New GFOA Recommended Practices
The GFOA’s Executive Board approved five new and 10 revised recommended practices (RPs) at its fall meeting. The RPs were developed by GFOA’s standing committees and are posted on the GFOA’s Web site.
New Recommended Practices
Considerations for Prefunding OPEB Obligations—recommends that prefunding of OPEB resulting from an implicit rate subsidy is desirable, yet recognizes that in some instances, prefunding an amount less than the annual required contribution or maintaining pay-as-you-go funding may be appropriate.
Presentation of the Capital Budget in the Operating Budget Document—focuses on the presentation of the major capital program highlights in the operating budget document.
Developing an Economic Development Incentive Policy—recommends developing an economic development incentive policy to guide the use of incentives, the role of the finance officer, and the evaluation and monitoring process.
Building Resiliency into Capital Planning—provides guidance to local governments trying to build sustainable capital plans for resiliency and disaster preparedness/management. It offers suggestions including raising the visibility of resiliency through proactive planning, engaging the general public in these plans, identifying resiliency needs, developing a plan, and addressing funding issues through project prioritization.
Tax Compliance—the Committee on Canadian Issues approved its first Canadian-specific RP addressing potential steps that Canadian local and provincial governments may pursue to comply with Canadian tax laws.
Updated Recommended Practices
Business Preparedness and Continuity Guidelines—encourages state and local governments to be prepared to react to various disasters immediately, knowing that aid from the federal government may not come in a timely fashion.
Revisions to two RPs, Enhancing Management Involvement with Internal Controls and Audit Committees—incorporate guidance from the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. A point was added to discuss how a baseline measure of the effectiveness of internal controls can enhance management’s involvement with internal controls. Also, information was added to the RP on audit committees to indicate that the responsibility for monitoring both controls performed by senior management and controls designed to detect senior-management override of other controls should rest with the audit committee.
Use of Local Government Investment Pools (LGIPs)—revised in light of recent market events affecting LGIPs. Primary modifications highlight that LGIPs are typically not guaranteed by sponsoring entities and may not provide adequate diversification on their own.
Securities Lending Programs for Non-Pension Fund Portfolios—significant modifications were made to more clearly explain steps involved in securities lending programs, as well as explaining the risks involved and how best to minimize them.
Repurchase Agreements and Reverse Repurchase Agreements—modified to incorporate clearer definitions, updated abbreviations, and references.
Selection of Underwriters and Selection of Financial Advisors—these two RPs replace Preparing RFPs to Select FAs and Underwriters to expand the considerations governments must undertake when choosing finance professionals. Furthermore, the RPs now reflect the Selecting and Managing the Method of Sale of State and Local Bonds RP position that in negotiated sales, a financial advisor should not resign to become underwriter for that transaction.
Alternative Investments for Pension Funds—renamed The Use of Alternative Investments for Public Employee Retirement Systems and Other Postemployment Benefits (OPEB) Established Trusts, this revision notes that extreme prudence and appropriate due diligence be exercised in the use of alternative investments in public pension and OPEB portfolios and sets forth several criteria that systems should consider before adding alternative investments to their portfolios.
Funding of Public Employee Retirement Systems—offers recommendations to ensure that the fundamental financial objective of a state or local government employee retirement system, which is to fund the long-term cost of promised benefits to plan participants, is effectively carried out. It recommends that the retirement system adopt a policy targeting a 100 percent or more funded ratio over a reasonable period of time and offers suggestions to ensure that promised benefits are properly measured and reported.
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Jurisdictions Sue Municipal Bond Insurers
The City of San Francisco, California, recently filed suit against five monoline insurers (Ambac, MBIA, XL Capital, Financial Guaranty Insurance Company, and CIFG Assurance North America) citing “fraud that has been exposed by the recent subprime mortgage crisis.”
The suit alleges that the city and county was forced to buy bond insurance because the municipal bond insurers “calluded” to ensure that credit rating criteria was skewed unfairly for tax-exempt bonds, giving tax-exempt securities lower ratings than more riskier corporate securities. San Francisco’s suit claims that this practice unfairly penalized state and local governments by creating an environment where purchasing bond insurance was necessary in order to attract investors. Other governments including Los Angeles and Stockton, California, have filed similar suits claiming that the credit enhancement they purchased is now worthless, thus harming the underlying securities because the bond issues are wrapped with bond insurance that has been downgraded by the credit rating agencies.
For almost a year now, many of the bond insurers themselves have been downgraded by the credit rating agencies because of their foray into more risky securities—those have been at the center of the subprime mortgage and mortgage-backed securities crisis—and away from a safe, solely municipal bond insurance business.
The civil suits by the government entities seek to recover compensatory and punitive damages.
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Plan Now to Earn Year-end CPE Credits
If you are looking to earn year-end continuing professional education (CPE) credits, then turn to the GFOA to meet your training needs. Group-live, satellite, and Internet training courses will be presented at the introductory, intermediate, and advanced levels.
Visit the GFOA’s Web site training page for a listing of all the latest course offerings. Register to participate using the GFOA’s e-store.
The GFOA wants to help you fulfill your CPE requirements. To take advantage of these valuable training opportunities, sign up today at www.gfoa.org.
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Don't Miss This Year’s Annual Governmental GAAP Update
Forego the travel expenses and sign up to attend the 13th Annual Governmental GAAP Update satellite teleconference on November 6, 2008, from 1 p.m. - 5 p.m. (EST) at a site location nearest you. Visit the GFOA's Web site to view the list of 135 registered sites across the United States where you can view the presentation.
Not able to locate a site in your area? Then set up a downlink site in your community. Check your city/county building, library, local high school, or college for satellite equipment that is capable of receiving multiple band signals. Once you find the proper satellite equipment, reserve the space and tune in to the GFOA broadcast.
For more details on hosting a site, including information on the GFOA’s revenue-sharing program and frequently asked questions, visit the GFOA's Web site or contact the GFOA at satellite@gfoa.org.
Stay current on the latest updates in accounting and financial reporting and earn four continuing professional education credits by participating in this premiere event. Register now.
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President Approves Measure to Avert Federal Government Shutdown
In absence of final congressional approval of any of the 12 annual appropriations bills, President Bush approved a continuing resolution (CR) on September 30, 2008, to keep most federal agencies running through March 6, 2009, at fiscal 2008 levels. The March 2009 date defers to the new Congress and president the decision-making authority about spending priorities for the remainder of the 2009 fiscal year.
While the CR funds most programs at fiscal 2008 levels, three departments—Homeland Security, Defense, and Veteran Affairs—along with military construction received a slight funding increase and full-year appropriations, through September 30, 2009. Homeland Security appropriations came to $41.2 billion, with $4.2 billion allocated to key state and local government first responder assistance programs. In particular, $950 million was allocated to the State Homeland Security Grant Program, $838 million to the Urban Area Security Initiative Grant Program, $750 million for FIRE grants, and $315 million to the Emergency Management Performance Grant program.
Also important to state and local governments, the CR included $22.9 billion disaster assistance, including $6.5 billion in Community Development Block Grants for repairing and replacing damaged homes and other infrastructure, and $850 million to the Federal Highway Administration for the repair of roads and bridges damaged by disasters.
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Distinguished Budget Presentation Awards
Congratulations to the following first-time recipients of the GFOA’s Distinguished Budget Presentation Awards: Central Lake County Joint Action Water Agency, Illinois; Rochester-Genesee Regional Transportation Authority, New York; and Culpeper County Public Schools, Virginia.
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Enclosures:
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Training Opportunities
Upcoming Training in October
Chicago, Illinois
Upcoming Training in November
Internet Training
Satellite Teleconference
November 6 Annual Governmental GAAP Update Satellite Teleconference
Phoenix, Arizona
Upcoming Training in December
Internet Training
Upcoming Training in January
Newport Beach, California
State and Regional Calendar
October 30-31: Tennessee GFOA
Franklin, TN. Contact: www.tngfoa.org
November 10-12: Alaska GFOA
Ketchikan, AK. Contact: www.agfoa.com
November 10-12: Texas GFOA
Galveston, TX. Contact: www.gfoat.org
November 10-12: Alaska GFOA
Ketchikan, AK. Contact: www.agfoa.com
November 10-12: Texas GFOA
Dallas, TX. Contact: www.gfoat.org
November 17-21: Florida GFOA. School of Governmental Finance
St. Petersburg, FL. Contact: PMitchell@flcities.com
November 18-21: Colorado GFOA
Vail, CO. Contact: www.cgfoa.org
November 20: District of Columbia Metro Area GFOA
Washington, DC. Contact: johnetta.bond@dc.gov
December 3-4: Alabama GFOA
Birmingham, AL. Contact: www.gfoaa.org
December 3-5: New Mexico GFOA
Albuquerque, NM. Contact: www.nmml.org
Employment Opportunities
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