A local government’s revenue system needs to treat people fairly to maintain the public’s trust. GFOA’s Code of Ethics requires that finance officers support equitable provision of services and call out unfair discrimination. But some local governments use and rely on revenue from imposed fees and fines that make socioeconomic and racial inequities worse.
Are Your Financial Policies Ethical?
Fines and imposed fees should not be used as revenue raising or cost-recovery tools. Using them this way can worsen problems that governments services are meant to solve. For example, unpaid fees can hurt a citizen’s credit score, which makes it harder for that person to find housing, get a job, or apply for credit. In another example, studies have found that local governments can end up spending more on collecting court fees than they raise in revenues, given the cost of jail time for nonpayment.
GFOA has released a new research report that provides tools for local government finance officers to use in evaluating their own existing policies, along with guidance and policy templates for drafting new policies. Trust is a government’s most valuable asset, and finance officers play a big role in safeguarding this by promoting transparency and accountability. Finance officers also need to ensure equity and fairness.
GFOA challenges all GFOA members to better understand the implications of misused fees and imposed fines, including their connection to systemic racism, lack of trust in government, and the potential to seriously harm the lives of disadvantaged citizens.
Criteria for Charging a Fine
Fines are often effective for dissuading people from undesirable behaviors, like breaking the speed limit while driving a vehicle. However, fines may be ineffective or counterproductive in other circumstances. Here are considerations that might be included in a policy to guide when a fine is or is not appropriate.
1. Is the person who violates the rule being punished in another way besides the fine?
2. Does the fine discourage or prevent access to services that are important for the violator to use?
3. Is there a better way to achieve the intended result?
4. Can the fine be collected for an acceptable cost?
5. Are the fines being fairly enforced?
Guidance for Asset Forfeiture
Just because a government can legally seize someone’s assets doesn’t mean they should. There is precedent for local governments to set higher financial standards for themselves than is provided for in enabling state or federal legislation. Financial policies, in essence, are about local governments creating more well-defined, more stringent, and better rules for themselves than can be found in enabling legislation. Here are examples of guidance that a policy could offer:
1. Assets seized will be held in escrow until a legal judgement is made
2. Define the minimum charges necessary to justify asset seizure
3. Prohibit seizing assets owned by people who are not being charged with any crime
4. The defendant must have counsel (appointed or private) in all forfeiture cases
5. The specific assets seized must have a direct connection to a convicted offense