Reserves are the cornerstone of financial flexibility. Reserves provide a government with options for responding to unexpected issues and a buffer against shocks and other forms of risk. Managing reserves, however, can be a challenge. GFOA's Research and Consulting Center begin working with local governments in the area of risk-based reserve analysis in 2008, building from our consulting experience in long-term financial planning and policies. Using a customized approach based on a government's risk factors, GFOA works with local goverments to determine the appropriate level of reserves for their circumstances and to identifiy policies to strengthen their overall reserve strategy.
For more information contact Shayne Kavanagh.
The City of Colorado Springs, like many other governments, had questions about the amount it should maintain in reserve. This case study of Colorado Spring's risk-based assessment of reserve requirements starts out by identifying general risk factors. It then identifies primary risk factors -- revenue volatility, infrastructure upkeep, and vulnerability to extreme events -- and secondary risk factors before explaining the GFOA's findings and recommendations for the city.
Much has happened in the two years after Colorado Springs implemented its reserve strategy. The article provides a progress report on how the reserve has been used and current reserve levels.
Financial policies are used by a governing board and executive management to set the baseline standards for how the organization will be managed financially. Financial Policies is a GFOA publication that provides guidance on developing and implementing financial policies. The book takes a new look at traditional policies such as those for general fund reserves, debt, and revenues. It also examines emerging policy issues around economic development, enterprise risk management, and reserves for funds other than the general fund.