Finance

Common Single Audit Findings and How to Avoid Them

Many municipalities get similar findings during their federal single audits. The good news is that most of these issues can be prevented with good planning and steady habits.

Internal controls are the rules and steps that help protect public money. Findings happen when controls are not followed or not written down.

Examples:

One person handles everything (no checks and balances)
Approvals are missing
Bank accounts aren’t reconciled regularly

How to avoid it:

Clearly assign responsibilities.
Separate duties so no one person controls a whole process.
Use clear approval steps for spending.
Reconcile accounts every month.
Write down procedures and follow them consistently.

Strong controls show that the municipality is careful and trustworthy.

Auditors often find that a municipality didn’t keep enough proof to show how federal money was used.

Examples:

Missing invoices
Not keeping copies of grant agreements, amendments, and approvals

How to avoid it:

Keep all grant records in one place.
Save receipts and invoices for every purchase.
Maintain clear approval records for purchases and payments .
Retain records according to grant requirements.

Good documentation is like keeping a trail of breadcrumbs — it helps auditors see exactly what happened.

Federal grants require detailed support for payroll costs charged to a grant. Findings may occur when timesheets or salary allocations are not properly documented.

Examples:

No timesheets for activities charged to federal funding
No support for payroll charges
No documentation of payroll changes

How to avoid it:

Document payroll time when employees work on federal programs - Timesheets need to indicate all time worked, not just the grant-funded time.
Review payroll charges regularly.
Document how payroll costs are allocated among programs.

Clear payroll records and accurate timekeeping reduce the risk of questioned costs or audit findings.

Federal grants have specific purchasing and bidding rules. Findings can occur if required quotes, bids, or conflict-of-interest disclosures are missing.

Examples:

Not putting work out to bid when required
Not including required contract clauses
Not documenting all steps of a purchase to meet federal requirements

How to avoid it:

Follow written procurement policies - You must follow federal procurement rules, and if your municipality's rules are stricter, you must follow those too.
Document all quotes and bids received.
Keep records showing how you advertised bids and why vendors were selected.
Review federal procurement requirements before large purchases.

Strong procurement practices and clear documentation help demonstrate compliance with federal requirements and can help protect your municipality from fraud or abuse.

The Schedule of Federal Awards (SEFA) is one of the most common places where findings occur.

Examples:

Wrong Assistance Listing Numbers (ALN)
Missing federal programs
Incorrect amounts reported
Not identifying pass‑through funds

How to avoid it:

List every federal program you spent money from.
Double‑check Assistance Listing numbers. They should be included in your funding agreement.
Match SEFA totals to your accounting system.
Mark pass‑through funds clearly.
Submit the SEFA to the State on time and amend it if you find errors.

A clean SEFA helps the audit start smoothly.

Most grants require regular reports to the state or federal government. Findings happen when these reports are late or incomplete.

How to avoid it:

Create a reporting calendar with all deadlines.
Assign responsibility to specific staff.
Review reports before submitting them.

Each federal program has its own rules. Findings happen when a municipality doesn’t follow them.

Examples:

Spending money on unallowed costs
Not getting required quotes or bids
Not meeting program requirements
Not including Davis Bacon requirements in bid packages or contracts or not documenting required verifications

How to avoid it:

Read the grant agreement and grant application guidance carefully.
Check cost allowability before spending.
Ask questions before charging unusual expenses to a grant.
Follow procurement rules for purchases and contracts.

For federal funding compliance, it is better to ask permission than to seek forgiveness.

Overall, the best way to avoid findings is to stay organized, document decisions and approvals, and review grant activity regularly throughout the year instead of waiting until the audit begins.

Most findings come from small gaps in documentation, controls, or understanding the rules. Reconciling records before the audit begins can help you spot - and potentially fix - potential issues. With good organization, clear procedures, and steady communication, your municipality can avoid these issues and feel confident going into the audit.

Publication Date

05/18/2026

Preparing for a Single Audit

Getting ready for a federal single audit can feel big, but with some steady steps, you’ll be in great shape. The goal is simple: show how federal money was used and that strong controls are in place to protect it.

Below are the most important things to focus on.

Good records make the audit smoother and faster.

Grant documentation — Keep copies of grant agreements, award letters, budgets, and any rules tied to each grant.
Spending records — Save invoices, receipts, contracts, payroll records, and anything that shows how money was spent.
Policies and procedures — Have written policies and procedures for how you handle money, approvals, and reporting.
Tracking system — Make sure you can clearly show which costs belong to which federal program.

Think of documentation as your “proof” that everything was done the right way.

Internal controls are the steps you take to prevent mistakes and protect public money.

Segregation of duties — Try to make sure no one person handles everything from start to finish.
Approval processes — Have clear rules for who can approve spending.
Reconciliations — Regularly compare your records to bank statements and grant reports.
Monitoring — Check throughout the year that spending follows grant rules.

These controls help show the auditors that the municipality is careful and responsible.

Federal grants have specific rules related to allowable costs, procurement, reporting, and record retention. Municipalities should review grant requirements and make sure staff understand them.

Single Audits usually takes more preparation than expected. Starting early gives staff time to gather documents, ask questions, and address any issues before fieldwork begins.

Many municipalities struggle to find an auditor because firms are very busy, and some do not respond to proposal requests. Starting early helps you avoid delays.

Release your Request for Proposals (RFP) several months before year‑end. Ask firms to indicate their availability as part of their proposal.
Advertise your RFP on the Vermont Bid Registry to increase your chances of finding an audit firm. Listings are free. Our Finding Auditors document has other ideas you can use.
Sign an engagement letter early so your spot is reserved

Hiring early gives you more choices and helps ensure the audit can be completed on time.

The Schedule of Federal Awards (SEFA) is one of the most important parts of the single audit.

List all federal programs — Include every federal award you spent money from during the year. Spending for FEMA Public Assistance awards should be based on when the funds are approved (i.e., approval of the Award Worksheet) since that is when FEMA actually obligates funds.
Use correct Assistance Listing Numbers — These numbers identify each federal program. Look for them on your funding agreement.
Report total federal spending — Show how much was spent for each program.
Note pass‑through funds — If you received money through the state or another agency, mark it clearly.

A clean, accurate SEFA helps the audit start on the right foot.

Talking with your auditors ahead of time makes everything easier.

Ask what they need — They can tell you exactly what documents to gather.
Share any concerns — If something is unclear, it’s better to ask now than later.
Set timelines — Agree on when information will be ready.

Preparing for a single audit is really about being organized, clear, and consistent. If you keep good records, follow your controls, and build a solid SEFA, you’ll be well prepared.

Publication Date

05/18/2026

CHIP IN VT Tools and Resources

Welcome to Our CHIP Learning Resources

This page helps you learn about the Community and Housing Infrastructure Program (CHIP). CHIP is a program that uses project-based Tax Increment Financing to finance infrastructure improvements that enable housing development.

VLCT's three‑year municipal workforce development effort – CHIP IN VT – helps towns and cities understand how CHIP works and how to use it well. As part of this effort, we are hosting a series of webinars for local governments. Each webinar explains a different part of the program, from building with CHIP to carrying out long-term responsibilities.

After every webinar (and sometimes between webinars), we add tools and resources to this page. These materials are designed to help you take the next step, build your skills, and feel confident using CHIP in your community.

Introducing CHIP: Vermont's $2B Housing and Infrastructure Program

CHIP overview and resources to help municipalities launch their CHIP efforts.

CHIP IN VT: Building Local Capacity for Housing and Infrastructure is VLCT 's CHIP IN VT landing page
CHIP Introductory Brochure is a trifold brochure that can be included in meeting packets
Actions to Enable Housing Development in Your Community
Best Practices for Committees to Work Effectively with Municipal Leaders
Funding Opportunities for

Building with CHIP: Project Readiness and Pre-Development Planning

Pre-development workflow, resources, and support available to municipalities.

Municipal Readiness

CHIP Municipal Readiness Self-Assessment – Understand your community's readiness to participate in a CHIP application and experience.
Increasing Municipal Capacity for Grants – A list of resource providers to increase municipal capacity for grants. Some provide CHIP assistance too.
Drinking Water, Wastewater, and Housing in Vermont – This webpage of the Vermont Rural Water Association explains elements that contribute to assessing water and wastewater capacity.
Questions-for-Local-Water-Wastewater-Systems.docx – Questions compiled by the Vermont Rural Water Association to help you learn about water and wastewater systems serving your community.
Best Practices for Early Engagement in CHIP - Explore best practices for building community understanding, engaging residents early, and maintaining trust throughout a CHIP project.
Preparing Municipal Land for Housing Development - Steps municipalities can take to understand a property, identify development challenges, and prepare municipal land for housing before reaching out to potential developers.

Working with Developers

CHIP Project Roadmap explains the stages of CHIP projects, who is responsible for each step, and when important decisions are made.
Information to Share with CHIP Developers identifies information municipalities can provide or post to help developers understand local goals, expectations, and processes.
Assessing Project Readiness - Information to expect from developers, why it matters, and questions to ask before investing significant time in a potential project.
CHIP Project Readiness: Sketch Plans – What a sketch plan is, how it is used, and typical elements included on sketch plans in Vermont.
Early Questions to Ask Housing Developers Seeking CHIP Financing – A guide for early conversations with developers. Includes a meeting notes template.
Reading a Housing Development Feasibility Study - A practical guide for understanding the study well enough to ask thoughtful questions, recognize important assumptions, and understand how the study supports the request for public participation.
Tools and Support for Local Mapmaking – A list of reliable mapping tools and support options to make planning easier and help your community understand local projects.
Environmental Review Starter Guide for Local Governments – Key data sources, maps, and explanations related to environmental reviews to help you understand what information is required and why it matters; a resource for conducting preliminary CHIP and infrastructure project reviews.

Understanding Estimated Property Valuation and Tax Increment Projections

The Grand List: Understanding It and Why It Matters - Explains what the grand list is and how it can help local officials make better decisions about community growth, budgeting, and property taxes.

Generating Buy-in for Public-Private Partnerships

Building Trust in Public-Private Partnerships - Lessons learned from municipalities that partnered with private developers to advance housing and redevelopment projects.
Project Champions: Helping Municipal Projects Move Forward - Good municipal projects need more than a good idea. They need people who believe in the work, help others understand why it matters, and keep it moving when challenges arise.
Model CHIP Participation Policy + Guidance - Optional model policies to help your municipality decide whether to sponsor a project through CHIP.

Risk Management for Public-Private Partnerships

The Municipality's Role in Managing CHIP Project Risk - While municipalities cannot eliminate every risk, they can take steps to understand those risks and make informed decisions.
CHIP: Vetting Housing Developers - Steps municipalities can take to understand whether a developer has the experience, team, financial resources, and financing plan needed to move the project forward.
Managing Tax Increment Risk - Common circumstances that may affect tax increment and practical questions to help municipalities evaluate and manage those risks.
Typical Housing Infrastructure Agreement Components - Understand the types of provisions commonly found in an agreement and download the CHIP Housing Infrastructure Agreement requirements.
CHIP Housing Development Plan Checklist - Learn about information that must be included in the plan and the steps the municipality must take to hold the required public hearing and adopt the plan.
Lessons from Middlebury’s CHIP Experience - Middlebury submitted Vermont’s first CHIP application. Learn about the Town's experience, what it has learned, and what advice it can offer other municipalities.

Publication Date

04/21/2026

Model Reserve Fund Policy + Guidance

A reserve fund is a separate, dedicated financial account that is created to fund a specific municipal purpose whose balance is carried over from year to year. Reserve funds are created by approval from a majority of voters at an annual or special town meeting. 24 V.S.A. § 2804. A reserve fund can be created for any legitimate municipal purpose. Once created, it falls under the control and direction of the selectboard.

Approval of this fund requires a majority vote regarding the purpose and amount of money to be set aside to create this fund. Once created, the selectboard has the authority to spend the money only for the special purpose for which the fund was created. The money set aside for this fund and any monies accruing from investing it are used for the original purpose of the reserve fund. If it is determined that the money allocated to a reserve fund would best serve an alternative purpose, this money can be so designated at an annual or special town meeting where the majority of voters approve of this reallocation.

The reason for creating a reserve fund is twofold. First, it ensures that money appropriated by the voters will only be used for the stated purpose of the reserve fund. Once created, the funds can be disbursed by the selectboard without further voter approval. Second, a reserve fund allows the selectboard to roll over money that is placed in the fund and not spent from year to year.

The bottom line is that a reserve fund does not exist unless the voters have approved it at an annual or special town meeting. In fact, under Vermont law reserve funds only cease to exist if the voters vote to rescind the fund. Accordingly, if you are not sure if you have a bona fide reserve fund, check the town or special meeting minutes to see if a record of the voters creating the fund exists. If no such record exists, neither does the fund.

Reserve Funds. Twenty-four V.S.A. § 2804 allows municipalities to establish a reserve fund under the control and direction of the selectboard. Money in the reserve fund can be expended by the selectboard for such purposes for which the reserve fund was established or for other purposes when authorized by a majority of the voters at an annual or special meeting. Creation of a reserve fund requires voter approval of warned articles similar to these:

Shall the voters establish a reserve fund to be called the [insert name of reserve fund] to be used for [insert purpose of reserve fund], in accordance with 24 V.S.A. § 2804?

Shall the town [insert funding mechanism such as “raise and appropriate the sum of $X,” or “deposit $X from the general fund surplus”] to fund the [insert name] reserve fund?

Note: If the town votes from the floor, the creation of the reserve fund and the funding of the reserve fund may be accomplished in two separate articles. However, if the town votes by Australian ballot, the creation and funding of the reserve fund must be combined into one article. Regardless of the voting method, any funding mechanism that is approved by the voters is only in effect for the ensuing year.

A reserve fund policy can assist the selectboard in administering such a reserve fund by guiding decisions about how money will be set aside in the reserve fund and the circumstances under which money in it will be spent.

Use of Funds. The model policy provides that the selectboard will only use the reserve fund for the purpose for which it was created or for other purposes when authorized by a majority of the voters at an annual or special meeting.

Publication Date

06/30/2019

Model Balanced Budget Policy + Guidance

A balanced budget is necessary for proper financial management in local government. Overestimation of municipal revenues, deferral of maintenance, replacement of capital assets, and inadequate funding of municipal obligations can necessitate borrowing or increases in tax rates, both of which can limit a municipality’s ability to provide future services.

Budget Creation and Administration. By tradition, the selectboard prepares the budget for voter approval at the annual town meeting; by law, it sets the tax rate necessary to raise the specific amounts voted. The selectboard manages the town budget through the course of the fiscal year under its authority to sign orders for payment of town funds. To approve orders, the board must meet and, by a majority of the total number of members of the board, vote to authorize the treasurer to disburse money. The selectboard may vote to authorize one or more members to examine and approve the payment of certain town expenses.

Unanticipated expenditures and revenue shortfalls caused by unforeseen circumstance can require a transfer of money between line items or even deficit spending. The model policy provides that the municipal budget will be administered to provide services in a manner consistent with the voters’ expectations in light of actual circumstances and managed to avoid deficit spending and short-term borrowing.

Line-Item Transfers. The model policy also provides that all transfers between budget line items will require a majority vote of the selectboard.

Budget Closing Plan. At the close of the fiscal year, the treasurer will present a budget closing plan to the selectboard, making recommendations for transfers between line items and recommendations for the application of any budget surplus. Approval of the plan will require a majority vote of the selectboard. Any annual budget deficit will be addressed in accordance with 24 V.S.A. § 1523(a).

Publication Date

04/01/2026

Model Investment Policy + Guidance

Vermont law provides that money received by a treasurer on behalf of the town may be invested and reinvested by the treasurer with the approval of the selectboard. 24 V.S.A. § 1571(b). While there are very specific investment requirements in 24 V.S.A. § 2432 that apply to trustees of public funds, there is nothing beyond the broad grant of authority in 24 V.S.A. § 1571(b) applicable to investments made by the treasurer and selectboard.

Given the amounts that could be invested by a town under 24 V.S.A. § 1571(b), it is imperative that the selectboard and treasurer adopt a policy to guide their investment decisions. The primary purpose of a town’s investment policy should be to strike a balance between risk and return while following a conservative investment approach that preserves sufficient liquidity to allow the town to meet its cash flow needs. A well written policy will provide the guidelines, parameters, and procedures for investing the municipality’s funds.

Consider the following when developing an investment policy:

Scope. The policy should identify which funds are subject to the policy. Normally, all funds of the government should be subject to the investment policy, except for trust assets, which are typically handled under a separate trust investment policy, and bond fund investments handled under a separate debt management policy. In addition, certain intergovernmental revenues contain restrictions on income earnings, so the policy would not apply to those funds either.

Objectives. The selectboard and treasurer should address the primary objectives of their investment program – safety, liquidity, yield – as well as a discussion of any goals for local investment.

“Safety” refers to the preservation of capital and the protection of investment principle and should be the foremost objective of the investment policy. Safety risks include credit risk (the risk of loss due to the failure of the security) and interest rate risk (the risk that the market value of securities in the portfolio will fall due to changes in market interest rates).

“Liquidity” refers to the ability of an investment to be converted into cash with minimal loss of principle or interest to insure that the investment portfolio will be able to meet all reasonably anticipated cash flow requirements.

“Yield” is of less importance than safety or liquidity but is important, nonetheless, as interest earning on an investment is a significant source of additional income for a municipality. A balance must be struck between risk and yield, as lower risk securities generally have a lower yield. Diversification of investments and a routine comparison of the portfolio’s performance with market indexes will address concerns over yield.

Local investment may be an important objective for a municipality if the eligible financial institution demonstrates the intention of using the deposited funds to better the local economy or to invest in community development projects.

Standard of Care. The policy should provide a clear delineation of responsibilities for carrying out the investment activities of the municipality. The Government Finance Officers Association (GFOA) recommends using the “prudent person” rule of investment as the standard of care. This rule provides that investments should be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income derived.

In addition, the policy should include a conflict of interest statement, directing those responsible for investing town funds to refrain from personal business activities that could conflict with the proper execution and management of the investment program.

Authorized Institutions and Authorized Investments. Public deposits should only be made in qualified public depositories as established by state law, and the policy should include guidelines as to the information that should be submitted by financial institutions. The municipality should also review the various investments that are permitted under state statutes and determine which investments are appropriate for their size and the type of portfolio they will have.

Maturity and Diversification Guidelines. Investment portfolios should be diversified to avoid an over-concentration of assets in any particular maturity, issuer, or class of securities. Maturity guidelines should reflect the cash flows of the municipality and the purposes of the investment. Shorter term investments provide readily available funds to meet expenditure requirements. The policy should limit the amount of funds that may be invested in any one issuer to avoid significant credit risk. Further, the policy should establish guidelines as to the diversification of investments by class of security.

Collateralization. Exposure to custodial credit risk – the risk that the municipality may not be able to recover its deposits in the event of the failure of the depository institution – can be minimized by collateralizing all deposits, and by having that collateral held in the name of the municipality with a third party bank or with the bank’s trust department.

Reporting. The policy should specify the frequency and format of any reporting of the investment portfolio. The reports should be issued frequently enough to give an accurate picture of the funds that are available and should provide enough detail for the users to understand the transactions for the period and the status of the portfolio at the end of the period. The policy should also establish benchmarks to determine the performance of the fund. The benchmarks used should be based on similar investment objectives and risk tolerances of comparable municipalities.

For more information on municipal investment policies, please refer to Financial Policies: Design and Implementation, published by the Government Finance Officers Association. A copy of this document can be purchased at www.gfoa.org.

Publication Date

04/01/2026

Model Cash Receipts, Petty Cash and Returned Checks Policy + Guidance

The Government Finance Officers Association’s (GFOA) recommended practice on cash receipts controls suggests that proper controls over revenues are imperative to ensure sound financial management practices, instill public confidence in municipal operations, and provide accurate, reliable, and timely information on which financial decisions can be made. Budgeting, revenue forecasting, account reconciliation and review, and financial reporting all rely on the proper recording of revenues. Local officials need to provide for appropriate mechanisms, both automated and manual, to collect all funds legally due to the entity and ensure that proper controls exist over all receipts.

Appropriate internal control procedures should be implemented to ensure the safeguarding of all receipts. One of the most important procedures is the segregation of duties. No one individual should be able to authorize or initiate a transaction, record the transaction in the accounting records, maintain custody of the asset resulting from that transaction, and reconcile the activity in the accounting records that pertain to that transaction. All internal controls should be in writing and reviewed on a regular basis.

Consider the following when developing a cash receipts policy:

Authorized Personnel. Only authorized personnel should receive town funds. The model policy that follows includes a list of local officials who could, in the course of their duties, receive funds on behalf of the town. Towns adopting this policy may choose to include other officials in the list or remove officials who are not strictly required to receive funds as part of their statutory duties.

Timely Deposits and Reconciliations. Deposits should be remitted to the bank in a timely manner, preferably daily, and recorded in the accounting records in a timely manner. This both lessens the risk of loss or theft and allows for the funds to be available for investment as soon as possible. Reconciliations to both the general ledger and to any supporting account ledgers should be routinely performed in a timely manner. The treasurer’s records should be reconciled to the monthly bank statements and to the reports received by other departments. Preparation of the reconciliations should involve more than one person.

Returned Checks. Procedures should be established for processing and collecting returned checks. The procedures should include any fees that might be charged to the check writer, any restrictions that may apply to the repayment of the uncollectible amount, and how the transaction would be recorded in the accounting records.

Petty Cash. A cash receipts policy should require all deposits to be made intact – that is, no cash that is included in the deposit should be used to pay for municipal expenditures. If cash is needed for such expenditures, a petty cash fund should be used and proper procedures for its utilization should be established.

Please note that this model policy has been developed for illustrative purposes only. VLCT makes no express or implied endorsement or recommendation of any financial policy, nor does it make any express or implied guarantee of legal enforceability or legal compliance, nor does VLCT represent that any particular policy is appropriate for any particular municipality. Your legal counsel should review any proposed financial policy before adopting it.

As always, please contact the Municipal Assistance Center if you have questions at info@vlct.org or 800-649-7915.

Publication Date

04/01/2026

Model Debt Management Policy + Guidance

Though most Vermont municipalities take a very conservative approach to debt, a formal debt management policy can be an important financial management tool for town government. When debt is issued, it obligates the municipality to make regular payments for a number of years into the future. As a result, debt service can impact a town’s financial condition over the long term and can limit flexibility to respond to changing needs and priorities.

Vermont law provides a very high ceiling for the limit of municipal debt. According to 24 V.S.A. § 1762, a municipality may not incur an indebtedness for public improvements which, with its previously contracted indebtedness, in the aggregate exceeds ten times the amount of the last grand list. Other statutes on municipal borrowing authority are found in V.S.A. 24, Chapter 53.

A municipal debt management policy will provide written guidelines affecting the amount, issuance, process, and type of debt. A debt management policy establishes criteria for issuing debt obligations so as not to exceed acceptable levels of indebtedness. Debt management policies transmit a message to the public and investors that the municipality is committed to sound financial management. These policies can also provide consistency and continuity in the debt issuance process.

The following should be considered in the development of a debt management policy:

Conditions for Debt Issuance. A debt management policy should specify the conditions or purposes for which the issuance of debt will be proposed by the selectboard, including the purposes and uses of each type of debt, the types of debt that will be utilized (short-term borrowing, capital lease agreements, general obligation bonds, etc.), life of assets acquired with each type of debt, and conditions for refunding debt.

Restrictions on Debt Issuance. Debt management policies should also indicate any restrictions or limitations that are placed on the use of debt, including any prohibited uses, any limitations on the size of each issuance, limitations on the length of maturity for different types of projects, and any statutory limits on the amount of debt that can be issued.

Debt and Debt Service Limits. A limit on the amount of outstanding debt that is allowed should be included in the policy. This limit can be expressed in terms of a percentage of assessed value or as an amount per capita. A limit on the amount of annual debt service (principal and interest) should also be specified. This limit can be expressed as a percentage of revenues or expenditures, including coverage requirements for revenue debt, or as an amount per capita.

Characteristics of Debt Structure. Debt management policies should address the structure of debt issuance, including repayment provisions (level principal payments or level debt service payments), maturity guidelines, the use of debt service funds, and the investment of any bond proceeds (including a discussion of arbitrage regulations).

Debt Issuance Process. Most municipalities in the state utilize the Vermont Municipal Bond Bank to issue general obligation debt, so their procedures detail the debt issuance process. Under other circumstances, the debt management policy would include discussion of the sale process, the use of professionals to assist in the issuance process, bond rating goals, disclosure requirements, and rating agency relations.

For more information on debt management policies, please refer to Financial Policies: Design and Implementation, published by the Government Finance Officers Association. A copy of this document can be purchased at www.gfoa.org.

Publication Date

04/01/2026

Model Fraud Prevention Policy + Guidance

Establishing good internal controls is one way to minimize the opportunity for fraud. Another good way is to adopt a fraud prevention policy that outlines what is expected of all employees in terms of their personal conduct, as well as their role and responsibility in reporting suspected inappropriate actions by others.

A fraud prevention policy must inform employees that fraudulent acts will not be tolerated and explain that each employee has a duty to report any activity that appears to violate any law, regulation, or policy. The policy must also clearly outline the process that is available to report any suspected violation and assure employees that complaints will be investigated confidentially and without retaliation of any kind.

Vermont law provides that town auditors may – and, if requested by the selectboard, shall –examine the records of any town officer authorized by law to receive or disburse money belonging to the town. If the town has voted to eliminate the office of auditor, this authority is vested in the public accountant upon request of the selectboard. Any town officer who refuses or neglects to submit these records is ineligible for re-election and will be personally liable to the town for a civil penalty. 24 V.S.A. § 1686.

Consider the following when developing a fraud prevention policy:

Explanation of Fraudulent Activities. Fraud prevention policies should begin with a statement stressing the town’s interest in encouraging ethical and honest behavior. It should include an explanation as to what constitutes misconduct or dishonest behavior and clarify that fraud is very different from errors or mistakes. Unlike errors or mistakes, fraud is the result of a deliberate act, an intentional deception to misappropriate assets or to manipulate data for personal gain. The policy should also state that the municipality will not tolerate any acts of fraud, regardless of the dollar amount involved.

Responsibility to Report. The policy should emphasize that each employee has a responsibility to immediately report any suspected acts of fraud. The policy should identify to whom an employee should report, and what to do if that individual is the one suspected of fraud.

Investigation and Reporting. Included in the policy should be the process for investigating the complaint, and a statement assuring employees that reports will be treated in a confidential manner and that retaliation will not be tolerated. The policy should also address the matter of false allegations and the consequences that may result from such allegations. At the conclusion of the investigation, a written response to the reported incident should be made, which will be a public document.

Publication Date

03/31/2026

Model Credit Card Policy + Guidance

Many towns have instituted credit card or purchasing card programs as a way to avoid small-dollar, high-volume repetitive purchases, and to avoid the necessity for petty cash funds. Transactions can be done more conveniently and expediently, there is less paperwork to process and fewer checks to write, and there are more merchants from whom purchases can be made.

Such programs provide an opportunity for misuse, so it is important that a credit card policy clearly establish the controls and criteria for card use, and that this information be effectively communicated to those employees who are authorized to use the cards.

The following should be considered in the development of a credit card policy:

Purchasing Controls. The Government Finance Officers Association (GFOA) recommends various controls be established to avoid misuse/abuse of credit cards:

Instructions on employee responsibility with written acknowledgement by the employee.

Ongoing training of cardholders.

Spending and transaction limits for each cardholder (both per transaction and on a monthly basis).

Written requests for higher spending limits.

Recordkeeping requirements, including review and approval process.

Clear guidelines as to the appropriate uses of the cards, including approved merchant codes.

Guidelines for making purchases by telephone, fax, or online.

Periodic audits for card activity and retention of documentation.

Timely reconciliation by cardholders and supervisors.

Procedures for handling disputes and unauthorized purchases.

Procedures for card issuance and cancellation, lost or stolen cards, and employee termination.

Segregation of duties for payment approvals, accounting, and reconciliations.

The accompanying model policy provides a simplified process to identify authorized card users and standards for appropriate credit card use and documentation. It also provides that authorized credit card users will be responsible for the card’s protection and custody.

Merchant Category Codes. Though not included in this model policy, the Merchant Category Codes (MCC) system is a process of identifying vendors based upon the type of commodities sold or services offered. Purchasing card programs can be set up to reject certain purchases based on the MCC of a particular vendor. For example, a card program can be set up to reject purchases at vendors identified as bars or cocktail lounges, travel agencies, jewelry stores, liquor stores, etc.

Segregation of Duties. As with so many other policies, adequate segregation of duties is important in the successful operation of a credit card or purchasing card program. No one individual should be able to authorize a transaction, record the transaction, maintain custody of the asset acquired under the transaction, and reconcile the transaction in the accounting records.

Publication Date

04/01/2026

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