Best Practices/Advisories

Best Practices/Advisories

GFOA Best Practices identify specific policies and procedures as contributing to improved government management. It aims to promote and facilitate positive change rather than merely to codify current accepted practice. Partial implementation is encouraged as progress toward a recognized goal.  

GFOA Advisories identify specific policies and procedures necessary to minimize a government’s exposure to potential loss in connection with its financial management activities. It is not to be interpreted as GFOA sanctioning the underlying activity that gives rise to the exposure.

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188 Documents


Debt Issuance Transaction Costs

Best Practice

GFOA recommends that finance officers be aware of the parties likely and necessary to be involved in the transactions and be prepared to select these parties in a manner that ensures that needed services are obtained at a fair and reasonable cost.  Additionally, an issuer should carefully review all invoices to ensure that an expense is not billed to multiple parties.

Governmental Debt Management

Public-Private Partnerships (P3)


Organizations, and especially the finance officer, must understand what is at stake and make informed, strategic decisions on whether or not to pursue P3 opportunities. Finance officers should be involved throughout the process of a public entity’s consideration of potential P3 opportunities.

Economic Development and Capital Planning

Refunding Municipal Bonds

Best Practice

The Government Finance Officers Association (GFOA) recommends that issuers include guidelines in their debt management policies that address preservation of future refunding flexibility when issuing any debt, formal refunding objectives, and monitoring of refunding opportunities on outstanding debt.

Governmental Debt Management

Understanding Pension Fund Investment Risk

Best Practice

GFOA endorses the report developed jointly by the Association of Public Pension Fund Auditors and selected chief investment officers of public pension funds, entitled "Public Pension Systems: Statements of Key Investment Risks and Common Methods to Address those Risks." By reviewing this report, governing and managing fiduciaries responsible for

Retirement and Benefits Administration

Governance of Public Employee Postretirement Benefits Systems

Best Practice

GFOA recommends that the state or local government or other designated governing entity establish rules of governance for its post-retirement benefit systems that define the key elements necessary for trustees and other fiduciaries to fulfill their responsibilities, in accordance with fiduciary standards. The following governance best practices are recommended:

1. Governance Manual – Adopting and maintaining a written governance manual enables good governance. At a minimum, this manual should include:

    • An outline of the authority under which the system operates.
    • A section outlining the roles and responsibilities of the board of trustees, administrator (director or executive director), and staff.
    • All board-adopted policies and any applicable statutes, regulations, and other relevant documents.
    • A description of all permanent (standing) committees, with a copy of the committee charter.

    2. Governing Boards:

        • Size of Board – The post-retirement benefit system’s board of trustees should be neither so large as to be unwieldy nor so small that it runs the risk of not being able to get a quorum to make decisions. Optimal board size is between seven and 13 members, depending on the size and complexity of the system.
        • Board Composition – Any board that operates effectively includes members who have a mix of skills, competencies, and behaviors, including leadership, teamwork, communication, planning and organizational abilities, and knowledge of sound decision-making principles. A successful board actively pursues and makes use of these skills and behaviors. Board composition should reflect the varied interests of those responsible for funding the plan and should include plan participants and retirees, citizens of the governmental unit, and officers of the plan sponsor, as well as independent directors. This assures balanced deliberations and decision making.
        • Board Education – New trustees must receive orientation training explaining their responsibilities and fiduciary duties as well as the duties of the system’s staff and agents (e.g., actuaries, attorneys, advisors, and fund managers). A program of continuing education must be developed, and participation should be strongly encouraged or required.

      3. Governance Policies:

          • Code of Ethics – Every governing board should adopt a code of ethics to provide standards of conduct for board members and plan staff. The code of ethics should, at a minimum, address:
            • Loyalty. Public fund fiduciaries must make all decisions in the best interest of system participants, placing those interests above all other interests.
            • Decision making. Decisions must be made in a fair, honest, and open manner, with information shared among fellow fiduciaries and all interested parties to enhance the quality of the system’s decision-making process. Policies should discourage fiduciaries who are plan participants from voting on matters that advance their personal financial interests, and should provide a mechanism for independent trustees to vote separately on such matters if a conflict of interest affects multiple members.
            • Personal Conduct. Every public system’s fiduciaries, including those who are under contract to provide services to the system, must take all reasonable steps necessary to ensure a full and accurate understanding of the trust, conflicts of interest, financial disclosures, and other ethics-related laws that apply to the system. They must conduct their official and personal affairs to ensure that they cannot be improperly influenced in the performance of their duties.
            • Relationships with Others. To foster trust and limit practices that create the appearance of conflicts of interest, plan sponsors should consider including restrictions in their code of ethics on the following behaviors:
              • Former employees and trustees soliciting business from the plan for a specified period of time.
              • An employee or trustee accepting contributions or material gifts from current or potential business partners, their agents, or their representatives.
              • Payment of finder or incentive fees to third-party marketers or other consultants for new or increased business, without full and advance disclosure and other controls where appropriate.
              • Any action that would bring into question the independence of the board or staff or the propriety of the system’s decision making.
            • Succession Planning – To ensure continuity of governance, there must be a policy for transition of leadership.
            • Investment Policy – The board must develop a comprehensive set of policies and procedures for investing and safeguarding plan assets. (See GFOA Best Practice, Public Employee Retirement System Investments, 2009.)
            • Professional and Contractual Services – The board must have policies and procedures for selecting agents such as actuaries, attorneys, auditors, advisors, and fund managers. These policies and procedures must encourage an open process free of actual or perceived bias and conflicts of interest.
            • Procedures for Monitoring Policies – Policies and procedures must be implemented to allow the board of trustees to monitor whether the board policies are being fulfilled, and whether the roles and responsibilities delegated to the various agents regarding the day-to-day management of the postemployment benefit system are being carried out effectively and to the board’s satisfaction.
        Retirement and Benefits Administration

        Investment Fee Policies for Retirement Systems

        Best Practice

        To minimize the impact of investment management fees on portfolio returns, the GFOA developed this best practice, which recommends that retirement systems, especially those that use alternative investment strategies, adopt an investment management fee policy that will allow the retirement system to negotiate the lowest competitive fee possible while looking out for the system's long-term earning potential. The best practice also provides recommendations to governments about strategies to reduce investment fees.

        Retirement and Benefits Administration