GFR June 2024

Government Finance Officers Association | JUNE 2024
Tips for building a stronger
budgeting strategy
Improving fiscal fluency
for better communication
Government Finance Review
Team training methods of
high-reliability organizations
How a new approach could
improve accuracy, benefit
the community and cultivate
trust in local government

contents JUNE
2024 | VOLUME 40, NUMBER 3
16
Is it Time to Rethink
Property Taxes?
How fair, accurate
and predictable property
taxes can benefit
local governments
and taxpayers alike
By Shayne Kavanagh and
Christopher R. Berry
26
Sharpening the
Budgeting Strategy
How two Florida cities
transformed their
budgeting process
By Jara Kern and Kel Wang
©2024 MICHAEL AUSTIN; HARRY CAMPBELL C/O THEISPOT.COM
“There were some
pretty happy residents
who came out and said:
‘I don’t have to be a
financial analyst to read
the budget anymore.’”
– Kevin McCarthy, Finance Director
for the City of Indian Wells, California
32
Speaking the
Same Language
How the cities of Shakopee,
Minnesota and Indian
Wells, California improved
their fiscal fluency
JUNE 2024 | GOVERNMENT FINANCE REVIEW 1

contents
36
Real-World
Reliability
How high-reliability
teams build
resilience instead of
chasing zero errors
By Jake Mazulewicz, Ph.D.
40
6 Contributors
Kelli Monroe, chief deputy treasurer for Pinal County, Arizona, stands with
Michael McCord, county treasurer. Read our Q&A with Monroe on page 60.
Run it Up the Flagpole
How the City of Evanston initiated conversations
about the best use of public assets
By Kyle Wedberg
8 From the CEO
10 Rewind: A Look Back at GFR
in February 2002
11 GFOA Job Board Analysis
By Samuel Mann and Mark Mack
15 Discover 5 GFOA Membership Benefits
By Natalie Laudadio
45 ERP Insights: We Require Requirements
By Mike Mucha
50 Getting Ghosted: Eerie Evidence of
Changes within Financial Reporting Entities
Resulting from GASB Statement No. 100
By Michele Mark Levine, Susannah Filipovic,
and Todd Buikema
54 Why Federal Grant Money Can Be So Elusive
By Katherine Barrett and Richard Greene
56 Be Tough, Not Rough, on Your Bankers
By Justin Marlowe
58 An Interview with Evan Zacharia
By Max Pinchak
60 Q&A with Kelli Monroe
By Mike Mucha
64 10 Steps to Better Coordination Between
Finance and Procurement
2

Publisher
Chris Morrill
Editor in Chief
Michael J. Mucha
Managing Editor
Marcy Boggs
GOVERNMENT FINANCE REVIEW
www.gfoa.org/gfr
EDITORIAL
gfr@gfoa.org
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gfr@gfoa.org
CHANGE OF ADDRESS
gfoa.org/update-membership
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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
Laura Allen
President
Maryland Department of
Budget and Management, MD
Terri Velasquez
Past President
City of Aurora, CO
Tanya Garost
President-Elect
City of Martensville, SK
Sonya Andrews
City of Scottsdale, AZ
Lunda Asmani
Norwalk Public Schools, CT
Jennifer Brown
City of Sugar Land, TX
Timothy Ewell
County of Contra Costa, CA
Bruce H. Fisher
Nova Scotia Utility and
Review Board, NS
Edward Gin
New Hampshire Housing, NH
Jason Greene
City of Miami Beach, FL
Anne P. Harty
City of Rock Hill, SC
Sue Iverson
City of Red Wing, MN
Grace Martinez
Metropolitan Transportation
Commission, CA
Debra Roberts
David P. Schmiedicke
City of Madison, WI
Kendel Taylor
City of Alexandria, VA
Diane Waldron
City of Bristol, CT
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 2024 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

CONTRIBUTORS
Christopher R. Berry is the William J. and Alicia Townsend Friedman Professor at the Harris School of Public
Policy and the College and director the Mansueto Institute for Urban Innovation, at the University of Chicago.
Shayne Kavanagh is the senior manager of research for GFOA. He started GFOA’s long-term financial planning
and policy consulting offering in 2002 and has been working with governments on financial planning and
policies ever since. Most recently, Kavanagh has pioneered the use of computer simulation to “stress test”
the long-term financial position of local governments. He is also the author of a number of influential
publications on financial planning and budgeting. His work has earned him a fellowship with the National
Academy of Public Administration, a position on the board of advisors for the University of Chicago’s Center
for Municipal Finance, and recognition as one of the 100 most influential people in local government by
Engaging Local Government Leaders.
Jara Kern is a consultant and executive with M. Harris & Co, a Chicago-based marketing agency. She has
interviewed many GFOA members about their accomplishments, innovations, and unique approaches to
implementing best practices and writes about it for GFR. Kern holds an MBA from the University of Wisconsin-
Madison and an undergraduate degree in classical music performance from the Oberlin Conservatory of
Music at Oberlin College.
Jake Mazulewicz, Ph.D., is director of JMA Human Reliability Strategies. He has researched, taught workers,
and advised policymakers about how to address errors by applying defenses, improving processes, and building
resilience. Mazulewicz shows leaders in high-hazard industries why errors are signals, not failures, and how to
address the deeper problem, so everyone can work more reliably and safely. He keynotes and advises globally.
Mazulewicz has a decade of experience in safety for electric utilities, and he has served as a firefighter, an EMT,
and a military paratrooper.
Kyle Wedberg, Ph.D., is a senior manager in GFOA’s Research and Consulting Center. Wedberg’s professional
career has focused on government, education, and public service. He has served as a senior budget analyst
in the Office of Budget and Management for the City of Chicago, Illinois; deputy chief financial officer of
the School District of Philadelphia, Pennsylvania; chief administrative officer of the Louisiana Recovery
School District; and president and chief executive officer of NOCCA, a performing and visual arts high school
and agency of the State of Louisiana, where he was recognized as the outstanding national art school leader.
Kyle has a BA from St. Olaf College, an MPA from the University of Massachusetts at Amherst, and a Ph.D. in
Public Policy from the Southern University and A&M College Nelson Mandela School of Government.
Kel Wang is a passionate practitioner and thought leader for data practices. He is the lead data and performance
expert with the Bloomberg Center for Government Excellence (GovEx) at Johns Hopkins University. Before
joining GovEx, Wang had spent more than a decade in local government. His work was recognized by the
Certificate of Distinction Award in Performance Management by ICMA four years in a row between 2016 and
2019. He also leads the Advancing Performance Management subcommittee of the Performance Management
Advisory Committee at ICMA and writes regularly for the PM Magazine.
6

FROM THE CEO
Christopher P. Morrill
Executive Director/CEO
Looking Beyond the Conference
GFOA staff has been
hard at work, getting
ready for another big
conference this year in
Orlando. Putting on the
event, scheduled for June 9 to 12 in
Orlando, Florida, requires thousands of
hours of work, with planning starting
as soon as last year’s conference in
Portland, Oregon, closed. We’re excited
to showcase more than 100 sessions
including keynote speeches, concurrent
sessions, pre-conference seminars,
and networking events. We also have
a full exhibit hall, with more than 200
exhibitors, and we’re thrilled to host
several social events including Tuesday
night at Universal Studio. We also have
something new this year—a 5K run on
Sunday morning. In all, we expect to
host approximately 5,000 delegates
from all 50 states, seven Canadian
provinces, four U.S. territories and nine
countries, helping them take advantage
of the opportunities for learning,
networking, and fun in Orlando.
As excited as we are about all we
have planned for the 2024 annual
conference, we also realize that many
of our members aren’t able to attend.
In fact, approximately 80 percent of
GFOA members won’t be attending
the event. So, for all our members
who can’t travel or are just looking
for opportunities to engage with their
GFOA peers from the convenience of
their own offices, I want to highlight
a few events we have coming up.
Best Practices Forum (virtual, July
29-August 2). GFOA’s Best Practice
Forum provides an overview of
essential best practices across all
disciplines of public finance. Over
the course of a week, GFOA presenters
will highlight more than 20 individual
best practices and provide the latest
information on trends, implementation
considerations, and essential practices
for all governments. This training
event provides finance professionals
in all types of organizations with an
opportunity to better understand what
defines the best practice in a wide array
of topics, along with interactive elements
that attendees can use to conduct selfassessments
and learn from each other.
Each session will feature presentations
on key elements of GFOA’s best practice
statements, a case study showing how
the best practice was implemented, and
an interactive self-assessment exercise
that allows you to benchmark your results
against your GFOA peers.
MiniMuni (October 9-11). At the 6th
Annual MiniMuni Conference, finance
professionals who work in debt management
will hear from leading experts, seasoned
practitioners, and regulators about a host
of issues that affect municipal issuers.
Whether it is ESG or the Financial Data
Transparency Act, the MiniMuni Conference
guarantees that attendees will walk away
understanding the most pressing issues
in the market, how to best handle all forms
of disclosure, and what their colleagues
across the country are thinking about.
GAAP Update (November 14 and December
5). GFOA will offer two sessions of the
Governmental GAAP Update using GFOA’s
online learning management system.
This four-hour, four CPE session covers
everything there is to know about what’s new
in governmental accounting and auditing.
8

©2024 MICHAEL AUSTIN C/O THEISPOT.COM
Each year, more GFOA members
participate in the GAAP update than
any other training event. Join us to
hear from and interact with recognized
subject matter experts, industry
leaders, and GFOA’s technical award
reviewers. In addition, attendees can
participate in interactive exercises
to test their understanding of the
material being presented.
Affinity group networking sessions.
GFOA now has eight active member
affinity groups that host regular virtual
networking sessions that are free to
members who qualify. The sessions
provide opportunities to connect with
peers, ask questions, share stories,
and build relationships with GFOA
members you have things in common
with. For more information on affinity
groups, or to join one, please go to
gfoa.org/gfoa-groups.
Ongoing educational events. Each
month, GFOA offers virtual classes
from our training catalog, plus
additional webinars on current events
and the latest GFOA research. These
events vary in length from one hour
to multiple days and reach a wide
audience that is interested in public
finance topics. For more information on
registration and a schedule of events,
please go to gfoa.org/events.
Standing committees. If you’d like to
engage with GFOA in a more significant
way, we are now recruiting for our
six standing committees. Each
committee comprises 25 members
who meet in person twice a year, and
remotely throughout the rest of the
year, to discuss and develop GFOA
best practices. Committees provide
an excellent opportunity to not only
learn from other peer leaders in local
government, but also to give back and
share your experiences to better the
profession. Applications are available
at gfoa.org/committee-application.
I encourage you to get engaged with
all GFOA has to offer, and I am always
available to connect with our members.
Sincerely,
GET INVOLVED TODAY!
Learn about essential best practices and how
to implement them by attending our virtual
Best Practices Forum (July 29–August 2):
gfoa.org/gfoa-best-practices-forum
Register for GFOA’s 6th Annual MiniMuni
Conference (October 9–11):
gfoa.org/minimuni
Sign up now for this year’s Governmental
GAAP Update and take advantage of an
early registration discount (two sessions;
November 14 and December 5):
gfoa.org/gaap-update
Connect with other GFOA members by joining
one of our eight affinity groups:
gfoa.org/gfoa-groups
Learn from other leaders and make a
difference. Apply for a standing committee:
gfoa.org/committee-application
View the full schedule and register for
GFOA’s ongoing virtual classes and webinars:
gfoa.org/events
JUNE 2024 | GOVERNMENT FINANCE REVIEW 9

ewind
Sustainability in Portland
A look back at GFR in February 2002
Timothy Grewe, director
of the Budget Office for
the City of Portland,
Oregon, emphasized
sustainability during
his term as GFOA
president. In his 2001 presidential
acceptance speech, he raised the issue
as an emerging critical area of focus for
government finance and for GFOA. As
he explained, “Sustainability touches
all facets of public management,
crossing jurisdictional boundaries and
even national borders. It is a concept
for addressing problems that we all
share—problems that, if left unsolved,
pose grave risks for future generations
and for the future of this planet.”
Grewe discussed climate change
and its many components, including
“brownfield proliferation, deteriorating
water and air quality, overflowing
landfills, and ever-increasing traffic
congestion.” These problems, he
explained, “must be addressed to create
economies and communities that will
be viable for generations to come. Our
essential resources—water, air, habitat,
fossil fuels, even food—are all irrefutably
and eerily finite. More than ever before,
these resources are interdependent.”
And 22 years later, most of us are
aware that average global temperatures
have increased by about 1.7 degrees
Fahrenheit since 1880, and that global
temperature is projected to warm by
about 2.7 degrees Fahrenheit by 2050.
Many of us are trying to come up with
ways to address associated issues
including water shortages, extreme
weather events, and flooding, now,
and in the near future. As Grewe
said, “Our generation will determine
whether an appropriate balance
is struck or irretrievably lost.”
Specific concerns Grewe raised—
increasing temperatures, global
melting, the loss of coral reefs, rising
sea levels, and changes in weather
patterns—have come to pass and are
becoming more of a concern for our
communities every day. He noted
that these are not just environmental
issues but also financial issues, and
“governments are spending more
and more money on environmental
remediation and treatment. We are
being called upon to reduce emissions
and to prevent the buildup of landfills.
Doing business as usual is becoming
increasingly costly. This is why
sustainability is a relevant issue
for public finance professionals.”
Grewe offered suggestions for
what we can do about it, including
reducing waste and recycling; altering
purchasing practices to ensure the
use of more sustainable products;
embracing electronic alternatives
to paper-based processes; ensuring
fuel-efficient fleets; using tree
planting, bio-swales, and eco-roofs to
reduce water runoff and impervious
surfaces; preserving open space;
participating in existing certification
programs; and setting an example by
incorporating sustainable development
and green building alternatives into
our own facilities and infrastructure
practices—all still good strategies.
All problems find their way to the
finance office. In 2002, Grewe urged
GFOA members to “become familiar
with the concepts and philosophy
of sustainability and to work with
our standing committees to identify
issues that need to be addressed.”
In 2024, these problems have not
been solved, or even addressed, in some
cases—instead, they’ve become even
more complicated, expensive, and
seemingly intractable. But more and more
finance professionals are tackling them.
Since 2002, GFOA has produced many
materials on sustainability (available
at gfoa.org). Take a look and see if we
can help your community find ways to
integrate concepts of sustainability in
risk management, disaster planning,
capital budgeting, procurement, debt
management, and overall leadership.
©2024 GARY WATERS C/O THEISPOT.COM
10

In Brief
GFOA RESOURCES | MEMBERSHIP
GFOA RESOURCES
The GFOA Job Board:
An Analysis
BY SAMUEL MANN AND MARK MACK
Analyzing GFOA job board data from June 2020 through December 2023—with more than 5,400 postings—has
helped GFOA better understand the distribution and characteristics of the job openings. Questions that guided
the analysis include:
• Which job titles are most common?
• How do employers describe their open positions?
• What is the average wage being offered?
• How do wages differ across job titles?
• How do wages differ across geographical regions?
• How do wages differ across government types?
Because of the lack of standardization in how the data was collected and the sheer size of the data set, it was
necessary to clean and categorize the data programmatically—which implies that our analysis and findings
are probably affected by some measurement error. But the approach taken was more than rigorous enough to
accomplish the purpose of the analysis—that is, identifying and concisely communicating the quantitative
and qualitative shape of the GFOA’s job board postings.
What follows is a synopsis of our findings.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 11

IN BRIEF
EXHIBIT 1 | JOB BOARD POSITION TITLES
Position titles
Titles for similar jobs vary relatively widely across
organizations, making analysis of a set of titles this
large challenging. We established groupings of titles by
focusing on their “base title”—in this case, “manager.”
(This method obviously erases some nuance, but it
does provide for analysis across the job board without
standardized titles or manual categorization.)
Position descriptions
It isn’t easy to communicate the characteristics of large
quantities of qualitative data. The position descriptions
included with GFOA’s Job Board postings, however,
are both the longest entries for most postings and the
most detailed data points available. Word clouds, while
certainly not precise, are expeditious and the only
reasonable way to try and convey something about the
contents of all 5,000+ position descriptions. The themes
communicated by this word cloud can be interpreted
as describing some of the most common job duties and
some of the most sought-after candidate qualities (see
Exhibit 2).
Leadership
Leadership
Leadership
Leadership
Policy, Planning, and Analysis
Policy, Planning, and Analysis
Policy, Planning, and Analysis
Policy, Planning, and Analysis
Policy, Planning, and Analysis
Accounting
Accounting
Accounting
Accounting
Accounting
Accounting
Accounting
Accounting
Audit
Audit
Budget
Budget
Budget
Compensation
Compensation
Debt Management
Procurement
Procurement
Procurement
Procurement
Procurement
Procurement
Treasury
Treasury
Treasury
Treasury
Chief Financial Officer
Finance Director
Assistant Finance Director
Vice President of Finance
Chief Economist
Director of Revenue Forecasting
Finance and Policy Coordinator
Senior Policy Advisor
Finance Consultant
Controller
Deputy Controller
Assistant – Controller
Senior Accounting Manager
Lead Accountant
Accounting Specialist
Accounting Technician
Accounting Clerk
Senior Internal Auditor
Revenue Auditor
Budget Officer
Budget Analyst
Police Budgeting Specialist
Payroll Systems Manager
Payroll Technician
Debt Administrator
Purchasing Agent
Assistant Purchasing Agent
Contracts Administrator
Senior Buyer
Buyer
Contracting Consultant
Treasurer
Deputy Treasurer
Assistant – Treasurer
Treasury Analyst
EXHIBIT 2 | THE MOST COMMONLY USED WORDS IN
GFOA JOB BOARD POSITION DESCRIPTIONS
12

Wages
Providing some sense of the wage distribution across the
job board, Exhibit 3 provides the summary statistics and a
histogram describing annualized wages. We determined an
annualized wage for 87 percent of job postings. Most of those
not included didn’t specify a wage in their posting by leaving
that section blank or submitting something like, “Salary
will reflect candidate experience and qualifications.”
EXHIBIT 3 | SUMMARY STATISTICS AND HISTOGRAM
DESCRIBING ANNUALIZED WAGES
GFOA Job Board Wage Distribution
Wages disaggregated by base titles
The wages associated with postings on the GFOA job board
vary meaningfully across base titles, with chief officers
being paid the most and specialists being paid the least,
on average.
In Exhibit 4, two figures describing the distribution of
wages are broken out by base title. The first is a boxplot that
emphasizes the quartiles for each distribution. The second
is a ridgeline plot, which more easily communicates the
shape of each distribution.
The wages associated
with postings on the
GFOA job board vary
meaningfully across
base titles.
Mean $110,274.27
Minimum $34,252.00
25% $82,127.75
Median $104,353.00
75% $130,254.00
Maximum $462,500.00
EXHIBIT 4 | THE DISTRIBUTION OF WAGES BY BASE TITLE
To avoid overcrowding, both plots include only those base titles with more than 50 occurrences.
GFOA Job Board Wage Distribution by Title
GFOA Job Board Wage Distribution by Title
JUNE 2024 | GOVERNMENT FINANCE REVIEW 13

IN BRIEF
EXHIBIT 5 | GEOGRAPHIC REGION AND CORRESPONDING FREQUENCIES
GFOA Job Board Wage Distribution by Region
West 2304
South 1233
Midwest 621
Northeast 326
The geographic location of a job
posting is another factor that may
affect the wage associated with
postings on the GFOA job board.
EXHIBIT 6 | FREQUENCIES OF MAJOR GOVERNMENT ORGANIZATIONS
BY TYPE, ALONG WITH WAGES
GFOA Job Board Wage Distribution by Organization Type
Wages disaggregated by region
The geographic location of a job posting is another
interesting factor that could affect the wage
associated with postings on the GFOA job board.
Postings for jobs in the West have the highest
wages, on average, followed by the Northeast,
and then the Midwest, with postings for jobs in
the South receiving the lowest wages on average.
This finding mirrors national trends outside of the
government finance profession.
City 2546
County 922
Transportation 305
Town 280
Utilities 260
K-12 177
Higher Ed 88
State 71
Other* 772
*The Other category represents jobs
in the public finance industry that may
be relevant for state and local finance
professionals, but in non-traditional
organizations. For example, jobs postings
included organizations such as GFOA,
other membership associations, non-profit
organizations, federal agencies, research
centers, and other similar opportunities.
Wages disaggregated by organization type
The type of government organization is another
variable that could affect wages. And although our
analysis does uncover some differences across
organization types, they are less dramatic than
other factors. That being said, state governments
offer the highest wages, on average, and higher
education entities offer the lowest wages.
Exhibit 6 shows each major government
organization type in the data set and its
corresponding frequencies. Additionally, wages
are broken out by organization type.
Samuel Mann is a graduate student intern in GFOA’s
Research and Consulting Center and an MBA/MPP
student at the University of Chicago’s Booth School
of Business and Harris School of Public Policy.
Mark Mack is a senior manager in GFOAs Research
and Consulting Center.
14

MEMBERSHIP
Discover 5 GFOA Membership Benefits
BY NATALIE LAUDADIO
GFOA has a lot to offer. Take a moment to explore these five key benefits, opportunities, and resources.
1
Networking can be difficult, but
GFOA is here to help. Our affinity
groups make it easy to connect
with your peers in a number of areas: the
Alliance for Smarter School Spending,
Black Caucus, Community for Canadian
Issues, LGBTQIA+ Caucus, Small
Government Forum, Urban Forum, Utility
Finance Forum, Women’s Public Finance
Network, and Young Professionals
Network. We also provide virtual
networking events, webinars, and social
events at GFOA’s annual conference.
“I love the leadership role that I have with
GFOA’s Women’s Public Finance Network.
It gave me the opportunity to network
and meet new people. GFOA inspires
me to get out of my comfort zone.”
Carla Ann Walker-Alston,
budget manager, Sumter
County Government,
South Carolina; GFOA
member for 11 years
2
Enroll in GFOA’s Certified
Public Finance Officers (CPFO)
program. The CPFO program is
designed to prepare individuals for
leadership positions in state and local
governments by enhancing fundamental
skills and increasing your knowledge
about best practices and standards in
public finance.
“A membership in GFOA provides
government finance professionals
with an abundance of benefits such as
professional development, access to
industry best practices and publications,
certification programs such as CPFO,
and advocacy to its members.”
Sherwin Pestka, CPFO,
treasurer, Ada County
Highway District, Idaho;
GFOA member for 15+ years
3
Keep yourself up to date
on a wide range of public
finance topics through
GFOA’s weekly newsletter.
It summarizes trends and events in
the public finance field, provides
information on association news and
legislative and regulatory issues, and
lists upcoming educational events
such as the GFOA’s annual conference
and new publications. It also links
you to job openings.
“A few things I highly value about GFOA
are the content (resources, education),
the community (staff, leadership, and
members), and the organization’s
commitment to the industry through
education, advocacy, and conferences.”
Erika Coombs, senior
vice president, Piper
Sandler & Co; GFOA
member for ten years
4
Participate in GFOA’s online
member communities.
GFOA’s General Forum and
American Rescue Plan Act Forum are
open to active government members
and allow members to post questions,
reply to posts, network with other
members, share documents, and
more. GFOA’s affinity groups also
have online communities for their
group members.
“GFOA forums have provided me
invaluable insights into best practices,
emerging trends, and innovative
solutions within government finance,
helping me stay ahead in my field.”
Maggie Lam, accounting
manager, City of Avondale,
Arizona; GFOA member
for four years
5
Apply to be a member of
one of GFOA’s standing
committees. GFOA’s six
standing committees—Accounting,
Auditing, and Financial Reporting;
Governmental Budgeting and Fiscal
Policy; Governmental Debt
Management; Economic Development
and Capital Planning; Retirement
and Benefits Administration;
and Treasury and Investment
Management—provide direction for
GFOA’s services by formulating new
policies and raising professional
standards via best practices. GFOA is
currently accepting applications for
all committees through July 31,
2024. Applications are available at
gfoa.org/committee-application.
“As an advisor of the Committee on
Accounting, Auditing and Financial
Reporting, I have had the opportunity
to engage with prominent financial
leaders from across the nation,
exchanging ideas and addressing
pressing accounting challenges.
GFOA’s proactive engagement
with universities has facilitated a
collaborative partnership, enabling
fruitful exchanges that benefit
both academia and the broader
public finance community.”
Irfan Bora, director,
Master’s in Governmental
Accounting Program,
Rutgers University,
New Jersey; GFOA
member for 23 years
You can find out more about
GFOA membership benefits at
gfoa.org/member-benefits.
Natalie Laudadio is GFOA’s senior
manager of member programs.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 15

Is It Time to
Rethink
Property
Taxes?
How fair, accurate and predictable
property taxes can benefit local
governments and taxpayers alike
BY SHAYNE KAVANAGH AND CHRISTOPHER R. BERRY
16

RETHINKING PROPERTY TAXES
The property tax is the most
important local source of
revenue for cities, counties,
schools, and many types
of special districts. It’s
also extremely unpopular.
Given the high revenue the
property tax generates and
the low regard in which it is
held, substantial benefits
would result from improving the tax.
But before we get to how we might improve
the tax, we should address a natural
question: if the property tax is so reviled,
why not “rethink” having a property tax
at all?
Goal #1
Provide accurate and fair valuations
of total tax liability for taxpayers
High-quality assessment practices
are foundational to the property tax.
Accurate assessments are needed so that
a taxpayer’s liability bears the closest
relationship to the underlying value
of the property. This has implications
for tax fairness, which is vital for the
ongoing legitimacy of the tax. It also has
implications for the revenue that the
property tax yields to local governments
that depend on it.
Let’s start with the fairness implications.
Exhibit 1 shows how assessment practices
can lead to unfair outcomes. Home A is in a
well-to-do neighborhood and is of a typical
size, quality, and more, for homes there.
Home B is in a working-class neighborhood
and is also typical for that neighborhood.
The per-acre land value is higher for Home
A, which is not surprising and shows us
that the real estate market places a higher
value on land in that neighborhood. The
surprise is that the county’s assessment
practices result in a higher building value
per square foot for Home B! This leads
to higher taxes for Home B on a per-acre
basis. Home A sits on a larger plot of land
and has more square feet, so Home A’s
total tax bill is higher than that of Home B,
but the size of the bill is not proportional to
the underlying value of the property (and
the underlying value of the building).
Properties like Home B tend to be owned
by lower-income people, and over-taxing
reduces their net income, leading to more
financial hardship, including increased
likelihood of tax delinquency and
foreclosure. 1 This situation can have longterm
consequences, as home ownership is
a component of generational wealth. 2
EXHIBIT 1 | 4-STEP STRATEGY PLANNING SYSTEM
$420k $181k
Data collected by urban planning firm Urban3.
Land Value (per acre)
Exhibit 1 is not an isolated case
but rather illustrates a widespread
problem. Evidence indicates that
across 90 percent of the United States,
properties of above-average market
value are consistently under-valued by
the assessment process, and properties
of below-average market value are
consistently over-valued. 3
These problems with assessment
practices could affect the revenue
that local governments receive. If the
local tax system is “rate driven,” where
the total revenue a local government
receives is determined by multiplying
the tax rate by the assessed value,
there will be a revenue loss from the
problem shown in Exhibit 1. There are
many reasons why the over- and undervaluing
of properties do not “balance
out” total tax revenues. The most
important reason is that the scale of the
$107 $125
Building Value (per sq. ft.)
$3,781 $4,604
County Taxes (per acre)
©2024 MICHAEL AUSTIN C/O THEISPOT.COM
JUNE 2024 | GOVERNMENT FINANCE REVIEW 17

RETHINKING PROPERTY TAXES
under-valuations is larger than the scale
of the over-valuations. As an example,
imagine a $1 million home is undervalued
by ten percent, and a $100,000
home is over-valued by ten percent. Local
government revenues will come out
behind in this case.
Some local governments have a
property tax system that is “budget
driven.” This means that the government
passes a total levy amount, and the tax
burden for generating that amount of
money is apportioned among taxpayers
according to their relative share of
assessed value. For a local government
under this property tax system,
assessment problems could lead to an
indirect revenue loss. Low-income people
tend to spend more of their income on
taxable goods than high-income people. 4
So if the distribution of property taxes
puts more burden on low-income people,
they will have less net income to spend.
Finally, regardless of whether there is a
“rate-driven” or “budget-driven” system,
the increase in financial hardship for
low-income people and consequences
for generational wealth are not good for a
local government’s tax base.
Goal #2
Provide stable, predictable
costs to taxpayers
Many causes of the property tax’s
unpopularity are related to how the
property tax is administered. Left
unaddressed, the tax’s unpopularity can
lead to decreased legitimacy for the local
government. For example, consider that
most property tax revolts are a response
to dramatic increases in property taxes,
particularly when the increase in taxes
results from an increase in property
values. 5 This could be galling to the
taxpayer for two reasons: first, increases
in property values can be surprising, in
that most people do not pay attention
to a theoretical market value of their
property. (Compare this to the price of gas
or groceries, where many people are aware
of even week-to-week shifts in prices.)
Second, especially for homeowners, a rise
in property values does not come with a
rising income stream with which to pay
increased taxes. (Again, compare this to
the price of gas or groceries, where many
people are aware of even week-to-week
shifts in prices.)
Thus, attenuating tax increases that
result from increasing property tax values
could be a way to reduce the unpopularity
of the tax and the likelihood of tax revolts.
However, not every means of attenuating
these tax increases is equally good. Goal
#2 also includes providing options for
people who have a tough time paying their
taxes, as the public and its government
are better off if all taxpayers pay their tax
obligations, even if some taxpayers need
accommodations to do so.
Before we move on, a note of optimism:
generally, most people are not opposed to
taxes. More than 90 percent of Americans
agree that “it is every American’s civic duty
to pay their fair share of taxes.” Another
view on this widespread consensus is that
“the percentage of Americans who deny
that taxpaying is a civic duty is nearly
equal to the percentage of Americans who
report believing that there is a chance that
Elvis Presley is still alive (seven percent)
or that the moon landing was faked
(six percent). 6 This provides hope that
rethinking property taxes has potential to
change attitudes for the better.
How to Reach Goal #1
Accurate and fair valuations of
tax liability for taxpayers
The most obvious cause of inaccurate
assessments is that too much time
has passed since the last revaluation.
The longer a jurisdiction goes without
reassessing property values, the greater
the tax inaccuracies. Properties with
the slowest growth in values (or largest
declines) become increasingly overtaxed,
and properties with the fastest
growth become under-taxed. To illustrate,
one of the authors of this report worked
with a county on financial management
reforms, and properties there hadn’t been
re-assessed in 40 years!
The problems with the local tax in this
community were large and obvious.
It is an extreme case, but the problem is
replicated in miniature whenever there
is a less dramatic duration between
reassessments. If too much time between
assessments is the cause, then the
solution is to reassess more often. The
optimal time between reassessments
is one year because that’s how often
tax bills are issued. Also, annual
revaluations allow assessments to track
real estate market activity. Imagine
revaluations occur every three years.
If market prices go up five percent each
year, a taxpayer would see an eyepopping
15 percent increase when they
get their new valuation.
Reassessments cost money, though.
The best way to contain this cost is to
automate or substitute machines for
labor. When it comes to reassessments,
machines are computerized algorithms
and data stores that can be used to create
accurate assessments with less human
RESIDENTIAL VERSUS COMMERCIAL PROPERTY
Though the goals we describe apply to commercial and residential
properties, this report will focus on residential properties for two
reasons. First, residential properties have more electoral power,
so the continued legitimacy of the property tax requires that
residents feel the tax is fair. Second, available research
on property tax focuses on residential properties,
so we can offer more fact-based guidance
on residential property taxes. (Research is
underway on commercial property taxes.)
18

©2024 MICHAEL AUSTIN C/O THEISPOT.COM
intervention. The next-best way is to
achieve economies of scale or to spread
fixed costs over larger production.
Fixed costs could include software
or specialized personnel, like data
scientists.
Let’s consider the cases of Cook
County, Illinois, and Maricopa County,
Arizona. Cook County, which includes
the City of Chicago and many suburbs,
has been successful at reducing the
kinds of problems shown in Exhibit
1 and improving the fairness of the
tax. Though the county can’t revalue
properties annually, it has taken steps
that are getting it closer—and these steps
are instructive for communities that
want to improve the cost-effectiveness
of assessments. Maricopa County, which
includes the City of Phoenix and many
suburbs, has an annual assessment
process and has also been working on
improving property tax fairness. These
efforts have produced impressive
results: the appeal rate in Maricopa is
less than one percent for all parcels,
including commercial, and less than
that for residential.
How have these counties made
progress? First, both counties have
invested in data science capabilities.
Cook County’s data team developed
a residential valuation model using
open-source software. Since 2019, the
model has been refined each year by
collaborating with valuation experts
who have years of assessment and
appraisal experience in Cook County.
Because location matters to property
values, the data team focused on adding
geospatial features to the assessment
model, such as distance to amenities
(like the lakefront or public transit)
and other geographies (such as school
districts) that affect property value and
assessment accuracy. Maricopa County
has blended traditional computer-aided
mass appraisal methods with statistical
tools. For example, it has improved its
ability to find and correct outliers in the
assessment data, which reduces the
number of appeals.
Second, the Cook County assessor has
invested in improving data quality for
residential properties. Online filings
have replaced a paper-based system for
construction permits. This notifies the
assessor of any substantial change in
EXHIBIT 2 | A FAIR PROPERTY TAX ASSESSMENT SYSTEM VS. UNFAIR (IN THEORY)
Sales
Ratio
Blue line = Regressive assessments, less
expensive homes assessed at higher rate
than more expensive homes
A fair assessment system produces a straight horizontal line because the sales ratio (the assessor’s estimate of
property value divided by sales price) is the same for all home values. In most counties, we will find something
closer in shape to the blue line.
a property’s characteristics. Office staff
can use online tools to validate property
characteristics without having to visit
the property. Maricopa County has added
the ability to model market influences in
certain neighborhoods.
Third, both Cook and Maricopa
counties are quite large. Both assess
hundreds of billions worth of property,
which means they can generate
economies of scale in assessment
activities. This doesn’t mean that smaller
assessor offices can’t improve. For
example, it may be possible to work with
other assessors to procure technology
or talent. Or assessors could share
statistical methods and models. In fact,
Cook County has published its methods
and models on an open-source platform so
other assessors can use it and contribute
to its improvement. Smaller assessors
could form joint purchasing agreements
for third-party data sets, increasing
their market power. Smaller assessors
could even cooperate on contracting for
data science capabilities. It may not be
cost-effective to hire a full-time data
scientist on staff. Multiple assessors, as a
group, could shift the market to thirdparty
contractors who support assessors.
This group could articulate the demand
for data science capabilities to address
the challenges shown in this report and
thereby encourage a supply of capable
contractors.
Neither county has solved all their
challenges with property taxes. Although
Cook County has increased its capacity,
it has barriers to overcome before annual
revaluations become possible. Cook
Black line = Fair and accurate assessments,
all homes assessed at market value. Sales
ratio = 1 for all homes
Equal
Low Home Value High
County has also made more progress
on improving the cost-effectiveness of
assessing residential properties than it has
on commercial properties. Commercial
properties are more difficult to value
because their value varies widely. For
instance, while a mansion is different from
a condo, a large factory is very different
from a convenience store. Also, more
assessments mean more appeals. Even if
appraisals are more accurate, increasing
the volume of assessments will result
in more appeals. Cook County revalues
every three years, so annual revaluations
would triple the volume of assessments—
although perhaps it would not triple if
assessments were more accurate. As we
saw earlier, Maricopa has a very small
appeal rate. Nevertheless, the Cook County
government would need to consider how to
handle the possibility of more appeals.
If the obvious cause of inaccurate
assessments is infrequent assessments,
the less obvious cause was previewed in
Exhibit 1: consistently unfair assessments.
Let’s start by defining what a fair and
accurate system looks like. This will set us
up to define the solutions.
Exhibit 2 shows the “sales ratio” plotted
against “home value.” The sales ratio is the
assessor’s estimate of a property’s value
divided by the property’s sale price. Ideally,
assessments reflect market values. (In
theory, the assessment ratio under a fair
system would be equal to 1.0. However,
local laws may result in a fair ratio that is
something other than 1.0. To illustrate,
for residential property owners in Cook
County, the assessed value equals ten
percent of the fair market value of the
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RETHINKING PROPERTY TAXES
home. Thus, the ideal assessment ratio
in Cook County is 0.10.) If assessment
practices are successful in assigning
consistent, fair values to homes of
different values, then we’d have a straight
line like the one in Exhibit 2. However,
based on Exhibit 1, the sales ratio often
doesn’t produce a straight line. Lowervalue
homes are often over-assessed, and
higher-value homes are under-assessed.
The blue line in Exhibit 2 shows lowervalue
properties getting a sales ratio
above the black dotted line, meaning the
assessor’s valuation of the property is
greater than the sales price. The line slopes
downward, which means that higher-value
properties are under-assessed.
Exhibit 2 is an ideal, intended to show
how we can examine property tax fairness.
Let’s look at real-life data in Exhibit 3. It
shows the equivalent of the blue line from
Exhibit 2 but for almost every county in
the United States (the data set covers
roughly 2,600 out of 3,000 U.S. counties).
It is far from a straight horizontal line.
Similar charts can be developed for
individual counties. You can see the
chart for almost any county as well as the
top 50 largest cities in the United States
at propertytaxproject.uchicago.edu,
developed by the University of Chicago. 7
The curves as we see in Exhibit 3 show
that low-income people tend to pay an
unfair share of property taxes because
they tend to occupy lower-value properties.
We can see the relative size of the tax
burden imbalance between low- and
high-value properties in Exhibit 4, where
we added color shading. The red-shaded
area is the “over-taxing” of low-value
properties. The green-shaded area is the
“under-taxing” of high-value properties.
As you can see, the green-shaded area is
materially larger than the red-shaded area.
The difference in the size between these
two areas is the shifting of property tax
burden to low-value properties from highvalue
properties and, therefore, to lowincome
people from high-income people.
We’ve made the case that tax shifting
is a problem, but fixing it requires
knowing why it happens. As is the case
with complicated problems, there are
many causes. We can start with causes
stemming from assessment practices.
We can broadly label the challenge that
assessors face as “the flaw of averages.” 8
Assessors must value many properties,
and each property is different. Averages
offer a shortcut to summarize many
different properties together. However,
this shortcut tends to benefit high-value
properties and disadvantage low-value
properties. Let’s examine some important
reasons for this.
An individual home has many features
that are observable to buyers and sellers,
so they will be reflected in the market
price. However, some of these features are
not observable to an assessor, so they are
not included in the assessed value. For
example, imagine a neighborhood with
homes that are similar from the outside,
but one home has upgraded kitchens and
bathrooms. That home would command a
higher price on the open market but would
be valued, for tax purposes, at the average
of the other homes. It is easy to imagine
that high-end properties are more likely
to have upgrades that impact sales prices,
but which are not visible to assessors.
Kitchen and bath upgrades are not
the main cause of the shaded areas in
Exhibit 4, but they do illustrate a broader
problem. An example of this might
EXHIBIT 3 | NATIONWIDE SALES RATIOS VS. HOME VALUES
Sales
Ratio
Real=life regressive
assessments
Nationwide, lower-value homes are consistently over-assessed.
be building materials. All else being
equal, a brick house is more expensive
than a cement block house, which is
more expensive than wood. Due to the
distribution of incomes (there are fewer
wealthy people than middle-income
people), there will be fewer homes made
from premium building materials than
from average-quality materials. There
will also be fewer buildings made from
the cheapest materials because there are
fewer low-income people than middleincome
people. Imagine middle-income
people tend to have cement block homes,
wealthy people have brick, and lowincome
people have wood. Assessment
methods based on “average” home
features (cement block) will over-value
the homes of low-income people
and under-value those owned by highincome
people.
We can see a real-life example of this in
data collected by Urban3. Assessments
are often done by “tracts,” which group
many properties assessment purposes.
A tract typically contains a few thousand
people or so. Exhibit 5 shows two homes
Equal
Low Home Value High
EXHIBIT 4 | TAX SHIFTING FROM HIGH- TO LOW-VALUE PROPERTIES
Sales
Ratio
Over-taxing
What fair & accurate
assessments would look like
Undertaxing
Equal
Low Home Value High
The difference in size between the red (over-taxed) and green (under-taxed) is the net subsidy to higher-value
properties
20

on either side of a tract borderline. The
homes look similar, but the one on
the right is in a tract that the assessor
determined to be worth more. As a
result, the one on the right received a
higher increase in their taxable value
because it was “averaged in” with the
more expensive homes.
In addition to assessment practices,
there are also policy choices that can
worsen the problems we described.
For instance, a policy can limit the
amount that assessments can increase
in a year. Such a policy has the biggest
impact on properties that are most
rapidly appreciating in market value.
The policy shifts tax burden to those
that are not appreciating as much. To
illustrate, imagine there is a policy that
limits assessment growth to five percent
per year. If properties in a wealthy
neighborhood experience a ten percent
increase in market value (because the
area is desirable to live in), then those
properties will have their assessed
value artificially limited. Meanwhile,
imagine properties in a less desirable
EXHIBIT 5 | FROM THE WRONG SIDE OF THE TRACT
This side of the tract: 102% increase
neighborhood aren’t appreciating by
more than five percent—they will not
benefit from this policy. The result
is that the homes in the wealthy
neighborhood are assessed at less than
their market value, while the homes
in the less desirable neighborhood are
taxed at their full market value. Also,
property appeals processes are more
often pursued by wealthy individuals. 9
Reasons for this may include less access
to the appeals process for low-income
people (for example, less access to
attorneys to represent them), or the high
dollar amounts at stake for owners of
high-value properties might provide an
incentive for them to appeal.
There is much that can be done to
address the problems we’ve described.
Cook County and Maricopa County are
examples of local governments that
have made progress. For example, a
2024 independent evaluation of Cook
County’s efforts by the University of
Chicago shows that Cook County has
made a lot of progress toward a fair
assessment system. Exhibit 6 shows the
This side of the tract: 316% increase
Using average characteristics for properties across an assessment tract resulted in a large increase in
assessed value for a modest home that happened to be grouped into a tract with higher values.
assessment ratio in Cook County before
and after the reforms that started in 2019.
You can see that the “before” line looks a
lot like the curve in Exhibit 3, while the
“after” line looks more like the ideal state
(black dotted line).
Let’s look at what local officials can do
to help flatten the curve, including both
tax assessors and local officials who have
rate-setting authority. Tax assessors who
would like to flatten the assessment ratio
curve in their jurisdictions can start by
investigating the causes of regressivity
in assessment models. Look at sales ratio
studies, and look for bias patterns by price
decile, neighborhood or geography, and
racial (or demographic) group. Use thirdparty
sources for decile price patterns.
Hold conversations with the field,
modeling staff, and software vendors,
and look for ways that operations may
build in biases or miss key information.
Next, assessors can look for
deficiencies in the physical census of
properties. These can arise because
of shortcomings in the reporting of
building permits or stale fieldwork. Or
fieldwork might miss factors that are
not reported, such as upgrades to the
interior of a building that don’t require a
permit. Improved data can help here. For
example, Cook County has improved the
transmission of construction permitting
data from permitting authorities to
the assessor’s office. This makes the
assessor aware of a greater number of
property upgrades than before. Once the
causes are understood, solutions can be
developed. That said, the best solutions
will usually be through better modeling
rather than better fieldwork. Both Cook
and Maricopa counties have invested
EXHIBIT 6 | ASSESSMENT RATIOS BEFORE AND AFTER REFORMS IN COOK COUNTY
0.2
Single Family Multi-Family Condominium
Sales
Ratio
Before
Before
Before
0.1
After
After
After
0.0
$250K $500K $750K $1M $250K $500K $750K $1M $250K $500K $750K $1M
Sale Price
*In Cook County, for residential property owners, the assessed value equals 10% of the fair market value. Thus, the ideal assessment ratio in Cook County is 0.10.
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RETHINKING PROPERTY TAXES
Local officials have a vested interest in better
assessments because fairness to the taxpayer
is essential for maintaining the legitimacy of
the revenue system that pays for much of
local government—and because of the direct
impact that low-quality assessments can have
on local government revenue.
heavily in improving their modeling and
data abilities.
Finally, assessors can work with others
who are trying to make property taxes
fairer. The authors of this article are
working to convene a network of local
governments that are working on this
problem. Get in touch with the authors
to learn more and be introduced to the
network.
Local officials with rate-setting
authority cannot flatten the curve on their
own. Nevertheless, they have a vested
interest in better assessments because
fairness to the taxpayer is essential for
maintaining the legitimacy of the revenue
system that pays for much of local
government—and because of the direct
impact that low-quality assessments can
have on local government revenue.
Local officials can start by getting
a handle on the quality of local
assessments. The University of Chicago’s
property tax fairness website is a good
starting point—it allows users to look up
the shape of the sales ratio curve in their
counties. (In theory, a fair assessment
ratio would be equal to 1.0; however,
local laws may result in a fair ratio that is
something other than 1.0. To illustrate,
for residential property owners in Cook
County, the assessed value equals ten
percent of the fair market value of the
home. Therefore, the ideal assessment
ratio in Cook County is 0.10.) From there,
local officials can take steps to better
understand local assessment practices.
Here are some questions that local
officials can ask of their county
assessors. These questions speak to
the building blocks of high-quality
assessments:
• Is there a sales ratio study? What
are the results by geographic region
and/or types of properties? A sales
ratio study would provide more
insights into the sales ratio curve
than is available from the University
of Chicago’s website. The presence or
absence of such a study may be a clue
as to how attuned the assessor is to
the issue of tax accuracy and fairness.
• Where does sales data come from?
What level of confidence do you have
in building characteristics data? Is
there a physical census of properties?
These questions speak to the building
blocks of high-quality assessments.
• How are residential values modeled?
As we have seen, better use of data
science has much potential for
improving the assessment quality.
Local officials can learn whether
the assessor is using leading data
science practices.
If local officials and the assessor agree
that there are opportunities to improve
property tax fairness, then there are ways
they can cooperate. The public needs to
have confidence that assessment reform
is not a covert attempt to raise taxes. Local
officials with rate-setting responsibilities
can commit to raising total revenue
consistent with past trends and forgo any
“windfall” revenue that might arise from
new assessment methods.
Local officials can also help
communicate the reasons for revising
assessment practices. Even though
there will be “winners” and “losers”
from assessment reform, progress is
possible. Consider the case of Cook
County. Chicago does not have a
reputation for honesty and integrity
in local government, 10 so the public
has reason to be skeptical of attempts
at property tax reform. Nevertheless,
Cook County Assessor Fritz Kaegi has
found that “there is often great relief in
knowing that formulas and valuation
calculations are public; that lawyers
have no special advantage in appeals;
that backdoor favors are not available.
In many cases, I see greater awareness
of progress on this front than where any
individual sits on the curve of winners
or losers.” Kaegi won re-election for a
second term with 81 percent of the vote.
©2024 MICHAEL AUSTIN C/O THEISPOT.COM
22

BY SHAYNE C. KAVANAGH
Before moving on to Goal #2, we will
examine a strategy for reducing the
importance of the building assessments
by increasing the weight land value
receives in the tax bill. As Exhibit 1
implied, it is easier to assess the value of
land accurately, compared to structures.
A form of property taxation called “land
value taxation” taxes only the land, not
the structures built on it. Advocates for
a land value tax provide evidence that it
is less distorting of economic behavior
than a conventional property tax, and
it is more effective at encouraging land
development. 11 For our purposes, the
potential of a land value tax to improve the
fairness of the property tax is interesting.
There isn’t a pure land value tax
system in the United States, but several
jurisdictions have employed a hybrid
system known as “split-rate taxation.”
(The State of Pennsylvania is the most
widely studied state where split-rate
taxation exists. About 20 municipalities
there have a split-rate system, including
the cities of Pittsburgh and Scranton.) This
applies different tax rates to the land and
property, with a much higher rate applied
to the land. (For example, the report, “Split-
Rate Property Taxation in Detroit: Findings
and Recommendations,” from the Lincoln
Institute of Tax Policy, recommends
a five times greater tax rate for land.)
Split-rate taxation has been shown to
provide many of the same benefits of land
value taxation, and it has the potential
to increase property tax fairness. 12
NEW TAXES THAT WORK
HOW LOCAL GOVERNMENTS CAN RAISE NEW REVENUES
LEARN MORE
Readers wishing to learn more about how
communities can successfully consider
new taxes are invited to read GFOA’s
report, “New Taxes That Work: How Local
Governments Can Raise New Revenues.”
gfoa.org/materials/new-taxesthat-work
How to Reach Goal #2
Provide stable, predictable costs
to taxpayers
People like to have predictability in
the expenses that they face, and that
applies to taxes too. Large, unpredictable
tax increases are a primary source of
dissatisfaction with the property tax. 13
To introduce more stable, predictable
costs to taxpayers, we need to identify
the reasons that a property tax bill might
change from one year to the next:
• Administrative. For example, a
property is revalued after many
years and the new valuation causes
taxes to go up.
• Market. The market values the home
more, causing values and taxes to
go up. Market values might increase
quite a bit in “hot” real estate markets,
causing sudden increases in taxes.
• Policy. The community decides to
raise taxes on itself, either through a
referendum or a decision by its elected
representatives.
For the purposes of this discussion,
we will put policy reasons aside. If the
community has agreed to tax itself
more for some reason, then the increase
should be predictable.
That leaves administrative reasons
and market reasons. Market-based
increases are, in theory, legitimate
because a rising property value
increases the wealth of the taxpayer.
However, this kind of wealth increase
often doesn’t come along with an
increased income stream, especially
for owner-occupied homes. Further, a
tax increase from increasing market
values doesn’t get factored into the
“mental accounting” of most people’s
expectations for their annual spending.
Compare this to an income tax. If you
were to get a big raise at work, you are
aware that you can expect to pay more
income taxes, all else being equal.
Given that consistency and
predictability in the taxpayer’s total
bill is important to maintaining public
support, how can we provide it? To
start, officials who set rates can be
more mindful of how the rates they set
will interact with valuation trends and
affect taxpayers’ total liability. There are
several ways this could be done.
First, assessors can provide data to
local officials to support setting rates
that are responsive to market conditions
and that don’t result in large increases
for property owners. Maricopa County
provides worksheets to local governments
that distinguish increased value between
new and existing construction, providing
insight into the impact of a tax rate on
existing properties. The county also has
reports that break down valuation trends
by property classification. Providing
trend data allows jurisdictions to forecast
impacts on values and subsequently to
tax bills.
Second, we described the difference
between a “rate-driven” and a “budgetdriven”
system. A budget-driven
system should be less volatile from the
taxpayer’s perspective because the taxing
government is only asking for the total
amount of taxes it would like to collect.
This way, local control of the property
tax liability is focused on the outcome
of interest to the taxpayer and taxing
government.
Third, the total amount collected could
be limited, unless a specific authorization
from the voters is given to collect more.
This would provide taxpayers with more
assurance of stable tax bills. This leads us
to the issue of tax and levy limits.
Responsive rate setting is important
for providing stable, predictable costs
to taxpayers. Some taxpayers may
need extra consideration to help them
afford their taxes. The classic case of
this problem is the “house rich, cash
poor” taxpayer, like a senior citizen who
is on a fixed income but whose home is
appreciating. Low-income homeowners
in gentrifying neighborhoods or people
who have lost their jobs may also need
consideration. Targeted relief can be
offered to people in these circumstances.
For example, a “circuit breaker” provides
relief to people paying a high share
of their income in property taxes by
offsetting taxes above a certain amount
of income. Just over half of states have
some kind of circuit breaker program,
but over half provide this program
exclusively to senior citizens. States
could expand circuit breakers to lowincome
payers and make sure the benefits
JUNE 2024 | GOVERNMENT FINANCE REVIEW 23

RETHINKING PROPERTY TAXES
are enough to prevent taxpayers from
being unable to pay their taxes. 14
Another relief strategy for senior
citizens with unaffordable taxes is a
tax deferral that allows homeowners
to delay payment of their taxes until
their home is sold or inherited. Then
taxes are due along with interest. For
example, the State of Massachusetts’s
property tax deferral for senior citizens
allows them to defer payment until the
senior sells the property or passes away.
These relief strategies are desirable
because they offer targeted relief
to the people who need it most, but
broad strategies like tax limits or
limits on growth in assessed value
can backfire. For example, a broad tax
limit won’t be a good fit for every local
government and might cause them to
rely on regressive revenue sources,
like user fees. Limitations on growth in
assessed value can also backfire. They
create winners and losers in the tax
system. For instance, they shift the tax
burden from appreciating properties to
properties that aren’t appreciating as
much. California’s Proposition 13 limits
the property tax rate to one percent of
assessed value at the time of purchase
and restricts annual tax increases to
no more than two percent until the
property is sold. The result is that a
long-time homeowner whose home is
identical to their just-moved-in neighbor
would be paying vastly less taxes. 15
That said, we must recognize the
reason these broad tax relief strategies
exist: taxpayers want (and deserve)
predictable, stable tax bills. Are there
other ways to achieve this goal, without
the drawbacks we described? One might
be to focus on the outcome taxpayers
care about (their total bill), instead of
trying to manipulate the inputs (rate
and assessment) to get to the outcome.
Some of the strategies described earlier
could help. For example, a budgetdriven
assessment system would
make it easier for local officials to
keep taxes stable. If the tax levy calls
for three percent more revenue, then
taxpayers’ taxes would not go up more
than three percent on average. However,
the problem of unstable bills is most
felt at the extremes, not the average.
There could be added guarantees for
individuals that their annual tax bill won’t
increase more than some given amount
in a year, with exceptions for when the
community has decided to tax itself
more. There could even be a role for local
governments to rebate taxes collected
over a certain amount. (Rebates could
be given by a taxing jurisdiction—so that
may be a strategy that can be used by local
governments without changes in state law.
Furthermore, people seem to enjoy federal
income tax rebates, even though it would
be ideal if the correct amount of income
taxes were collected in the first place.)
Now let’s move on to discuss
administrative reasons for unstable/
inconsistent tax liabilities. Carrying out
quality assessments solves much, but
not all, of the administrative problems
that contribute to taxpayers’ view of
unstable, inconsistent tax bills. Aside
from the quality of the assessments,
there are other ways to improve the
perception of the property tax by
adjusting the administration of the tax.
Typically, property tax bills are
sent out once or twice per year, and
taxpayers may find these infrequent,
large bills surprising. Evidence shows
that homeowners who pay their property
taxes into an escrow account as part
of their monthly mortgage payment
are less likely to end up in mortgage
delinquency. 16 On the other hand,
the property tax has shown to be less
salient to those who pay by escrow.
Those taxpayers are less informed about
their property tax burden, less likely
to appeal when they are over-assessed,
and more likely to be over-taxed. 17
One solution might be to send a
monthly property tax statement to every
taxpayer, even those paying via escrow,
and allowing those not on escrow to
set up monthly automatic payments.
This practice would make the tax more
salient to those paying by escrow while
allowing those not paying by escrow to
make predictable monthly payments. For
example, Cass County, Missouri, provides
a monthly program for people who are
current on their tax bills. Payments are
deducted from the taxpayer’s bank account.
Another administrative strategy for
increasing people’s satisfaction with the
property tax is to format the bill in such a
way that taxpayers can better understand
it. Here are four ways to do this:
• Clarity of tax liability and calculation.
Provide a breakdown of different
components of the tax and how
calculations are made.
• Use of plain language. The bill should
avoid jargon or technical terms. Simple
sentence structures also help.
• Visual presentation. Formatting and
headings can help draw the taxpayer’s
eye to the right parts of the bill, in the
right order. Graphs could be used to help
taxpayers better grasp their tax liability.
• Comparative information. Research
shows that taxpayers are often less
concerned with the size of their tax bill
than they are with everyone paying their
fair share. No one wants to feel they are
being made to bear an undue burden.
The tax bill could include information
about other people’s tax liabilities and
relative fairness. People also want fair
value for their tax money, so the bill could
show how tax money is being used.
Any local government that levies a property
tax can provide a more compelling property
tax bill. The City of Shakopee, Minnesota,
created a property tax receipt that shows
how the city uses a given home’s property
taxes to support different city functions.
Finally, some taxpayers will fall behind
on their tax bills and become delinquent.
Conventionally, tax liens and sales have been
used for delinquent properties, but there
is mounting evidence that this approach
has drawbacks. For example, ideally, a
delinquent taxpayer would never reach
the point of tax liens and sales because the
process is slow, costly, and often ineffective
at getting properties back on the tax rolls.
Alternatives include assistance programs
for struggling taxpayers and collection
methods other than tax liens and sales. 18
ABOUT THE RETHINKING REVENUE PROJECT
Many local government revenue structures are based on assumptions that no longer hold today due to digitization,
data globalization, demography, political changes, and other trends. Further, fairness is becoming an increasingly
important concern for public finance. For these reasons, the Rethinking Revenue project is taking a fresh look
at how revenues are raised. Learn more: gfoa.org/rethinking-revenue
24

Conclusion
The property tax is a critical tax for local government.
It funds a large portion of many public services, and it
provides local governments with autonomy to better
match local tax rates with local service demands. The
property tax is also an old tax, having been in place before
the United States was founded. There are opportunities
to rethink the property tax to make it fairer, to make
the tax burden more predictable/consistent from year to
year and, thereby, to protect and enhance the legitimacy
of the property tax. We invite readers to join us at
gfoa.org/rethinkingpropertytax for more information and
to learn about ways to help make these changes happen.
Shayne Kavanagh is GFOA’s senior manager of research.
Christopher R. Berry is the William J. and Alicia Townsend
Friedman Professor at the Harris School of Public Policy and
the College and director the Mansueto Institute for Urban
Innovation, at the University of Chicago.
Contributing to this article are: Fritz Kaegi, assessor for
Cook County, Illinois; Dawn Marie Buckland, chief deputy
assessor for Maricopa County, Arizona; Scott Smith, chief
of staff for the Cook County Assessor, Illinois; and Joe
Minicozzi, principle, at Urban3.
1
Bernadette Atuahene and Christopher Berry, “Taxed Out: Illegal Property Tax
Assessments and the Epidemic of Tax Foreclosures in Detroit,” U.C. Irvine Law Review,
May 2019.
2
Though income levels are the primary vector of tax unfairness, there is research that
suggests that racial minorities face other tax disadvantages beyond that caused by
income. This is due to factors like African American families being less likely to appeal
property taxes because they have less access to the resources needed to appeal.
See: Carlos F. Avenancio-Leon and Troup Howard, “The Assessment Gap: Racial
Inequalities in Property Taxation,” Quarterly Journal of Economics, 2022.
3
Christopher Barry, “Reassessing the Property Tax,” 2023 working paper, Center for
Municipal Finance, the University of Chicago.
4
Wealthy people tend to save more, so an additional dollar of disposable income for a
wealthy person is more likely to be saved, while a low-income person is more likely to
spend it. Spending is more likely to impact the local economy and will likely do more to
help local government revenue. Savings may be more likely to enter a global market.
5
Ronald C. Fisher, Andrew Bristle, and Anupama Prasad, “An Overview of the
Implications of Eliminating the Property Tax: What Do Recent State Debates and Prior
State Experience Tell Us?” The Property Tax and Local Autonomy (ed. Michael E. Bell,
David Brunori, and Joan Youngman), (Lincoln Institute of Land Policy: 2010).
6
This provides hope that rethinking property taxes has potential to change attitudes for
the better. Information for this section is from: Vanessa Williamson, Read My Lips: Why
Americans Are Proud to Pay Taxes. (2017: Princeton University Press).
7
xiaoyanw, “Property Tax Project Featured in Wall Street Journal” video, April 18, 2021.
8
Sam Savage coined this the term in his book, The Flaw of Averages (Wiley: 2012).
9
Robert Ross, “The Impact of Property Tax Appeals on Vertical Equity in Cook County,
Illinois,” 2017 working paper, Center for Municipal Finance, The University of Chicago.
10
Heather Cherone, “Three-Peat: Chicago Ranks No. 1 in Corruption, Report Finds,”
news.wttw.com, May 11, 2022.
11
For a summary of evidence supporting land taxation, see: Richard F. Dye and Richard
England, Assessing the Theory and Practice of Land Value Taxation, (Lincoln Institute
of Land Policy: 2010).
12
For a summary of studies on the effects of split-rate taxation see: John E. Anderson
and Nick Allen, “Split-rate Property Tax in Detroit: Findings and Recommendations,”
Lincoln Institute of Land Policy, April 2022.
13
Fisher, Bristle, Prasad.
14
Information in this paragraph taken from: Carl Davis and Brakeyshia Samms,
“Preventing an Overload: How Property Tax Circuit Breakers Promote Housing
Affordability,” Institute on Taxation and Economic Policy, May 11, 2023.
15
Matt Levin, “Similar Homes, Different Taxes: Is Prop. 13 Fair to New Homeowners?”
CALmatters.
16
Based on a study of subprime borrows. See: Nathan B. Anderson and Jane K. Dokko,
“Mortgage Delinquency and Property Taxes,” Proceedings, Annual Conference on
Taxation and Minutes of the Annual Meeting of the National Tax Association, 2008.
17
Andrew T. Hayashi, “The Legal Salience of Taxation,” University of Chicago Law
Review, 2014.
18
Christopher Barry and Max Schmidt, “Selling Distress: How the Tax Foreclosure
System Exacerbates Disinvestment in Cook County Communities,” University of
Chicago Center for Municipal Finance, September 2022.
Summary of Key Ideas
Goal #1
PROVIDE ACCURATE & FAIR VALUATION OF TAX LIABILITY
Accurate assessments are needed for the property tax to be fair. Across
90% of the United States, properties of above-average market value are
consistently under-valued by the assessment process, and properties of
below-average market value are consistently over-valued.
Regressive assessments.
Less expensive homes assessed at a
higher rate than more expensive homes.
SOLUTIONS
High-quality
data science
Goal #2
PROVIDE STABLE, PREDICTABLE COSTS TO TAXPAYERS
Most property tax revolts are a response to dramatic increases in
property taxes. Greater stability in taxes could be a way to improve
public opinion of the tax.
SOLUTIONS
1. Public officials can be mindful of how tax rates will interact with
valuation trends and affect taxpayers’ total liability.
2. Offer targeted relief strategies.
Assess properties
frequently
3. Make assessments more accurate.
Orange line: Fair and accurate
assessments. All homes assessed
at market value and sales ratio = 1.
4. Send tax bills more frequently and provide payment plans.
Conduct a sales
ratio study
JUNE 2024 | GOVERNMENT FINANCE REVIEW 25

26

SHARPENING THE BUDGETING STRATEGY
Sharpening the
Budgeting Strategy
How two Florida cities transformed their budgeting process
BY JARA KERN AND KEL WANG
CITY OF FORT LAUDERDALE, FLORIDA
Making better budget decisions
BY JARA KERN
©2024 CHRIS GASH C/O THEISPOT.COM
The career path of many government finance
and budget staff members is sequential, with
steady promotions to positions of increased
responsibility. This progression introduces
a balancing act: as analysts, they must be
“in the weeds,” but with executives, they also have
the opportunity to guide high-level decisions. The
challenge is to summarize and present data that creates
the context for meaningful, strategic decision making.
Establishing this context, though, requires a different
approach to the budget process.
Like many other governments, the City of Fort
Lauderdale, Florida, took a “clean slate” approach to its
annual budget process. This meant that staff built each
year’s budget from the ground up, without discussion of
trends and performance of newly funded initiatives and
existing programs. This approach embroiled staff in
discussions about line-item requests instead of higherlevel
conversations focused on performance, trends
over time, and the success of initiatives and programs.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 27

SHARPENING THE BUDGETING STRATEGY
When Laura Reece became the city’s
budget manager in 2019, she attended
GFOA’s Managing the Budget Process
training. This course emphasized
GFOA best practices and included
practical examples of ways in which
others had successfully managed the
budget process by creating context.
For Reece, this approach brought to life
the role a budget officer could play in
being a decision architect for financial,
community, and government priorities.
Creating context
Guided by this training, Reece led a
change in the city’s budgeting process.
With her colleagues and the assistant
city manager, she began to restructure
meetings and reset expectations. It
took a couple of budget cycles to fully
refine the approach. Today, as part
of the budget development process,
the Office of Management and Budget
(OMB) coordinates and hosts meetings
with each department and the city
manager. Nearly half of all meeting time
is dedicated to presenting information
and setting context for staff, with the
goal of creating appropriate discussions
for decision making on the budget.
Before each meeting, OMB staff compile
pertinent data into a presentation, which
is provided in advance and also referred
to during the meeting. The meeting itself
focuses discussion on the big picture.
A sample agenda for these meetings
may include discussions and questions on:
• Staffing level, including growth.
• Recent budget trends and growth.
• Enhanced service levels or
above-base requests.
• Key programs and initiatives that
have been funded, with outcomes.
• Program-based budget review, including
revenues, expenses, and key metrics.
• Specific programs, events, or
requests for in-depth discussion.
This approach has transformed the tone
of budget meetings. The focus has shifted
from line items to strategic discussion
and continuous improvement. Attendees
come prepared for a high-level discussion.
As Reece noted, “The city management
team feels more confident in their
knowledge of budgets. Everyone is on the
same page as to where we have been.”
Taking this approach
to long-term planning
has helped OMB
and city department
staff build a stronger
budget process.
Taking the long view
As part of budget development,
government finance officers must plan for
future service delivery levels—and ensure
appropriate funding. Certain funds are
easier to budget for than others. Making
the right assumptions and taking the long
view can help budget officers succeed.
For certain key funds, the OMB
looks at the upcoming year as well
as ten years into the future for funds
like water, sewer, sanitation, and the
general fund. Anticipating changes
in revenue and expenses helps staff
prepare a revenue sufficiency analysis,
which informs the necessary rates
or fees to guarantee current or future
service levels to the community. These
analyses are then discussed with staff
and the Budget Advisory Board before
they’re presented to the mayor and
city commission at public meetings.
To lead the long-term financial
planning process, the OMB starts with
the baseline budget and then projects
inflationary increases over the ten-year
time horizon. Known or planned increases
are then factored in, along with key
replacement plans like those for fleets,
PCs and internet technology, boats, and
even service animals like horses and
dogs. Staff also incorporate actuary
plans and contributions, including
pension annual required contributions.
Once these projections have been
prepared and incorporated, OMB staff
meet with city departments to share
the baseline information and discuss
the current service levels and projected
changes. This provides an opportunity
for department staff to identify key
changes that could occur, based on
their knowledge. The final step is to
determine the approaches for ensuring
the appropriate funding levels. OMB
staff confer with consultants who help
guide long-term rate setting or navigate
the transition to a special assessment.
Taking this approach to long-term
planning has helped OMB and city
department staff build a stronger budget
process. As OMB director, Reece noted,
“We fund needs before wants with a budget
process that ties into known replacement
plans and other long-term documents
like CIP and actuary plans.” This helps
the city more accurately predict and
budget for expenses—and avoid shocks.
Long-term financial planning also helps
the OMB and government leaders earn
community support for important changes.
For example, stormwater was a user fee
that generated $5 million annually, while
stormwater drainage needs that exceeded
$200 million were identified over the
next five years. To ensure funding for
several large drainage projects, the city
had to demonstrate needs for the project,
including them in a long-term plan, and
start to design a revenue source that could
support the increased expense. The tenyear
timeframe approach helped OMB staff
prepare for the ask, and in the end, the city
was also able to make use of federal funds
to support these important projects.
Long-term financial planning can help
government finance officers time their
capital investments, too. Reece shared the
example of the city’s sanitation fund. The
city outsources residential collections,
which has recently resulted in high
inflationary costs for the fund when the
collections contract was re-bid. As market
conditions changed, the ten-year plan
helped city staff strategize when to invest
in capital needs like vehicle equipment.
“If you have all the different pieces, and
you’re aware of them as a manager of the
service, you can strategize,” Reece said.
Jara Kern is a writer and marketing
strategist with Right Angle Studio.
LEARN MORE
Review the City of Fort Lauderdale’s annual
budgets, strategic plan and more:
fortlauderdale.gov/government
Visit the city’s interactive OpenGov
Financial Transparency Portal to access
the current fiscal year budget as well
as historical financial information from
previous fiscal years:
fortlauderdalefl.opengov.com
28

CITY OF PORT ST. LUCIE, FLORIDA
Setting the stage for a strategy-informed budgeting approach
BY KEL WANG
Approving the budget is
one of the most important
decisions any council gets
to make. Making budget
decisions effectively
helps address the critical needs of the
community, maintains the fiscal health
of the administration, and positions the
community and the administration for
long-term sustainability. But perhaps,
more importantly, the budget is a
delicate balancing act that must address
the community’s needs without funding
one area at significant cost to another.
There are many challenges, and the
decision making includes:
• Diverse community needs. Local
communities are diverse, with
varying demographics, socioeconomic
conditions, and priorities. Crafting a
budget that addresses the distinct
needs of different populations while
promoting equity and inclusivity is a
significant challenge.
• Unpredictable revenue streams.
Local governments heavily depend on
revenue sources like property taxes,
grants, and fees. Economic fluctuations
and changes in property values can
lead to unpredictable revenue
streams, affecting the fiscal health
of the organization.
• Infrastructure maintenance and
development. Balancing the need for
maintaining existing infrastructure
with investing in new projects poses
a challenge. Aging infrastructure
may require significant resources for
maintenance, while neglecting
investments in new infrastructure
can hinder the community's growth
and vibrancy.
On top of everything else, each
member of the council has their
unique background, lived experience,
philosophy, belief, interests, and
expectations, all of which add to their
discussions and decisions about the
budget. So, how could we set the stage for
more informed, smarter budget decision
making that focuses on maximizing
the benefits of good budgeting practice
and not letting the challenges and
differences hijack the conversation?
The City of Port St. Lucie, Florida, has a
strategy-informed budgeting approach
that may shed light on the ideal method.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 29

SHARPENING THE BUDGETING STRATEGY
Paying attention to community needs
A strategy-informed budgeting approach
is based on the principle that budget
decisions are informed by the needs of
the community. The steps involved are
learning community needs, analyzing,
and internalizing these needs (within the
organization), and finally, making budget
decisions based on the information and
discussions from what is learned in
the first two steps. An example of this
approach is Port St. Lucie’s strategic
planning and budgeting process.
The city, which has a council-manager
form of local government, is led by a fivemember
elected council whose members
make policy decisions and set long-term
directions. The council is managed by a
professional city manager who oversees
the administration and is responsible for
the implementation of policies and day-today
operations. Bloomberg Philanthropies
recently recognized the City of Port St.
Lucie for its exceptional use of data with a
What Works Cities certification.
“Our city has been transformed by
significant growth in a short amount
of time, which has placed a premium
on utilizing data to ensure we are
providing the right services to meet our
community’s needs,” said City of Port St.
Lucie Mayor Shannon Martin. “Data is
guiding planning decisions, improving
efficiencies, and driving innovations
that benefit our residents today while
preparing a foundation for our future.” So,
what is unique about the city’s approach?
The city’s budget is approved in
September, before the start of the fiscal
year (which begins on October 1), and
the cycle runs annually. Working behind
the scenes is the city’s four-step strategy
planning system (see Exhibit 1).
The system’s rhythm and structure
“We use a four-step process, a rhythm
for the year, that really helped us make
progress.” said Kate Parmelee, deputy
city manager for strategic initiatives
and innovation and chief innovation
officer, who is leading this work. “When
we began this process, we realized the
content of the strategic plan wasn’t
tangible enough—there wasn't a shared
understanding between the council and
staff on what the deliverable looked like.
So, part of our early work was just getting
our structure right. We restructured
our strategic plan so it has a goal, a
strategic initiative, and projects. And
every project has a project manager, a
project team, and a project charter with
key performance metrics associated. So,
there's real, tangible, deliverable items
built into the strategic planning system.”
Built on “rhythm” and “structure,”
the system begins by analyzing citizen
feedback from a community survey
that is sent to randomly, scientifically
sampled residents, plus an open
participation survey. Then the city
further analyzes the feedback through
its annual Citizen Summit. The most
recent three-hour event, held in early
February in 2024, attracted 900 people
and provided more in-depth citizen
feedback. After the summit, the next
step is the winter workshop, where the
city council and staff come together
to learn and discuss emerging issues,
using a wide range of sources: economic
outlook, health indicators, capacity
projects, and budget and debt outlook—
all of which help create a long-term,
strategic, and forward-looking view of
the community. Next, the council sets
its priorities at a strategic planning
workshop in April, finalizing the
corresponding strategic plan goals,
strategic initiatives, and priority
projects.
These steps set a stage for smarter
and more strategic budget decision
making at the city council, a process that
formally begins in July at the summer
workshop, led by the city’s office of
management and budget. This step
takes the direction of the strategic plan
into account, working collaboratively
with staff. The council makes decisions
during this review to fund those priority
projects and to increase or decrease fees
or costs in various programs, if needed.
Council members also set the date for the
two budget hearings, which are held in
September of each year, before the final
budget is adopted, by September 30.
Throughout the year, the city provides
quarterly updates on the progress of
the strategic plan, and the city council
provides continued feedback and
evaluation on implementing the plan.
All these efforts are aligned with the
community’s vision, the organization’s
mission, the financial realities facing
the city, and operational priorities.
To build up the momentum of this
work and further improve the system,
the city introduced quarterly stats
meetings in 2024. The city manager,
the executive team, and all the project
managers attend these meetings and
share metrics related to priority projects.
PHOTO COURTESY OF TWITTER.COM/CITYPORTSTLUCIE
30

EXHIBIT 1 | 4-STEP STRATEGY PLANNING SYSTEM
They also troubleshoot if needed. When
reflecting on this journey, Parmelee
offered a few tips for others who may
be interested in pursuing a similar
approach:
1. Develop a strategic plan (structure)
that collects resident feedback and
delivers tangible results.
2. Develop a strong rhythm using multiple
check-in points throughout the year
and build a system that people buy into.
3. Work with the mayor and members of
the council closely and secure (and
maintain) their buy in.
4. Develop stronger relationships
between the strategy lead and budget
lead and collaborate throughout the
process.
One thing that really stands out
here is the level of engagement and
commitment from the city council.
“The mayor and the city council had
been highly committed to strategic
planning for several years, and truly
strengthened their commitment
beginning in 2016. They placed an
emphasis on their strategic plan. They
placed an emphasis on convening,”
Parmelee said. “The council really
valued (this approach), spending the
time to deeply understand the issues and
building in meaningful opportunities to
engage with residents and obtain their
feedback, thinking about how they want
to move the city forward. They are very
committed to keeping their promises to
residents, and stress that to the staff as
they build the strategic plan each year."
Conclusion
By default, for a strategy-informed
budgeting approach to be a success, an
organization must have a solid strategy
that is approved and owned by the
council. If your community happens to
have both, perhaps a strategy-informed
approach is worth your consideration.
Kel Wang is a manager of applied data
practices with the Bloomberg Center for
Government Excellence at Johns Hopkins
University.
Kate Parmelee, deputy city manager for
strategic initiatives and innovation and
chief innovation officer for the City of Port
St. Lucie, Florida, contributed to this article.
To learn more about this work, contact
Parmelee at kparmelee@cityofpsl.com.
ABOUT THE RETHINKING BUDGETING PROJECT
The public finance profession has an opportunity to update local government budgeting practices to
take advantage of new ways of thinking, new technologies, and to better meet the changing needs
of communities. Rethinking Budgeting will raise new ideas and will produce guidance for state and
local policy makers on how local government budget systems can be adapted to today’s needs. Learn
more: gfoa.org/rethinking-budgeting
JUNE 2024 | GOVERNMENT FINANCE REVIEW 31

Speaking the
©2024 HARRY CAMPBELL C/O THEISPOT.COM
32

FISCAL FLUENCY
Same Language
Numbers are abstract concepts, which can make it challenging for local governments
to communicate with residents about how the city spends its tax dollars. These two
cities improved their fiscal fluency by using innovative tools and strategies to help their
communities understand and engage with the budgeting process.
The City of Shakopee’s Budget Communication Emphasizes Utility
When the City of Shakopee, Minnesota,
communicates about the city budget, it’s
all in service of providing information
residents find useful.
This philosophy led the city—an
honorable mention winner in GFOA’s
Fiscal Fluency Challenge—to develop two
innovative methods for communicating
information about the city’s budget. It was
a city manager’s idea to condense as much budget information
as possible onto a single presentation board, Finance Director
Nathan Reinhardt said.
He recognized that top-line budget summaries weren’t
providing the full picture of the budget’s impact on individual
households. Creating and promoting a budget board filled with
information broken down to the household level allowed the
city to “right the record” on how Shakopee spends its tax dollars.
“We just wanted to be able to put the information in a format
people could understand and relate to,” Reinhardt said.
ABOUT FISCAL FLUENCY
Numbers are at the core of a finance professional’s job, and a big part of the job is communicating those numbers
to other people. However, numbers are not the first language of many who need to understand this message.
GFOA’s Fiscal Fluency work helps finance professionals to better communicate numbers using insights from
behavioral science. Learn more: gfoa.org/fiscalfluency
JUNE 2024 | GOVERNMENT FINANCE REVIEW 33

For more information, visit gfoa.org/rethinking-budgeting
FISCAL FLUENCY
The board combines metrics from the
budget that most affect residents, from
comparing the average tax bill to other
household expenses to tax rate trends over
time. City staff and elected officials bring
the board with them to budget meetings
and refer to it when answering taxpayers’
questions. When it’s not on the road, the
board lives at City Hall, in view of everyone
who comes to do business there.
“People appreciate having information
they can understand, and some of our
comparable information puts things in
perspective,” Reinhardt said.
City staff are regularly surprised by how
many people they see engaging with the
budget board independently, he added.
It’s also a valuable tool for elected officials
who want to stay on message when fielding
questions from taxpayers, according to
Amanda McKnight, communications
manager for the City of Shakopee.
This fiscal year’s board was their best
because it emphasized bullet points and
graphics to keep it as clean as possible,
Reinhardt said.
At the bottom of the board is a QR code that
sends residents to discover their personal
tax receipt, the second way Shakopee is
working to demystify their city budget
and bring it down to the household level.
The online tool allows residents to
calculate their unofficial property tax
receipt, drawing a line between their total
bill and the city services that bill pays for.
“People appreciate having information they
can understand, and some of our comparable
information puts things in perspective.”
City of Shakopee Finance Director Nathan Reinhardt
The receipt usually reveals good and
bad surprises, depending on the taxpayer,
McKnight said. But it always provides
information that allows residents to form
their opinions based on facts, rather than
misconceptions or assumptions.
“I'm hoping that the transparency
aspect makes all of that easier to digest
in general and corrects some of the
assumptions that might be out there,”
McKnight said.
The receipt looks a lot like one you might
get from a store or restaurant, making it
relatable to the average Shakopee resident.
Getting people to engage with the online
tool was challenging, however, so the
communications team produced a fun,
engaging video that took advantage of
social media’s preference for video content.
“Of course, yes, we want them to use the
tool, but first we need them to know that
the tool exists,” McKnight said. “Maybe
when they get their property tax statement
they're going to think, ‘Wait a minute,
I watched a video about this, I should go
find that and see my breakdown.’”
The Shakopee community responded
to the video by urging other taxing
entities to implement similar software,
Reinhardt said.
Both tools help city leaders build trust
with the community and offer proof of the
value the city provides to its residents.
FISCAL FLUENCY
MADE EASY
How finance officers can better communicate
numbers using insights from behavioral science
LEARN MORE ABOUT FISCAL FLUENCY
This GFOA research report provides
essential strategies for transforming
numbers into human experience.
gfoa.org/materials/fiscalfluency
From left: Finance Director Nathan
Reinhardt displays the budget board, which
gives residents a clearer understanding
of how tax dollars are spent. The online
property tax receipt tool breaks down how
property taxes are used so the information
is easily relatable to residents.
34

Indian Wells Program Budget Helps Residents Understand City’s Strategic Planning
The City of Indian Wells,
California, is home to a
highly involved community
that is invested in the longterm
financial wellbeing of
their community. The city’s
careful financial planning
has made Indian Wells a
premier residential resort,
boasting recreational resources like
Indian Wells Golf Resort and Indian Wells
Tennis Garden.
The small, affluent community started
using a program budget in 2015 to better
explain the city’s spending to its fiscally
conservative citizenry. A program budget
focuses on identifying the value the
public gets from government spending.
After first implementing a program
budget, the city was able to reduce the
volume of its budget by 50 percent. The
budget became easier to manage, and
citizens gained a better understanding of
what departments are doing to maintain
the community. The program budget
resulted in an uptick in community
involvement too, according to Finance
Director Kevin McCarthy.
“There were some pretty happy
residents who came out and said just what
you’d expect them to say: ‘I don’t have to
be a financial analyst to read the budget
anymore,’” McCarthy said.
He attributes residents’ voting for a
new hotel tax of 12.25 percent as a direct
result of the public’s understanding of the
city’s finances and trust in the city to be
a good steward of the money. The new tax
became effective Jan. 1, 2019.
Today, residents express appreciation
for the city’s maintaining healthy
reserves, a fully funded pension program,
and a $2 million annual capital reserve
fund. Recently, the California state
auditor ranked Indian Wells as one of the
most fiscally sound cities in the state.
“That was never a specific city goal; it
was just commensurate with our longterm
financial conservative outlook, and
so the residents love that,” McCarthy said.
While residents have grown used
to the new budget structure and have
stopped commenting on the new format,
the values of fiscal conservatism and
emphasis on maintaining reserves
outlined in the program budget continue
to draw praise, McCarthy said.
Indian Wells’s strategic priorities
for FY 2024 and 2025 include finding
a new revenue source to diversify
revenue streams supporting public
safety, implementing updates to the
city’s capital improvement plan, and
increasing revenue from tourism.
McCarthy is most proud of the city’s
budget at-a-glance document, which
allows residents to quickly understand
how the city plans to spend its general
fund and golf resort budget. The eightpage
document also outlines planned
The easy-to-follow design of the city’s budget
communications help Indian Wells residents
quickly understand how the budget is spent,
enhancing engagement and community
involvement in the budgeting process.
investments in capital improvements
and the rising costs of public safety.
The at-a-glance document is one of
13 fiscal communication pieces that
are produced and sent to residents
throughout the year. That level of
communication sets the stage for public
meetings where residents can show up
and express their concerns or views on
the planned investments, McCarthy said.
“By and large, we spend more time in
actual strategic planning, than we do
explaining the budget,” McCarthy said.
“I’m probably not surprised as much as
I used to be, but I’m a little surprised at
just how well the residents understand
the budget, and I think that’s in large part
because of the way it’s formatted.”
JUNE 2024 | GOVERNMENT FINANCE REVIEW 35

36

REAL-WORLD RELIABILITY
Real-World
Reliability
BY JAKE MAZULEWICZ, PH.D.
How high-reliability teams build resilience instead of chasing zero errors
©2024 MICHAEL AUSTIN C/O THEISPOT.COM
Wildland
firefighters.
Air traffic
controllers.
Flight
deck crews
of Navy
aircraft
carriers.
Operators
of nuclear
power plants
and the national bulk electric grid. These
are among the safest and most reliable
work teams in the world. And they don’t
try to eliminate all errors and surprises.
Decades of experience have shown
that the crusade to eliminate every
error is both impractical and unwise. So,
what do high-reliability work teams do
instead? They operate so that errors and
surprises don’t disable them. Instead of
being brittle or fragile, these teams seek
to build resilience.
In the past 30 years, researchers have
discovered a few unusual traits that
high-reliability organizations share. For
example, they tend to trust the workers
with the most expertise, not the most
status. They also tend to respect the
complex, often sticky ground truth of how
work actually gets done, instead of trying
to oversimplify and “proceduralize”
everything. And of course, highreliability
organizations seek to build
resilience.
Many of the articles and books on highreliability
organizations were written
by academics—and perhaps even for
academics. The result? A lot of confusion
about exactly how to turn high-reliability
organizations theory into real-world
practice. Many modern front-line teams
in electric power utilities, gas and oil,
renewable energy, maritime shipping,
and other high-hazard industries are still
looking for concrete, practical ways to
build resilience into their everyday work.
There is no one recipe to follow. There
is no single playbook or procedure that
guarantees success. That’s why some
people now speak of high-reliability
organizations—HROs—as high-reliability
organizing—a verb, not a noun. Yet
nearly all reliability-seeking teams use
several classic, time-tested strategies.
Here are three of them.
1
WATCH FOR WEAK SIGNALS
Mark leads a team of five electric utility
line workers. They install, repair, and
maintain the 250,000-volt power lines
on 150-foot tall metal towers. Mark’s
team is widely respected for being
consistently safe and efficient, but they
often get criticized for talking too much
while working. And they do chat and
banter through most of the workday.
Some team leaders hate this. But Mark
actively supports it. Why? Because long
before any of his operators get indecisive,
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REAL-WORLD RELIABILITY
and a lifetime of regret, you get a small nick
and a lesson you will never forget.
What’s one common, serious error that
people often make in your line of work? If
it’s impractical to eliminate that error, then
how could you become more resilient to it?
What kind of fail safe would allow you and
your peers to make that error with minimal
consequences, learn from it, and recover
from it quickly, easily, and cheaply?
3
PRACTICE UNCERTAINTY
Trying to eliminate all errors or to “proceduralize”
everything in most modern jobs is impossible.
So, the world’s most high-reliability teams take
a different approach.
confused, stressed, or in trouble, Mark
hears subtle changes in their usually
playful banter.
Mark realized this “weak signal” was a
clever early warning system. Over time,
he identified more weak signals and
learned how and when to best respond to
each one. Mark’s team is more resilient
than most others partly because he
resolves potential problems, surprises,
and errors long before most other team
leaders even notice them.
What’s one weak signal in your line
of work that took you a long time to
learn, and that helps you catch errors
or problems early, while they’re still
relatively easy to address? What are the
best weak signals that three to five of
your most trusted peers use? How could
you train the apprentices in your team to
recognize and act on these weak signals
earlier in their career than you did?
2
EMBED FAIL SAFES
How can we ensure that a carpenter
doesn’t accidentally put their finger into
the razor-sharp, spinning blade of a table
saw? The answer is simple: we can’t.
Trying to eliminate all errors or to
“proceduralize” everything in most
modern jobs is impossible. So, the
world’s most high-reliability teams take
a different approach. They adjust their
systems not to prevent all failures, but
to help them fail safely, then recover
quickly, easily, and cheaply.
Many modern table saws include a
clever safety system. The spinning blade
actually senses electrical conductivity. If
it senses a highly conductive material like
your finger, it slams the spinning blade
to a full stop within a few thousandths of
a second. It doesn’t prevent the error. It
prevents that error from disabling you.
The result? Instead of a severed finger
After World War II, a European general
commented that Americans are so good
at war because war is chaos, and nobody
practices chaos on a daily basis like the
Americans.
High-reliability teams train and practice
regularly. But they don’t just practice the
“right” procedures for everyday tasks. They
practice chaos, or at least uncertainty. For
example, a pilot climbs into a flight simulator
without knowing that her simulated plane
will soon be struck by lightning. A nurse
gives a mock medication to an advanced
life-like mannequin that has been secretly
programmed to simulate a heart attack
without any warning. Pilots and nurses
handle their respective surprises. Afterward,
they debrief with their peers and learn
without blame.
Does your team practice responding to
unexpected errors, emergencies, or other
surprises in a safe way? If not, then start
with a few simple, even fun experiences like
interactive, discussion-based case studies.
Pick an incident relevant to your work that
happened one to three years ago. Tell your
team how the job started, but don’t reveal the
error or surprise yet. Ask them, “What are
some risks you sense here, and how would
you handle them?” After the discussion
peaks, then reveal “what happened” in the
incident and discuss what surprised them,
how they would respond, and why. Debrief
together to share insights, lessons learned,
and good practices on how to respond to
uncertainty with resilience.
For decades, high-reliability organizations
have used these and similar methods to build
resilience instead of chasing the illusion of
an error-free workplace. What kind of results
could they generate for your team?
Jake Mazulewicz, Ph.D., a former firefighter,
EMT, and military paratrooper, is director of
JMA Human Reliability Strategies.
©2024 GORDON STUDER C/O THEISPOT.COM
38

Run it Up
the Flagpole
How the City of Evanston
initiated conversations about
the best use of public assets
BY KYLE WEDBERG, PH.D.
40

PUTTING ASSETS TO WORK
©2024 AAD GOUDAPPEL C/O THEISPOT.COM
It may have begun with a flagpole.
This particular flagpole was
not the majestic vehicle for
any kind of deeply meaningful
observance, like Memorial Day,
July 4th, or baseball’s opening
day. This flagpole was something
much sadder—a nod to a time lost.
Its bare metal was especially grim on
a cold winter day in Evanston, Illinois.
The wind off Lake Michigan, though
probably a mile away, could still be felt.
Paul Zalmezak is the director of
economic development for the City of
Evanston. He is showing the flagpole,
which the city owns, to a tour of national
delegates who are engaged in the GFOA
initiative, “Putting Assets to Work.”
This rather small and antiquated object
would not necessarily appear on any
formal asset inventory. Because of its
age and low cost, it could have been
easily missed. Had Zalmezak not called
the group’s attention to it, the flagpole
could have blended into the steel-gray
January sky without a thought.
And yet, Zalmezak spoke about it with
passion and conviction. Those gathered
could tell this flagpole meant something
to Zalmezak.
Zalmezak talked about removing the
flagpole in a public meeting. It was no
longer in use and may not have been
operable. The scrubby and opportunistic
cedar bush that grew around it cut off
access to the rope and pulley system
needed to raise a flag. Even if that
apparatus was there, it was unclear who
would do the raising.
The building behind the flagpole is a
former elementary school (now an arts
center) designed by Daniel Burnham, the
legendary architect and master planner
who famously told Chicago after the great
fire of 1871: “Make no little plans. They
have no magic to stir (people’s) blood and
probably themselves will not be realized.”
But that was a long time ago.
Despite its meager appearance and
apparent obsolescence, the flagpole had
actually been a topic of conversation
in the community for several years, for
The flagpole stood next to the Noyes Cultural Arts Center in Evanston and was removed in May of this year.
Image from Google Maps; captured in August of 2019.
a very unlikely reason: the COVID-19
pandemic. Across the street from the
flagpole was a low-slung, mixed-use
brick building from the first half of the
20th century. There are a number of
restaurants on the ground floor. These
eateries face the sidewalk and arterial
street underneath the elevated Purple
Line tracks that connect Evanston
to Chicago. During the pandemic’s
lockdown, this street was not big
enough for the kind of spontaneous al
fresco dining that many restaurants
adopted—but there was more than
enough space next to that flagpole.
“For about $1,100, the city bought
patio furniture to provide a place
for people to eat outside next to the
flagpole,” Zalmezak remembers. It was a
short-term expense by the city to help a
handful of local restaurants that might
otherwise have gone out of business,
but it became something more.
These restaurants had never had
ample seating inside, so even after the
pandemic, people continued to use this
expanded and enhanced civic space for
enjoying a meal, talking, reading, or just
people-watching. The local soundtrack of
trains and traffic was part of the charm.
Business owners and local leaders
alike realized that the nascent district
could grow if they made a few small
changes to the existing public property.
For instance, what if the fence around
the school were adjusted to give more
space for seating? Potentially moving
the fence gave rise to a larger discussion:
why was the fence there at all?
For that matter, what about the
disregarded and neglected flagpole
at the end of the fence line?
When Zalmezak broached the topic
of removing the pole at a community
meeting, there was immediate pushback.
One community member said, “It’s
not bothering anybody.” Zalmezak
responded, “Well, it's bothering me.”
In addition to Zalmezk being the
director of economic development, he
is also a resident, spouse, and parent
in the same community. In these tense
situations, he’s talking as, and to, a
constituent and fellow Evanstonian.
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PUTTING ASSETS TO WORK
The City of Evanston, Illinois sits on the shores of Lake Michigan
and is 12 miles north of downtown Chicago. The city is home to
Northwestern University, one of the world’s leading research
universities, and is known for its ethnically-diverse population.
Evanston has a population of approximately 75,000.
42

Thinking creatively about what these assets
can produce may unlock new revenues,
cost-sharing opportunities, and development
scenarios that benefit everyone.
Trying to keep the conversation cordial
and professional, Zalmezak tried another
tack: he talked about possibly cleaning
up the pole and putting it back into use.
He spoke about the arts center and
how the city subsidized it. He talked
about how that made it an amenity by
and for the entire community, beyond
just the creatives who used the space
itself. With all of this in mind, if people
truly felt that the flagpole was an
important civic asset, he could justify
investing some time, energy, and
resources to make it usable again—if
the center’s users would like to take on
the responsibility for its utilization.
The community member’s response
to Zalmezak was, “We’re not flag
kind of people, and the community
is not in favor of it either.”
A discussion about the future of a fallow
piece of public property had elicited
strong pushback from a single individual,
which spurred city staff into thinking
more broadly and collaboratively.
This story will be relatable to any
government employee who has led a
public meeting, of course, but it is also
a metaphor for how we can revisit the
very purpose of our public assets.
All state and local governments have
assets on their books. The government
maintains them, heats them in the
winter and cools them in the summer,
keeps their grounds, and uses them for
various activities. These governments
also have an obligation to periodically
revisit the usefulness of these assets
and their purpose, relative to the needs
and demands of the entire community.
City leaders should be willing to
envision a future for these assets by
first considering how they’re being
used. There should be active decision
making about how these assets are
used, even if (especially if) that shifts
thinking about their highest and
best use. City leaders must also be
unafraid to engage in conversations
about ways to appropriately monetize
publicly-owned assets if doing so will
provide more resources to help pay for
pure public goods and more services
for more people. Citizens’ tax dollars
need not be the sole funding source for
their governments’ services. Thinking
creatively about what these assets can
produce may unlock new revenues, costsharing
opportunities, and development
scenarios that benefit everyone.
Evanston city officials are now taking
a fresh look at the assets it owns because
they want to think about the best way
to fund some clear public priorities:
more housing, more support for the
most vulnerable populations, and
public safety, among other priorities.
This could lead them to centralize some
municipal government functions in
underutilized commercial office spaces
or develop revenue-positive enterprises
in abandoned or surplus public buildings.
This interrogation of all public assets
in the city's inventory will allow them to
better put their assets to work. The results
will be more resources for programs
the public needs while shrinking the
number of properties and land they own
which no longer serve the public good.
The opportunities associated with
Putting Assets to Work in Evanston
could yield real resources to house,
educate, heal, feed, support, and engage
its population. Possibilities abound for
Zalmezak and his team in the city.
What began as a conversation about
eliminating an old flagpole has triggered
new ideas about how to best steward
Evanston into the future—a vision the
entire community can rally around.
A conversation about a flagpole even
Daniel Burnham could support.
Kyle Wedberg, Ph.D., is a senior manager
in GFOA’s Research and Consulting Center.
LEARN MORE
This GFOA research report examines
how local governments can use Urban
Wealth Funds to generate revenue for the
betterment of the local community.
gfoa.org/materials/putting-publicassets-to-work
JUNE 2024 | GOVERNMENT FINANCE REVIEW 43

44

In Practice
ERP INSIGHTS | ACCOUNTING | PERSPECTIVES | Q&A
ERP INSIGHTS
We Require Requirements
BY MIKE MUCHA
Enterprise resource
planning (ERP) system
implementations offer
much promise for improving
business processes,
empowering employees with tools to
become more effective, and ultimately
transforming the entire organization. ERP
projects also involve considerable risk,
require significant investments in both
time and money, have the capability of
stressing an organization’s culture and its
people, and have no guarantee that project
goals will be achieved. Most governments
also have limited experience with ERP
implementations with major projects
only occurring once every ten to 15
years. While some organizations going
through the process are able to achieve
amazing success stories, others don’t
fare as well and can experience failure.
The most likely outcome, though, is
somewhere in the middle. Yes, ERP
projects are difficult, but also not
impossible. In many cases, difficulty
doesn’t come from the technology,
but rather the organizational changes
necessary to achieve the project goals
that often go along with implementation
of best practices, streamlined
processes, or modern functions.
ERP projects include many complex
components that involve a variety of
stakeholders, all of whom must come
together if the project is to succeed.
Gaining support and alignment requires
a clear project vision, achievable goals,
and a well-defined scope. Establishing
where the finish line should be is and
making that known to everyone involved
makes the project much easier to manage
and much more likely to achieve success.
For the past 25 years, GFOA has
provided resources and services to
help organizations navigate the path
to an ERP system replacement, and
one component that is essential to
our approach is the development of
functional requirements. When used
correctly, functional requirements are a
valuable tool throughout the entire project.
Requirements help communicate scope
to internal project stakeholders and set
clear expectations about how the system
will support future business processes.
Requirements also then communicate
the scope to potential vendors so they
can propose the appropriate software
and services. In their proposals, vendors
will confirm that the requirements
will be achieved, and the government’s
evaluation team can properly analyze
proposals to determine which offers the
best value. From there, requirements
define the scope of the statement of
work and can serve as a benchmark
for testing and project sign off.
WHAT ARE REQUIREMENTS?
Requirements describe major tasks,
outcomes, or functions that the configured
ERP software will need to do to support
business processes. GFOA prefers to
differentiate requirements that address
“what” the system must do versus
requirements that identify “how” the
system should do something. To focus
more on outcomes, we try to avoid “how”
requirements. Also, by specifying what
(but not how) the government allows for
JUNE 2024 | GOVERNMENT FINANCE REVIEW 45

IN PRACTICE | ERP INSIGHTS
the opportunity that the software vendor
will provide a better way of meeting the
requirement.
One important clarification is that
functional requirements shouldn’t
describe system features of what the
system has the ability to do. They should
describe functions that are actually built
into the system by the consultants tasked
with configuring the project and that are
available for staff to use. There is a big
difference between “has the ability to do”
and “does.” For example, every morning
when I wake up, I have the ability to go to
work and complete my required tasks. But
what’s important to my supervisor is that
I actually go to work and am productive.
All requirements should also be
organized by business process or steps
in a business process. Functional
requirements serve as a checklist or set of
criteria that defines the scope of what you
need the ERP system to do to achieve your
new business processes. Requirements
then describe parts of a transaction
or process, calculations, and major
outcomes (such as, reports generated,
information stored, approvals). Exhibit 1
shows sample requirements that support
the purchase requisition process in a
standard ERP system. Each requirement
is written as a standard to be achieved
by the ERP system or project, and each
one can be verified or tested. Organizing
requirements by process makes
organizing testing efforts much easier.
HOW DO WE DEVELOP
REQUIREMENTS?
One trap governments face with ERP
projects is configuring the new system
to work just like the old one. To mitigate
this risk, GFOA advises governments to
work on improving policies and processes
before engaging any technology vendors
and developing requirements that
support a future vision. Steps in GFOA’s
recommended process include:
• Analyze existing processes.
Governments should document
existing business processes to capture
key elements. For many processes, this
could also include drawing a process
map. Bringing together stakeholders
from multiple departments to document
and discuss current processes is
also valuable. Stakeholders are often
knowledgeable about their portion
of the process, but unaware of steps
taken in other parts of the organization.
Better understanding of the full
current process makes identifying
opportunities for improvement easier.
• Determine opportunities for
improvement. After processes are
documented, stakeholders can
brainstorm options to improve the
process. At this stage, applying concepts
from a Lean process improvement
approach can help you identify waste
or non-value added steps. When you’re
coming up with improvements, you’ll
likely identify options that can be
implemented immediately, instead of
waiting for a new system. For others,
new technology will be required to
support new business processes.
• Define future business process
expectations. In evaluating options, you
will start making decisions about what
the new process will look like. Before
engaging technology vendors, define
what you want the future process and
policies to look like. You will eventually
want to make full use of your system and
make sure you are using the ERP system
as it was intended, but ERP systems
often offer many configuration options,
and you need a general sense of direction
going into the project. From there, you
can optimize the detailed process
with the system’s bells and whistles.
• Identify functional requirements to
support future process. What starts as
a general vision for a new process will
need to identify objective standards
communicating a scope of work for
a potential vendor. When you start
defining requirements, you are really
putting the process vision into operation
by establishing acceptance criteria
that will define the project scope.
• Clearly communicate process
expectations and requirements
in a request for proposals (RFP).
Communicate the requirements to
potential vendors within the context
of business process expectations and
the changes needed to get from where
you are now to where you want to be
with the new system. The scope of
an ERP project is not just purchasing
software, but also purchasing the
consulting services needed to set up
the software, convert data, train users,
and manage teams along the way.
Requirements as described in this
article can be used for new ERP
implementations, to upgrade projects, or
to simply assess features of your current
system. In fact, the broader concept
of developing requirements or clearly
defining the scope of a project, an RFP, or
a contract is an established best practice
supported by project management,
technology, and procurement standards.
From a technology project perspective,
requirements are essentially the same
as test scripts developed from your
business processes or use cases to
provide a form of quality assurance
and to ensure that scope is met.
From a procurement perspective, as
communicated in NIGP’s Global Best
Practice on specifications, requirements
serve as the specifications that define
scope for the vendor.
NIGP Global Best Practices—
specifications
Using specifications (or requirements)
in competitive solicitations and contract
documents is a best practice supported
by NIGP’s Global Best Practices.
Performance requirements describe the
desired result or commodity and are not
concerned with specific details of the
commodity’s physical characteristics or
features. The best practice defines some
of the benefits of using requirements in
contracts, all of which are applicable and
relevant to ERP contracts.
• Allow potential vendors to use their
expertise, creativity, and innovation
to provide a solution. The potential
vendor chooses the method of
achieving the outcome.
• Place a higher degree of risk on the
awarded vendor, who is responsible
for achieving the outcome and will be
evaluated based on defined criteria
(the requirements).
• Provide opportunity for innovation.
Allow potential vendors to suggest
unique solutions to defined needs.
• Allow end users to benefit from the
latest products and technologies.
• Corrective action may be applied if
service levels are not achieved (for
example, warranty remedies for
failure to satisfy the requirements).
Read more at nigp.org/our-profession/
global-best-practices.
46

EXHIBIT 1 | SAMPLE REQUIREMENTS THAT SUPPORT THE PURCHASE REQUISITION
PROCESS IN A STANDARD ERP SYSTEM
NUMBER
REQUIREMENTS
1 All staff have access to enter purchase requisition
2
3
Purchase requisition can store the following information:
• Vendor (optional)
• Price
• Account
• Justification for purchase
• Commodity code
Purchase requisition identifies if purchase is related to:
• Contract
• Work order
• Project
4 Purchase requisition can be initiated for multiple fiscal years
5 Purchase requisitions initiate approval process
6 Purchase requisitions pre-encumber funds
7
Approval process for purchase requisitions includes approvers based on:
• Dollar amount
• Department/organizational chart
• Type of purchase
At this point, future processes have been
defined and requirements set. You can
now solicit proposals from vendors.
WHAT ARE POTENTIAL VENDORS
OFFERING?
Standard vendor proposals offer
descriptions of software products or
provide explanations of consulting
methodologies designed to implement
the software products. They also
typically make claims about their
expertise or identify differentiators
showing why a certain product leads the
market, takes an innovative approach,
or delivers superior service. What they
often don’t contain is a description of
specific business processes the system
will support or how the system will be
set up to meet accounting standards,
comply with payroll calculations
defined in a union contract, interface
with existing software products, or
facilitate any of GFOA’s best practice
statements. For this, vendors will need to
respond to a government’s requirements
affirming the requirements will be met,
and even provide information as to how.
In its simplest form the RFP with its
requirements define a problem to solve.
The vendor’s proposal identifies specific
tools (the software) and an approach
(consulting services) that together
comprise the solution to solve the
problem. Moving forward, a government
and the vendor it selects will agree to
a statement of work and scope that is
defined by the requirements. Having
both the requirements and the responses
confirming the vendor’s scope for
satisfying the requirements is essential.
WHY DO VENDORS RESIST INCLUDING
REQUIREMENTS IN A CONTRACT?
To be fair, not all vendors resist including
requirements in a contract. Some view
requirements as an effective way to define
scope and hold the vendor accountable to
promises made during the sales process.
And some understand that requirements
can benefit both parties by clearly setting
criteria for acceptance of the project.
Completing all the requirements enables
the vendor to invoice for any payment
associated with final acceptance or
project close-out, or to demonstrate that
intermediate deliverables are working
toward achieving the defined end scope.
There are also vendors that resist or flat
out refuse to include requirements in
the contract. Below are some of the more
common justifications for avoiding the
accountability imposed by requirements.
1. Requirements are vague. The purpose
of a requirement is to provide an
objective standard for the configured
system to achieve—although the
quality of requirements isn’t always
consistent. Ideally, both the vendor
and the government should be able
to assess whether the ERP system
has met a requirement, coming to
the same conclusion. The intent of
vague requirements can be hard to
understand; they are, therefore, very
difficult or impossible to test. It’s in
the best interest of both parties to
clarify unclear requirements. Failing
to do so leads to a potential dispute.
Clarifying and discussing the vague
requirements eliminates this concern
and allows all requirements to be
included in the contract.
2. Requirements aren’t really
requirements. If you found the
requirements on the internet and they
don’t apply to your project, then they
probably don’t have much value in the
contract anyway. But if you developed
your own requirements or reviewed
an existing list and determined that
all the requirements are relevant,
they provide accountability and there
should be no problem in including
them in the contract.
3. Software vendors can’t control how
the system is implemented and
shouldn’t be held responsible for the
system being configured incorrectly.
Project requirements really serve two
purposes. The first is to ensure that
the software you purchase is capable
of performing the tasks your project
requires. The second is to ensure
that the software was configured
appropriately to meet your needs. If
the software vendor is not involved in
software configuration, it may be fair
to leave the requirements out of the
software contract. In this case, the
firm responsible for implementation
should include the requirements
and use them to define the scope to
ensure that services will be provided
to satisfy the requirements.
4. Requirements should not be applied
to software-as-a-service contracts.
As ERP systems migrated to the cloud,
some cloud vendors tried to claim
that getting a vendor to commit to
requirements would actually hurt
the government, as it would prevent
the vendor from rolling out new
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IN PRACTICE | ERP INSIGHTS
features in the promised upgrades
that the cloud would make possible.
This is simply not true. Requirements
that define what the system will need
to do in no way hinder the software
vendor’s ability to innovate on how
it will accomplish a requirement. In
fact, with newer software-as-a-service
products, requirements become even
more important as it’s much more
likely that the vendor’s new product
doesn’t yet offer the functionality
that was promised, or the consulting
approach underestimated the work
effort required to implement it.
Having requirements in the contract is
therefore that much more important.
5. Leadership from the vendor won’t
allow it. It’s not surprising that
the leadership or decision makers
for the vendor will look out for the
vendor’s best interests and try to
avoid accountability or making
commitments to follow through on
sales promises. It’s also reasonable
for the leadership or decision makers
from the government to not want to
do business with a firm that takes
this approach. In one of GFOA’s recent
projects, the vendor tried to make the
argument that requirements should
only be used as part of the procurement
and demo process to find the best
vendor. The firm claimed that from
that point on, governments should
adopt the vendor’s approach, and
vendors shouldn’t be required to follow
the requirements. Don’t be fooled.
It’s difficult to think of any scenario
where this would be acceptable. Most
RFPs or government contracts should
set the expectation that the vendor
not only include their responses to
the requirements in a contract, but
also provide a warranty for services.
A vendor that takes exception to this
requirement is making a significant
change to a material term of the
contract that may even make the entire
proposal non-responsive to the RFP.
WHAT IS THE RISK OF SIGNING A
CONTRACT WITHOUT REQUIREMENTS?
When governments sign a contract for an
ERP system or for ERP implementation
services, they actually know very
little about the product, having never
used it before, and must rely on the
promises made during the sales process.
The vendor should provide services that achieve the
requirements, and any deliverables or milestones should
reference requirements where applicable in their acceptance
criteria. Quality assurance on the project should trace
the requirements through design, system configuration,
testing, and ultimately final/system acceptance.
Contract documents that identify
modules purchased or hours of services
to be provided also provide very little
protection. For example, if you purchase
an “accounts payable module,” what you
just purchased is not clear. To get the
functionality you want, you may need
the “advanced accounts payable module.”
Similarly, if the consulting proposal calls
for 500 hours of services, you have no
idea if 500 hours will get you a completed
project or one that is only halfway there.
The requirements provide protection
by clearly defining project success and
the standards to be achieved before the
project can be considered complete. For
example, if your requirements defined
that you needed to process invoices
through an approval workflow, initiate
electronic payments, and send 1099s,
you would have protection if you later
learned that one of those functions was
not included in what you initially licensed
or were promised.
Let’s consider a similar, non-ERP
example and assume that you are issuing
an RFP to purchase a new house. Your
defined requirements are that you need at
least 2,500 square feet, four bedrooms, a
finished basement, and a pool. You accept
proposals from multiple housing vendors,
and each one offers to build a house that
meets each of your requirements. You
interview builders, review pricing, and
ultimately select the vendor that seems to
offer the best value. Then you’re presented
with a contract that only requires the
vendor to build you “a house.” Do you sign?
It’s possible that you would still get the
house you wanted—but it’s also possible
that the vendor would deliver a house that
fails to meet your requirements, even
though it still qualifies as a house. That
vendor might also run into challenges
during construction and eliminate the
pool, to save time. And since there were no
requirements in the contract for the pool,
you still end up paying full price.
For at least the last 15 years, GFOA has
met repeatedly with vendors claiming
to have found a pre-configured template
or accelerated method of implementing
an ERP system. Often, the advantage
to this approach is a reduced level of
effort and a more competitive price. But
there really isn’t any “easy button,” and
to make this work, vendors will need to
limit scope and avoid accountability.
Instead, they offer their own definition of
what project success looks like. GFOA has
found that this approach often removes
from scope many essential functions
that governments need, like project and
grant accounting, payroll, workflow, or
reporting features. Similarly, many of
the functions that offer the biggest return
on investment or would require a more
difficult process change to implement,
are reserved for later phases. And without
requirements, it’s very difficult to find
this out until after you are in the middle
of implementation and starting to
question the “good deal” that you signed.
HOW DO WE ENSURE THAT THE
REQUIREMENTS IN THE CONTRACT
ARE EFFECTIVE?
Including requirements in the contract
should be a standard expectation for
all governments—but simply including
requirements in the contract is not
enough. Requirements should be
referenced in the following terms:
1. Scope. The statement of work should
specifically reference the requirements
that help define the scope of the project.
The vendor should provide services
that achieve the requirements,
and any deliverables or milestones
should reference requirements where
applicable in their acceptance criteria.
Quality assurance on the project should
trace the requirements through design,
system configuration, testing, and
ultimately final/system acceptance.
48

2. System acceptance. At the end of
the project, after its gone live, the
government should be able to confirm
that all requirements have been met
before signing off on the project.
3. Warranty. The vendor should provide
a warranty in case requirements
are not met. The standard warranty
remedy is for the vendor to first
re-perform services or, if that isn’t
possible, to refund any software or
service fees associated with any
warranty issues.
4. Order of precedence. Vendors will
insert limitations on service, so watch
for conflicting statements in other
sections of the statement of work or
agreement that limit the effectiveness
of requirements. For example, if
the requirements indicate that the
vendor is responsible for developing
interfaces to a third-party utility
billing system, but also caps interface
development at a set number of hours,
you may hit the cap before satisfying
the requirement. Where there is a
potential for conflicting statements,
governments should insist that
requirements and a commitment
to meeting the requirements takes
precedence.
GFOA IS TAKING A NEW
APPROACH TO REQUIREMENTS
Looking back on GFOA’s overall
experience in working with local
government clients to help plan for,
procure, and oversee the implementation
of ERP systems, there is still room
for improvement on requirements.
Some vendors can be resistant to a
government’s requirements as an
accountability tool, and there is no
doubt that requirements provide some
level of protection for promises made
during the sales process. There is also
no doubt that clearly defining the scope
for meeting requirements has helped
governments avoid millions of dollars
in change fees. It’s also disappointing
when governments settle for a go-live
that only delivers a fraction of the
promised functionality and very little
progress toward improved processes
or the adoption of best practices.
We remain frustrated by the continued
negotiation challenges in getting vendors
to agree to include requirements in the
contract. Perhaps there is a different way
to approach ERP requirements that makes
it easier for vendors and governments to
improve the success rate for ERP projects.
In taking a step back to evaluate, we can
recognize that some of the requirements
governments have developed have been
confusing, vague, or irrelevant. We also
understand that writing requirements
can be difficult, and that starting over
with developing a new set of requirements
for every project is inefficient for both the
government and for the vendor that needs
to respond to something new each time.
So, in response to these problems, GFOA
plans to develop a standard set of ERP
requirements. The definition of these
requirements will be refined over time to
clarify intent, what is necessary to achieve
the requirement, and how it fits with
common local government practices. The
requirements will also define a minimum
viable product and provide a target for
vendors and governments that want to
implement a core ERP system for finance,
procurement, and human resources/
payroll. The requirements will also include
references to GFOA’s best practices.
GFOA’s mission is to advance
excellence in government finance,
and we provide resources, tools,
templates, and checklists to support
local governments. These requirements
will be similar to other resources that
are available to members. GFOA would
then also provide education and continue
to advocate for their use to support
overall adoption of best practices.
Over the next few months, GFOA
will work toward releasing a series of
resources, which will be available at
gfoa.org/erp-requirements, that set
common expectations and better promote
effective strategies for managing scope
and accountability on ERP projects. We
hope that using these resources will
provide local governments (and vendors)
with significant advantages by:
• Clarifying confusing or vague
requirements. GFOA can refine a
standard set of requirements, offer
more explanation, and clarify any
questions with a set of requirements
that will be used over and over.
• Defining minimum standards for
modern ERP implementation. Going
live with the same functionality found
in your 20-year-old legacy system is not
a successful project. GFOA will define
minimum standards for modern ERP
implementation scope, ensuring
that the core functionality is in place
and governments can benefit from a
complete system.
• Integrating GFOA best practices.
GFOA has many best practice
statements that rely on ERP systems.
By helping governments define
implementation success by including
best practices, GFOA will improve
adoption rates of these important
financial management practices.
• Providing accountability. GFOA
will develop a standard approach
to requirements traceability and
recommendations for system
acceptance, deliverable acceptance,
and a warranty that includes
accountability to the requirements.
• Becoming more efficient in
developing and responding to
requirements. By standardizing core
requirements, vendors should be able
to reduce the time it takes to respond
to RFPs and ideally even reduce the
time it takes to implement a system.
• Offering more assistance with
requirements traceability. A common
set of requirements will allow GFOA to
more easily provide services to verify
that requirements are met at multiple
stages in the project.
• Recognizing governments and
vendors for implementation success.
GFOA may recognize governments
(and potentially vendors) for
successful ERP implementation.
CONCLUSION
We look forward to this new approach
and hope that it provides value not only
for governments that are taking on new
ERP projects, but also for assessing
the scope of already completed
projects. For more information on
GFOA’s ERP requirement resources or
to volunteer to assist in developing or
reviewing standard business process
documentation or draft requirements,
please visit gfoa.org/erp-requirements.
For additional questions, please contact
Mike Mucha at gfoa.org/bio/mucha.
Mike Mucha is deputy executive
director for GFOA and director of GFOA’s
Research and Consulting Center.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 49

IN PRACTICE | ACCOUNTING
ACCOUNTING
Getting Ghosted
Eerie Evidence of Changes within Financial Reporting
Entities Resulting from GASB Statement No. 100
BY MICHELE MARK LEVINE,SUSANNAH FILIPOVIC AND TODD BUIKEMA
GASB Statement No. 100,
Accounting Changes
and Error Corrections
(GASB 100), 1 must be
implemented first by
governments with fiscal years ending
June 30, 2024—meaning, essentially,
now. An overview of all key aspects of
the statement appeared in the August
2022 issue of GFR, 2 but in this article,
we’ll focus on a little-noticed but
significant nuance about the reporting
and disclosure requirements related
to certain changes within a financial
reporting entity: the “ghost column.”
With the implementation of GASB
100, the change in a fund’s presentation
as major or nonmajor, and the change
in a component unit’s presentation as
blended or discretely presented, must
be both displayed and disclosed in basic
financial statements. 3 Specifically,
“A change to or within the financial
reporting entity should be reported by
adjusting the current reporting period’s
beginning net position, fund balance,
or fund net position, as applicable, for
the effect of the change as if the change
occurred as of the beginning of the
reporting period.” 4
To fulfill this requirement, all reporting
units (generally, columns) that appeared
in the financial statements for the prior
fiscal year will also need to appear in the
statements for the current year, even if
only to demonstrate that their beginning
balances have been appropriately moved
to another reporting unit. 5 This means
that in governmental fund statements
of revenues, expenditures, and changes
in fund balance “ghost columns” should
be presented for governmental funds
that were major funds in the prior fiscal
year but are now nonmajor. Those
columns will not reflect the activity for
the year of the reclassified fund—which
should be included in the current year’s
nonmajor funds column—but will show
both the “beginning fund balance, as
previously reported” and the “adjustment
to beginning fund balances,” wherein that
fund’s prior year ending fund balance
will be shown as a decrease in the ghost
column and an increase in the nonmajor
fund total column.
Similarly, in proprietary fund
statements of revenues, expenses, and
changes in net position, ghost columns
should be presented for enterprise funds
that were major funds in the prior fiscal
year but are now nonmajor. In governmentwide
statements of activities, ghost
columns and ghost rows should appear
when a formerly discretely presented
component unit becomes a blended
component unit. Finally, wherever
columns (other than total columns) in
financial statements are aggregations
(nonmajor governmental funds, nonmajor
enterprise funds, and more than one
discretely presented component unit
reported in a column on government-wide
financial statements), governments
should include combining financial
statements as supplementary information
in the financial section of their annual
comprehensive financial reports
©2024 MICHAEL AUSTIN C/O THEISPOT.COM
50

All reporting units that appeared in the prior fiscal
year financial statements will also need to appear
in the current year statements, even if only to
demonstrate that their beginning balances have
been appropriately moved to another reporting unit. 4
(ACFRs), so ghost columns will appear in
combining statements when situations
are reversed and formerly nonmajor
funds are now reported as major funds.
For governments that have only a few
funds and those whose practice it is to
continue reporting a fund as a major fund
once it has been reported as major in any
year, this may be only a theoretical or
occasional problem. However, the greater
the number of major funds a government
reports, the higher the cost and burden
involved in obtaining an independent
audit of those financial statements, since
auditors’ opinions explicitly address
each major fund, dramatically lowering
the level of materiality and increasing
amount of audit testing required. As a
result, many governments do regularly
reclassify funds that were formerly
major to avoid the added cost and burden
required to obtain an audit opinion.
Think, for example, about a government
that only occasionally undertakes large
capital projects, and thus reports only
a single capital project fund (CPF) in
its financial statements. If no major
projects had occurred in recent years
and with transfers made into CPF from
the general fund for the occasional small
project or improvement, CPF may have
been reported as a nonmajor fund at the
end of year one. If a new major project is
undertaken and bonds issued for that
purpose at the beginning of the next year,
CPF may well exceed the ten percent and
five percent thresholds and is reported as
a major fund for year two. If the project is
completed in year three, CPF may once
again fall below the ten percent and five
percent thresholds and be reported as
a nonmajor fund for year three. As this
example shows, funds may be changed
between major and nonmajor frequently,
with fund statements potentially
reporting a graveyard’s worth of ghost
columns on a recurring basis.
To illustrate how ghost columns
would appear in financial statements,
let’s look at a fictitious government with
several accounting changes and an
error correction occurring in one fiscal
year, including some that will result in
ghost columns. Assume that fictitious
government has the following accounting
changes and error corrections for which it
must restate beginning fund balances and
net position.
1. Private Grants Fund, a special revenue
fund the city reported as a major fund in
its fiscal year ended 6/30/X1 financial
statements, should be reported instead
as a nonmajor special revenue fund
for its fiscal year ended 6/30/X2. Its
originally reported fund balance at
6/30/X1 was $2,587,439.
2. A legally separate health clinic that
was reported as a discretely presented
component unit of the city in its
fiscal year ended 6/30/X1 stopped
providing services to the public during
the city’s fiscal year ended 6/30/X2.
The city decided to keep operating
it for city staff only, to help reduce
employee absenteeism by providing
no-appointment necessary treatment.
The clinic will bill the employee’s
insurance and charge co-pays, and
that revenue will be contractually
restricted for use in paying for the
clinic’s operations. The city determined
that the clinic should be reported as a
blended component unit—specifically,
as a nonmajor special revenue fund—in
its financial statements for the fiscal
year ended 6/30/X2. The clinic’s net
position at 6/30/X1 was $169,402.
3. A legally separate adult education
entity was reported as a discretely
presented component unit of the
City in its fiscal year ended 6/30/X1,
because the city’s mayor appointed a
voting majority of its board members
and could replace those members
at will. Effective July 1, X1, the
board composition changed such
that the state’s governor appoints
a voting majority and can replace
those members at will. The adult
education entity is properly reported
as a component unit of the State,
and not part of the City’s financial
reporting entity as of 6/30/X2. The
adult education entity’s net position at
6/30/X1 was $9,412.
4. The city implements GASB Statement
No. 101, Compensated Absences,
resulting in cumulative effects on
prior years’ net position amounts for
governmental activities and business
activities. (For simplicity, the changes
to proprietary fund statements won’t
be illustrated.) The cumulative effects
on net position of governmental
and business-type activities were
$(3,956) and $(33,669), respectively.
5. During its fiscal year ended 6/30/X2,
the city uncovered an error made in
its financial statements for the fiscal
year ended 6/30/X1 that affected
both its general fund’s fund balance
and its governmental activities’ net
position, by the same amount. The
error had caused the 6/30/X1 general
fund’s fund balance and the total
governmental activities net position
to be understated by $194,216.
See Exhibit 1 for a condensed version of
the governmental funds statement of
revenues, expenditures, and changes
in fund balance. Note the inclusion of
a column for Private Grants Fund with
the columns for major funds on the face
of the statement, even though Private
Grants Fund is no longer a major fund
and the activity is properly aggregated
in the nonmajor fund column. In this
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IN PRACTICE | ACCOUNTING
EXHIBIT 1
EXHIBIT 2
EXHIBIT 3
illustration, we’ve included a descriptive
heading to clearly indicate to readers
that the absence in the column of inflows
(revenues, other financing sources)
and outflows (expenditures and other
financing uses) for the period is not an
indication that the fund had no activity,
but that the activity for the period is
included in the nonmajor governmental
fund column. While such column
headings are not a requirement of GASB
100, they are illustrated here to reduce
confusion about the meaning of the
ghost column. Also, for the purposes of
the illustration, each accounting change
and the error correction that affects
governmental funds is shown in its own
row as an adjustment or restatement of
fund balance as previously reported.
GASB 100 permits but does not require
this level of detail on the face of the
financial statement. Instead, a single
row for accounting changes and a single
row for error corrections could be shown
on the face of the statement, and the
details provided in a table in the note
disclosures showing each individual
accounting change and error correction.
Exhibit 2 is a condensed version of a
government-wide statement of activities.
Here we see ghost columns for both
discretely presented component units
that were reported in the prior year as
well as ghost rows for their expenses and
program revenues. As with Exhibit 1, the
detailed description of each change is not
required to be separately displayed on
the face of the statement, but the details
would need to be in the note disclosure.
While activity statements span a period
of time and thus report both opening and
ending fund balances or net position,
position statements such as governmental
fund balance sheets, proprietary
fund statements of net position, and
government-wide statements of position
are of course reported as of a specific point
in time, namely the end of the last day of
a fiscal year. Therefore, no ghost columns
would appear in position statements.
See Exhibit 3 for the governmental fund
balance sheet that would correspond
to our Exhibit 1. This means, however,
that activity and position statements
for the same fund classification for
the same fiscal year will be reporting
different numbers of reporting units,
52

EXHIBIT 4
EXHIBIT 5
Fund—we were reclassifying a formerly
nonmajor governmental fund as a major
governmental fund or a discretely
presented component unit, it stands to
reason that the combining statements
of revenues, expenditures, and
changes in fund balance for nonmajor
governmental funds would include
ghost columns as well. The combining
statement would then articulate with the
required display in the basic financial
statements to present movement as
an adjustment to beginning position
balances previously reported. Exhibit 5
illustrates such a combining statement.
While governments that prepare their
financial statements on spreadsheets
may need only a few hours to insert
and remove columns each year,
governments with more sophisticated
reporting systems may require
substantial reprogramming to be able to
accommodate ghost columns and
ghost rows. With June 30, 2024, and
fiscal year ends rapidly approaching,
we encourage governments to
determine the needed course of action
now and we hope you will not be long
haunted by the need to do so.
Activity and position statements for the
same fund classification for the same
fiscal year will be reporting different
numbers of reporting units, which itself
can cause some confusion.
Michele Mark Levine is the director
of GFOA’s Technical Services Center.
Susannah Filipovic is GFOA’s manager
of Technical Accounting. Todd Buikema
is assistant director for publications in
GFOA’s Technical Services Center.
which itself can cause some confusion.
Here again, we hope that the column
labels for the activity statements will
help readers make sense of the display.
Exhibit 4 is an example of a note
disclosure table which would be the
alternative to showing the details of
each accounting change and error
correction on the face of each statement
but is never a substitute for the display
criteria requiring governments to
reconcile the “beginning position
balance, as previously reported”
with the “beginning position
balance, as adjusted or restated.”
Finally, while GASB 100 does
not specifically address combining
financial statement presentation, the
same principles should apply. So, what
if the situations were reversed from the
assumptions in our example? If, instead
of adding nonmajor funds—one for the
now-blended clinic component unit and
one for the now-nonmajor Private Grants
1
GASB 100 has been included in the GASB Codification
of Governmental Accounting and Financial Reporting
Standards (Cod.) Section (Sec.) 2250, “Additional Reporting
Considerations,” paragraphs .121 through .157, and in other
locations throughout the Cod.
2
Michele Mark Levine, “GASB 101. Literally,” GFR, August 2022.
https://www.gfoa.org/materials/gfr822-gasb101
3
GASB Cod. Sec. 2250.127.
4
GASB Cod. Sec. 2250.140.
5
For an explanation of a reporting unit, see: Michele Mark
Levine, “From Confusing to Cringe-Worthy,” GFR, February
2022, Exhibit 2. https://www.gfoa.org/materials/gfr222-
accounting
6
Recall that while funds that meet or exceed the ten percent
and five percent thresholds must be reported as major funds,
those (other than a general fund or equivalent) that fall below
the thresholds may nonetheless be reported as major funds
if the government judges that treatment to be appropriate.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 53

IN PRACTICE | PERSPECTIVE
PERSPECTIVE
Why Federal Grant Money Can Be So Elusive
BY KATHERINE BARRETT AND RICHARD GREENE
Believe it or not, the federal
government provides more
money to states and local
governments through grants
than it does through contracts
(and that even includes the contracts
from the Department of Defense).
Over the last few years, hundreds
of billions of dollars have been made
available, directly or indirectly, to
benefit states and local governments.
This includes grants that were part
of the American Rescue Plan Act,
which appropriated $350 billion in
state and local fiscal recovery funds to
help with the COVID-19 pandemic; the
Bipartisan Infrastructure Law, which
provides $1.2 trillion for transportation
and infrastructure projects including
$550 billion for “new” efforts; and the
$53 billion CHIPS and Science Act,
intended to ensure that the United States
remains competitive in the design and
manufacture of advanced computer chips.
It would seem that states and local
governments merely need to bring their
buckets down to this enormous well of
federal dollars and they’d be able to pull
up all the money they’ve ever dreamt
of having. But things are much more
complicated than that. As Senator Gary
Peters pointed out in testimony about a
year ago, “More than 50 different federal
agencies distribute grants to more than
131,000 recipient organizations for more
than 1,900 grant programs, each with
its own application and award process
that can be difficult to navigate.”
Five key challenges to accessing
federal grants money, according to Elena
Boyd, senior manager at Accenture
and lead for the company’s public
sector Center of Excellence for Federal
Funds and Grants Management, are:
The complexity and multitude of
available funding streams. “We’ve
heard local grant managers say the
message they get from their leadership
is that ‘there’s a lot of money out
there, go get us some grants.’ And that
leaves them with a lack of direction
as to where to spend their time.”
Seeking grants requires resources.
“Funding distribution can be biased in
favor of communities that have dedicated
grant writers versus those that don’t.”
Requirements for cash strapped
entities to match funds. “Many
funding streams require matching
funds from the grantees. And if they
don’t have the funding that they can
repurpose or partners to provide it,
they miss opportunities to access the
federal funds that are available.”
©2024 JON KRAUSE C/O THEISPOT.COM
54

Technology. “We’ve just attended a
National Grants Management Association
meeting with about 2,000 people. What
we heard most frequently is that they
don’t have the technological tools to do
grant management effectively.”
Managing post-award activities. “It’s
really not just about getting the money.
There’s a lot of detailed work with grants
administration, compliance, and
reporting. We see that with broadband,
for example. The invoices necessary for
processing can be hundreds of pages long.
This is an area in which we see AI being
used to gain efficiencies.”
These complexities can stand squarely
in the way of federal money that was
allocated to good causes finding its way to
the people who could be helped by it.
“We interviewed a guy from a small
town in Ohio,” recalled Pari Sabety,
senior advisor for U.S. Digital Response,
a nonprofit organization that helps
governments, other public entities, and
nonprofits respond quickly to critical
public needs. “He said, ‘I've lived here
and run transportation in this little town
for 30 years. I can count on the fingers of
one hand the number of federal grants
we finally decided we could go after. Five
federal grants for 30 years.’ That's all they
did. Why? Because they said it wasn’t
worth it. It's just so hard to go after it.”
All these issues are particularly
troublesome for communities that don’t
have the resources necessary to find
federal grants, let alone apply for and
implement them. “Smaller localities may
not even know what’s out there or where
to find them, or how to apply,” says Jeff
Arkin, director of strategic issues for the
U.S. Government Accountability Office.
You might think that finding the
grants in the first place would be a
simple proposition—but just try to use
the federal government’s one-stop
shopping portal, grants.gov, and you’ll
discover otherwise. It is a frustrating
exercise for pretty much anyone who
has ever used that route to locate some
extra dollars. Although efforts are being
made to improve the site, right now,
“grants.gov is a nightmare,” Sabety said.
You might think that finding the grants in the first place
would be a simple proposition—but just try to use
the federal government’s one-stop shopping portal,
grants.gov, and you’ll discover otherwise.
As Arkin testified before Congress
last year, “[Let’s say] I want to find
watermelon grants out there. What
pops up when you type watermelon
into the search in grants.gov is a grant
opportunity for the U.S. Egypt education
program to help Egyptian children
increase their math skills. How that’s
connected to watermelon, I couldn’t
discover.”
Fortunately, some alternatives to
grants.gov are being developed, notably
a very useful website set up by U.S.
Digital Response, Federal Grant Finder
(usdigitalresponse.org/grants). This
site, which is straightforward and
elegantly structured, uploads its data
from grants.gov every 24 hours and
“is a single source to search all federal
grants to track relevant opportunities.”
In addition, Sabety explained, “It allows
you to save your searches and actually
refer grants and collaborate with others
who might be interested in going after
those same grants.”
But even when a community
discovers an appropriate grant, the
paperwork required—not just to apply,
but to remain in compliance with the
receipt of the grant money—can become
impossibly time-consuming and
complex. The State and Local Recovery
Fund, for example, required that anyone
who received money had to report on
103 data elements every three months.
Is it possible that the federal
government really needs all that
information? Probably not. And it’s
difficult to believe that anyone in
Washington D.C. is actually making any
use of all this data.
“There is a long history of the federal
government setting up programs and
having people come up with a wish list
of data elements,” Sabety said. “These
become the data elements that stay in
perpetuity. There's a tremendous amount
of inertia—everything's on autopilot.
And it's all built on this notion that ‘we'll
collect all this data and then we'll put
it in spreadsheets and try to analyze it
and make sense of it.’ And the reality is
that they never really engage on the front
end to say which of these data elements
would be useful to us at the federal level
and to you as the grantee.”
In fact, “anecdotally you hear that
agencies are requiring recipients to
turn down grants because it’s just not
worthwhile,” Arkin said.
For many communities the situation
is like that of people who want to borrow
money from the bank: they can’t get the
loan if they don’t have money in the first
place. Similarly, the challenge in getting
additional grants money for communities
is that they don’t have the resources
necessary to tap that source. So, given
the importance of these revenue streams
to Americans in all 50 states, it’s up to the
feds to make the big changes.
Shelley Metzenbaum, a good
government consultant, teacher,
and advocate who was associate
director of performance and personnel
management at the White House Office of
Management and Budget, and founding
president of the Volcker Alliance, said,
“The federal government needs to
help states, localities, and other grant
applicants learn from each other, share
implementation tools, and find ways to
submit high-quality applications that
don’t favor richer communities over
communities that have greater needs
but fewer resources to prepare those
applications.”
Katherine Barrett and Richard Greene
are principals of Barrett and Greene, Inc.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 55

IN PRACTICE | PERSPECTIVE
PERSPECTIVE
Be Tough, Not Rough, on Your Bankers
BY JUSTIN MARLOWE
Baseball legend Yogi Berra
once said, “When you come
to a fork in the road, take it.”
Like with many “Yogi-isms,”
it’s not quite clear what he
meant. But upon further reflection, it
seems Yogi is simpatico with today’s
rock star management professor Adam
Grant. According to Grant, good decision
making is not about making the right
decision, but rather about making
the decision right. In other words,
how you carry out a decision is more
important than the decision itself.
Public finance investment banking
is at its own proverbial fork in the road.
States and local governments that
will soon arrive there should follow
Yogi and take it. And to comport with
Grant’s advice, they should “be tough,
not rough” on public finance bankers.
In October 2023, the Swiss banking
giant UBS announced plans to scale
back its municipal bond underwriting
business (in other words, the process
of taking bonds from a borrower to
investors). To most in “Muniland,” this
move was not entirely unexpected. UBS
left the business after the financial
crisis of 2008, only to reemerge in
2015. Since then, it had performed
admirably. It was the go-to underwriter
in certain niche corners of the market,
and it built a strong secondary
market sales and trading team (that
is growing even today). But overall,
it was a middle-tier player, ranking
15th in total underwriting in 2022.
The real shock came a few months
later when Citi announced its plan to
leave municipal bonds. Citi was a major
player. It accounted for ten to 15 percent
of new municipal bond underwriting
each year since the Great Recession. It
was a stalwart across the many subindustries
within municipal bonds,
and it famously leaned into municipal
bonds when others pulled back. There’s
no question it will take years for other
banks to fill the hole left by Citi’s exit.
Moreover, there are rumors that other
large banks will leave in the near future.
What sent two big banks running for
the exit, with others potentially to follow?
Broadly speaking, there’s three factors.
One is a shift from local to hyper-local.
The old adage is that there’s no municipal
bond market, but there are 50 markets
©2024 HARRY CAMPBELL C/O THEISPOT.COM
56

for municipal bonds. In other words,
investors tend to maximize the tax and
other advantages of municipal bonds
by focusing their portfolios on issuers
within their own state. Growing hyperpartisanship
and the evolving statelevel
“anti-ESG” movement has further
narrowed the universe of potential
purchases for many investors. For
bankers, that makes the job of finding
buyers more difficult. It also means that
deep, long-standing connections to the
local investment community matter
more than ever. International banking
giants like Citi and UBS could no longer
be everything to everyone all at once.
Technology also matters. Today,
more than a dozen companies advertise
artificial intelligence solutions for
the municipal bond market. They
offer products and services designed
to evaluate and predict the prices
of municipal bonds in real time; to
automate regulatory compliance and
financial reporting requirements;
to build and maintain customized
portfolios for high net-worth
individuals; and to address many of
the market’s other unique challenges.
These same technologies allow smaller
and upstart firms to enter the market,
compete immediately, and scale quickly.
The net effect is stronger competition
and, in turn, thinner profit margins.
To illustrate, consider that data from
the California Debt and Investment
Advisory Commission—one of the few
reliable sources for data on underwriting
costs—shows that in the past decade
the average fee an underwriter earned
on a California general obligation bond
shrunk by more than half, from just over
$9 per thousand dollars of borrowed
money to just under $4.50. For essential
revenue bonds like public utilities,
it’s fallen from about $5.75 to $2.75.
States and local governments have
also become savvier consumers. In
a thoughtful analysis of Citi’s exit,
Goldman Sachs analyst Christian Lin
points out that today’s state and local
governments want “closer, long-term
relationships with ‘their brokers’ in
executing specialized and localized
financing. 1 Not to mention, some
Public finance investment banking is at its own proverbial
fork in the road. States and localities that will soon arrive
there should follow Yogi and take it. And to comport with
Grant’s advice, they should “be tough, not rough” on public
finance bankers.
local governments themselves were
developing savvy, corporate-style debt
management teams and asked more
thoughtful, challenging questions.” The
fact that issuers want better execution on
behalf of taxpayers is a good thing. But it
makes a tough business even tougher.
For state and local borrowers, this is a
tremendous opportunity, if well played.
As the industry becomes more localized
and specialized, bankers are eager for the
business and willing to work harder than
ever. The challenge is to not push them
past the breaking point. In other words, be
tough on your bankers, but don’t be rough.
What does this mean in practice? It’s
fine—encouraged, in fact—for borrowers
to ask their bankers tough questions. How
did they arrive at the prices investors
were willing to pay? How did the sales
force present the deal to investors? What
sorts of comparable bonds did they use
to benchmark their expectations? How
did they respond to unexpected market
developments? Asking these types of
questions is being tough on behalf of
taxpayers. Fighting with bankers over
one more basis point just as the deal is
about to close is being rough.
Encouraging underwriters to
participate in both competitive and
negotiated underwritings on new bonds
is the right kind of tough. It signals to
taxpayers that a banker is keeping a close
eye on how a borrower’s bonds perform
in the market. Demanding or requiring
they participate in both is rough.
Asking bankers to make a clear and
compelling case for why they belong in
an underwriting pool is tough. Kicking
an underwriter out just to show that
you’re willing to kick one out is rough.
Encouraging an underwriter to allocate
credit for the sale to underwriters in a
certain way (for example, a designation
policy) is tough. Dictating that policy
is rough.
The municipal finance business is at
a fork in the road. If states and localities
“take it” the right way, they can do well
by taxpayers, and make sure bankers
are there when they need them in the
future.
Justin Marlowe is a research professor at
the University of Chicago, Harris School of
Public Policy, and a fellow of the National
Academy of Public Administration.
1
Christian Lin, “Case Study: Citigroup Spotlight pt. 4,” Christian
Inc. Substack newsletter, March 30, 2024 (christianinc.
substack.com/p/case-study-citigroup-spotlight-pt-586).
JUNE 2024 | GOVERNMENT FINANCE REVIEW 57

IN PRACTICE | INTERVIEW
AN INTERVIEW WITH
Evan Zacharia
Max Pinchak interviews Evan Zacharia, investment
finance coordinator for Broward County, Florida’s
Finance and Administrative Services Department.
Evan Zacharia has worked
as an investment finance
coordinator for Broward
County, Florida, since
November 2022. Located in
the southeastern region of
the state, Broward County encompasses
the cities of Deerfield Beach, Hollywood,
and Fort Lauderdale along the Atlantic
Coast. The county includes the Everglades
Wildlife Management Area, the Fort
Lauderdale-Hollywood International
Airport, Port Everglades, and the Broward
County Convention Center. It is the
second-most populous county in the state,
after Miami-Dade County, and it has an
annual operating budget just shy of $7
billion. Zacharia, in collaboration with
his colleagues, helps manage the county’s
multibillion-dollar investment portfolio.
He’s also an active member of GFOA’s
South Florida Chapter (SFGFOA) and is a
member of GFOA’s Young Professionals
Network Leadership Committee.
As investment finance coordinator,
Zacharia is primarily responsible for
forecasting the county’s cashflow
and overseeing its liquidity levels.
His daily work consists of analyzing
market conditions, communicating with
BROWARD COUNTY, FLORIDA
With nearly 2 million residents,
Broward County is the secondmost
populous county in the state and has an
annual operating budget just under $7 billion.
brokers and trustees, tracking daily
cash transactions, and investing in
fixed assets. His goal is to understand
the anticipated monthly and yearly
inflows and outflows to maximize
the value of county funds. The
benefit is twofold, promoting sound
investment practices and ensuring
that the county has enough cash on
hand to cover unexpected expenses.
This isn’t the location, role, or
sector Zacharia originally envisioned
for himself. His story is one that
is perhaps familiar to many of us,
with unanticipated professional leaps
leading him to the public sector.
After graduating from the University of
Florida in 2019 with a bachelor’s degree
in accounting, Zacharia landed a tenweek
internship with the fifth largest
accounting firm in the U.S., RSM US LLP,
in New York City. Afterward, Zacharia
pursued his master’s degree in accounting
at Florida Atlantic University and
obtained his certified public accountant
(CPA) license. Zacharia later accepted
a remote position with the same firm
while the world was still dealing with the
throes of the COVID-19 pandemic. This
transition presented its own challenges,
as the internship had been fully in-person.
Zacharia found it increasingly challenging
to learn and grow, or to build a rapport with
colleagues. “It was different than being in
person,” he explained. Seeking a change,
Zacharia transferred to the firm’s satellite
office in Fort Lauderdale.
Shortly after this transition, Zacharia
developed a professional working
relationship with a mentor, George Tablack,
the chief financial officer of Broward
County, who recruited him rather quickly
to come work for the county’s Accounting
58

Department. After a few months in
the public sector, Zacharia jumped
departments, swapping his accountingfocused
job for his current role within the
Finance and Administrative Services
Department.
Discussing this chapter of his
career, Zacharia said, “It was a unique
experience and transition. I originally
had all this expertise in accounting, and
to go into a different finance role was
maybe a bit challenging because I didn’t
know what to expect. It wasn’t something
I’d necessarily studied for, but I embraced
the challenge.” This opportunity, he
explained, has provided a means of
professional development and growth
that was previously unforeseen.
When asked about the advice he’d
give to someone starting a career in the
public sector, Zacharia reemphasized the
benefits of embracing a new role, pointing
out the dynamic nature of professional
growth and goals. “Plans change all the
time,” he commented. While it may not
come naturally, developing a certain
level of comfort with the changes that
new opportunities require is imperative.
Referencing Ted Lasso, Zacharia recalled
Instead of immediately judging things, take a
step back and analyze it, and ask yourself what
this opportunity could provide for you. Saying
yes to something can open up so many doors.”
a scene in which the title character implores
others to “be curious, not judgmental.”
This is the mentality that has helped him
grow. Sometimes, he said, “instead of
immediately judging things (and saying
no), take a step back and analyze it, and
ask yourself what this opportunity could
provide for you. Saying yes to something
can open up so many doors.”
Though he hadn’t imagined himself
working for government just a few years
ago, Zacharia has been enjoying his public
finance-related position with Broward
County. From a day-to-day perspective,
he has been able to refine his skills with
various investment tools. Guidance
and support from supervisors have
made improvement a more comfortable
experience for Zacharia, who said he is still
learning and pushing himself to grow on
a weekly basis. Taking the initiative to
enroll in online learning courses about
using these investment tools has also
been helpful. Not only has Zacharia
strengthened his technical capacity,
but his efforts have contributed to
an increasing sense of professional
confidence as well.
From a wider perspective, Zacharia
said that being part of something bigger
than himself and serving the community
has been fulfilling. “The work really has
a great purpose behind it,” he explained.
Zacharia credits the county and the
thoughtfulness of his colleagues with
providing him the motivation and
inspiration for his work every day.
Max Pinchak is a consultant with
GFOA’s Research and Consulting Center.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 59

IN PRACTICE | Q & A
with Kelli Monroe
Mike Mucha, GFOA’s deputy executive director, spoke with Kelli
Munroe, the chief deputy treasurer for Pinal County, Arizona, about
technology innovations, customer service, her untraditional career
path, and the importance of mentoring and engagement at GFOA.
Mike: Let’s get things started. Can you
tell me about your current position with
Pinal County?
Kelli: I am the chief deputy treasurer
with the Treasurer’s Office at the county.
We have approximately 24 people on
our staff, including Treasurer Michael
McCord. We serve as the bank for the
county and handle investments, debt
management, disbursement of funds, and
collection of payments and taxes. We also
provide a variety of financial services
to special districts and other political
subdivisions within Pinal County. It’s an
honor to work with the great team we have
at the Treasurer’s Office.
I saw the team you work with in the
Treasurer’s Office has won awards
recently for innovation. Can you explain
what the county was honored for?
Yes. In 2019, 2021, and 2022, Pinal
County was recognized with the Arizona
Association of Counties Summit Award,
each time for technology projects. In
2022, we implemented a contactless
payment solution that allowed for
customers to pay their taxes through the
phone. The mobile payment options were
installed to all Treasurer’s Office window
locations and the county departments
with the highest transaction volumes.
During the COVID-19 pandemic there was
demand for us to move in this direction,
and our staff was able to successfully
implement a solution. In 2019 and
2021, the county won the award for
implementing a mobile app that provided
smart phone access to tax information.
As a citizen, you can look at property
information, tax bills, and tax notices
information improving transparency
and access. The ability to make
improvements like this and continue to
work on ways to innovate is one of the
reasons why I really enjoy the work we do
and was a big part of me wanting to join
the Treasurer’s Office.
Where were you before you started your
current role?
I’ve only been in my current position for
two years, but started with the County
approximately 9 years ago as a senior
accountant in the Finance Department.
At the time, I came in with a background
in commercial banking and school
finance, and was able to take advantage
of my experience in different types
of organizations. I later moved to the
Community Development department
as a budget analyst, where I focused on
permitting and development fees. When the
opportunity in the Treasurer’s Office opened
in 2022, I was able to start my current role.
I’m guessing that provides you with a
unique perspective, having now worked
in three different departments and three
different areas of finance. What’s going on
now in Pinal County? Any challenges for the
Finance Department or Treasurer’s Office?
The county is facing rapid growth and as
a result, all county departments need to
find ways to grow and provide services in
a changing environment. Over the past
ten years, we have grown into the third
largest county in Arizona and new home
sales have soared at a rapid pace. From a
treasury perspective, the tax roll is growing
and we have had to assess our staffing
60

needs. With many of our employees
approaching retirement, I would say
one of the biggest challenges is finding
candidates who are not only qualified for
the open positions but who share the same
passion for service that has allowed us to
be innovative and cutting edge.
The county has been successful in
working as a team and providing new
technology like the award-winning
projects you mentioned. How does the
county approach these projects to make
them succeed when other governments
sometimes struggle?
We focus on processes first and really lean
into the technology. Our team does a great
job coming together to collaborate and
identify potential problems so we can work
through options and develop appropriate
plans. We spend time on contingency
planning for risks, working through
security concerns, and anticipating how
users will respond. I have to give credit to
our IT team, which serves the Treasurer’s
Office and specifically Wiley Siler, who
leads that team as information technology
systems administrator. They emphasize
working with management and improving
processes. For example, another project
they led was streamlining check writing.
In the past, the treasurer signed checks;
now we have check signing built into our
system, which has freed up staff time to be
put to better use.
What has been your experience with
the technology projects and the public?
Do they notice or appreciate the
improvement? Also, have you had any
feedback that the county is changing too
fast and may not be serving some citizens
who may not be as technologically savvy?
I think people notice. We’ve actually had
a pretty good percentage of our taxpayers
use the new technology. I think there will
always be some people who like to engage
in more traditional ways, by writing a
check or coming into either our main
office or one of our satellite locations.
The new technology is used to process
about 50 percent of our payments. I think
that rolling out new technology during
COVID-19 helped our adoption rates, but
success for the project is really due to our
overall approach and drive to be more
innovative.
Does the county have anything planned
for the next innovative project?
We do have a few plans, but I don’t want to
share too much before we’re ready. I can
Left: The Pinal County Treasurer’s Office team.
Right: The county was recognized with several awards
for innovative technology in recent years, including an
app that gives citizens access to property information
and allows them to pay their bill via smart phone.
We focus on processes
first and really lean
into the technology.”
talk about another project we’ve
announced recently. Right before
the last tax season, we invested in
an OPEX machine that sorts, copies
and processes mailed tax payments.
Prior to this purchase, our staff would
manually complete this task, which
is very time consuming. As part of the
project to roll it out in Pinal County, we
developed a program that integrates
into our financial systems and allows
customer service representatives a
much faster and more convenient access
to payments. By automating much of the
manual work, we have been able to take
what was a two- to three-week process for
receiving and depositing checks down to
two days. It’s been a game changer for us.
Impressive. Have you always been
involved in technology? Or were you
drawn to finance because of the ability to
innovate through the use of technology?
I would say that I’ve always enjoyed
working with technology, but my career
actually started in banking, primarily
in an administrative role. I’ve actually
had somewhat of an interesting journey
to get to this point in my career. Out of
high school, I started as a teller at United
American Bank in California. Part of the
motivation for the job initially was that I
thought that I’d be able to be at the beach
by 3 p.m. each day. Little did I know that
if we were out of balance for the day, I’d
need to stay late. Throughout my career,
I’ve had the benefit of working with some
great mentors who always encouraged
me to continue developing and to take
advantage of opportunities that came up.
After working in California for a few
years, I moved to Arizona to take a
job with Bank of America, working in
back-office operations to support their
fraud prevention efforts. Looking back,
I can see that this position helped me
integrate banking, technology, and
finance. It’s also where I started to get
some managerial experience. About that
time, though, I had young children and
wanted to switch gears. I really wanted
to have the same schedule as my kids, so
I took a job with a local school district, in
the superintendent’s office. Soon after, a
position in payroll opened, and I moved
over there.
As my kids got a bit older, another mentor,
Apache Junction School Superintendent;
Dr. Robert Pappalardo, encouraged me to
go back to school and finish my degrees.
I ended up earning a bachelor’s degree
in business administration in 2007, and
JUNE 2024 | GOVERNMENT FINANCE REVIEW 61

IN PRACTICE | Q & A
master’s degree in accounting in 2011,
about halfway through my career.
While I was getting my master’s degree,
I had a professor who encouraged me
to gain experience in the private sector
before pursuing a CPA. I took a job in a
manufacturing plant as their business
manager, but ultimately, I didn’t ever sit
for the CPA exam.
Working in the private sector also made
me miss the public sector, specifically
the best practices and the overall
structure of government. At the time
I interviewed for positions in Pinal
County and the City of Phoenix. I lived
in Pinal County, was excited about the
growth here, and the vision that the
current leadership had for the county’s
future. I was also drawn to the customer
service aspects of the work. From my
days in banking, I’ve always enjoyed
taking care of customers. At the county,
I was rewarded by seeing the value of
helping a department or citizen with
their concerns. That was my passion.
I can help make something better for our
internal and external customers.
That is a unique journey. Many other
GFOA members I’ve interviewed have
also spoken about the rewards of public
service. Are there any disadvantages to
working in local government?
Compared to private industry, I would
say that local government has more
red tape. I understand that sometimes
it’s necessary, but that also doesn’t
mean that it’s not frustrating when
change takes a long time. In the private
sector, our leadership team could reach
decisions about a change in direction
and quickly implement it. In the public,
we need to make sure we are aligned
with stakeholders, ensure the change
works with the budget, and keep our
plans with other strategic initiatives
at the county. I like getting things done
fast, and that doesn’t always happen.
From your recent experience, it seems
like you’ve been quite successful in
implementing things quickly. Is there
anything you’ve learned during your
time in the private sector that helped
make you better at driving change?
Looking back, I did benefit from serving
under good leaders. I would say that my
time at Bank of America was a turning
point in my career. I realized that I
could provide good ideas, but I needed a
seat at the table to do that effectively, get
feedback, and implement change.
Any recommendations on how finance
professionals can work on getting a seat
at the table?
For me, I was eager to learn, and I think
I made it clear that I was eager to learn.
I was able to watch in meetings and
notice the difference between good and
bad leaders. When the time came for
me to step up, I was ready, but I’ll admit
I also needed help. In this case, one of
my supervisors, Dora Wisner, gave me
the opportunity to engage. Sometimes,
I think you just need someone to take a
chance with you, and she did. She used
to say we need to pay it forward. I think
about that now, and I am looking for
people who want a chance—I’m not going
to be here forever. If I can give someone
that chance, not only will I be helping
them in their career, it’s also a great
opportunity for me to learn and take
on a different role, as a mentor. If I can
talk with high school students, I try to
communicate what a rewarding career
the public sector can be. For me, I was
able to work my way up. I’d like to think
that I’m now in a position where I can help
others do the same. It’s one of the reasons
I’m excited to collaborate with human
resources and work on establishing an
internship program at the county.
In addition to learning from experience,
I understand you also completed a
public sector-focused management
program? Can you tell me what the
biggest takeaway from that program
was for you?
I did. In 2022, I completed the Certified
Public Manager Program at Arizona
State University (ASU). I think the most
valuable thing I learned was how you
can best structure an organization to
serve the public in changing times. I was
able to quickly apply what I learned in a
real-life situation. We had a department
that was hit with fraud, and our entire
team came together to problem solve. We
communicated options, applied some
creative thinking, and were able to take
quick action.
Thinking back on my career and the
professional development opportunities
I’ve had; I think I get more out of them
now that I have experience than I did
before when I was younger. I’ve said this
to my own children now that they are
adults. I started my career first and then
went back to school. I think that made
school more rewarding. I was able to
relate what I learned in class to real-life
work experiences, and experiences
like this program at ASU are another
example of that.
Any goals or plans for your next
learning opportunity?
I just signed up for the certified
government investment professional
program with the Government
Investment Officers Association. As you
know, I’m also in my first year serving
on GFOA’s Treasury and Investment
Management committee.
Thanks for bringing up your involvement
in GFOA. Before we talk about your role
as a standing committee member, I want
to ask about your experience serving on
GFOA’s ethics task force.
I was happy to be a part of that team.
When I joined the ethics task force,
I was working with the Community
Development department at the county.
While I was also engaged with the
Arizona GFOA, this was one of the first
times I had volunteered to be more
active in GFOA. What I loved most about
the ethics work was that it took a topic
that was not new and approached it in a
completely different way. We’ve always
learned ethics from the perspective
of right versus wrong—but that
terminology was old. A newer workforce
faces different challenges and we had to
speak in a way that reflected these new
realities. In addition, it wasn’t enough to
GET INVOLVED
Explore GFOA’s research on ethics and
trust, and how to put the GFOA Code of
Ethics into practice in your government.
gfoa.org/trust
GFOA’s Committee on Treasury and Investment
Management (TIM) tracks new developments
in cash management and develops best
practices for government officials at all levels.
gfoa.org/tim-committee
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just list the things not to do. I think the
task force was successful in defining
what “ethical” means in its simplest
form. It isn’t about what you shouldn’t
do, and it’s not about the values you
should work to uphold.
I have the new code of ethics on my
wall at the county and we do refer to
it often in discussions. For example,
when discussing policies here at the
county, the code provides a reminder
of how we as finance officers need to be
fair, reliable, and trustworthy. It really
does inform the culture of our office.
It’s also a great introduction to GFOA.
As part of GFOA’s Treasury and
Investment Management committee,
you’re helping develop GFOA’s
suite of best practice statements.
Can you describe what this
opportunity has been like?
Professional development is critical in
any role, especially leadership. When
I heard that spots were open on the
committee, I really wanted to be part of
establishing best practices, but also to
build my network with other leaders.
In my role as chief deputy, I thought
serving on a committee would not
only be valuable for me, but also for my
team. Currently, the committee has
been discussing recommendations
related to cash handling, requests
for proposals for banking services,
and fraud prevention. Being a part
of these discussions is an excellent
opportunity to engage with other
leaders from around the country and
bring ideas back to the county.
Now that you’re almost done with the
first year, do you have any advice for a
new committee member or someone
thinking about applying?
Get involved. Government is
government. We all do things a
little bit differently, but we are all
governments. The support system that
a group like this provides will no doubt
be beneficial to your government. I’ve
also used this as an opportunity to
get others at the county involved. As I
learn more about GFOA, I’m in a better
position to help others on my team.
Our new investment manager has been
involved, and our treasurer, Michael
McCord, will be joining me in Orlando
this year for the annual conference.
Professional development
is critical in any role,
especially leadership.”
That’s great. Recruiting others to GFOA
or to the public finance profession
in general is so important, but it’s
something that governments often
struggle with. Do you have any
suggestions?
This is a tough question. I don’t think
that recruiting challenges are new, but I
do think there are differences from years
ago. Times have changed a bit since I
was in high school, and students have
different ways of learning about options.
From what I’ve seen, there aren’t that
many opportunities for local government
finance officers to make a pitch at a
career day. I think that we really need
to work on getting the word out to young
college students. Not all students are
a fit for college, and trade schools or
community colleges could also be great
way to recruit for entry-level positions.
I know that a lot of young people want
to pursue the jobs that will make them
the most money. It’s not that you can’t
earn a good living in the public sector,
but at some point, I think you learn there
is more to a job than money. As we are
hiring, I’m always looking for someone
who has a passion to learn, who wants
to be part of a team, and is looking to
be mentored, even if they don’t have
a college degree. Once we get them on
board, it’s up to us to make sure they
have projects that keep them engaged
and growing.
You mentioned earlier that the county’s
staff is growing? Has Pinal County been
successful at recruiting new staff?
We emphasized the need to grow our staff
and I think are working to put the right
policies in place. I believe that having
an internship program is a big help in
recruiting. I was attracted to the county
and specifically to the Treasurer’s office
for the mission of the organization
and the team. When I started, I asked
the treasurer what he wanted to see
implemented in the Treasurer’s Office.
He said that he preferred to move to a
4/10 schedule, open satellite offices
Monday through Friday, and make the
office’s inviting to the public. He also
said that we needed to increase staff.
I realized that to recruit, we needed
more flexibility. Like me going to work
and attend school earlier in my career,
some talented individuals need to juggle
personal commitments. We try to be
accommodating. Management in our
office now has a laptop so they can work
from home. I know there are some fears
about remote work, but for us, it increased
productivity. This is another area where
technology has allowed us to make
significant improvements.
So, after starting your career hoping you
could leave early to get to the beach, now
you can actually work from the beach.
I guess that’s true, but Pinal County is not
known for its beaches. I am proud of the
way our team has embraced technology
in this case. But I think it’s important
to point out that our team doesn’t
necessarily use technology to get away—
we use technology to stay engaged with
the office. I think most of our employees
would prefer to still be in the office, but
when they are not, they are still part of
the team and can participate. There is a
lot of motivation that comes from working
with an engaged staff.
Is there any particular message you
try to instill in those you mentor, or
experience from your career that you
share to reinforce your team’s culture?
Good question. I think that everyone
needs to take their own journey and
to some extent figure out what they
really want. For me, being a part of an
innovative and collaborative team
culture is refreshing, and I love that I
can continue to pay it forward and share
what I can here at the county and within
GFOA. GFOA provides the framework
that someone can use to build a career.
Through best practices, networking, and
continued professional development,
I’ve found an opportunity to share my
passion with others who are on a similar
journey to contribute what we can to
helping others and serving the public.
Mike Mucha is deputy executive
director for GFOA and director of GFOA’s
Research and Consulting Center.
JUNE 2024 | GOVERNMENT FINANCE REVIEW 63

10 STEPS
TO BETTER COORDINATION BETWEEN FINANCE AND PROCUREMENT
While organizations can structure finance and procurement
in many different ways, they all share one need: the two
functions must be aligned and working together. This issue,
we feature ten steps that all governments can take to improve
the coordination between finance and procurement while
improving organization-wide culture, accountability, transparency,
and the ability to get results and serve the community.
1
Understand
the importance of
procurement authority. Procurement
authority is the power to award or
approve legally binding procurement
agreements such as contracts or purchase
orders. For governments, this means that
before a purchase is made, it needs to
comply with policies for appropriate
approvals, competition, and budget
availability.
2
Separate purchase from payment.
Don’t confuse multiple approval
processes that may take place over
time. When the budget is approved, funding
is allocated to an overall plan. Approvals
related to the purchase itself ensure proper
procurement authority and allow a
government to enter into an agreement with
a specific vendor. Approving the payment
should ensure that goods or services have
been provided or that contract milestones
have been reached. Each approval is
separate and necessary within a system of
appropriate controls.
3
Use
p-cards effectively. GFOA
recommends that all governments
explore the use of purchasing
cards to improve efficiencies. They can
provide a convenient and transparent way
to make small and routine purchases.
P-cards also have potential to eliminate
work effort in registering vendors,
managing purchase orders, and processing
invoices – but only when used without
burdensome, redundant, and
administrative processes that don’t add
any value.
4
Use purchase requisitions
correctly. Purchase
requisitions manage the
“request” to purchase. They should
always be used in advance of a
purchase and be used for all
non-p-card purchases. In a financial
system, processing a requisition
will also pre-encumber funds,
providing necessary budget checks
before starting a competitive
procurement process. Using
purchase requisitions before
purchases not only works to ensure
consistency with procurement
policies, but it also greatly improves
the reliability of budget reporting.
5
Document
existing policies
and procedures. The entire
organization will benefit
from documented policies and
procedures. For finance and
procurement professionals,
however, this work will also create
opportunities to improve processes
and collaboration.
6
Collect
feedback from
customers. Finance and
procurement both serve
the same stakeholder groups—
operating departments and vendors.
Collecting feedback from these
stakeholders can initiate
discussions about how to better
meet the needs of the organization
and pursue shared goals of
efficiency and transparency.
7
Set expectations using service-level
agreements. Everyone should be
held accountable to performance
standards. Service-level agreements, even
extremely simple ones, can provide good tools
for managing expectations, improving the
perception of services, and demonstrating
reliability. When there are issues, missed
service-level standards can pinpoint areas
for improvement.
8
Collaborate
on contract risk
management. Finance and
procurement should work together
to assess risk, implement appropriate
policies and controls, and develop an
overall program to manage contracts
throughout their lifecycle.
9
Clarify
ethical procurement
On the surface, knowing what’s
right and wrong can seem easy;
but in practice, ethics related to finance
and procurement can be extremely difficult.
All organizations face occasional challenges
with conflicts of interest, vendor gifts,
unfair competition, and vendor relationships.
Finance and procurement should work
together to clarify and document clear
policies that define boundaries of ethical
procurement—and then work to communicate
key messages throughout the organization.
10
Focus on building a relationship.
Breaking down organizational
silos and improving
collaboration requires professionals in both
finance and procurement to establish trust,
mutual understanding, and appreciation for
the value that each brings to the table. In
other words, staff from finance and
procurement need to work on building a
relationship. Reach out and get to know your
peers, better understand why what they feel
is important, and take time to listen to their
concerns. You never know, you might find
that procurement and finance are more
similar and aligned than you previously
thought.
©2024 MICHAEL AUSTIN C/O THEISPOT.COM
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