Municipal Financial Risk Management

Municipalities are a local level of government. Financial management is an important role for municipalities. Voters expect the municipal council and administration to make sure public assets and funds are properly managed and protected from theft and fraud.

Municipal councils have a financial oversight role. They do not manage day-to-day operations. Reduce your municipality's financial risk by following provincial laws and adopting best practices for council and administration.

Provincial legislation

Provincial laws require all municipal councils to do certain things:

• Hire a qualified administrator or city clerk.
• Adopt an operating and capital budget each year before approving the tax levy.
• Ensure any employee handling cash or securities is bonded or has equivalent insurance. (Council should review the amount each January.)
• Appoint an independent auditor.
• Ensure that the municipality's annual audited financial statement and the auditor's report are submitted to the minister.
• Make financial statements available to the public.
• Appoint at least one other person besides the administrator to sign cheques on behalf of the municipality.
• Ensure all expenditures are:
  • approved by council resolution;
  • included in the budget;
  • required for an emergency; or
  • legally required to be paid.
• Ensure borrowing is within the municipality's debt limit unless authorized by the Saskatchewan Municipal Board.

What council can do to reduce financial risk

Since council members are not bondable, they should never handle cash. Council members can ask questions to their administration, such as:

• Are school taxes, municipal hail premiums, payroll and other legally required remittances paid each month?
• When are instalment payments for projects due?
• What control tests does the auditor perform?

Council can also use the following best practices to manage financial risk:

• Monitor compliance with policies and procedures.
• Appoint a finance committee, who prior to a meeting:
  • review and initial invoices; and
  • review prepared cheques.
• Investigate reports of missing funds immediately upon discovery by forensic audit/legal authorities. Not reporting a theft may compromise investigation later and may be seen as condoning the theft.
• Change locks when a new administrator is appointed.

What administration can do to reduce financial risk

Administrators should ensure only staff have office keys. Council members should not have access to the office without staff present. If money goes missing or financial records are tampered with, every person that has a key could be a suspect in a police investigation.

The administrator can also use the following best practices to manage financial risk:

• Write financial policies and procedures, including purchasing policies.
• Implement a strict municipal credit card policy.
• Train staff in cash handling and financial control measures.
• Ask citizens to make payment by cheque, debit and credit card instead of cash to limit cash collections.
• Issue receipts immediately upon receipt of payment.
• Balance cash and cheques to receipts daily.
• Make frequent bank deposits and ensure deposits equal receipts.
• Compare invoices to original tenders, quotations, bids.
• Make invoices and prepared cheques available at council meetings for review and information.
• Sign and disburse cheques once payments are approved.
• Never sign blank cheques.
• Provide monthly financial reports to council of:
  • receipts and payments;
  • monthly bank reconciliation and petty cash reconciliation; and
  • budget variance report.
• Keep cash handling and reconciliation duties separate, if possible.
• Do not allow borrowing from petty cash.
• Limit petty cash transactions so most payments are made by cheque.

An Information Bulletin about Financial Risk Management is available from the Government of Saskatchewan's Publication Centre.