for our rate payers.” 

Benchmarks can be a hindrance if 

they are not sufficiently relevant to 

your own government’s context. 

Exhibit 2 contains a presentation with benchmarking 

data and a new graphic that avoids peer comparisons. If 

the objective is to provide affordable water to low-income 

households, avoiding peer comparisons seems like a clear 

improvement. The first graphic might imply that lowincome 

residents are paying too little! The new graphic 

emphasizes how little income these residents actually 

have, so anything WaterOne can do to help them save 

money could make a big difference. 

The key takeaway here is, first, to think carefully about 

the relevance of the anchors you are providing to decisionmakers. 

Whether serving as a comparative reference 

point or a standalone value, they can and will shape 

subsequent decisions. For example, if a budget needs to be 

rethought, providing historical numbers might reduce the 

amount of change people will engage in. Or a comparative 

benchmark might not be relevant to your own context. 

Second, recognize the weaknesses of incremental 

budgeting. Sometimes a shortcut is OK. Look for parts 

of the budget where shortcuts work well and use them 

there. Avoid shortcuts for parts of the budget where a 

more critical examination is required to better serve 

the community. 

©2021 JAMES STEINBERG C/O THEISPOT.COM 

52

EXHIBIT 2 | WATERONE 2021 BUDGET (REVENUE & RATES) 

Local Utility Comparison: Typical Monthly Bill Amount as a % of Median Household Income 

WaterOne 

0.6% 

Olathe 

Miami RWD2 

Gardner 

Water 7 

Spring Hill 

KCMO 

Bonner Springs 

DeSoto 

BPU 

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 

In the graph above, the typical monthly amount is compared to median household income for WaterOne. This 

provides a measurement of community affordability. In the graph below, low usage typical monthly amount is 

compared to the 20th percentile income, representing a comprehensive view of household affordability for WaterOne. 

Water Costs as a Percentage of Basic Needs* 

Housing 

Food 

Income After 

Basic Needs** 

$735 

Non-water 

essential 

expenses 

WaterOne 3.7% 

Taxes 

Healthcare 

Total Income $3,515 

* Amount was calculated based on an individual in the 20th percentile for income. 

** Please note costs related to transportation, childcare, energy, and other household needs are not included in Basic Needs calculation. 



Recency Bias 

Budgeting is also afflicted by the recency bias. This 

means that whatever is more recent is what comes to 

mind more easily, and that which comes to mind more 

easily tends to be thought of as more probable or likely 

or prevalent. For example, when formulating an annual 

budget, a current “hot topic” might be over-weighted 

versus long-term, persistent (and ultimately more 

important) challenges that the local government faces. 

One design solution might be to link strategic and longterm 

planning to the budgeting process, where decisionmakers 

are reminded of all the big issues facing the 

local government before making budget decisions. 

To mitigate recency bias, design 

a way for decision-makers to 

“zoom out” and see the big picture. 

Another example of recency bias might be when a 

citizen comes to a public meeting to complain about 

an issue they are concerned about, but that is not 

representative of broader community sentiment. That 

issue—and the citizen’s perspective on it—is then overweighted 

in the discussion. The solution here might be 

to make a habit of taking regular surveys or to use more 

representative approaches to community engagement— 

and to document the results and keep them in front of 

decision-makers. 

The commonality between the two solutions offered 

above is to design a way for decision-makers to “zoom 

out” and see the big picture, and not put too much 

emphasis on the most recent information they’ve been 

exposed to. 


54

Assume people will make mistakes 

Finally, designing the decision-making environment 

is not only about mental shortcuts gone awry. 

Sometimes people just make mistakes in their 

budgets. Of course, department managers know they 

might make a mistake and, understandably, are 

more concerned about under-budgeting than overbudgeting. 

Therefore, they tend to build some “slack” 

or “padding” into their budgets. When all departments 

do this, the total amount of padding can really add 

up. One way to address this situation is by creating 

an annual pooled contingency that departments 

can draw from if they have unplanned, unavoidable 

expenditures. This is a bit like an insurance program 

for department budgets. Local governments that 

have used this approach have found that having this 

“insurance” in place makes departments feel less 

need for their own budgetary padding, resulting in 

significant, ongoing savings. You can read more about 

how to set up a pooled contingency and the benefits 

in “Don’t Go It Alone,” an article in the June 2021 

issue of Government Finance Review (available at 

gfoa.org/gfr-june-2021). 

The finance officer can anticipate other common 

mistakes people make and prepare mitigating 

strategies. 

The budget officer needs to 

design a decision-making 

environment that anticipates the 

effects of biases and fallibility. 

Conclusion 

Cognitive biases and people’s natural fallibility mean 

that the budget officer needs to design a decision-making 

environment that anticipates the effects of biases and 

fallibility. This article has provided examples of some of 

the most essential biases and mistakes and suggested 

solutions. We encourage you to learn more about the 

growing field of behavioral science and how it can be applied 

to budgeting. Be on the lookout for additional articles from 

GFOA and consider checking out the webinar series on 

behavioral science that GFOA recently offered (see above). 

Linnea Gandhi is the founder of BehavioralSight, an 

ExecEd Lecturer at The University of Chicago, and a 

PhD candidate at Wharton. 

Shayne Kavanagh is the Senior Manager of 

Research in GFOA’s Research and Consulting Center. 

This article is based on a webinar series presented 

by GFOA called “Using Behavioral Science for 

Better Decision-Making and Budgeting.” 

We have provided this article to bring you 

some of the insights from the webinar series. 

A recording of the webinars is available at 

gfoa.org/materials/behavioral-science-2021. 


Strengthening Risk 

Management Before 

the Next Big Crisis 

A SIX-STEP GUIDE 

56

RISK MANAGEMENT 

BY MARK BEASLEY, AL CHEN, AND ERICKA F. KRANITZ 


As we begin to emerge 

from the pandemic, 

most business leaders, 

including those at the 

helm of state and local governments, 

are seeking ways to learn from this 

experience and to strengthen their 

level of preparedness for the next risk 

management crisis. In fact, our recent 

research finds that a strong majority 

of organizations (73 percent) report 

that there will be significant changes 

in their approach to continuity 

planning and crisis management 

processes. 1 These levels are even 

higher for state and local governments 

and nonprofits (84 percent of those 

surveyed). Some organizations are 

realizing that their approach to 

managing risks is woefully lacking in 

robustness and maturity. 

Each year, through the work of 

the Enterprise Risk Management 

(ERM) Initiative at North Carolina 

State University, we work closely 

with business leaders across all 

sectors, including state and local 

governments, helping them identify 

opportunities to enhance their 

processes for getting their arms 

around the ever-changing risk 

landscape. 2 During the COVID-19 

experience, we have provided handson 

coaching for government leaders 

and other executives about effective 

tactics and emerging best practices 

related to risk management processes. 

This included a municipality with 

a population of 500,000 and a $215 

million budget, along with a larger 

municipality that has a population 

of more than one million people and 

an operating budget exceeding $1.5 

billion. ERM has also advised two 

large state agencies. 

Building on the reality that managing 

risks will remain challenging for all 

organizations, this article includes 

insights from our ongoing work to 

formulate a six-step guide. State and 

local government leaders can use this 

guide to refresh their organization’s 

risk oversight capabilities to be ready 

for the inevitable next crisis, before it 

happens. 

It’s not getting easier 

State and local government 

leaders have had a front-row seat in 

navigating the extraordinary events 

of the past year. They are still called 

upon to help manage many responses 

to risks triggered by the ongoing 

pandemic situation, including 

oversight of COVID-19 testing and 

vaccine distribution efforts, issuance 

of evolving social distancing 

community guidelines and policies, 

and responding to increased 

demands for existing services while 

managing a host of other issues 

related to social unrest, public 

safety, homelessness, cyber threats, 

political elections, and so on. At the 

same time, government leaders have 

had to address risks affecting core 

operations that have been disrupted, 

and as they anticipate what’s next. 

Leaders are looking for ways to 

better anticipate risks, especially as 

senior executives are being asked 

to provide more information about 

risks affecting their organizations. 

They are looking for new ways to 

elevate their organization’s approach 

to navigating the ever-emerging risk 

landscape. Organizational leaders 

are convinced that complex and 

interrelated risks will continue 



to emerge—and stakeholder 

expectations for more effective risk 

oversight will continue to grow. 

Many leaders are embracing a 

more enterprise-wide approach to 

risk management that is centered 

on better anticipating risks that 

may emerge and affect what is 

strategically important. But many 

leaders are unsure of what steps 

they should take. Our objective in 

this article is to highlight how state 

and local government leaders can 

either jumpstart or strengthen their 

enterprise-wide risk management 

efforts to obtain strategic value. 

See the sidebar for a more detailed 

description of ERM. 

Keep things simple: 

Use a frame of reference 

Organizations can keep things 

simple by using a six-step framework 

to evaluate and enhance the 

enterprise-wide risk management 

processes. Because the concept of 

ERM isn’t new, leaders have varying 

levels of understanding (and 

misunderstanding) about ERM’s 

role and key elements. Therefore, 

the concept needs to be defined at 

the outset to make sure everyone 

is on the same page about ways 

in which ERM might be helpful 

and what comprises an effective 

risk management process. This 

has generally been accomplished 

through a brief overview at an 

existing meeting of the executive 

team. Keeping the process relatively 

simple and aligned with current 

business practices is generally 

a successful strategy. There will 

always be opportunities to enhance 

and make further improvements 

over time. 

The approach we tend to use is 

linked to six key elements of an 

effective ERM process, which are 

illustrated in Exhibit 1. Its circular 

nature highlights the fact that 

ERM is intended to be a continual, 

ongoing process, since risks will 

never stop emerging. The five 

inset ovals highlight critical 

components that business leaders 

should take to launch an ERM 

process that can provide proactive 

risk insights for strategic decisionmaking. 

These five elements are 

influenced by the organization’s 

culture and leadership, which sit 

at the center, emphasizing the 

importance of setting the tone at 

the top. These elements are also 

in line with the Committee of 

Sponsoring Organizations of the 

Treadway Commission (COSO) 

Enterprise Risk Management 

framework issued in June 2017. 3 

Let’s briefly walk through the six 

steps that directly correspond to 

the six elements of an effective 

ERM process. 

What Is ERM? 

The goal of enterprise risk management (ERM) 

is to help organizational leaders identify and 

manage risks that could have a significant 

impact on the organization’s ability to achieve 

its mission-critical strategic goals. In its 

simplest form, ERM is a way of thinking 

about current and emerging risks, as well as 

missed opportunities, so leaders can be better 

prepared to manage risks more nimbly and 

proactively and to creatively adapt to changing 

circumstances. Having an ongoing process 

and mindset that focuses on understanding 

and managing risks proactively helps make 

leaders better prepared and resilient, and 

better able to pivot and adapt to changing 

circumstances. The concept of ERM focuses 

on the entire organization, with the goal of 

providing a comprehensive, holistic, top-down 

view of risks when they emerge. It helps make 

risks visible across functional areas and 

allows leaders to see their inter-relationships. 

EXHIBIT 1 | SIX ELEMENTS OF AN ERM PROCESS 

Communication 

and Monitoring 

Risk 

Reponse 

Core Value 

Drivers and 

Strategy 

Culture and 

Leadership 

Risk 

Assessment 

Risk 

Identification 

58

84% 

of state and local 

governments report 

that there will be significant 

changes in their approach to 

continuity planning and crisis 

management processes.1 

STEP 

1 

Start with a strategic lens 

The goal of ERM is to help 

management better anticipate 

risks that might emerge, impeding 

the government’s ability to 

provide mission-critical products 

and services. The key is to get 

individuals focused on what’s 

most important—that is, make sure 

everyone has a clear understanding 

of what the government works at 

every day to fulfill its core mission. 

We like to refer to these as the entity’s 

“crown jewels.” So, an effective ERM 

process starts with Step 1, which is 

highlighted by the top oval labeled 

“Core Value Drivers and Strategy” in 

the ERM cycle shown in Exhibit 1. 

Most state and local governments 

provide a multitude of services 

such as public safety, parks and 

recreation, education, healthcare and 

childcare services, and libraries. We 

begin by engaging in conversations 

with government leaders to ensure 

there is a consistent and clear 

understanding of what is strategically 

most critical to the organization’s 

mission and strategic success. These 

conversations are often conducted 

in a management meeting or an 

educational training session or 

workshop to ensure that key leaders 

agree about what is most important to 

the entity’s strategic success. Leaders 

from throughout the organization 

need to be included. A successful 

restart after COVID-19 needs 

enterprise-wide input from Human 

Resources, Finance, Budget and 

Planning, Information Technology, 

and core operational units including 

Waste Management, Public Safety, 

and Transportation, because 

the focus will be on anticipating 

risks that could have a significant 

strategic impact on the entire 

organization, not just an individual 

function or unit. 

Developing a strategic lens should 

occur before considering risks 

that might impact the ability to be 

successful. Without consensus about 

what is strategically most important, 

management may be going in 

competing directions about what 

risks are of the highest priority for the 

state or local government to manage. 



STEP 

2 

Use a strategic lens to identify risks 

With a strong strategic point of focus, 

management is in a position to begin 

identifying risks that might affect the 

government’s ability to deliver those 

mission-critical services or new 

strategic initiatives (as shown by 

the “Risk Identification” oval in 

Exhibit 1). It’s helpful to start by 

asking two important questions about 

these mission-critical services: 

1. What has to go right to deliver 

these services? 

2. What assumptions are we 

making about our organization’s 

ability to provide these services? 

Once management thinks about these 

key elements, we then flip the first 

question to “What might emerge from 

within or external to the organization 

that might keep these from going 

right?” Answers to this question 

provide insights about potential risks 

on the horizon that are important to 

executing the government’s missioncritical 

deliverables. Internal (from 

within the governmental entity) 

and external events (outside the 

control of the governmental entity) 

that might derail a process are great 

candidates to consider for potential 

risks that could emerge and impact 

strategic success. 

Similarly, once the assumptions are 

pinpointed about the state or local 

government’s ability to continue 

delivering mission-critical services, 

we then ask, “How do we know these 

assumptions are valid?” and “What 

is the impact to our success if an 

assumption is flawed?” For example, 

will critical IT systems support the 

increased volume of online business 

and core activities for employees 

working remotely? Answers help 

to tease out strong candidates 

for potential risks to what is 

strategically important for the state 

or local government to achieve. 

Exhibit 2 provides a simple 

illustration of how these questions 

might help identify potential 

risks that might impact a local 

government’s ability to secure books 

and database resources for libraries 

that serve their local community. 

EXHIBIT 2 | RISK IDENTIFICATION TEMPLATE 

MISSION-CRITICAL 

SERVICE 

KEYS TO SUCCESS OF DRIVER 

What must go right for value driver to 

be successful? (Key people, processes, 

technologies, etc.) 

BIG ASSUMPTIONS 

What are the big assumptions being made? 

Example: 

Local library staff 

select books and 

databases for 

acquisition 

POTENTIAL 

RISKS TO MISSION- 

CRITICAL SERVICE 

• Librarians need to be knowledgeable about 

appropriate books and databases. 

• The process of prioritizing books and 

databases for purchase needs to be accurate 

and reliable. 

• The system for entering books and 

databases for purchase needs to be accurate 

and reliable and secure. 

RISKS TO KEYS TO SUCCESS OF DRIVER 

What challenges might emerge to prevent 

“keys to success”? 

• Library staff is culturally competent to 

make selections that the community needs 

and desires. 

• IT infrastructure can support the databases 

selected. 

• The community can access the books and 

databases they desire. 

RISKS TRIGGERED BY ASSUMPTIONS 

What might challenge our assumption in 

the future? 

• Turnover in library staff may lead to 

deterioration of institutional knowledge. 

• Management overrides process, leading to 

biased decisions. 

• Systems used to select books and databases 

may crash or be inaccurate. 

• Shifting community demographics may be 

overlooked when making book selections. 

• Databases selected may not be compatible 

with entity’s legacy IT systems. 

60

40% 

of state and local 

governments 

provide explicit guidelines in the 

form of scales for individuals to 

use as they rank order risks.1 

STEP 

3 

Prioritize top risks 


Most state and local governments 

face a plethora of risks, so a number of 

potential issues are identified in this 

step. Management needs a process 

to help them assess which risks are 

most important (as reflected by the 

“Risk Assessment” oval in Exhibit 

1). A common approach is to rank 

risks based on impact, likelihood, 

preparedness, and velocity. A fivepoint 

scale numbered from 1 (low) 

to 5 (high) could be used to assess 

these elements of a given risk: 

• Impact refers to how big an 

effect the risk would have on 

the organization, such as from a 

financial perspective or in terms 

of reputational damage. 

Example: The pandemic could 

have a negative economic impact 

on income tax revenues of more 

than 50 percent. (This would be 

considered high impact.) 

• Likelihood, or probability, 

considers the chance of the risk 

occurring in a given period of 

time, usually two to three years. 

Example: There is a high probability 

that actual tax revenues will 

decrease by 25 percent or more 

than the amounts budgeted over 

the next fiscal year. (This would be 

considered a high likelihood.) 

• Preparedness reflects whether 

the organization believes it has 

steps in place to manage the risk, 

should it occur. 

Example: Fund balance reserves 

and budget cuts will only sustain 

the current level of activity through 

the next fiscal year. (This would be 

a low level of preparedness.) 

• Velocity considers the speed of onset, 

or how fast the risk might emerge. 

This element needs to be considered 

along with all other factors—for 

example, a risk may be determined 

unlikely, but it might evolve quickly 

and have a high impact if it appears. 

So, risk responses would need to be in 

place for trends that are fast-moving 

with disruptive potential. 

Example: The pandemic’s onset 

has been fast-moving, with little 

advance warning about the 

potential extent and damage to 

business operations. (This would 

be considered high velocity.) 

Risk scores can be developed 

from the assessments of each risk 

to rank-order risks from highest 

to lowest to pinpoint which risks 

deserve the most attention. 

The COVID pandemic prompted 

many state and local government 

leaders to realize that they must 

understand their top risks in 

order to effectively focus their 

limited resources on what is most 

important strategically to the 

organization overall. 

Our 2021 State of Risk Oversight 

Report finds that about 40 percent 

of state and local governments 

and nonprofit organizations 

provide explicit guidelines in 

the form of scales for individuals 

to use as they rank order risks. 

Those that do not provide these 

kinds of scales (or templates) 

sometimes just simply ask 

individual leaders to submit their 

ranking of top 10 risks from the 

list of risks identified in Step 2. 

The rankings from individuals 

can be aggregated to quickly 

pinpoint a consensus view of top 

risk concerns. 



STEP 

4 

Develop risk response 

Many risks are interrelated, so it’s a 

good idea to assign a “risk owner” for 

each risk theme to keep management 

informed about top risks and 

communicate with a high-level 

internal risk committee. Risk owners 

help management keep an eye on all 

aspects of their assigned risks. 

The risk owner is usually the person 

who leads a business function most 

closely related to the risk theme. For 

example, the vice president of Human 

Resources would likely be the risk 

owner for risks related to attracting 

and retaining key talent. Each risk 

owner is a “champion” responsible for 

developing a deep understanding of a 

group of related risks, identifying root 

causes. They will evaluate responses 

to prevent and/or manage the risk 

and monitor the risks for changes, 

both positive and negative. The risk 

owner is responsible for overseeing 

the organization’s approach to 

managing a particular risk theme, 

such as talent, and identifying a 

team of subject matter experts to help 

address the organization’s responses 

to the underlying individual risk 

statements. 

who have direct responsibility for 

the activity or area related to the 

particular risk statement. Therefore, 

the risk owner, in conjunction with 

other members of management, 

would also determine what additional 

measures, if any, the organization 

needs to implement to enhance the 

effectiveness of its risk management. 

A useful tool, referred to as a bow-tie 

analysis, helps in evaluating the 

root cause and the effectiveness of 

risk responses. Exhibit 3 provides 

an example of a completed bow-tie 

analysis. 

Let’s walk through an example of how a 

risk owner could use the bow-tie format 

to analyze an individual risk statement. 

The hypothetical risk is related to 

an outdated information technology 

system that can no longer support the 

government’s current environment 

(see Exhibit 3). The risk is in the center 

of the bow-tie—it is the “knot.” 

A bow-tie analysis begins with a focus 

on possible root causes (which are 

illustrated in the far-left column 

of Exhibit 3). In this example, 

the unprecedented level of 

unemployment claims may be 

stretching the IT system capabilities. 

Also, employees who are working 

remotely may unintentionally create 

IT system vulnerabilities because of 

a lack of awareness and insufficient 

training. Many governments have 

older IT systems, and the capabilities 

of these systems, along with the IT 

support team, may not be able to keep 

ahead of the emerging cyber threats. 

Next, the risk owner summarizes 

the measures currently in place to 

prevent these risks (see the second 

column from the left in the bow-tie 

analysis in Exhibit 3). Examples 

include cross-training employees 

and hiring part-time workers to 

keep up with the increased volume 

of claims. Organizations can also 

address cyber risks by conducting 

annual training and using thirdparty 

software to scan the network 

for unauthorized access attempts. 

The risk owner oversees the process 

to determine if the organization’s 

current risk management approach 

adequately addresses each of the 

top risks and, if not, what additional 

responses or adjustments are 

necessary (as shown by the oval 

“Risk Response” in Exhibit 1). 

The goal is to consider how the 

organization is already managing 

the risk by taking steps to reduce 

the likelihood of its occurrence. 

This is achieved by understanding 

the root causes of the risk and 

finding ways to prevent those root 

causes from emerging. Risk owners 

also need to assess how prepared 

the organization is to manage the 

impact or consequences of a risk 

event. They also need to engage 

other subject matter experts 

The goal is to 

consider how the 

organization is 

already managing 

the risk by taking 

steps to reduce 

the likelihood of 

its occurrence. 


62

To the right of the center of the 

bow-tie analysis in Exhibit 3, the 

risk owner identifies consequences 

and responses for managing the 

risk event. For example, many 

state and local governments have 

already experienced a backlog 

of claims, given the increased 

volume and the time it takes to 

process unemployment benefits. A 

ransomware attack on a government’s 

IT systems could make it difficult or 

impossible to provide core business 

processes for a period of time. Both of 

the above examples could also have a 

negative impact on the government’s 

overall reputation. Possible actions 

for managing the impact of risk 

events may include eliminating 

non-value-added manual processes 

and evaluating a new IT system, or 

expanding its capacity, should these 

risks continue for a longer term. 

A key ERM principle that has emerged 

during the past year is that risk 

owners must learn how to respond 

to risks quickly and effectively, 

without expecting perfection. The 

risk owner, in conjunction with other 

members of management, would also 

determine what additional measures 

the organization would need to 

implement in order to enhance 

the effectiveness of how they are 

managing the risk. 

Risk owners must 

learn how to respond 

to risks quickly and 

effectively, without 

expecting perfection. 

EXHIBIT 3 | BOW-TIE ANALYSIS TEMPLATE 

CAUSES 

RESPONSE TO 

PREVENT RISK 

OWNER OF 

RESPONSE 

CONSEQUENCES 

RESPONSE TO 

MINIMIZE IMPACT 

OWNER OF 

RESPONSE 

• Significant 

increase in 

volume of 

unemployment 

claims in a short 

period of time. 

• Current manual 

processes are 

inefficient and 

not designed for 

current situation. 

• Evolving cyber 

risks may outpace 

capabilities 

and knowledge 

of IT support 

especially due 

to employees 

working remotely. 

• Improper data 

handling, storage, 

and/or disposal of 

information. 

• Cross-training of 

employees. 

• Part-time 

employees hired 

for the near-term. 

• Regular review of 

exception reports 

and metrics for 

unusual activities. 

• Required annual 

training on best 

practices. 

• Utilize a third 

party software to 

scan network. 

Individual #1 

Individual #2 

The current 

information 

technology 

systems are 

outdated and 

may not be 

able to support 

the extent 

and nature of 

activities in 

the current 

environment. 

• Significant 

backlog of claims. 

• Individuals 

unable to 

obtain status 

information. 

• Negative impact 

to reputation and 

public image. 

• Various data 

systems attached 

by malware. 

• Business 

interruption to 

core processes. 

• Management 

may be unable 

to make reliable 

and/or timely 

business 

decisions due 

to inaccurate or 

incomplete data. 

• Increase crosstraining 

of 

employees. 

• Reduce and/ 

or eliminate 

manual processes 

considered 

low-risk. 

• Evaluate 

long-term IT 

options, such as 

a new system or 

expanded server, 

to allow for 

increased volume 

and efficiency. 

• Stronger access 

requirements 

(two factor) to key 

systems. 

• Regular review 

of metrics and 

data analytics 

to support 

management 

decisions. 

• Ongoing required 

education. 

Individual #3 

Individual #4 



STEP 

5 

Communicate and monitor risks 

To be truly effective, ERM should 

foster rich dialogue about the 

management of the top risks on 

the horizon that might derail 

mission-critical services. Effective 

communications about risks among 

the management team can help 

foster conversation that will help 

in making decisions. (This links to 

the “Communications” aspect of 

the last insert oval in Exhibit 1.) 

A growing number of organizations 

are creating management-level 

risk committees to oversee and 

coordinate risk management efforts 

across the enterprise. Our 2021 

State of Risk Oversight Report reveals 

that 62 percent of organizations 

surveyed have a managementlevel 

committee in place in 2021, 

as compared to 22 percent over a 

decade ago. A management-level 

risk committee is an internal 

committee made up of senior leaders 

involved in strategic decisions 

throughout the entire organization. 

The committee’s role is to evaluate 

and assess the effectiveness of the 

organization’s response plans for 

specific risks. Communications 

from risk owners to risk committees 

help management engage in an open 

discussion as to whether the entity’s 

risk response plans are reasonable 

and if leadership is comfortable 

with the level of residual risk 

accepted. The committee should 

meet regularly with the risk owners 

to review a summary about each of 

the assigned risks and the related 

risk responses. 

40% 

of organizations 

surveyed have 

a management-level risk 

committee in place, compared 

to 22% over a decade ago.1 

Many entities are asking risk 

owners to prepare one-page risk 

templates that summarize all the key 

information related to a particular 

risk. (See Exhibit 4 for an example.) 

These templates are intentionally 

designed to be one-page summaries 

that provide a high-level overview 

for all members of the management 

team about a given risk. Of course, 

if more information is needed, the 

risk owners can be asked to provide 

it. Many organizations find these 

summaries very helpful. 

(KRIs). Most organizations have 

several metrics, or key performance 

indicators, for monitoring historical 

activities. One example would be 

actual expenditures as compared 

to the appropriated and approved 

budget. These performance 

indicators (or KPIs) focus on the 

past and are usually based on 

internal data. 

To identify KRIs that are relevant 

to each risk, think about the 

following questions. 

Communication is essential to any 

organization, but even more so as 

the organization works through 

these ERM efforts. Many of these 

risk statements will be interrelated, 

so communications need to be 

transparent, and information 

should flow regularly throughout all 

levels of the organization and to the 

board or governing body. 

Risk committees need metrics to help 

in their assessments (as indicated 

by “Monitoring” in the last oval in 

Exhibit 1). A lesson learned from 

dealing with COVID-19 and other 

events of the past year is that all 

types of entities must consistently 

monitor and communicate an 

organization’s internal and external 

risks using key risk indicators 

• How would you know if one of 

your top risks was increasing? 

• What would the warning signs be? 

• Who is monitoring this? 

• How would management be 

informed? 

• What are the process and 

culture to support escalation? 


64

EXHIBIT 4 | EXAMPLE OF A 1-PAGE RISK REPORT 

Value Driver Theme: Talent Management 

Tier 1 Risk Statement: There is a concern that we may struggle to attract and retain talent we need for strategic success. 

Risk Owner: Jane Doe 

High-Level Summary of the Risk Issue (i.e., what’s happening, what are the root causes): 

Job candidates and existing employees may no longer view our business and industry as interesting and attractive. 

Our compensation packages may not be sufficiently competitive to attract and retain needed talent. 

What are We Doing Now to 

Prevent the Risk from Occurring 

(Preventive Response): 

What are We Doing to Minimize 

Consequences of Risks If They 

Occur (Reactive Response): 

Need for Additional Responses 

to Better Manage Risk Responses 

Our website and other external 

communications in online hiring sites 

are emphasizing how our organization 

is innovative and dynamic and having 

an impact on our customers’ lives. 

We have recently completed a 

compensation benchmarking 

analysis and have made market 

adjustments to key positions. 

We have entered into a contract 

with a professional staffing agency 

to provide temporary staffing 

needed for key positions. 

Each key business function is 

cross-training individuals to 

ensure there is backup redundancy 

for key processes that must be 

operational. 

We need to evaluate our existing 

benefits package to bring it up 

to date with expectations in the 

marketplace. 

We need to boost our work 

schedules to allow for more 

work-hour flexibility and 

work-from-home options. 

How is this Risk Trending? 

Increasing at a steady pace 

on a month-by-month basis. 

How Fast Is this Risk 

Changing Over Time? 

(i.e., what is its Speed of Onset) 

Escalation of this risk may occur 

at a gradual and moderate pace 

(probably quarter over quarter 

versus oversight). 

What Information Might Be 

Helpful in Monitoring this Risk? 

(e.g., Key Risk Indicators): 

• Turnover in key positions 

• Percentage of employee 

complaints (or exit interviews) 

citing industry concerns or 

compensation/benefit concerns 

• Trends in number of applications 

submitted for employment 

When Would We Know 

that a Different Action 

Should be Taken? 

• When turnover exceeds ____ 

positions in key roles 

• Employee complaints begin to 

escalate to ____ percentage 

• Key processes are interrupted 

and can’t be completed on time. 

What is Our Greatest Concern About this Risk? 

If we can’t reduce the risk of losing key talent and improve our recruiting efforts for new talent, the entity is likely to face delays in 

service deliveries that will lead to significant criticism and backlash from residents and other key stakeholders who are vocal in 

expressing their frustration in the media and other visible platforms. 



STEP 

6 

Set the tone (culture and leadership) 

The success of any significant 

initiative requires the right level 

of support at the highest levels of 

the organization, and ERM is no 

exception. The right tone at the 

top creates a culture that sees risk 

oversight as essential. This is why 

the entire larger oval in the ERM 

cycle diagram (in Exhibit 1) is 

shaded gray, indicating that culture 

and leadership are foundational 

to effective risk oversight. If the 

culture of an organization does not 

embrace the importance of risk 

management, then implementing 

an ERM process will not help. 

It is vital to establish an 

environment in which individuals 

feel comfortable bringing 

concerns to management’s 

attention. An organization can’t 

effectively respond to risks 

if it doesn’t know they exist. 

Leadership should communicate 

throughout the organization 

the importance of anticipating 

and managing risks that could 

derail the organization’s strategic 

efforts. And leadership should 

ensure that the organization’s 

culture has a positive impact on 

its risk oversight efforts. 

The right tone at 

the top creates a 

culture that sees 

risk oversight as 

essential. 

The time is now 

Given the events of the past year, 

many organizations have had to 

quickly pivot to break down silos and 

build trust as leaders work together 

to maintain stability of the business 

and to manage the risks to the current 

business model. Many organizations 

are taking the time now to evaluate 

what worked and what did not over 

the past year and to learn from their 

experiences to determine the gaps in 

their ERM practices. 

While ERM would not have prevented 

events like COVID-19 from affecting 

state and local governments, it can 

improve the preparedness and agility 

of government management teams in 

navigating risks that could have an 

enterprise-wide impact—like those 

caused by the pandemic. Government 

leaders realize that they need to 

move away from siloed thinking and 

instead work together to identify 

and manage those risks, as well as 

potential opportunities. ERM should 

help leaders work together to become 

more resilient and forward-thinking. 

Mark Beasley is a professor of 

accounting and director of the ERM 

Initiative at the Poole College of 

Management, North Carolina State 

University. Al Chen is a professor 

of accounting, graduate faculty, 

Department of Accounting, at the 

Poole College of Management. 

Ericka F. Kranitz is a lecturer in 

the Department of Accounting in the 

Poole College of Management. 

Beasley, Chen, and Kranitz serve 

in leadership positions within the 

Enterprise Risk Management (ERM) 

Initiative at NC State University 

(erm.ncsu.edu). The ERM Initiative 

provides thought leadership 

about ERM practices and their 

integration with strategy and 

corporate governance. Faculty in 

the ERM Initiative frequently work 

with boards of directors and senior 

management teams, helping them 

link ERM to strategy and governance. 

NOTES 

1 

2021 State of Risk Oversight: An Overview of Enterprise Risk Management Practices, April 2021. 

2 

The ERM Initiative is a thought leader advancing enterprise risk management practices, with an emphasis on the integration of ERM with strategic 

planning and governance (erm.ncsu.edu). 

3 

See Enterprise Risk Management: Integrating with Strategy and Performance, COSO, 2017. 

66

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LGHN.org 

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2021 Biennial Conference 

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Paving the Way 

Aligning the Budget with 

Your Mission and Vision 

BY CELESTE F. BAKER 

68

PAVING THE WAY 

A Tale of Two Entities: 

Cleveland Metroparks and the City of Lakewood, Ohio 


Agood budget tells a story 

about an organization 

that is not captured by 

the financial statements. It describes 

what is important to the organization, 

how it funds its mission and vision, 

and how it provides value to the 

community. Laying this out in writing 

is important to all stakeholders, 

including employees. Governments 

need to provide the transparency that 

citizens expect, especially in times 

of financial uncertainty. This article 

shares two entities from my hometown 

that do this very well. 

I spoke with William Chorba, chief 

financial officer of Cleveland 

Metroparks, and Peter Rancatore, 

finance director of the City of 

Lakewood, Ohio, on the process 

involved in aligning an organization’s 

budget with its mission and vision. 

Both municipalities are in Cuyahoga 

County, Ohio. Both are Ohio State 

Auditor and GFOA award winners. 

With calendar year 2021 budgets of 

$155.9 million and $135 million, 

respectively, the two are similar in 

size as far as estimated resources, 

number of employees, and diversity 

of services. Both are seen as leaders 

in innovation. And their budgets 

illustrate ambitious yet attainable 

vision and strategic plans; the 

documents are robust, detailed, and 

comprehensive. 

Cleveland Metroparks 

Cleveland Metroparks includes the 

Cleveland Metroparks Zoo and many 

other assets, including rivers, golf 

courses, and trails. The mission and 

vision of the Metroparks is summed 

up in three words: conservation, 

recreation, and education. Each 

affects the other. The strategic plan 

has five primary goals: protection, 

relevance, connections, “come 

out and play,” and organizational 

sustainability. The mission and vision 

of Metroparks’ Finance Department 

provides an example (see Exhibit 1). 

William Chorba provided detailed 

insight into the processes and 

philosophy behind the Metroparks’ 

long history of award-winning budgets, 

noting that the entire organization 

is poised to receive public feedback 

on its mission and vision, which 

encourages frequent interaction; and 

that interaction can be through the zoo, 

golf courses, restaurants, and parks. 

The organization conducts monthly 

board meetings that the public is 

encouraged to attend—and to speak at. 

For a large project such as a bridge that 

spans the Rocky River, which took two 

to three years, public working sessions 

were held to assure that the structure 

was not only functional and safe, 

but also aesthetically pleasing. The 

Metroparks is active on social media 

as well and is able to get local news 

coverage. It maintains and updates its 

website frequently. The organization 

capitalizes on the expertise of its team 

members, who are introduced to the 

finances and budget when they join 

the staff to promote understanding 

and accountability. 

Spanning more than 24,000 acres, Cleveland Metroparks includes more than 300 miles of 

trails, eight golf courses, eight lakefront parks and a nationally-acclaimed zoo. 



The organization 

capitalizes on the 

expertise of its team 

members, who are 

introduced to the 

finances and budget 

when they join 

the staff to promote 

understanding 

and accountability. 

The budget process starts in July 

for a calendar year budget, and the 

budget module is set up by the Finance 

Department. Each department 

provides a first pass at sharing what 

it envisions for the next year; the 

Finance department does the same, 

but without sharing. Then they come 

together to see how close their visions 

are. The remainder of the process 

is highly interactive and involves 

working with the chief executive 

officer, chief finance officer, and 

department heads. The goals are 

alignment, buy-in, opportunity, 

and risk assessment, and together, 

everyone involved develops scenarios 

along a continuum of pessimism 

and severity. Collaboration with 

the department heads continues 

throughout the year. At the board 

meetings, the budget is discussed in 

terms of variance review. This way, 

the organization can update its 

forecast if any headwinds or 

opportunities present themselves. 

Monthly budget adjustments allow 

for a great deal of agility. 

Over the past year the COVID-19 

situation, along with mild weather, 

increased the demand for public spaces 

such as parks, zoos, and golf courses. 

Unfortunately, the increased demand 

was not met with any federal financial 

relief, as special park districts weren’t 

included in any aid packages. In 

addition, supply chain disruptions had 

an impact on construction projects. 

In response, the Metroparks focused 

on projects that provided quick wins 

and were not affected by shortages, 

such as concrete aggregate and 

blacktop. The monthly capital 

planning meetings allow for the team 

to keep looking at new opportunities. 

The Metroparks is on a 10-year levy 

cycle, so the budget is developed for 

the 10 years. “Imagine a highway— 

you can change lanes, but you have 

to stay within the guardrails,” Chorba 

said. The entire budget document was 

partially overhauled earlier in 2021, 

and the language and graphics that 

had gotten stale were updated. But 

the budget document still follows 

GFOA’s best practices and remains 

true to the Metroparks’ strategic goals 

and objectives. 

The current Metroparks strategic plan 

was developed in 2012 with the intent 

of providing long-term direction and 

goals for the Park District. This period 

includes two major milestones: the 

10-year levy renewal, in 2014, and 

the Centennial 100 Year Anniversary 

of Cleveland Metroparks, in 2017. 

Therefore, taking a fresh look at the 

Park District’s goals and priorities 

leading up to those events, and for 

the years that followed, was an 

opportunity and a challenge that 

Cleveland Metroparks took very 

seriously. The organization worked 

with its staff, professional consultants, 

and the community to create the 

strategic plan that is still in use today. 

Historically, most of Cleveland 

Metroparks’ resources were devoted to 

preserving and enhancing facilities 

and programs within park reservation 

borders and to serving established 

constituencies. The current strategic 

plan addresses ways in which the 

Park District can have an even greater 

impact by addressing different levels 

and scales of concern, including 

reservations, their surrounding 

communities, the district’s core 

service area (Cuyahoga County and 

Hinckley Township in Medina County), 

and the larger Northeast Ohio Region. 

The broadening of scope and the 

district’s desire to make a significant 

impact led it to refine the Metroparks’ 

vision and mission. 

EXHIBIT 1 | THE MISSION AND 

VISION OF METROPARKS’ FINANCE 

DEPARTMENT 

MISSION 

Finance is responsible for careful 

stewardship of taxpayer assets by 

timely and accurately capturing 

and reporting financial activities 

and ensuring compliance with state 

regulations and Cleveland Metroparks 

bylaws related to financial matters. 

SERVICES PROVIDED 

Finance objectives are met by 

systematic, detailed budgetary 

control over board-approved 

appropriations through its people, 

systems, policies, and processes. 

The Purchasing Division is a key 

functional area within Finance, 

completely controlling the 

procurement process to ensure 

fairness, transparency and fiduciary 

control in accordance with legal and 

ethical standards. Other Finance 

functional areas are Internal 

Audit, Accounts Payable, Revenue 

Accounting, Expense Accounting 

and Payroll. 

FISCAL 2020 PRIORITIES 

• Maintain excellence in financial 

stewardship and accountability 

(organizational sustainability) 

• Improve business continuity 

preparedness for the Park District 


• Drive a culture of continuous 

improvement in Accounting, Internal 

Audit, Payroll, and Purchasing 


• Improve and increase utilization of 

Munis (organizational sustainability) 

70

EXHIBIT 2 | THE CITY OF 

LAKEWOOD’S 2021 KEY INITIATIVES 

• The City of Lakewood’s proposed 

$155.9 million budget for all 

funds in 2021 will focus on the 

key initiatives of public safety 

and human services, commerce, 

public health and welfare, our 

environment, and transparency in 

public finance by: 

• Continuing to collaborate across 

divisions on interdepartmental 

issues to deliver efficient and 

improved core services. 

• Following established procedures 

in our COVID-19 playbook to keep 

employees and citizens safe, 

while responding quickly and 

appropriately to the pandemic, 

whether it’s serving senior citizens 

with meals or providing EMS 

services for safe transport to a 

healthcare facility. 

City of Lakewood 

In 2012, the City of Lakewood elected 

a new Mayor and embarked on an 

ambitious goal to update a 20-year-old 

mission and vision statement and 

a strategic plan. The effort involved 

numerous listening sessions, guided 

by a reputable municipal consulting 

firm. The city spent considerable 

time in 2013 asking two questions: 

“Where are we today?” and “Where 

do we want to go?” 

The 1993 Community Vision was 

based on resident input that began at 

the first community meeting in May 

2012. More than 130 residents and 

community leaders participated in 

the update process, along with a crosssectional 

group of 30 city employees 

who participated in a facilitated 

self-evaluation of the organization as 

a workplace. The process identified 

strengths, opportunities and 

comments in the following areas: 

strategy and vision, organization and 

culture, accounting and finance, and 

responsiveness and execution. 

The result was a set of goals: economic 

development, safe and secure city, 

vibrant neighborhoods, and sound 

governance. But, as the saying goes, 

the devil was in the details. For one 

thing, the vision document was too 

large and too structured to allow the 

city to change with the times and 

challenges—bedbugs, the opioid 

crisis, an influx of new residents 

from a variety of backgrounds and 

needs, and federal clean-water 

mandates, to name a few. There was 

inconsistent buy-in from the rest 

of the organization, especially the 

Finance Department. And over time, 

the existing structure, departments, 

managers, and employees were left to 

decide how they fit in with proposed 

business practices and goals, instead 

of bringing them along and showing 

them how they were part of the change 

and how this was communicated 

through the budget. New employees 

weren’t trained regarding their 

importance in the process, either. 

• Further developing the city’s 

financial integrity through financial 

processes and reporting that 

examine dollars spent. 

• Engaging in a collaborative budget 

process that includes dialogue 

with the mayor, staff, council, the 

court, and the public. 

• Being supportive and responsive 

to the needs of community 

members and businesses, 

especially as we listen to our small 

business task force and help our 

businesses and citizens survive 

the pandemic financially. 

• Improving and modernizing the 

infrastructure throughout our 

community, including our parks, 

water and sewer systems, and our 

community gathering places. 



EXHIBIT 3 | PAGES FROM THE CITY OF LAKEWOOD’S 2021 BUDGET DOCUMENT 

In 2020, the city had a new elected 

mayor and made several changes to 

the administrative staff, including 

bringing on a new finance director. 

City staff revisited the previous 

document and considered the 

hard lessons that had been learned 

before creating the FY 2021 City 

of Lakewood’s Strategic Planning 

Mission. Their goal for the city was 

to deliver exceptional essential core 

municipal services, go above and 

beyond the call of duty, and promote 

a high quality of life for residents, 

businesses, and visitors. 

As an example, the mission and vision 

and accomplishments for the Finance 

Department in 2020 included: 

• Financially navigating the 

COVID-19 pandemic in a way 

that minimizes both immediate 

negative financial impacts and 

the loss of public services, while 

also maintaining a long-term 

perspective on the city’s operational 

and capital needs. 

• Receiving the Government Finance 

Officers Association (GFOA) award 

for the preparation of the city’s 2019 

annual financial report. 

• Completing the 2019 financial 

audit by the auditor of state with no 

citations, resulting in the prestigious 

Auditor of State Award with 

Distinction, which is earned by fewer 

than five percent of all governments 

in the State of Ohio. 

• Creating a 2021 and Beyond Strategic 

Plan. 

• Adopting a transparent, collaborative 

budget by December 31 that includes 

key personnel while examining both 

the operational and capital needs 

and structures of each of the city’s 

divisions and departments. 

• Participating in and expanding 

financial reporting programs that 

provide transparency and financial 

integrity. 

• Submitting an annual financial 

report that is compliant with GFOA’s 

rigorous standards. 

• Submitting a document for 

consideration in GFOA’s 

Distinguished Budget Presentation 

Award Program. 

Peter Rancatore, the city’s finance 

director, explained the processes 

This collaborative 

process ensures 

institutional 

knowledge and 

helps prioritize 

capital planning. 

necessary in updating the mission 

and vision and the resulting budget 

document. He pointed out that the 

new budget document features more 

pictures and charts, and the format 

was streamlined (see Exhibit 3). Charts 

help illustrate the information in a way 

that words cannot. The city’s financial 

policies are also laid out, as well as 

the internal controls that are in place 

to assure the public of the financial 

oversight. An independent auditing 

firm provides assistance with this 

review and also directs the Finance 

Department on current topics. Future 

documents will include fraud policies 

that are now under development. 

72

The new budget document also 

includes a glossary for citizens, 

breaking down financial language 

and putting it in layman’s terms. The 

city hopes to provide readers with 

some idea of the challenges it faces, 

along with its goals. This is especially 

important because 50 to 55 percent 

of the city’s income is generated by 

Lakewood’s income tax. 

Rancatore was very appreciative that 

the whole Finance Department took 

ownership, he said; their involvement 

made the whole process come together. 

And in turn, the Finance Department 

is able to look back and see what is 

being accomplished through the lens 

of the city’s mission, goals, and values. 

Rancatore noted that he brought his 

philosophy and approach from similar 

work at a previous post, treating 

the budget as a living document. He 

encourages and motivates his staff, 

along with internal stakeholders, to 

create continuous improvements 

each year. Being flexible allows for 

relevancy as the environment dictates. 

What about your own budget? 

Wherever you might be on the 

spectrum of budget development, from 

mathematical exercise to developing 

your first budget for submission to 

GFOA, you’ll find some ideas below 

that will help make your mission and 

vision clear to your community. 

• No matter how big the challenge you 

are facing is, start by picking three 

changes you would like to make 

first. You can do more later. This is 

what Peter Rancatore was referring 

to when he described the budget as 

a living document, with this year’s 

success being built upon in coming 

years. William Chorba also allowed 

for flexibility by making sure the 

Metroparks budget responds to 

environmental changes. 

• Your three choices should be the 

ones most likely to be adopted and 

to achieve immediate success. 

• When those three are 

accomplished, pick the next three. 

• Don’t be afraid to reach out to your 

colleagues for support, advice, 

and expertise. Most people are 

happy to help. 

• Celebrate your successes. 

• Remember that things change— 

staffing, economy, priorities, 

opportunities. You might find 

yourself taking a step backward 

now and again; just be prepared 

for it, reassess, and adapt. 

Celeste F. Baker is the fiscal officer 

for the Tiffin-Seneca Public Library 

in Tiffin, Ohio. 

Department heads are included in 

budget discussions, along with the 

mayor, finance director, assistant 

finance director, and the budget 

manager. This collaborative process 

ensures institutional knowledge and 

helps prioritize capital planning—what 

gets moved forward in the five-year 

plan and what can be postponed or 

eliminated. When two departments’ 

goals or challenges come together or 

conflict, all the managers involved are 

brought into the room until the issues 

are resolved. This promotes greater 

understanding and awareness, builds 

teamwork, and really tears down 

silos. An overview of the discussions 

includes reflection on the future, 

long-range planning, and the role of 

bargaining units. When vacancies 

occur, hiring is not the immediate goal; 

instead, there is an examination of the 

performance and responsibilities of 

the particular position, with potential 

opportunities and modifications to the 

organizational structure analyzed. 

In essence, the process answers the 

question, “What opportunities does 

this create?” 

View the Cleveland Metroparks budget: 

gfoa.org/clevelandmetroparksbudget 

View the City of Lakewood budget: 

gfoa.org/cityoflakewoodbudget 


74 

Against All Odds 

How Springfield, Massachusetts 

Built a Fiscally Sustainable Future

AGAINST ALL ODDS 

BY TIMOTHY J. PLANTE 

If COVID-19 and the devastating events of 2020 had happened 

a decade earlier, the third largest city in the Commonwealth of 

Massachusetts would have completely gone under. 

That was Springfield’s unfortunate 

reality. Haunted by economic 

decline, poor school performance, 

crime, underfunded pensions, and 

underwhelming housing values, 

Springfield was simply a broken city. 

Springfield’s problems started back 

in the early 1980s when budgets 

were cut following the passage of 

Proposition 2½, a Massachusetts law 

that limits property taxes and the 

ability to support core city services. By 

the early to mid 1990s, Springfield’s 

police force was down to 400 officers. 

In 2004, violent crime on city streets 

was nearly four times the national 

average. Businesses were decamping 

for nearby locations, hollowing out 

the downtown districts and leaving 

gaping economic holes throughout the 

city. It wasn’t long before Springfield 

lost control of its bottom line. 

For a variety of reasons, a city with a 

$442 million budget simply wasn’t 

living within its means. After years of 

political inaction, a reckoning was long 

overdue. When the tab was tallied up 

in 2004, Springfield found itself staring 

down a $41 million deficit, with few 

prospects for getting out of the red. 

State law prohibited the city from 

operating at a deficit, so Springfield 

essentially papered over its structural 

deficits. While the city prepared 

and submitted balanced budgets to 

the state, its account balances were 

negative. There’s no nice way to explain 

this away—it was extraordinary 

malfeasance for a city of this size. 

When the smoke cleared—that is, 

when a full accounting reconciliation 

was completed in 2004—the 

Massachusetts state government 

moved in and created the five-member 

Springfield Finance Control Board in 

return for a $52 million no-interest 

loan to cover the city’s shortfall. 

Over the following years, the Finance 

Control Board helped spearhead 

initiatives that got to some of the root 

causes of the city’s many problems. 

But to be effective, Springfield 

needed systems to collect, store, 

track, and analyze city data—and it 

had none. Everything from revenue 

and expenses to reconciliations 

was handled through paper-driven 

processes and paper-reliant systems. 

Unsurprisingly, nothing happened 

in real time. Procurement and 

payables were routed multiple times, 

and approvals could take weeks. 

Adjustments required months. 

People were making day-to-day 

decisions using months-old data. From 

an analytics perspective, there was 

zero visibility. The only positive aspect 

of the formerly manual processes and 

terrible chart of accounts was that it 

gave the finance team tremendous 

motivation to make lots of changes, if 

only to escape the painful red tape that 

was in place. 



To be effective, Springfield 

needed systems to collect, 

store, track, and analyze 

city data—and it had none. 

Revolutionary changes 

In July 2007, the city implemented 

a financial management software 

program called Munis, and the 

data started to trickle in. Things 

started improving when the finance 

department received data it could use 

to proactively manage the city. It was 

finally possible to see the vacancies, 

the savings, the surpluses. Back taxes 

started to roll in as the city pursued 

and collected on liens. The finance 

department could inquire about a 

purchase, intervene on non-standard 

procurements, redirect budget 

dollars, and take corrective actions. 

The city could aggregate purchases, 

determine economic order 

quantities, and finally negotiate 

volume discounts from suppliers. 

These are hardly earth-shattering 

improvements for most major 

enterprises, but for Springfield, it was 

nothing short of revolutionary. Within 

that first year, the city generated more 

than $30 million in free cash. Soon, 

this number grew to $50 million, 

accumulated simply because the 

new data made it possible to control 

spending. 

The next step was being able to 

see, understand, and control labor 

costs—which in the mid-to-late 

2000s accounted for approximately 

68 percent of what was then a $486.5 

million annual budget. At the time, 

employees were using paper timesheets 

to log their hours, and labor expenses 

were entered into spreadsheets. 

Worse, each of the city’s 30 departments 

had its own payroll staff, making 

it virtually impossible to aggregate 

citywide data or detect actual trends. 

Instead, the finance department 

could only perform infrequent, basic 

spot-check audits, using data that was 

months old. Without an automated 

reconciliation process, data was 

inconsistent, payroll deductions were 

mismanaged, and internal controls 

were altogether inefficient. 

When Mayor Domenic J. Sarno took 

office in 2008, he moved swiftly to 

address the situation, believing that 

automation and data analytics would 

provide real-time visibility into 

©2021 ALEX NABAUM C/O THEISPOT.COM 

76

citywide spending, and that this would 

be the key to finally getting a grip on 

workforce and payroll challenges. 

After all, you can’t manage what you 

can’t see. In 2009, the city deployed an 

automated workforce management 

system and integrated it with its 

existing HR management and payroll 

systems. This allowed Springfield 

to centralize city and school payroll 

teams into a single payroll department, 

where a combined staff shares 

processes and information for all 6,300 

city employees. 

REUTERS/ZACH HOWARD 

The system ultimately shed light on a 

lot of murky areas. It allowed the city to 

easily identify and immediately correct 

many instances of timecard fraud, and 

to negotiate for important changes in 

labor contracts. City departments and 

schools now had the tools to reign in 

overtime costs and to more efficiently 

deploy full- and part-time employees. 

The total savings in salaries and 

overtime topped $900,000 within the 

first year of implementation. 

From adversity to advantage 

The city had finally regained control 

of its finances, and by summer 2009, 

the Springfield Finance Control Board 

returned control to local leaders. By 

then, many of the savings generated by 

Springfield’s technology investments 

and data-driven processes were being 

successfully reallocated to improve 

education, public safety, economic 

vitality, and local neighborhoods. 

After a long period of doubt, citizens 

and the business community were 

beginning to regain confidence in what 

the city could do on their behalf, and 

many believed that Springfield’s best 

days were ahead. 

But on June 1, 2011, Springfield was 

again thrown into turmoil when the 

city experienced the worst natural 

disaster in its history: an EF-3 tornado 

(with wind speeds of 136 to 165 miles 

per hour). Trees were uprooted, 

streetlights and wrought-iron fences 

were bent into pretzels; street signs 

flew like frisbees. Tens of thousands 

of citizens lost power, dozens of people 

were sent to hospitals, and hundreds of 

families were displaced. The tornado 

affected approximately 40 percent of 

Springfield’s citizens. More than 500 

buildings were destroyed, and property 

values suffered a loss of more than 

$428 million. The city was looking at 

an extraordinary unplanned cost, and 

for a city just regaining its financial 

footing, the tornado could have been a 

knockout blow. 

In the aftermath, the finance team 

assumed the responsibility of 

tracking all expenditures related to 

the disaster: contractors, employee 

time, equipment, supplies, and so 

on. But New England isn’t exactly 

Tornado Alley, so the city had no prior 

experience in disaster recovery at this 

scale. It also lacked sufficient time 

and resources to research and review 

every damage assessment in depth. As 

the Federal Emergency Management 

Agency (FEMA) and the Massachusetts 

Emergency Management Agency 

started denying claims, the city was 

After a tornado caused over $400 million 

in damages in 2011, Springfield was able 

to utilize FEMA dollars to the fullest extent 

thanks to data from the financial and 

workforce management systems the city 

had put in place. 

authorizing expenditures of millions 

of dollars, unsure if it would recoup a 

penny in reimbursements. 

The city hired a consultant to 

navigate the maze of federal and state 

regulations driving disaster recovery 

funding. Its team had spent years in 

New Orleans, Louisiana, working for 

cities and towns affected by Hurricane 

Katrina. They knew FEMA’s rules 

and regulations inside and out and 

helped the city realize that it could be 

more cost-effective to replace certain 

facilities than to repair them. For 

example, the original damage estimate 

for the State Armory in Springfield was 

$4.5 million. But the estimate for a full 

replacement of the building was $18 

million—which FEMA agreed to pay. 



This time, Springfield 

was prepared for the storm 

because of all the other 

storms it had weathered. 

Soon after, Springfield applied to 

enter a FEMA pilot program that 

would allow the city to reallocate 

recovery funds toward projects in 

other locations. Suddenly, those 

FEMA dollars represented an 

extraordinary opportunity. Rather 

than restoring damaged buildings to 

their former condition, we could invest 

in the community in ways we never 

previously had the financial means to 

do. Goals that had been languishing 

on the city’s to-do list became feasible 

for the first time, creating a pivotal 

moment for the city’s recovery. 

In the end, Springfield only had to pay 

a small fraction—just 13 percent—of 

a $97 million rebuilding effort. The 

city’s recovery was successful largely 

because of the financial and workforce 

management systems it had put in 

place to provide real-time visibility into 

labor spending. This data was critical in 

allowing the city to secure the greatest 

amount of FEMA reimbursements 

available to it—funding that made it 

possible to restore the city and revive 

its neighborhoods. 

In the last decade, Springfield has 

regained its footing in all key areas, 

bringing in major economic engines 

and creating a number of middleclass 

jobs. Springfield’s public schools 

are regaining their vibrancy as high 

school graduation rates rise and 

college acceptances increase. The city 

formed new and effective contracts 

with first responders, making 

streets and neighborhoods safer. 

And by driving forward market-rate 

housing initiatives and community 

engagement programs, the city is 

attracting new residents. 

Instead of a $41 million deficit, 

Springfield city government created a 

$50 million surplus, paying back the 

entire multimillion state loan ahead 

of schedule and improving its credit 

rating. Springfield has seen more 

than $4.5 billion in new economic 

development—an unprecedented level 

of investment in the city’s vitality. 

Weathering the storm—again 

To say that the city’s technology 

upgrades, process improvements, and 

extensive collaboration with public 

and private leadership over the past 

decade put Springfield in a position to 

weather the greatest storm in modern 

history—the COVID-19 pandemic—is 

an understatement. 

Emerging from the early months of 

the pandemic, Springfield closed its 

2020 fiscal year on June 30 with an $8 

million surplus. This was a remarkable 

feat and certainly unexpected, given 

the city’s financial history. For too long, 

the prevailing attitude throughout 

New England was simply don’t do 

what Springfield does. But this time, 

78

Springfield was prepared for the storm 

because of all the other storms it had 

weathered. 

After declaring a state of emergency 

on March 16, 2020, the mayor was 

thereafter in constant contact with 

Massachusetts Governor Charlie Baker 

to talk about the city’s needs. The 

governor called on legislators to ensure 

that federal funding came directly to 

Springfield, rather than being allocated 

through the state, and Springfield 

secured direct entitlements to any 

funding of more than $50,000. 

By mid-April, Springfield had 

implemented a hiring and spending 

freeze. And, going against federal 

guidance, the city refrained from 

paying vendors for services not 

rendered, in an effort to minimize 

revenue losses. These companies 

had access to funding through the 

Paycheck Protection Program and had 

laid off their staff, in addition to not 

providing any services. 

Making the most of its past experience, 

the city generated millions in cash, 

which it kept and reinvested. When 

cities and towns reached out to the 

state for help, this time they were told 

to go talk to Springfield. 

In the first 14 months of the pandemic, 

the city spent $38.1 million on its 

COVID-19 response and recovery— 

and it expects to be reimbursed for 

every dollar. Once again, Springfield’s 

technology infrastructure makes this 

possible: Every expense related to 

COVID-19 is tracked, from equipment 

and resources to labor hours. 

When 30 firefighters were out at 

the same time with COVID-19, the 

department generated an enormous 

amount of overtime—but these hours 

were easily segregated and reimbursed 

in full by FEMA. The same goes for 

labor and additional equipment 

purchased to streamline meal 

preparation and distribution at feeding 

sites set up across the city. Since the 

start of the pandemic, Springfield has 

provided 7.5 million meals to foodinsecure 

students and families. Anyone 

is welcome to pick up breakfast, lunch, 

dinner, a snack, and a gallon of milk, 

seven days a week. And it’s all funded 

by federal grants and reimbursements. 

Of course, Springfield’s 62,000-squarefoot 

Culinary Nutrition Center, 

which opened in 2019 at a cost of $21 

million, played a significant role in 

supporting these efforts to care for our 

community. None of this would have 

been possible without this facility and 

its staff. In fact, previous investments 

in technology, city infrastructure, and 

community-based programs allowed 

Springfield to achieve countless 

advantages, along with the strategic 

relationships the city built and the 

experience it gained along the way. 

When Springfield brought in an 

industrial hygienist in spring 2020 to 

help its schools prepare for bringing 

kids back into the classroom, it learned 

that only six of its 60 public schools 

required HVAC upgrades. Eight of 

Springfield’s schools are new, having 

been built since 2007, and most others 

had received substantial updates. As 

a result, the total cost for air cleaning 

equipment was just $6 million. 

The schools also benefited from a 

fully implemented technology policy, 

which meant there was no delay in 

transitioning students to remote 

learning. Every student in Grades 2–12 

was already equipped with access to 

a take-home laptop. The city’s only 

additional expense was $3.5 million to 

purchase laptops for kindergartners 

and first graders, as well as iPads for 

pre-K students, and it coordinated 

delivery through one of its longtime 

transportation partners as part of 

a negotiation to keep their drivers 

employed, while also delivering meals 

to seniors and unhoused families 

throughout the city. 

Today, Springfield is on track to 

generate $15 million in free cash by 

the close of FY2021, and it has plans to 

maximize those funds, jumpstarting 

many of the projects that were paused 

abruptly in March 2020. The city has 

already received an influx of money to 

revitalize its economy and create jobs. 

Springfield is working to address food 

insecurity across the city and delivering 

aid to its nonprofits, businesses, bars, 

and hospitality venues. 

But challenges persist, like the extra 

costs associated with the massive rise 

in the volume of residential trash and 

looming concerns that companies 

might not return to their long-vacant 

downtown office spaces now that 

their teams have gotten accustomed 

to working from home. Springfield 

city government, however, has faced a 

decades-long uphill battle to revitalize 

the city, and no matter the challenge, it 

has no intention of slowing down. 

Perseverance pays 

When Springfield reluctantly fell under 

the control of the Finance Control 

Board in 2004, it was the culmination 

of decades of bad decisions, bad 

circumstances, and, yes, some bad 

luck. The decline of the manufacturing 

sector and the near-total erasure of 

blue-collar jobs throughout the latter 

half of the 20th century had gutted 

many once-vibrant cities and left them 

struggling financially. Springfield was 

not immune to these trends. It took 

many years to reach that low point, 

and the city government realized that 

it would take many more years to pull 

itself out. 

Here we are again—this time, emerging 

from a global health and economic 

crisis. But Springfield is far more 

prepared and confident in its ability to 

recover quickly. It has rebounded from 

dark days before and is stronger for it. 

Here’s to a brighter, more prosperous 

future for Springfield and every 

midsize city in America. 

Timothy J. Plante is the chief 

administrative and financial officer for 

the City of Springfield, Massachusetts. 


How a Proud City Built a Fiscally Sustainable Future 

Discover how local leaders revitalized the City of Springfield, Massachusetts, 

through strong financial management, technology upgrades, savvy data 

analysis, and people power. 

It’s an inspiring story that 

everyone in government 

can learn from. 

Receive your free book at 

ukg.com/gfoabook 

TIMOTHY J. PLANTE | Introduction by MAYOR DOMENIC J. SARNO 

80

In Practice 

FINANCE | ACCOUNTING | PERSPECTIVE | INTERVIEW 

FINANCE 

On the Art of 

Collaboration 

at Long Beach 

BY KATIE LUDWIG 

For the leaders of the City 

of Long Beach, California, 

Budget Office, collaboration 

is part of their day-to-day 

job, but they don’t take it 

for granted. The team works hard to 

nurture a culture of collaboration 

within and outside of the Budget 

Office, which they believe allows them 

to serve their community better. 

The Budget Office leadership team 

consists of Budget Manager Grace H. 

Yoon, Budget Management Officer 

Rhutu Amin Gharib, Revenue 

Management Officer Geraldine Alejo, 

and Budget Analysis Officer Greg 

Sorensen, who just recently became 

a part of the team. For the City of 

Long Beach, the budget function falls 

within the Department of Financial 

Management (longbeach.gov/finance), 

which is one of 23 departments. For 

FY 2021, the city had a $2.8 billion 

budget, spread across 37 funds. The 

Department of Financial Management 

has nearly 250 employees and consists 

of seven bureaus: Budget, Accounting, 

Business Services, Commercial 

Services, Fleet Services, Treasury, and 

Administration. The Budget Bureau 

has about 15 employees. 

Rhutu, the budget management 

officer, has been with the department 

since 2006, working her way up from 

a budget analyst position. She has 

been in her current role for six years 

and oversees the functions related to 

internal Budget Bureau operations 

and management. This includes 

implementing all the processes 


IN PRACTICE | FINANCE 

involved in developing the upcoming 

year’s budget, facilitating major fiscal 

milestones such as closing out the old 

fiscal year and getting the new one 

started, and managing the calendar 

that maps out all the projects that 

staff must complete throughout the 

year. Along with Geraldine and Greg, 

Rhutu oversees the citywide review of 

budget amendments and fiscal impact 

statements of city council letters. 

Geraldine, the revenue management 

officer, started with the City of Long 

Beach in 2008 as a graduate student 

intern. She worked her way up from 

an analyst to the management level 

and did a few stints in other city 

departments, but she has always come 

back to the Budget Office. “For me, the 

Budget Office has become my home. 

Even with the pressure and the stress 

and the complexities, the challenges 

and the people have always been that 

home base for me to come back to,” 

she said. Her responsibilities include 

forecasting general fund revenue, 

including sales tax, property tax, and 

franchise fees, and reviewing current 

performance to ensure that the city’s 

financial projections are based on the 

most up-to-date information available. 

Grace, the budget manager, oversees 

the entire budget operation. “My 

job is really just to cheerlead Rhutu, 

Geraldine, and the rest of the budget 

team on,” she said. “We work very 

closely together.” 

Grace believes that the value of 

collaboration is greatest when a crisis 

hits. “How much team capital do you 

have to draw on when there’s a crisis 

or when there’s a fire? For me, I think 

the test and the value of collaboration 

isn’t when things are smooth-flowing 

or when we’re just having fun—it’s 

when the crisis hits. It’s when the 

stress runs high. It’s when there’s 

pressure from all sides to meet 

sudden, unexpected deadlines. That’s 

when you really see the power and 

the value of a culture of teamwork, 

friendship, and collaboration, and 

that’s why I think it’s so prudent to 

invest in it prior to any crisis.” 

New demands 

Grace explained that the last two 

budget years have been quite 

challenging for her team. They’ve 

navigated through historic changes 

for the city, including a move into a 

new City Hall building, rolling out a 

new enterprise resource planning 

system, and then the pandemic. “I 

truly do not think we would have been 

able to get through it as successfully as 

we did if it weren’t for the foundation 

of trust and collaboration that we have 

in place,” she said. 

The city’s fiscal year runs from 

October through September, so 

normally the budget team starts its 

development process in January. The 

city paused the development of its 

FY 2021 budget when the COVID-19 

82

pandemic hit in March 2020 as staff 

in every department were diverted to 

assist with the response and recovery 

efforts. The process did not start 

back up until late May 2020, leaving 

the Budget Office with extremely 

limited time to implement an entire 

budget process and prepare a budget 

book, which is normally presented to 

the mayor in early July, followed by 

meetings with the city council and 

the community in August. The budget 

is usually adopted in September, 

according to deadlines specified in the 

city charter. Given the significantly 

truncated timeframe, the team had to 

quickly brainstorm and rethink how 

they would meet all the deadlines and 

prepare a budget that would serve the 

city well in the coming year. 

Grace described the strategies that 

the team came up with to meet these 

new demands, including developing 

updated projections and creating 

a multifaceted budget balancing 

approach. “Before the pandemic, 

our general fund shortfall was $9 

million. Post-pandemic, it was $30 

million. That’s a different nut to 

crack.” The team also implemented 

an expedited timeline for reviewing 

budget proposals and a modified 

proposed budget book that was 

designed to communicate the 

critical budget topics with key data 

reports that needed to be developed 

manually, since numbers were not 

yet available in the budget system 

due to the time constraints. 

True partnership allows teams to 

emerge from crises stronger than 

they were before, Grace said, adding 

that collaboration provides “a certain 

sense of hope that we can continue 

to tackle problems and address 

things as a team in the future.” 

Grace also credits collaboration 

with having a positive impact on 

staff longevity. “When there is 

collaboration and trust, there’s 

this acknowledgment of people’s 

personal and professional lives that 

leads to longevity; and when people 

stay around, because they feel valued 

in that sense, that makes our unit 

stronger and the city stronger because 

then there’s more institutional 

knowledge,” she explained. 

Grace noted that the Budget Office 

had very high levels of staff turnover 

in the past because of the quickpaced, 

high-pressure working 

environment. She is pleased that 

this trend has slowed. “We haven’t 

had turnover in years,” she said. 

“If people leave, it’s because they’re 

getting promoted. Not every 

analyst is necessarily looking to be 

promoted, and that’s wonderful. 

We’ll keep our analysts forever if 

they want to stay, but we’re also 

super supportive of their growth 

and want to support them if they 

want to leave and pursue other 

management opportunities.” 

External collaboration 

Geraldine believes that a strong 

partnership between the Budget 

Office and the other departments is 

necessary for the team to do its job 

effectively. She noted that to fully 

understand any challenge the city 

might be experiencing in managing 

its funds, the Budget Office must 

work closely with departments 

to understand the finer details. 

Information from the departments 

about the current and future state 

of their operations, coupled with 

the Budget Office’s big-picture 

evaluations, help put together a 

cohesive story. “It allows us to explain 

where we land or where we could 

land in the future for each and every 

one of our funds,” she explained. 

In another example of external 

collaboration, Grace and John Gross, 

the chief financial officer/director of 

financial management, meet weekly 

with City Manager Thomas B. Modica 

and his executive team. “We talk 

every week about various issues and 

strategy because Budget touches 

all the departments and all the 

operations,” Grace said. She believes 

these weekly check-ins are important 


IN PRACTICE | FINANCE 

to ensuring that the budget remains 

connected to the city’s strategic 

goals. Because the last couple of 

years have been so abnormal, Long 

Beach couldn’t follow the typical 

playbook for developing the budget 

or managing internal and external 

communications. These weekly 

meetings help ensure that Grace and 

her team can adapt to any shifting 

priorities and plans, and ultimately 

allow the Budget Office to support the 

city in serving the community better. 

Rhutu mentioned that in addition 

to the weekly meetings with the city 

manager, Grace also participates 

in a weekly meeting with all the 

department directors and shares 

pertinent information from the 

meetings with the entire Budget 

Office staff. This information from 

executive and director-level meetings 

helps them do their jobs better, Rhutu 

said. With the information coming 

from these meetings, Budget Office 

staff will often pull together meetings 

with several departments to get 

everyone on the same page, so they 

don’t have to relay information back 

and forth to multiple departments. 

“Not only is collaboration within our 

group really great, but it has worked 

its way into how we operate with 

other city departments,” Rhutu said. 

Similarly, Geraldine also mentioned 

how important it is for the Budget 

Office to convene other departments 

as partners in solving problems. “We 

bring together the relevant parties 

because we can’t make decisions or 

strategize or figure out problems 

on our own as a budget office,” 

explained Geraldine. “Department 

collaboration is key. There is nothing 

we can do without them.” 

Geraldine described the budget book 

itself as the physical representation 

of citywide collaboration. “Yes, 

the Budget Office puts it together, 

everything from the words on the 

paper to the numbers in the book, 

but absolutely all of the details, 

everything, is a huge collaborative 

effort,” she explained. 

As part of their continuous 

improvement efforts, the Budget 

Office team regularly reflects on how 

they can improve their relationship 

with the other city departments. 

Grace acknowledged that she and 

her team give the departments a 

lot of deadlines and demands that 

contribute to their ongoing stress, 

and as such they regularly reflect 

on how they can do a better job 

communicating and listening to 

them to understand their needs and 

any shifting priorities. She knows 

that not everyone will be satisfied at 

every step of the budget process, but 

she believes that adopting a growth 

mindset and working to improve 

will lead to “a stronger team that’s 

ultimately best for the city and best 

for the community.” 

Because we allow 

everyone to live up to 

their potential, give them 

space, and empower 

them, it automatically 

makes them just want to 

put in that extra work.” 

GRACE YOON, BUDGET MANAGEER 

Three pieces of advice 

When asked what they would 

recommend to other public finance 

leaders looking to develop a culture of 

collaboration, Grace outlined three 

key pieces of advice. 

Be purposeful, work at it, and 

make a conscious investment in 

collaboration. “Culture is not an 

accident; it takes hard work. Also, if 

it’s as valuable as we say it is, then we 

shouldn’t shy away from the things 

that might erode it,” Grace said. “So, 

if there’s a miscommunication or a 

conflict, that’s something we need to 

work on right away. We don’t want 

to let it fester.” She explained that 

the budget team is made up of a very 

diverse group of personalities. Some 

are loud; some are quiet. Some are 

spontaneous, and others are more 

methodical. As a result, the team 

has to be very purposeful in how it 

communicates and works together. 

“It’s easy to think that collaboration 

or connection is something natural 

and easy—but it’s really not. It takes 

work and investment and, sometimes, 

difficult conversations. We’ve had times 

where there was miscommunication 

between people, and we’d have to just 

directly talk about it, and work through 

it. I think, ultimately, that it’s not about 

being this perfect team or this perfect 

image where everyone is just nice and 

talking happily with each other; it’s 

about creating that environment where 

people can be authentic.” 

“I think that no matter what, any 

team is going to have challenges. It’s 

just a matter of how upfront they are 

about it, and whether it’s addressed 

or acknowledged,” said Grace. “It’s 

just normal. It’s natural. People are 

different; people work differently. 

I think it’s smart to expect it, and 

not be surprised that collaboration 

and building a culture of teamwork 

is something that you have to work 

toward.” 

Focus on each individual’s strengths. 

“If you focus on the individual 

strengths gifts, and talents that people 

bring, you can treat each person 

as an investment in your team and 

culture. Otherwise, you’re trying to 

hammer people into a certain box, 

and you’ll just get frustrated,” Grace 

explained. “When their strengths 

are used strategically, they feel more 

empowered, and they have successes 

and wins that align with where their 

abilities are.” 

Grace explained that in the Budget 

Office, the hierarchy of manager, 

officer, and analyst is just for 

organizational purposes, and that 

operationally, the bureau is quite flat. 

“The analysts are smarter than us,” she 

said. “They have to tell us what’s going 

on. They correct us, and we need them 

to do that. We need them to have that 

voice. We’re better for that.” 

“There’s very much a sense of 

empowerment, that the leaders are not 

84

just the people who have a title who 

are on top, but everyone can step up 

and take ownership,” she said, adding 

that this leads to staff taking greater 

initiative and developing projects 

independently. If they see something 

that doesn’t make sense, they will 

follow up on it on their own. 

Rhutu believes that empowering 

staff in this way also makes them 

more accountable. “Because we allow 

everyone to live up to their potential, 

give them space, and empower them, 

it automatically makes them just want 

to put in that extra work,” she said. 

Foster an atmosphere of gratitude 

and patience. “It sounds potentially 

cliched, but I really think it’s a truly 

powerful engine that can drive a 

team forward and avoid burnout or 

stagnation,” Grace said. 

An atmosphere of gratitude and 

patience also reinforces the idea of 

empowering staff because it means 

we appreciate and acknowledge them 

for their specific efforts, and at the 

same time lets them know that it’s OK 

to make a mistake. The Budget Office 

staff maintains a shared spreadsheet 

each year that they call the “Things 

to Improve List.” “We encourage all 

our staff, as things are happening, if 

things don’t work out, to throw it on 

the list,” said Grace. “Getting better 

and improving shouldn’t be a taboo 

topic.” She wants her staff to feel 

emboldened to try new things and 

hopes that the list shifts the mindset 

from one of failure and defensiveness 

to learning and doing better in the 

future. 

For Rhutu, fostering this kind of 

atmosphere means being relatable 

as a manager. She cited Grace and 

John Gross as examples. “Grace is 

one of the smartest people I know, 

and she will be ready to explain any 

topic to you at your level and welcome 

questions and discussion,” she said. 

She went on to explain that Grace 

always has a positive attitude, but 

at the same time she’ll acknowledge 

when a colleague might be having a 

bad day and allow that person space 

to have those feelings. Similarly, she 

said John will sometimes drop in on 

a Budget Office staff meeting and 

sit on the floor and refuse a chair. 

Quirky behaviors like this show that 

no one in the office is better than 

anyone else, and they have endeared 

him to the staff over the years. 

Rhutu said that Grace and John 

have inspired her to be as relatable 

as possible, which reinforces the 

culture of staff empowerment. 

“Relatability allows you to feel like 

it’s OK not to meet the mark because 

everybody is not going to do that 

every time. But we are a team, and 

we can tackle it together,” she said. 

Katie Ludwig is a senior manager 

in GFOA’s Research and Consulting 

Center. 


IN PRACTICE | ACCOUNTING 

Ch-Ch-Ch-Changes: Adopting GASB GAAP 

BY MICHELE MARK LEVINE 

On May 20, 2021, 

the Governmental 

Accounting Standards 

Board (GASB) issued 

an Exposure Draft 

(ED) titled Accounting Changes and 

Error Corrections. With this ED, GASB 

is looking to bring more consistency to 

the reporting and disclosure of events 

that result in changes to previously 

reported information or potentially 

distort trend analysis. The clarity will 

likely be welcomed by most interested 

parties, although the additional 

reporting and disclosure requirements 

may not be welcome by all preparers. 

For those with opinions—pro or con— 

GASB is soliciting public comments 

on the proposals, which are due by 

August 31, 2021. 

The scope of the ED includes proposed 

definitions of, and accounting and 

reporting standards for, (1) accounting 

changes, including changes in 

accounting principles, changes in 

accounting estimates, and changes to 

or within the financial reporting entity; 

as well as for (2) corrections of errors in 

previously issued financial statements. 

The ED also clarifies that the first-time 

adoption of GASB generally accepted 

accounting principles (GAAP) is neither 

an accounting change nor an error 

correction. 

One key aspect of the ED is a proposed 

disclosure requirement for a schedule 

disclosing the effects of accounting 

changes and error corrections on 

beginning position, effectively serving 

as a crosswalk from previously issued 

financial statements to the adjusted 

and/or restated financial statements 

(“crosswalk schedule”). 

Changes in accounting principle 

The ED proposes defining a change 

in accounting principle as the 

application of an accounting principle 

to transactions or other events 

(hereafter collectively referred to as 

“transactions”) of a similar type that 

are different from—and preferable 

to—the accounting principle 

previously applied to that type of 

transaction. 

The proposed definition of a change 

in accounting principle excludes 

initial adoption and application 

©2021 ANNA GODEASSI C/O THEISPOT.COM 

86

of an accounting principle to 

transactions that: 

• Are clearly different in substance 

from those previously occurring, 

• Are occurring for the first time, or 

• Were previously insignificant in 

their effect. 

Also excluded from the definition of a 

change in accounting principle are (1) 

implementations of new authoritative 

GAAP pronouncements and (2) changes 

from the application of a non-GAAP 

accounting principle to the application 

of a GAAP accounting principle, for 

transactions and events that were 

previously significant—the latter being 

error corrections, which are separately 

addressed in the ED and discussed below. 

Changes that must be justified as being 

preferable to the previous practice 

(including changes in accounting 

principle and changes in estimation 

methodologies, discussed below) must 

be preferable based on the qualitative 

characteristics of financial reporting 

in GASB’s conceptual framework, 

which are: 

• Understandability, 

• Reliability, 

• Relevance, 

• Timeliness, 

• Consistency, and 

• Comparability. 1 

A change in an accounting principle 

(other than a change that results 

only in reclassification in financial 

statements, which are discussed 

below), absent specific transition 

guidance, 2 is proposed to be accounted 

for retroactively, by: 

• Restatement of financial statements 

for each individual prior period 

presented, by applying the newly 

adopted accounting principle (“new 

principle”), if practicable; and 

• Restatement of the beginning net 

position, beginning fund balance, 

or beginning fund net position, as 

applicable (hereafter collectively 

termed “beginning position”) for the 

cumulative effect, if any, of the change 

on prior periods, to earliest period 

presented applying the new principle. 

That earliest period will be either: 

– The earliest period presented, or 

– The earliest period for which it 

is practicable to apply the new 

principle, if later. 

This proposal would represent a 

change from the current authoritative 

guidance on the accounting for changes 

in accounting principle, which requires 

adjusting the beginning position in the 

period of the change for the cumulative 

effect of changing to a new principle. 3 

Required disclosures for a change in an 

accounting principle, absent specific 

transition guidance, are proposed to be 

composed of: 

• The nature of the change, including 

identification of the financial 

statement line items (other than 

totals and subtotals) affected, 

• The reason for the change, including 

why the new principle is preferable, 

except when implementing new 

GAAP (because the new GAAP is 

assumed to be preferable), and 

• The reason it is not practicable to 

restate prior periods presented, if 

applicable. 

• Additionally, the effect of the change 

is proposed to be included in the 

crosswalk schedule discussed below. 

Changes in accounting estimate 

A change in accounting estimate is 

proposed to be defined as one that 

results from changes to the inputs 

(such as data, assumptions, and 

measurement methodologies) used to 

determine the accounting estimate, 

which is an output. 

A change in an accounting estimate 

is proposed to be accounted for 

prospectively, by recognizing the 

effects of the change in the reporting 

period in which the change occurs. This 

does not represent a change from the 

current authoritative guidance on the 

accounting for changes in estimates, 4 

but it does more clearly state that the 

classification includes changes in 

estimation methodologies, which are 

now sometimes erroneously treated as 

changes in accounting principles. 

Required disclosures for a change in an 

accounting estimate are proposed to be 

composed of: 

• The nature of the change, including 

identification of the financial 

statement line items (other than 

totals and subtotals) affected, and 

• The reason for the change, if the 

change is the result of a change 

in measurement methodology, 

including why the new methodology 

is preferable, as discussed above. 

Changes to or within the 

financial reporting entity 

A change to or within the financial 

reporting entity is proposed to be 

defined as one that results from: 

• The addition or removal of a fund, 

including from a government’s 

blended component units (CUs), 

• A change in the presentation of a 

governmental or enterprise fund as 

major or nonmajor, 

• The addition or removal of a CU (note 

exclusions, discussed below), or 

• The change in presentation of a 

CU (bended versus discrete). 


reporting entity is proposed to exclude: 

• Acquisitions, mergers, and transfers 

of operations that result in the 

addition or removal of a discretely 

presented CU, and 

• CUs reported because of 

the reporting government’s 

noninvestment majority equity 

interest. 


reporting entity is proposed to 

be accounted for by adjusting the 

beginning position for the effect of the 

change, as if the changed occurred as of 

the beginning of the reporting period. 

Current GAAP include changes in the 

reporting entity as a special type of 

change in accounting principle, 5 which 

requires restatement of prior periods 

when they occur. 6 Current GAAP 

more narrowly defines this category, 


IN PRACTICE | ACCOUNTING 

however, limiting it to changes in 

which legal entities are included in 

the reporting entity, rather than also 

including changes within the entity 

(such as changes in the presentation 

of a governmental or enterprise fund 

from major to nonmajor or vice versa, 

and the addition or removal of funds). 

The proposal to include such fund 

reclassifications would call attention 

to and require explanation of events 

that routinely occur as a result of 

governments annually applying the 

quantitative test for major funds. 

Proposed disclosure requirements 

for a change to or within the financial 

reporting entity include the nature 

and reasons for each change, and the 

effect of the change is proposed to be 

included in the crosswalk schedule 

discussed below. 

Error corrections 

Accounting errors are proposed to be 

defined as resulting from mathematical 

mistakes, mistakes in the application 

of accounting principles, or the 

oversight or misuse of facts that existed 

at the time the financial statements 

were issued, specifically those about 

conditions that existed as of the 

financial statement date, that could 

reasonably be expected to have been 

obtained and taken into account at 

that time. 

A correction of an error (other 

than a correction that results only 

in reclassification in financial 

statements, which are discussed 

below) is proposed to be accounted for 

retroactively by restating financial 

statements for each individual prior 

period presented, and for restating 

the beginning position for the earliest 

period presented, for the cumulative 

effect of the change on periods prior to 

the first period presented. This does 

not represent a change in the currently 

required accounting for corrections of 

errors in previously issued financial 

statements. 7 

Disclosure for an error correction is 

proposed to require the inclusion of: 

• The nature of the error and its 

correction, including identification of 

the financial statement line items (not 

sub/totals) affected. 

• The effect of the correction on the 

change in net position, fund balance, 

or fund net position, as applicable, 

of the prior period. 

Additionally, the effect of the error 

correction is proposed to be included 

in the crosswalk schedule, discussed 

below. 

Accounting and disclosure for 

changes in accounting principle 

and corrections resulting in 

reclassification only 

Changes and corrections that have 

no effect on beginning position are 

proposed to be reported by applying 

the reclassification to all prior periods 

presented for an error correction, or 

for all prior periods, if practicable, for 

a change in accounting principle. 

Required disclosures under these 

circumstances are proposed as follows: 

• For changes in accounting principle, 

– The nature of, and reason for, 

the accounting change, including 

why new principle is preferable 

(except when implementing new 

GAAP), and 

– The reason why reclassification 

of prior periods presented for 

an accounting change is not 

practicable, if applicable, or 

• For an error, the nature of the error 

and its correction. 

Display of the aggregate effect 

of accounting changes and error 

corrections 

The ED proposes to require that the 

aggregated amount of adjustments of 

beginning position from all accounting 

changes and error corrections be 

displayed for each financial statement 

column, excluding totals. This would 

be a new requirement for preparers. 

Crosswalk schedule 

The ED proposes to require 

governments to disclose, in a table 

that reconciles beginning balances, 

as previously reported, to beginning 

balances, as restated for each 

financial statement column (excluding 

totals), for the following occurrences 

during the period that resulted 

in restatement (unless separately 

displayed in the financial statements): 

• Each change in accounting principle, 

• Each change to or within the 

reporting entity, and 

• Each error correction. 

Governments would disclose each 

of the above items separately for 

each reporting unit, combined to 

avoid unnecessary duplication. This 

would also be a new requirement for 

preparers. 

Required and other 

supplementary information 

(RSI and SI) 

The ED proposes to require that: 

• For periods that are included in both 

the basic financial statements (BFS) 

and RSI/SI, the reporting in RSI/SI 

should follow that in the BFS, and 

– For periods present in RSI/SI but 

not in the BFS, information should 

not be restated for changes in 

accounting principles, but 

– Should be restated for error 

corrections. 

When prior period information in RSI 

is inconsistent with current period 

information because of an accounting 

change, an explanation for that 

inconsistency should be provided. 

An explanation in MD&A should 

reference the related note disclosure. 

Current GAAP do not directly address 

restatement of RSI and SI, and the 

proposal to require restatement of 

all prior periods in the case of an 

error correction may be a burden to 

preparers. 

Michele Mark Levine is the director 

of GFOA’s Technical Services Center. 

1 

It is noteworthy that these characteristics 

may be at odds with each other. For example, 

a change to using estimates rather than 

awaiting final actual results when measuring 

unavailable revenue in a governmental fund 

may be justified as being preferable based on 

timeliness, while a change from using estimates 

to awaiting final actual results may be justified 

as being preferable based on reliability. 

2 

Such as in transition guidance in new GASB 

pronouncements. 

3 

GASB Cod. Sec. 2250.139-.140. 

4 

GASB Cod. Sec. 2250.146-147. 

5 

GASB Cod. Sec. 2250.134. 

6 

GASB Cod. Sec. 2250.149. 

7 

GASB Cod. Sec. 2250.123-124. 

88

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IN PRACTICE | PERSPECTIVE 

Improving Procurement Practices 

in the Wake of the Pandemic 

Historically, procurement 

has often been something 

of a backwater of state 

and local government 

management. But when the pandemic 

hit, procurement officers suddenly 

became either the heroes or the goats 

of government service. Shortages 

of masks, ventilators, cleaning 

equipment, and even toilet paper 

seized the public’s attention and 

provoked calls for reform. 

Now, with the aid of vaccinations, the 

pandemic has been waning. But many 

in government continue to be focused 

on ways to improve their procurement 

practices. Even though the pandemic 

has been a singular event, other 

emergencies can easily smash supply 

chains, leading to shortages of 

necessary goods and services. 

“Reading about the 1918 pandemic,” said 

Nathan Myers, associate professor of 

public science and public administration 

at Indiana State University, “there 

was a sense of collective amnesia. It 

was such a terrible thing that people 

chose to forget it. Hopefully with more 

documentary evidence now, people 

will remain committed to seeing 

procurement reform through.” 

Of course, even in the absence of a 

pandemic, hurricane, tornado, or 

wildfire, the necessity of strategic 

procurement policies is a day-to-day 

concern. 

Purchasing practices that focus 

only on low-bid have been common 

practice historically. However, as more 

governmental entities work towards 

not only budget goals, but also consider 

business continuity, long-term financial 

Katherine Barrett & Richard Greene 

planning, and impact on service level – 

many governments have begun consider 

risk and quality factors beyond price. 

Michael Owh, chief deputy director at 

the internal services department of the 

County of Los Angeles, said: “The world 

had prioritized efficiency over resiliency. 

Many were hyperfocused on getting 

the best price.” Owh’s county has been 

reviewing ways to move away from that 

environment, as have many others. 

The State of Florida ran into these kinds 

of issues during the pandemic, and now, 

“we are transitioning away from low 


90

id,” said Carrie Mathes, procurement 

manager for Orange County 

Government in Florida. “Beyond just 

price, we want to know if vendors can 

get services to us without disruption. 

And you can’t necessarily do that with 

low bid.” 

Whether or not low-bid contracts are 

used, one of the most alarming lessons of 

the pandemic is that in times of pressing 

shortages, vendors can turn out to be 

less competent than they first appeared 

to be if they aren’t vetted sufficiently. 

“During the pandemic, states faced 

challenges with irresponsible suppliers 

who were not able to provide the 

materials they promised or whose 

products did not meet the specifications 

required by the solicitation,” said 

Lindle Hatton, chief executive officer 

of the National Association of State 

Procurement Officials. 

Fortunately, he said, “procurement 

professionals are trained to incorporate 

supplier responsibility requirements 

and conduct supplier vetting that helped 

to identify these ‘bad actors.’” 

To be fair, even the most responsible 

vendors couldn’t please all their 

customers over the course of the last 

months. Their own suppliers were often 

in short supply, leaving them caught 

in between. As one distraught vendor 

told us, “I had a customer call me and he 

needed disinfectant wipes. I said, ‘it’ll 

take a month and a half,’ and he started 

screaming at me. People were screaming 

at me all the time. I don’t know what 

they thought, that we were stocking 

everything? Nobody is big enough to 

handle that kind of stocking.” 

One seemingly obvious way for localities 

and states to be sure they have all 

the goods they need, regardless of 

circumstances, is by warehousing. But 

most of the experts interviewed for this 

column agreed that warehousing is 

simply not the best route to guaranteed 

supplies or best use of limited budget 

resources. Rick Grimm, chief executive 

officer of NIGP: The Institute for Public 

Procurement, said, “The key decision 

about warehousing is deciding what you 

need to warehouse versus purchase on 

demand to sustain operations. Are you 

able to define what items you need to 

store in the right quantities and reorder 

points given that there are carrying 

costs of inventory and the risk of 

obsolescence?” 

Beyond these salient questions, publicsector 

warehouses can easily be longterm 

housing for goods that wear out 

before they’re needed. 

Consider the plight of San Diego County, 

California, in the early days of the 

pandemic. The county had warehoused 

N95 masks for just such an event. 

“When the pandemic first hit,” 

recalls Jack Pellegrino, director of 

the department of purchasing and 

contracting for San Diego County, “we 

had something like 300,000 N95 masks 

in our medical operations warehouse, 

and we found that they were beyond 

their shelf life. The elastic bands 

had deteriorated, and they couldn’t 

hold compression. So, in light of the 

Warehousing is 

simply not the best 

route to guaranteed 

supplies or best use 

of limited budget 

resources. 

worldwide shortage and unavailability 

of new N95 masks, we decided to retrofit 

for our immediate emergency needs by 

buying a million large, number seven, 

latex-free rubber bands to replace the 

straps in the back.” 

One alternative to governmental 

entities warehousing for themselves is 

turning to their vendors to do so. This 

isn’t always a viable option, as vendors 

don’t necessarily have the capacity to 

keep sufficient supplies in stock, but 

it can be helpful, and “many states 

have augmented their state-owned 

warehouse capabilities by contracting 

with suppliers to expand storage and 

delivery resources during times of 

crisis,” according to Hatton. 

Another element to a procurement plan 

that can help to provide goods in times 

of short supply is reliance on multiple 

suppliers, instead of just one. This is 

particularly true when the vendors are 

providing supplies on a just-in-time 

basis, and they aren’t necessarily being 

kept in warehouses for provision when 

they’re needed. 

“Procurement officers have learned 

over the last 15 months that single 

sources of supply are often not good,” 

said Pellegrino. He pointed out that 

though there are times when only one 

supplier can be beneficial for obtaining 

quantities of scale and advantageous 

pricing, limitations in sources of 

supplies can unknowingly increase risk 

to an organization during emergency 

situations. 

Many localities have helped buttress 

themselves from shortages—and help 

get good prices—through cooperative 

purchasing, where they join forces with 

other entities to buy larger quantities 

of goods. This makes them even more 

important customers to their vendors, 

which is always a good thing. 

Of course, with cooperative contracts, 

there’s the hazard that individual 

entities won’t vet the details thoroughly 

enough. NIGP’s Grimm said: “When 

accessing cooperative contracts, the 

purchasing agent still has the fiduciary 

responsibility to manage the contractual 

relationship with the supplier. That 

burden does not shift to someone else.” 

In fact, NASPO made an effort during 

the pandemic to support these efforts 

by regularly hosting scheduled calls 

for state chief procurement officers. 

“These calls have allowed states to 

discuss available supply chains and 

identify opportunities for cooperative 

purchasing,” explained NASPO’s Hatton. 

There are, of course, no magic solutions 

to solve all the issues of procurement. 

But the pandemic has been a stressor 

that revealed the weaknesses in supply 

chains and helped to solidify efforts to 

make sure that they’re strengthened in 

the future. There may not be another 

event of this magnitude in our lifetimes, 

but if procurement practices have 

become more strategic because of it, that 

will benefit cities, counties, and states 

for years to come. 

Katherine Barrett and Richard Greene 

are principals of Barrett and Greene, 

Inc (greenebarrett.com). and are coauthors 

of the recently released Making 

Government Work: The Promises and 

Pitfalls of Performance-Informed 

Management. 


IN PRACTICE | INTERVIEW 

DAVID ERDMAN is capital finance director for the State of 

Wisconsin. David has been a member of the State of Wisconsin 

Capital Finance Office since 1994, and he’s been the director 

since 2015. David is also a member of GFOA’s Committee 

on Governmental Debt Management. In this article, David 

discusses his work and hobbies with GFOA’s Ryan Lawler. 

Can you give our readers some 

insight into the work you do at 

the State of Wisconsin? 

I’m currently the capital finance 

director, which means I oversee the 

capital finance office here at the State 

of Wisconsin. I’ve been the director for 

the last five years after learning many 

excellent principles and practices 

from Frank Hoadley, who was the 

capital finance director before me. A 

lot of the principles and practices that 

we still undertake today are things 

that Frank taught me over many years. 

The Capital Finance Office is part 

of the State Budget Office. We work 

with people who develop the state’s 

biennial budget and address day-today 

budget operations. The Office is 

responsible for all borrowings and debt 

issuances completed by the State of 

Wisconsin. We manage five different 

credits in this office, including 

general obligation bonds, a couple of 

appropriation credits, and revenue 

credits. All matters that include 

developing new bonding programs go 

through the Capital Finance Office. 

Our responsibilities also include the 

authorization, issuance, disclosure, 

post-issuance compliance, and 

anything else that relates to bonding or 

capital needs of the State of Wisconsin. 

I work closely with the State Budget 

Director and State Comptroller 

because all our functions are in the 

same division in the Department of 

Administration, and many of our 

functions interact and interrelate. 

I’ve been in the Capital Finance Office 

since 1994. 

I came over to this office from the 

Department of Natural Resources. 

Before that, I was working with 

communities to secure subsidized 

loans from the state revolving fund 

program. 

Have you always had an 

interest in public service? Or 

has it developed over time as 

you’ve gotten more involved 

with the state as you’ve 

changed responsibilities? 

I think people will find out in a hurry 

that there is no college course or 

degree in public finance. Obviously, 

you have a finance or political science 

background, and it’s a mix of those 

two areas, or a legal field, that results 

in public finance. I wasn’t thinking 

92

I’m taking what I 

learned from others 

over my years in debt 

management and 

giving back to those 

who are newer to the 

field, with hopes that 

they will be a longtime 

debt manager 

for their states or 

municipalities. 

when I went to college that I’d be a 

capital finance director for the State 

of Wisconsin. As for the public side 

of it, I’ve always been interested in 

local and state politics. I think it goes 

back to high school. Government has 

always been something that I’ve been 

interested in. 

One of the things we’ve seen 

over the last decade or so is 

sort of the transformation 

of Wisconsin into a political 

bellwether. When it comes 

to political elections, as an 

administrative official working 

for the state, how do you 

navigate the political climate 

to make sure you’re being 

consistent across the board? 

Obviously, Wisconsin has been 

politically active the past few years, 

and we have a pretty big political 

divide right now. I do vote in the 

elections, so I have my personal 

political views. I’ve worked for many 

administrations, some Republican 

and some Democrat. One key part 

of my position is that I’m not a 

political appointee. This office is 

here regardless of who is in charge, 

so we’re able to maintain good debt 

management practices regardless 

of the political affiliations that may 

predominate in the executive or 

legislative branch. 

My approach is that every elected 

official has been elected for a 

reason. My duty is to provide them 

straightforward debt management 

advice but not political advice—just 

financial and debt management 

reasons why we should or shouldn’t 

do something. I tell many people who 

have worked with me that when it 

comes to debt management in state 

government, where there are going to 

be different political theories, there’s 

the smart financial decision and 

there’s also a smart political decision. 

Our duties are to provide information 

to make the smart financial decision 

and to not be frustrated when the 

political decision is made. We’ve done 

our job by providing them information 

that quantifies or qualifies different 

financing scenarios. And if a different 

decision is made, because of politics, 

that is something that happens, and 

we accept that and move on to tackle 

the next assignment. 

You’re an active member 

of GFOA’s Committee 

on Governmental Debt 

Management and you 

do a lot of work with the 

National Association of State 

Treasurers (NAST). It’s also 

not uncommon to see you 

making presentations to 

organizations in the public 

finance community. And all of 

that is in addition to what you 

do with the State of Wisconsin. 

How important is it for you to 

stay engaged in the industry? 

The benefit of being involved with 

the State of Wisconsin is that I’m 

hearing things as they happen in D.C. 

I’m learning new ideas and talking 

to other debt issuers, whether it be 

state issuers or smaller issuers, and 

hearing ideas for programs. I’m able 

to bring that information back to the 

state for the benefit of the state. 

The other reason I’m so active is that 

I’ve been honored and blessed to 

be a debt manager for many years. 

I understand that public finance is 


IN PRACTICE | INTERVIEW 

something that takes some time to get 

your arms around, and I love working 

with new staff here at the state, or at 

within other governments to share 

some secrets and ideas about debt 

management. Also, I feel like I’m 

taking what I learned from others over 

my years and giving back to those 

who are newer to the field, with hopes 

that they will too enjoy a long and 

rewarding career. 

Also, my personal campaign is 

for good disclosure and voluntary 

disclosure. I’ve been doing this long 

enough to see what the Securities 

and Exchange Commission (SEC) did 

with 15c2-12 Municipal Securities 

Disclosure regulations in 1994 

and how that changed the area of 

municipal disclosure. There have 

been some rumblings recently about 

the quality of and the access to 

municipal disclosure, and I really 

think it’s up to the municipal industry 

to be proactive. It will show that 

municipal disclosure has improved, 

and it will demonstrate to the SEC, 

investors, institutional analysts, 

and others that municipal disclosure 

continues to improve and that there’s 

no need to take additional regulatory 

actions. This personal crusade is 

helped by being active in GFOA, NAST, 

and other organizations, and by 

speaking, when asked, to help convey 

my ideas. 

Shifting gears a bit, one of the 

more fascinating things we’ve 

talked about is the volunteer 

work you do in the local 

community, including with 

the EMT service and serving 

as an election inspector. Can 

you tell us about that? And 

how do you manage your 

time both with your work 

responsibilities, staying 

involved in the industry, and 

then also carving out enough 

time to make sure you’re 

making an impact in your 

local community? 

I have three hobbies with my local 

government. I am a chief election 

official, which means I am one of 

the people who run a polling place 

in the City of Stoughton, Wisconsin, 

where we have four polling places. 

I’m also the chair of the utilities 

committee, which is a committee 

of citizen members plus elected 

officials. I’m also a volunteer 

advanced EMT, providing volunteer 

services for our emergency medical 

services in Stoughton. In my city, 

medical services are still provided by 

volunteer service, and there’s about 

42 of us. I am also a squad leader, 

which means that one day of the week, 

I’m responsible for managing people 

on my squad. 

The volunteer EMT service is probably 

the biggest time commitment I have 

outside of work. Finance and “blood 

and guts” are completely different 

areas. I do call it a hobby. I also golf 

and go to baseball games and football 

games, but being an EMT is something 

that takes my mind off work. From a 

finance angle, you hear discussions 

about Medicaid reimbursement 

rates for ambulance services, and 

I get to see it firsthand. Emergency 

medical services vary community 

to community, and it’s something 

that’s evolving in rural America. 

Going back 20 years ago, I would 

imagine quite a few communities had 

a volunteer service, whereas now a 

paid paramedic service is a norm—but 

it’s costly to maintain. My guess is 

that more and more communities will 

phase in emergency medical services 

provided by full-time, paid staff 

sometime soon. 

As an election official, my 

involvement goes with the elections; 

sometimes that’s six or eight times a 

calendar year, and other times there 

are no elections in a calendar year. 

Being a chair of the utilities 

committee is also time-consuming, 

but it’s fun. First, seeing how 

electricity, water, and wastewater 

services are provided through a 

government is very interesting. 

Considering my finance experience, 

I understand that 

public finance is 

something that takes 

some time to get your 

arms around, and 

I love working with 

new staff here at 

the state, or at within 

other governments to 

share some secrets 

and ideas about debt 

management. Also, 

I feel like I’m taking 

what I learned from 

others over my years 

and giving back to 

those who are newer 

to the field, with 

hopes that they will 

too enjoy a long and 

rewarding career. 

94

I can apply some of the debt 

management items that I’ve learned 

here at the state and give some 

feedback to staff at the utilities on 

bonding or other financing ideas. 

It’s a way for me to give back to the 

community in an area where I have 

some experience. In the interim, I 

feel like I’m adding some value to my 

city by providing these services as a 

volunteer. 

Are there any interesting 

stories to share from your 

EMT service (none that would 

violate HIPAA, of course!)? 

I have been providing EMT services 

since 2008 and have seen many good 

things and bad things. Delivering 

a baby in the back of an ambulance 

while going 75 mph down the highway 

will always be a great memory, along 

with the many times an elderly 

person squeezes your hand and says, 

“thank you.” Knowing that our EMT 

crew provided a skill or intervention 

that helped save a life is also very 

rewarding and motivating. EMT is 

not always good, and you see people 

at their worst. Triple traffic fatalities 

to drug overdoses involving people in 

their 20s to family friends who have a 

cardiac arrest, and their heart will 

not respond to your efforts—those 

situations are always tough. And 

any call involving a child is always 

mind-boggling. 

An area of focus for GFOA 

recently is how the role of 

finance professionals in their 

communities is evolving into 

more active engagement in 

conversations in as well as 

being contributing members 

of their communities. Do you 

see the volunteer work that 

you do as an extension of the 

work you’re doing with the 

state, or is it more that you 

just enjoy doing it? 

Well, I think both. I’ve lived in 

Stoughton since 1992. It’s not where 

I grew up, but it’s my home now. 

Offering services and being involved 

in the community allows you to walk 

around on a Saturday and Sunday 

and to know many people and have 

great conversations with them— 

conversations that not only address 

friendly matters, but also address 

the growth, economic development, 

and happiness of the community. Am 

I bringing a lot of debt management 

to those conversations? Thankfully, 

no, as most people aren’t interested 

in discussing bond yields and closing 

transcripts. 

But being involved in public finance, 

you’ll see some of the back-of-the 

envelope calculations and theories on 

how utilities run and how to calculate 

rates for services. It’s intriguing from 

a public finance perspective, but I 

see this more as just being an active 

community member and having the 

ability to give back. When I retire from 

the State of Wisconsin, would I like to 

work for the City of Stoughton in some 

capacity? Most definitely! 

One last, very important 

question—what’s your 

prediction for the NFC North 

this season? 

Well, my first prediction is that Aaron 

Rodgers will be our quarterback on 

week one. And my other prediction is 

that, unlike other recent years, we will 

again win the Super Bowl this year. 

Ryan Lawler is a senior manager in 

GFOA’s Research and Consulting Center. 


10 STEPS 

10 Steps 

to Budgeting 

for Salary 

and Wages 

1 

Forecasting. Salaries typically 

make up the greatest portion of the 

expenditure budget, so it makes 

sense to try and better understand 

how different trends or cost drivers 

may impact payroll costs. 

2 

Personnel tracking system. 

Budget payroll projections are 

based on the estimate of budgeted 

positions for the year, so make sure 

the number of budgeted positions 

is correct. If the system that tracks 

budgeted positions is outside of 

finance, ensure there is regular 

coordination and communication 

to ensure accurate information. 

3 

Vacancy adjustments. Address 

expected vacancies in the salary 

budget. Consider tracking expected 

start dates; reviewing trends 

(average filled positions per year 

versus average vacant positions) 

to determine the dollar impact of 

including a hiring lag; quantifying 

the money saved by not filling 

frozen or eliminated positions; 

tracking unfunded positions; 

and budgeting payouts where 

employees have indicated specific 

retirement dates. 

4 

Collective bargaining units. 

Note the positions that are covered 

under collective bargaining, 

identifying the group name and 

representation, along with the 

beginning and end date of the 

contract and key dates in contract 

provisions; consider setting aside 

reserves for contract settlements. 

Also account for any union 

agreement items such as overtime 

and holiday premiums that may 

be different. 

5 

Impact of inflation. The 

Consumer Price Index is used 

most often for determining costof-living 

adjustments, but the 

U.S. Bureau of Labor Statistics 

Employment Cost Index might be 

a better choice, as it measures the 

change in the cost of labor, free 

from the influence of employment 

shifts among occupations and 

industries. 

6 

Optimal staffing level. Some 

governments compare their 

staffing levels to those of other 

governments; some make hiring 

decisions to fulfill strategic 

initiatives. You might also use 

volunteers or part-time or seasonal 

employees in certain programs 

or services. Some governments 

make more use of overtime instead 

of hiring full-time workers. 

7 

Compensation approaches. 

When analyzing current 

compensation levels, or 

comparing to other governments, 

consider total compensation. 

Costs of benefits, retirement 

programs, employee training, 

and other related costs beyond 

salary can be significant. 

8 

Program costs. You may want to 

consider tracking time and costs 

that relate to the specific services 

that your government provides. 

Tracking costs to specific 

programs can provide better 

data for evaluating cost of service 

and making decisions on how to 

best achieve outcomes. 

9 

Outsourcing or shared services. 

Governments may be able to 

improve service levels or reduce 

costs by considering partnerships 

with vendors, non-profits, or 

other governments. However, 

keep in mind that outsourcing 

some services may not directly 

result in position reductions as 

employees may also be providing 

other services that were not 

outsourced. 

10 

Monitoring. Monitor the salary 

and wages budget throughout the 

year, not just when the budget is 

being put together. Should actual 

results significantly deviate from 

the budget, you’ll need to make 

adjustments. 

For more details, visit: 

gfoa.org/materials/effective-budgeting-of-salary-and-wages 

96

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leadership 

academy 

Registration Opens in Fall 

2 Offerings/Locations for 2022 

For more information, visit 

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GFR_August_2021

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