MRSC has joined with Toni Nelson, Small Cities Specialist, State Auditor's Office, Tracey Dunlap, Director of Finance & Administration at the City of Kirkland, and Mike Bailey, Finance Director, City of Redmond, to bring you the "Finance Advisor" column. The "Finance Advisor" will feature a new article each month with timely local government finance information and advice you can use.*

Finance 102

January 2009

By Toni Nelson, Small Cities Specialist
Washington State Auditor’s Office

The start of a new year often brings with it new elected officials and staff to city hall. These changes can present both challenges and opportunities. Because of this, the Finance Advisor Group wanted to take this opportunity to address some of the basics of governmental finance, including roles and responsibilities for financial reporting and oversight.

The challenges presented often involve not knowing the “lay of the land.” This can be particularly challenging when both elected officials and finance staff are new to the world of government finance. Each year, the Association of Washington Cities presents great workshops around the state called “What Local Government Officials Need to Know.” These workshops address open public meetings and public records requirements. However, there are no workshops specifically for elected officials to help them understand the rules associated with government finance.

Budgeting, accounting and financial reporting are all areas of governmental finance that have complex components and requirements. These are fundamental components of your city’s finances as well as the threads that link the executive branch, legislative branch and staff of local governments.

Each branch of government has a vital role in assuring its city is financially healthy. Council members focus on setting policies and priorities that will be implemented by the city, along with reviewing financial reports to assure the city is meeting those priorities. Mayors and City Managers often function as the city’s CEO, which requires budget development and internal control oversight. The City Administrator, in larger cities, or the Clerk/Treasurer or Finance Director in smaller cities, oversees and communicates the financial condition of the city to the council and the mayor.

Elected officials can learn about budgeting at the annual Association of Washington Cities (AWC) Budget workshops, but governmental accounting and financial reporting is often learned in the council chambers. Finance staff prepares and present financial reports that provide municipal officials with the information necessary to evaluate the level of service being provided. However, it is difficult to make informed decisions if you don’t understand what the reports say. For additional information on this subject matter see Municipal Research & Services Center (MRSC) archive articles: Finance 101 – June 2007 and 2nd Quarter Review – June 2006.

If you are the new Clerk/Treasurer or Finance Director, there are several classes available. MRSC is the central registration center for all finance-related training around the state. Proper training is the key to success and a commitment to education is essential now more than ever.

A change in city hall also presents tremendous educational opportunities. For example the creation of a training venue such as pre-council workshops for the purpose of teaching how to read and understand the city’s financial reports. This can be an excellent opportunity to educate in the basic concepts of governmental accounting and reporting. A council workshop can additionally serve as a starting point for reviewing the city’s financials with the added benefit of providing some required internal control measures.

There are many resources available to assist cities. Make a point of contacting local organizations and/or the Small Cities Specialist with the State Auditor’s Office to obtain training or additional information about these concepts. During these challenging economic times, it is important to understand and present accurate financial reports.

Toni Nelson is the "Small Cities Specialist" for the Washington State Auditor's Office, providing both on and off site financial training and assistance to smaller cities and towns throughout the state. Ms. Nelson has been working with the Auditors office for 6 years and prior to that was the Clerk/Treasurer for a small town for 9 years. She has co-authored the "Small Cities Manual" a detailed reference guide for new clerk/treasurers on governmental accounting procedures and presents numerous training workshops throughout the state for AWC, WFOA, WMTA, WMCA and local/regional organizations such as EWFOA and SCWMCA. Ms. Nelson is also a member of and conference track coordinator for the WFOA Education Committee.

Toni can be reached at 509.228.9346 or at nelson@sao.wa.gov. For more information, see the Small Cities Assistance Program page on the State Auditor's Web site.

Mike Bailey is currently the Finance Director for the city of Redmond. Previously he worked as Administrator of Finance and Information Services for the city of Renton and as the Director of Finance for the city of Lynnwood. Mr. Bailey also served as president of the Washington Finance Officers Association and is the Vice Chair of the GFOA Budget Committee. An experienced CPA and GFOA budget reviewer, Mr. Bailey co-founded the annual Budget and Fiscal Management Workshops held each summer. Mr. Bailey conducts numerous workshops and has authored various articles on local government finance, including Effective Budgeting in Washington State Cities published by the Association of Washington Cities.

Tracey Dunlap, P.E. is the Director of Finance & Administration at the City of Kirkland. Prior to joining Kirkland in 2006, she was a principal and shareholder in FCS Group, a regional financial and management consulting firm (14 years). An industrial engineer registered in the state of Washington, she has worked with jurisdictions throughout the Northwest to develop and implement cost recovery and fee strategies, set utility rates, and improve organizational efficiency and effectiveness. Tracey's experience also includes working for a large defense contractor (5 years) and a major financial institution (3 years). She has presented on a wide array of topics for organizations including WFOA, APWA, APA, WABO, and AWC.

*The Articles appearing in the "Finance Advisor" column represent the opinions of the authors and do not necessarily reflect those of the Municipal Research & Services Center.