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FIN-2.16 - Non-exchange Financial Transactions

Binding City Policies (BCP)
Policy number


Binding City Policy



It is the policy of the City of Portland that bureaus can enter into non-exchange financial guarantee arrangements only when such actions are in compliance with limitations prescribed by FIN 2.12 Debt Management and when such actions have been reviewed and approved by the Chief Financial Officer, City Budget Director, City Attorney, and authorized by formal City Council action.

Bureaus shall consult with and obtain the approval of the Chief Financial Officer, City Budget Director and City Attorney prior to negotiating terms for any non-exchange financial guarantees. Bureaus shall evaluate the likelihood that the City will be required to make a payment on a guarantee made by the City. The bureau shall annually perform an evaluation of the likelihood of such a transaction to ensure the appropriate and accurate accounting and financial reporting by the City of all non-exchange financial guarantees.

Explanation of Non-Exchange Financial Transactions

Governments may extend financial guarantees for the obligations of another government, a not-for-profit entity, a private entity, or an individual without receiving equal or approximately equal value in exchange, to the extent not otherwise limited by law. These arrangements are considered non-exchange financial transactions or guarantees. The City of Portland may be either the guarantor or obligor in these transactions.


As part of a non-exchange financial guarantee, a government commits to indemnify the holder of the obligation if the entity or individual that issued the obligation does not fulfill its payment requirements.

The Governmental Accounting Standards Board (GASB) requires a government that extends a non-exchange financial guarantee to recognize the guarantee as a liability when it is more likely than not that the government will be required to make a payment on the guarantee. GASB defines “more likely than not” as being greater than a fifty percent chance. If it is determined the City is acting as a guarantor and meets the GASB requirements, it may be necessary to record a liability and expense, and/or to include a note to the financial statements.


GASB requires the government that has issued an obligation guaranteed by another entity in a non-exchange financial transaction to report the obligation until legally released as an obligor. In the instance where the City is in the obligor position of an arrangement that has been guaranteed, the City may need to recognize revenue to the extent of the guarantee.


Bureaus are responsible for ensuring appropriate review, approval, accounting, financial reporting, and disclosure when they extend or receive non-exchange financial guarantees on behalf of the City.

Bureaus shall provide audit materials to the Accounting Division at each fiscal year-end in support of any recording and reporting requirements.

The Accounting Division and the Public Finance and Treasury Division of the Office of Management and Finance shall implement this policy, provide technical assistance to the bureaus, and report on compliance issues no less than annually to the Chief Financial Officer.


Resolution No. 37086, adopted by City Council August 6, 2014.

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