A local government’s “reserves” are the portion of fund balance which serves as a hedge against risk. The City of Providence, Rhode Island (“the City” or “Providence”) has asked the questions: “what is the right amount of general fund reserves for us?” and “how resilient would any potential reserve target be to losses?” The Government Finance Officers Association (GFOA) has helped the City answer this question by examining the risks that it is subject to.
GFOA’s methodology is intended to evaluate potential risks and their cost to the City’s general fund. Our methodology is not intended to predict Providence’s future. The GFOA Risk Model provides the option for Providence to adjust variables when future conditions change. Our model and this report also describe the assumptions behind our analysis and recommendations.
- Publication date: October 2021