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Legislation Details
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Type:
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Presentation
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Status:
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Consent Agenda
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On agenda:
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8/6/2026
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Final action:
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Title:
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A Discussion of the Draft External Agency Funding Policy and Direction to Staff
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Title
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A Discussion of the Draft External Agency Funding Policy and Direction to Staff
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Introduction
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Staff is presenting a draft policy for Finance Committee direction on how existing and future direct and indirect funding relationships with external agencies should be evaluated, approved, documented, and monitored, including their fiscal and operational effects on the Village.
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Recommended Action
Staff recommends that the Finance Committee review the attached draft External Agency Funding Policy and provide direction regarding its scope, the treatment of existing agreements and new requests, the approval and oversight structure, the evaluation of Village financial and operational impacts, and accountability requirements. Based on the Committee's direction, staff will revise the policy and bring it forward to the Village Board for consideration.
Prior Board Action
There is no prior Board action associated with adoption of a comprehensive External Agency Funding Policy. Individual external agency funding and financing arrangements have historically been considered through separate budget items, agreements, resolutions, or ordinances.
Background
This item is a core service priority related to financial stewardship, transparency, accountability, and long-term planning. The Village has historically supported nonprofit organizations, sister governments, and other partner organizations through a range of arrangements. Existing relationships include, among others, the Oak Park Area Arts Council, Downtown Oak Park Business Alliance, Explore Oak Park and Beyond, and the Collaboration for Early Childhood. The purpose of the proposed policy is not to predetermine the continuation or termination of any specific partnership. It is to establish common standards for determining the benefit to residents, the full cost and risk to the Village, and whether the arrangement remains aligned with Board priorities and available resources.
For purposes of the Committee's discussion, staff is using the following broad distinction:
Direct funding: Village funds are paid, contributed, or loaned directly to an external organization to support operations, programs, services, or a discrete project. This category includes operating support, grants, contributions, subsidies, and direct loans.
Indirect funding or support: The Village enters into a partnership or financial arrangement through which an external organization provides a service or community benefit that advances Village purposes, including a service the Village might otherwise need to provide, coordinate, or finance. This category also includes arrangements that facilitate access to financing or other resources, such as administrative support, bridge financing, short-term liquidity assistance, lines of credit, guarantees, credit enhancements, conduit debt issuance, or use of the Village's borrowing authority, even when no traditional grant is disbursed.
Both categories can affect Village operations and funding needs. Direct funding creates an identifiable budgetary cost. Indirect support may create staff workload, legal and financial-advisory costs, liquidity or credit exposure, use of debt capacity, continuing administrative obligations, or reliance on an outside organization for services. Conversely, reducing or ending a partnership may shift service responsibility or demand back to the Village, increase the cost of direct service delivery, or create a service gap for residents.
The attached draft establishes a consistent framework for locally funded discretionary assistance. It presumes that funding is one-time unless the Board specifically approves a multi-year term and sunset date; requires written applications, financial documentation, outcome measures, and agreements; subjects financing and credit requests to enhanced due diligence; preserves Board approval authority; and provides for reporting, recapture, and annual review. Formal grant programs administered by the Village using federal, State, or other non-local funds remain governed by the applicable grant requirements and the Village's separate grant policies.
Finance Committee direction is requested on the following policy choices:
- Whether the policy should govern all direct and indirect support, including service partnerships and financing mechanisms, and how to distinguish these arrangements from ordinary procurement or intergovernmental service agreements.
- Whether existing agreements should be inventoried and brought into the policy framework at renewal, extension, amendment, or another Board-established transition date, rather than being permanently grandfathered.
- Whether recurring operating support should generally be limited in favor of one-time, clearly scoped assistance, and what circumstances justify a multi-year commitment.
- What fiscal and operational factors staff must present, including direct cost, indirect financial exposure, administrative burden, service continuity, the cost of Village delivery, competing core services and capital needs, and potential effects on future revenues or the property tax levy.
- Whether Finance Committee review should remain discretionary or be expected for multi-year commitments, significant dollar amounts, or arrangements involving Village liquidity, credit, debt capacity, or borrowing authority.
- What standardized application, agreement, outcome reporting, monitoring, sunset, recapture, and annual review requirements should apply.
- Timing Considerations
- Finance Committee direction is requested at the August 6, 2026, meeting so that the policy framework can inform the FY2027 budget process, review of continuing external agency funding, and any new or renewed requests. Existing agreements remain subject to their approved terms until amended, renewed, expired, or otherwise acted upon by the Village Board. Establishing a transition approach before the FY2027 budget is finalized will allow staff and partner organizations to plan for consistent expectations.
- Financial Impact
- Discussion of the policy does not itself amend the budget or authorize funding. The policy will affect how future direct and indirect funding decisions are evaluated and may have material effects on operating expenditures, revenues, fund balance, liquidity, debt capacity, borrowing costs, the Village's credit profile, and future revenue or property tax levy needs.
- For each arrangement, staff proposes to present a full-cost analysis that considers: (1) the direct Village payment or financing commitment; (2) staff, legal, advisory, banking, monitoring, and other administrative costs; (3) contingent or indirect financial exposure; (4) the cost to the Village of providing the service directly or the consequences of a service gap; and (5) the opportunity cost relative to core operations, capital priorities, and other funding requests. Transitioning or ending an existing arrangement could reduce external agency expenditures, but it may also increase Village service-delivery costs or affect services available to residents.
- Operations Impact
- Implementation will require coordination among the Village Manager's Office, Finance Department, Law Department, and the departments that sponsor or rely on individual partnerships. Initial work will include an inventory of existing direct and indirect arrangements, review of agreement terms and funding sources, identification of staff and professional-service costs, and evaluation of the services or community benefits provided.
- On an ongoing basis, staff will receive and evaluate applications, perform financial and legal due diligence, negotiate and maintain written agreements, monitor outcomes and repayment obligations, and report noncompliance. The workload will vary with the number and complexity of requests. Because some partnerships supplement or replace services the Village might otherwise provide, any material change should also include a service continuity and departmental capacity assessment.
- DEI Impact
- A consistent and transparent framework can improve equity by applying common criteria, documenting the resident benefit of each arrangement, and making the rationale for funding decisions more visible. External organizations may serve residents and populations that experience barriers to Village services, so the review should consider who benefits, who could be affected by a reduction or termination, and whether the proposed outcome measures capture those impacts.
- At the same time, uniform documentation or reserve requirements may place a greater burden on smaller or community-based organizations. The Committee may wish to direct staff to make requirements proportionate to the size and risk of the arrangement while maintaining consistent financial, legal, and accountability standards.
- Community Input
- There has been no formal community engagement in relation to the draft policy. The August 6, 2026, Finance Committee discussion will provide an initial public forum for review and comment. Following Committee direction, staff anticipates consulting affected Village departments and current partner organizations, as appropriate, before presenting a final policy recommendation to the Village Board.
- Staff Recommendation
- Staff recommends using the attached draft as the basis for a comprehensive policy and revising it in accordance with Finance Committee direction. Staff's recommended implementation approach is that all new requests be governed by the policy after its effective date; existing approved agreements be honored through their current terms; and renewals, extensions, amendments, and replacement agreements be subject to the new framework. Existing relationships should be inventoried and evaluated before renewal, with no automatic entitlement to continued support.
- The final policy should require a documented public purpose and resident benefit, a full financial and operational impact analysis, standardized due diligence, a written agreement, Village Board approval, a defined term and sunset date, measurable outcomes, post-award monitoring, recapture or collection provisions, and periodic policy review. The Committee's direction should also clarify when Finance Committee review is expected before an item advances to the full Board.
- Advantages:
- Creates a consistent, transparent, and accountable framework for both direct and indirect support.
- Allows the Board to evaluate external support alongside core Village operations, capital needs, fund balance, debt capacity, and future revenue requirements.
- Provides an orderly transition for existing partnerships while eliminating automatic or presumed continuation at renewal.
- Improves documentation of resident benefits, outcomes, financial exposure, and service continuity.
- Disadvantages:
- Requires additional staff time for the initial inventory, due diligence, agreement management, monitoring, and reporting.
- May reduce flexibility or lengthen the review timeline for time-sensitive requests.
- Could require changes to longstanding partner relationships and may create service or funding uncertainty during transition.
- Alternatives
- Alternative 1: Apply the policy prospectively and grandfather existing partnerships.
- Advantages:
- Minimizes immediate disruption to current partner organizations and Village departments.
- Reduces the initial administrative workload associated with reviewing existing agreements.
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- Disadvantages:
- Maintains different standards for similarly situated organizations based solely on prior funding history.
- Limits the Village's ability to evaluate the cumulative fiscal, operational, and service effects of recurring commitments.
- Could allow longstanding arrangements to continue without standardized outcomes, sunset dates, or periodic review.
- Alternative 2: Continue the current case-by-case approach without a comprehensive policy.
- Advantages:
- Preserves maximum flexibility for the Board and staff.
- Avoids the immediate administrative work of implementing a standardized process.
- Disadvantages:
- Continues inconsistent documentation, evaluation, agreement, and monitoring practices.
- Provides less transparency and predictability for the Board, partner organizations, and residents.
- Increases the risk that indirect financial exposure, staff workload, service dependency, or future revenue needs are not evaluated consistently.
Anticipated Future Actions
Following Finance Committee direction, staff will revise the draft in consultation with the Village Manager's Office, Law Department, affected departments, and the Village's financial and bond advisors, as appropriate. Staff will also inventory existing direct and indirect arrangements; identify their terms, appropriations, service benefits, staff support, and financial exposure; and prepare a recommended transition approach. The revised policy will return to the Village Board for consideration by resolution. Upon adoption, staff will finalize the standard request form, agreement templates, internal review procedures, implementation schedule, and annual reporting process.
Prepared By: Louis Hall-Makarewicz, Deputy Chief Financial Officer
Reviewed By: Kevin Bueso, Chief Financial Officer
Approved By: Kevin J. Jackson, Village Manager
Attachment(s):
1. Draft External Agency Funding Policy
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