EVALUATING FINANCIAL PERFORMANCE Objective: To enable participants to evaluate and report on financial performance for governmental entities 1 APIPA 2009
ANALYZING GOVERNMENT FINANCIAL PERFORMANCE l Why do we care? – – – 2 Governments can become bankrupt. An increasing number of governments are in fiscal crisis. Governments provide essential services to its citizens and need to be fiscally sound APIPA 2009
SAN FRANCISCO, CALIFORNIA l l l 3 1/27/09 San Francisco faces budget crisis 3/09 San Francisco unemployment at 9% 5/15/09 Newsom to layoff 1, 000 city employees APIPA 2009
PORTLAND, OREGON l l 4 5/1/09 Adams releases basic services budget (cuts of $9 mm) 5/21/09 Superintendent proposes further Portland Public School cuts APIPA 2009
SEATTLE, WASHINGTON l l 5 1/14/09 On top of school closures, layoffs proposed ($25 mm budget gap) 4/17/09 Midyear budget adjustment APIPA 2009
WHO CARES? l l GASB Study in 1985 Three primary users of government financial reports – – – 6 Citizen groups Legislative and oversight officials Investors and creditors APIPA 2009
CITIZEN GROUPS l Use financial reports to – – – 7 Evaluate efficiency and effectiveness Compare results of the current year with previous years Assess financial operations and financial condition Determine compliance with budget Advocate certain programs or actions APIPA 2009
INVESTORS AND CREDITORS l Use financial reports to – 8 Ascertain ability of government to repay its debt APIPA 2009
LEGISLATIVE AND OVERSIGHT OFFICIALS l Use financial reports to – – – 9 Evaluate executive branch funding and spending proposals Determine compliance with the budget and other finance-related requirements Monitor fund activity and financial position and analyze fund balances APIPA 2009
COMPREHENSIVE ANALYSIS 1. 2. 3. 3. 10 STEP ONE: Consider the environment in which the government operates STEP TWO: Identify and consider key factors that affect the environment STEP THREE: Assess the government’s current status STEP FOUR: Forecast the future (next five years) APIPA 2009
STEP ONE: OPERATING ENVIRONMENT n 11 Consider the current state of and trends in economic, political, and social environments APIPA 2009
ECONOMIC ENVIRONMENT l Population – – Age of population Wealth and income distribution Educational and skill level Other relevant demographic factors l l 12 Immigration Density APIPA 2009
ECONOMIC ENVIRONMENT l l l 13 Major industries (and stability) Unemployment rates Value of property per capita Sales tax base Elasticity of revenues APIPA 2009
POLITICAL ENVIRONMENT l l l 14 Formal structure of government Degree of political competition Competence and integrity of government officials Overall citizen satisfaction with and expectations of government “Liberal” or “conservative” citizen view as to role of government Relations with other governments (e. g. , those of surrounding and overlapping entities) APIPA 2009
SOCIAL ENVIRONMENT l l 15 Crime rates Percentage of citizens requiring public assistance Percentage of residents owning their own homes Health!!! APIPA 2009
STEP TWO: KEY FACTORS n 16 Identify and consider key factors that affect the environment APIPA 2009
POPULATION l l l 17 Growing? Shrinking? Aging? How? e. g. immigration Effect on geographical boundaries? APIPA 2009
POPULATION l Impact on infrastructure – – l l 18 Highways and streets Utilities Impact on operating revenues Impact on operating expenses APIPA 2009
NATURE AND SCOPE l l Nature and scope of government services to be performed Nature and scope of enterprise activities carried out (e. g. , future of electric utility) – l 19 Pressure to privatize Mandated services APIPA 2009
POLITICS AND ORGANIZATION l l 20 Political climate (e. g. , pro- or anti-growth, proor anti-business) Form and organization of government (e. g. , possibility of single-member election districts) APIPA 2009
POLITICAL ATTITUDES AND INTERGOVERNMENTAL RELATIONSHIPS l l 21 Changing views toward the role of government Relations with legislature Extent of state and federal assistance Additional costs imposed by overlapping governments (e. g. , school districts) APIPA 2009
TECHNOLOGY AND SOCIAL SYSTEM l Technological changes – Increased use of computers l l – l Increased efforts to conserve? Social changes – 22 May reduce operating costs Requires large capital investment Changes in family structure resulting in need for more government facilities to care for the elderly APIPA 2009
COMMERCE AND INDUSTRY l l 23 Major employers (including stability and likelihood of relocating) Impact on revenues (e. g. , property taxes) and expenditures (e. g. , infrastructure improvements) APIPA 2009
OTHER l l 24 Wealth and income of population Other economic changes (e. g. , those affecting the electrical power and health care industries) APIPA 2009
STEP THREE: CURRENT STATUS n 25 Assess the government’s current financial condition APIPA 2009
CURRENT FINANCIAL CONDITION l l 26 Overall quality of disclosure Auditor’s opinion GFOA certificate Letter of transmittal APIPA 2009
KEY ACCOUNTING POLICIES l l 27 Reporting entity Number, type, and character (purpose) of funds Revenue and expenditure recognition Accounting changes APIPA 2009
BUDGET- AND ACCOUNTINGRELATED PRACTICES l l l 28 “One-shot” additions to revenues or reductions in expenditures Unusual budget-balancing transactions (e. g. , interfund transfers) Changes in budget-related practices (e. g. , delaying payments or speeding up tax collections) Use of “off-balance-sheet” debt (e. g. , leases, long-term contracts) and of revenue debt Use of long-term debt to finance operating expenditures Increased use of short-term debt to cover temporary cash shortages APIPA 2009
CASH BASIS VERSUS ACCRUAL BASIS l l l 29 Budgets on cash basis Financial statements on accrual basis (full or modified) Easier to manipulate budget than financial statements APIPA 2009
FINANCIAL STATEMENT “TRICKS” l l Account for transaction in internal service or proprietary fund instead of in general fund Finance capital acquisitions by incurring “off-balancesheet” obligations rather than with general obligation debt – l Select “liberal” accounting practices that recognize revenues sooner rather than later and delay recognition of expenditures – – 30 Operating leases, service contracts Lengthen period of “availability” after YE Reduce estimate of uncollectible APIPA 2009
FINANCIAL STATEMENT “TRICKS” l l Make “liberal” actuarial assumptions and estimates in determining required contribution to pension plans Engage in discretionary transactions which result in FS gains but no substantive economic benefit – – 31 Sales of capital assets Refunding of debt APIPA 2009
FINANCIAL RATIOS – CAUTIONARY NOTES l No reliable “rules of thumb” as to an acceptable or nonacceptable ratio – l Accounting for same operation in different ways – 32 Governments carry out different functions making it difficult to compare Governments may account for functions in different funds, resulting in different accounting APIPA 2009
FINANCIAL RATIOS – CAUTIONARY NOTES l Preference for higher or lower ratio not clear – – Depends on issue and perspective of user For example: General fund revenues / general fund expenditures l l 33 High: Good because government able to generate sufficient revenues to cover its expenditures High: Bad because government overtaxing and may be less fiscally sound in long-run APIPA 2009
FINANCIAL RATIOS – CAUTIONARY NOTES l Stage of maturity impacts level of ratios – – l 34 Young governmental entity with high-growth may require rapid expansion of infrastructure and high long-term debt levels Mature governmental entity in stable situation may have established infrastructure and low debt Ratios are no better than underlying financial statement numbers APIPA 2009
DETERMINING SCOPE OF A RATIO l Which financial statements do we use? – – – l It depends! – – 35 Government-wide General fund only Combination of funds Why measure is being calculated How it will be interpreted APIPA 2009
ASSESSING FISCAL EFFORT l l 36 Fiscal effort = extent to which government is taking advantage of its fiscal capacity Compare revenues generated from own sources to taxpayer wealth or income Ratios increase as government uses more of its fiscal capacity Lower ratio better than higher – why? APIPA 2009
FISCAL EFFORT RATIOS l l 37 Per capita revenue from own sources (excluding grants from other government) Median family income Revenue from own sources Total appraised value of property APIPA 2009
ADEQUACY OF REVENUES l l l 38 Need to be sufficient to cover expenditures Trend important, especially compared to growth in expenditures Revenue adequacy ratio Total revenues Total expenditures APIPA 2009
REVENUE STABILITY l Revenue base – – – – 39 Diverse sources; Linked to population Trends in adequacy and stability of revenues Total revenues / total expenditures Intergovernmental revenues / total operating revenues Property tax revenues / total operating revenues Restricted revenues / total operating revenues One-time revenues / total operating revenues Uncollected property taxes / total property taxes levied APIPA 2009
REVENUE STABILITY RATIOS l Intergovernmental revenues Total operating revenues l Maximize use of “other peoples’ money” BUT can be taken away so risky Low % preferred l l 40 APIPA 2009
REVENUE STABILITY RATIOS l Restricted revenues Total operating revenues l Decrease flexibility Can lead to misallocation of resources Low % preferred l l 41 APIPA 2009
REVENUE STABILITY RATIOS l Property tax revenues Total operating revenues l Considered to be stable source High % preferred l 42 APIPA 2009
REVENUE STABILITY RATIOS l Uncollected property tax revenues Total property taxes levied l Warning sign of underlying weakness in economy Could predict future drop in other revenues Low % preferred l l 43 APIPA 2009
EXPENDITURE TRENDS l Changes in spending can result from – – l 44 Price increases Productivity decreases Changes in number, quality, or mix of services (e. g. , resulting from new housing developments or increases in unemployment) Bad weather or disaster Expenditure ratios help to identify changes in spending which may, in turn, require further investigation and action APIPA 2009
EXPENDITURE TREND RATIOS l l l 45 Number of employees Population Payroll expenditures Total expenditures Expenditures for specific functions Total expenditures APIPA 2009
ABILITY TO MEET SHORT-TERM COMMITMENTS l Adequacy of fund balance – l Adequacy of working capital – 46 Unreserved fund balance Operating revenues Cash, short-term investments, and receivables Current liabilities APIPA 2009
ABILITY TO MEET LONG-TERM COMMITMENTS l l 47 Debt burden – Debt service costs Total general fund and debt service expenditures Debt per capita = Total debt outstanding for governmental activities Total population APIPA 2009
FINANCIAL PERFORMANCE CONCEPTS l Financial condition – l Interperiod equity: whether current-year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided – 48 Ability to maintain existing or provide increasing service levels Excessive shifting of burden to future taxpayers a threat to ability to maintain or provide increasing service levels APIPA 2009
INTERPERIOD EQUITY l l 49 Net revenues / Total expenses Where net revenues = Gross revenues +/internal transfers/special/extraordinary items Measure of whether the government has lived within its means for the year Utilize government-wide Statement of Activities APIPA 2009
STEP FOUR: THE FUTURE n 50 Forecast the future (next five years), taking expected changes and likely responses into account APIPA 2009
FISCAL FORECASTS l l 51 Overview of how trends and exogenous variables will affect key fiscal indicators in the next 5 years (taking into account government’s likely response) Pro forma financial statements of general and other key funds APIPA 2009
IN THE END l l Will the government have the financial wherewithal to provide the services expected of it in the next years? What are the key risks and uncertainties facing the government that might impair the ability of the government to provide these services? – – 52 How can the government best manage these risks? What should be the key concerns of government managers, especially those directly concerned with finance? APIPA 2009
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) l Introductory Section – – – l Financial Section – – – 53 l Letter of Transmittal Organizational Chart List of Principal Officials Independent Auditor’s Report MD&A Financial Statements Statistical Section APIPA 2009
FINANCIAL SECTION l Basic financial statements – Government-wide financial statements l l – Statement of net assets Statement of activities Fund financial statements l Governmental funds Balance sheet – Statement of revenues, expenditures, and changes in fund balance – 54 APIPA 2009
FINANCIAL SECTION – Fund financial statements l Proprietary funds Statement of net assets – Statement of revenues, expenditures, and changes in fund net assets – Statement of cash flows – l Fiduciary funds Statement of fiduciary net assets – Statement of changes in fiduciary net assets – – 55 Notes to the financial statements APIPA 2009
MD&A l 56 Must include – Brief description of the financial statements – Condensed financial information from the government-wide financial statements, comparing CY to PY – Analysis of the government’s overall financial position and results of operations – Analysis of balances and transactions of individual funds APIPA 2009
MD&A l 57 Must include – Analysis of differences between original and final budget amounts and between final budget and actual results for General Fund – Description of significant capital asset and longterm debt activity during year – Discussion of condition of infrastructure assets – Description of any known facts, decisions, or conditions that would have a significant effect on the government’s financial positions or results of operation APIPA 2009
CITY OF RENO, NEVADA 58 APIPA 2009
RENO, NEVADA CAFR l Selected sections – – – l 59 Letter of transmittal Organizational chart MD&A Financial statements – government-wide, governmental funds Statistical section (portions) Preformatted ratio analysis workpapers APIPA 2009
RENO, NEVADA STEP ONE: OPERATING ENVIRONMENT n n n 60 Largest community in northern Nevada Third largest city in the state Located in the Sierra Nevada mountains, 35 miles northeast of Lake Tahoe APIPA 2009
ECONOMIC ENVIRONMENT l Population – Age – Median 35. 7 – – – 61 Age 0 to 19 = 26% Age 20 to 29 = 16% Age 30 to 39 = 13% Age 40 to 49 = 13% Age 50 to 59 = 13% Age 60 and up = 18% APIPA 2009
ECONOMIC ENVIRONMENT l Population – Wealth and income – – l Population – Educational and skill level – – 62 Median household income - $47, 042 (2007) Per capita personal income - $42, 332 – High school graduates – 17% Some college – 16% Associate degree – 4% Bachelor’s degree – 12% Graduate degree – 8% APIPA 2009
ECONOMIC ENVIRONMENT l Population – Immigration – Diversity – – – l Population – Density – 63 American Indian – 2% Asian or Pacific Islander – 7% Black – 3% Other – 17% White – 72% Median travel time to work – 16 minutes APIPA 2009
ECONOMIC ENVIRONMENT l Major industries (and stability) – – 64 Leisure and hospitality (includes gaming) – 18% Construction and manufacturing – 15% Trade, transportation, public utilities, financerelated services – 27% Government – 13% APIPA 2009
ECONOMIC ENVIRONMENT l Unemployment rates (see page 198) – – 65 2005 – 3. 8% 2006 – 4. 0% 2007 – 4. 5% 2008 – 6. 4% APIPA 2009
ECONOMIC ENVIRONMENT l Major revenue sources (see p. 9) – – Capital grants and contributions – 24. 70% Charges for services – 24. 39% Property taxes – 21. 72% Consolidated tax distribution – 16. 30% l l 66 Sales tax Room tax APIPA 2009
ECONOMIC ENVIRONMENT l Value of property per capita - 2008 – l Value of property per capita - 2007 – l Estimated actual value = 17, 477, 351 = $79. 22 Population 220, 613 Value of property per capita - 2006 – 67 Estimated actual value = 19, 445, 997 = $86. 33 Population 225, 246 Estimated actual value = 15, 991, 361 = $74. 60 Population 214, 371 APIPA 2009
ECONOMIC ENVIRONMENT l Sales tax base – l 7. 375% on gross sales, excluding groceries Elasticity of revenues – – – How susceptible are revenues to changing Price elasticity – how much will consumers buy (more or less) if the price changes How elastic are Reno’s major revenue sources? l 68 Grants, Property tax, Sales tax, Room tax APIPA 2009
POLITICAL ENVIRONMENT l Formal structure of government – – l Degree of political competition – 69 Council- Manager form of government (see p. ix) Elected Mayor – 4 year term Six Council members elected for staggered terms of 4 years City Manager – selected by Council, City’s CAO Currently cooperative APIPA 2009
POLITICAL ENVIRONMENT l Competence and integrity of government officials – – – l l l 70 Substantial government experience CPA, attorney Note: PT positions, other income sources Overall citizen satisfaction with and expectations of government – “good” “Liberal” or “conservative” citizen view as to role of government – “conservative” Relations with other governments (e. g. , those of surrounding and overlapping entities) – Sparks, Carson City APIPA 2009
SOCIAL ENVIRONMENT l Crime rates – Total crime risk index l l Percentage of citizens requiring public assistance – 71 Reno = 118 (higher than average) Nevada = 126 United States = 100 (national average) Households with income $20, 000 and below – 15. 33% APIPA 2009
SOCIAL ENVIRONMENT l Percentage of residents owning their own homes – l Owner-occupied homes – 45. 11% Health!!! – Consider: l l l 72 Age of population Activity level Access to healthcare APIPA 2009
STEP TWO: KEY FACTORS n 73 Change!! APIPA 2009
POPULATION l Growth – – – l 74 2003 to 2004 – 1. 8% 2004 to 2005 – 3. 8% 2005 to 2006 – 3. 7% 2006 to 2007 – 2. 9% 2007 to 2008 – 2. 1% Note: Even greater growth in adjoining cities and regions APIPA 2009
POPULATION l How – – – l 75 New construction Expansion of city boundaries Inflow from California Effect on geographical boundaries expanded APIPA 2009
POPULATION l Impact on infrastructure (see p. 202) – – 76 Paved streets Sewer lines Storm drains Police and fire stations APIPA 2009
POPULATION l Impact on operating revenues – – – l Impact on operating expenses – 77 Revenues (p. 188) Property taxes (see p. 192) Licenses and permits (p. 193) Expenditures (p. 188) APIPA 2009
NATURE AND SCOPE l Government services to be provided – – – – 78 Public safety (police, fire, building inspection) Public works Public improvements Planning and zoning Community development Parks and recreation Wastewater treatment General administrative services APIPA 2009
NATURE AND SCOPE l Enterprise activities carried out – – l Mandated services – – 79 Sewer Building permits and inspection Dispatch center Golf course Sewer Building permits and inspection APIPA 2009
POLITICS AND ORGANIZATION l Political climate (e. g. , pro- or anti-growth, proor anti-business) – – – 80 History of pro-growth Increasing growth control sentiment Passage of sustainable water sources APIPA 2009
POLITICAL ATTITUDES AND INTERGOVERNMENTAL RELATIONSHIPS l Changing views toward the role of government – l Relations with legislature – l Biennial state budget – 2009 -11 currently in process Extent of state and federal assistance – 81 Public employee benefits Look at grants APIPA 2009
POLITICAL ATTITUDES AND INTERGOVERNMENTAL RELATIONSHIPS l Additional costs imposed by overlapping governments (e. g. , school districts) – – 82 Others share in sales tax and property tax revenues Overlapping debt (see p. 195) APIPA 2009
TECHNOLOGY AND SOCIAL SYSTEM l Technological changes – efforts to conserve – Increasing “green” efforts l l 83 Recycling Green building Truckee River restoration Energy conservation APIPA 2009
TECHNOLOGY AND SOCIAL SYSTEM l Social changes – – – 84 Annual residential turnover = 20% Average household size = 2 Households with children = 26. 5% APIPA 2009
COMMERCE AND INDUSTRY l Major employers (see p. 199) 1. 2. 3. 4. 5. 6. 7. 85 Washoe County School District University of Nevada Reno Washoe County International Game Technology Renown Regional Medical Center Silver Legacy Resort Casino Peppermill Hotel Casino APIPA 2009
COMMERCE AND INDUSTRY l Impact on property tax revenues (see pp. 19 -20 and 191) – – – Declining assessments, challenges and revisions Abatements for downtown redevelopment area New construction l l l – 86 Downtown Ballroom (completed Feb. 2008) Baseball complex (completed Apr. 2009) Re. TRAC Enhancement Project (to be completed in 2009) Relocation of homeless (Community Assistance Center Campus) APIPA 2009
COMMERCE AND INDUSTRY l Impact on expenditures (e. g. , infrastructure improvements) – – 87 Demand for services for increased population Demand for services due to economy APIPA 2009
OTHER l Wealth and income of population – – 88 Increasing unemployment Decline in household wealth (e. g. , stock market holdings) APIPA 2009
STEP THREE: CURRENT STATUS n 89 Assess the City of Reno’s current financial condition APIPA 2009
CURRENT FINANCIAL CONDITION l l l Overall quality of disclosure – considered good (received Certificate of Achievement of Excellence in Financial Reporting) Auditor’s opinion – clean Financial statements – – 90 Government-wide – accrual basis Governmental funds – modified accrual basis APIPA 2009
FISCAL EFFORT RATIOS l l 91 Per capita revenue from own sources (excluding grants from other government) Median family income Revenue from own sources Total appraised value of property APIPA 2009
OPERATING REVENUES PER CAPITA 2004 Tot. gov’t fund rev Less: Intergov’t (91, 675) Rev from own sources 118, 988 Tot. pop. 92 210, 663 199, 249 Oper. rev. per capita 597 2005 2006 2007 2008
OPERATING REVENUES PER CAPITA 2004 2006 2007 2008 Tot. gov’t fund rev 210, 663 229, 721 237, 966 259, 313 280, 512 Less: Intergov’t (91, 675) (95, 758) (99, 877) (109, 092) (84, 288) Rev from own sources 118, 988 133, 963 214, 371 220, 613 225, 246 Tot. pop. 93 2005 199, 249 206, 735 214, 371 220, 613 225, 246 Oper. rev. per capita 597 648 644 681 871
OPERATING REVENUES PER CAPITA l l 94 What happened in 2008 to create the big increase? If per capita revenues are decreasing the government may not be able to maintain existing service levels unless it finds new sources of revenues.
OPERATING REVENUES TO PROPERTY VALUES 2004 Rev from own sources Total appraised value of property 95 118, 988 13, 593, 0 00 Oper. rev. to property values . 009 2005 2006 2007 2008
OPERATING REVENUES TO PROPERTY VALUES 2004 2005 2006 2007 2008 118, 988 133, 963 214, 371 220, 613 225, 246 Total appraised value of property 13, 593 14, 587 15, 991 17, 477 19, 446 Oper. rev. to property values . 009 . 010 Rev from own sources 96
OPERATING REVENUES TO PROPERTY VALUES l l 97 Lower ratios are better (smaller values). As the value increases, the government exerts greater fiscal effort and uses a greater portion of its fiscal capacity. As a result, it will have less ability in the future to raises taxes.
ADEQUACY OF REVENUES l l 98 Revenue adequacy ratio Total revenues Total expenditures Used revenues from own sources (as previously calculated) APIPA 2009
REVENUES TO EXPENDITURES 2004 Rev. from own sources 210, 663 Total expenditures 273, 198 Rev to exp 99 77% 2005 2006 2007 2008
REVENUES TO EXPENDITURES 2004 2006 2007 2008 Rev. from own sources 118, 988 133, 963 214, 371 220, 613 225, 246 Total expenditures 273, 198 350, 032 266, 468 264, 503 292, 872 Rev to exp 10 0 2005 43. 6% 38. 3% 51. 8% 56. 8% 67%
REVENUES TO EXPENDITURES l 10 1 Higher ratios are better. A high value indicates that a government’s revenues are adequately covering its expenditures.
REVENUE STABILITY RATIOS l l 10 2 Intergovernmental revenues Total operating revenues Restricted revenues Total operating revenues Property tax revenues Total operating revenues Uncollected property tax revenues Total property taxes levied APIPA 2009
INTERGOVERNMENTAL REVENUES TO TOTAL OPERATING REVENUES 2004 Intergov’t revenues Tot. gov’t fund rev 210, 663 Outside to tot. rev. 10 3 91, 675 43. 5% 2005 2006 2007 2008
INTERGOVERNMENTAL REVENUES TO TOTAL OPERATING REVENUES 2004 2006 2007 2008 Intergov’t revenues 91, 675 95, 758 99, 877 109, 092 84, 288 Tot. gov’t fund rev 210, 663 229, 721 237, 966 259, 313 280, 512 Outside to tot. rev. 10 4 2005 43. 5% 43. 4% 42. 1% 30%
INTERGOVERNMENTAL REVENUES TO TOTAL OPERATING REVENUES l l Shows how much of a government’s revenues are received from other governments. Remember that other governments can arbitrarily STOP providing these revenues. – l 10 5 l Too high a ratio is risky! However, too low a ratio may indicate a failure to take advantage of available grants. What happened in 2008?
RESTRICTED REVENUES TO TOTAL OPERATING REVENUES 2008 Total governmental fund revenues Less: General Fund revenues (180, 864, 147) Restricted revenues 99, 647, 656 Restricted revenues to total revenues 10 6 280, 511, 803 35. 5%
RESTRICTED REVENUES TO TOTAL OPERATING REVENUES l l Shows how much of a government’s revenues are restricted in use. High ratios indicate less flexibility – 10 7 A high ratio makes it difficult for a government to respond to changing conditions.
PROPERTY TAX REVENUES TO OPERATING REVENUES 2004 Property tax revenues Total operating revenues 10 8 45, 156 210, 663 Property tax rev. to total revenues 21. 4% 2005 2006 2007 2008
PROPERTY TAX REVENUES TO OPERATING REVENUES 2004 2006 2007 2008 Property tax revenues 45, 156 47, 836 51, 203 59, 075 64, 058 Total operating revenues 10 9 2005 210, 663 229, 721 237, 966 259, 313 280, 512 Property tax rev. to total revenues 21. 4% 20. 8% 21. 5% 22. 8%
PROPERTY TAX REVENUES TO OPERATING REVENUES l Higher ratios are better – property taxes are considered a stable source of revenue – 11 0 Not true in a volatile real estate market!!
UNCOLLECTED PROPERTY TAX REVENUES TO TOTAL PROPERTY TAXES LEVIED 2004 Taxes levied Total collected Total not collected 11 1 Not collected to taxes levied 2005 2006 2007 2008
UNCOLLECTED PROPERTY TAX REVENUES TO TOTAL PROPERTY TAXES LEVIED 2004 2006 2007 2008 Taxes levied 46, 425 48, 263 51, 949 59, 649 64, 543 Total collected 45, 197 48, 073 51, 203 59, 307 64, 416 Total not collected 11 2 2005 1, 228 190 746 342 127 2. 6% . 4% 1. 4% . 6% . 2% Not collected to taxes levied
UNCOLLECTED PROPERTY TAX REVENUES TO TOTAL PROPERTY TAXES LEVIED l l 11 3 Low ratios are better. A high ratio may be a sign of a weak economy or an inefficient department
EXPENDITURE TREND RATIOS l l 11 4 Number of employees Population Expenditures for specific functions Total expenditures APIPA 2009
GOVERNMENT EMPLOYEES TO TOTAL POPULATION 2004 Tot. gov’t employees Population Gov’t empl to population 11 5 2006 2007 2008
GOVERNMENT EMPLOYEES TO TOTAL POPULATION 2004 2006 2007 2008 Tot. gov’t employees 1, 495 1, 578 1, 577 1, 642 1, 631 Population 199, 249 206, 735 214, 371 220, 613 225, 246 Gov’t empl to population 11 6 2005 . 75% . 76% . 74% . 72%
GOVERNMENT EMPLOYEES TO TOTAL POPULATION l An increase may suggest – – 11 7 Decrease in governmental efficiency (a sign of fiscal weakness) OR Increase in governmental services provided (a sign of fiscal strength)
PUBLIC SAFETY EXPENDITURES TO TOTAL EXPENDITURES 2004 Judicial Police Fire Tot. Pub. Safety Total Exp. 11 8 P/S as % of Total 2005 2006 2007 2008
PUBLIC SAFETY EXPENDITURES TO TOTAL EXPENDITURES 2004 2006 2007 2008 Judicial 4, 524 4, 915 5, 645 6, 596 Police 47, 406 51, 889 55, 068 59, 087 61, 320 Fire 42, 803 47, 763 46, 765 52, 459 56, 310 Tot. Pub. Safety 94, 733 104, 567 107, 448 117, 191 124, 226 Total Exp. 11 9 2005 273, 198 350, 032 266, 468 264, 503 292, 872 P/S as % of Total 34. 7% 29. 9% 40. 3% 44. 3% 42. 4%
GENERAL ADMINISTRATION EXPENDITURES TO TOTAL EXPENDITURES 2004 Gen. Admin. Total Exp. Gen. Admin. as % of Total 12 0 2005 2006 2007 2008
GENERAL ADMINISTRATION EXPENDITURES TO TOTAL EXPENDITURES 2004 2005 2006 2007 2008 13, 961 15, 604 17, 080 17, 778 17, 731 Total Exp. 273, 198 350, 032 266, 468 264, 503 292, 872 Gen. Admin. as % of Total 5. 1% 4. 5% 6. 4% 6. 7% 6. 1% Gen. Admin. 12 1
PUBLIC WORKS EXPENDITURES TO TOTAL EXPENDITURES 2004 Public works exp Total exp Public works as % of total exp 12 2 2005 2006 2007 2008
PUBLIC WORKS EXPENDITURES TO TOTAL EXPENDITURES 2004 2005 2006 2007 2008 Public works exp 21, 126 24, 439 20, 793 21, 499 28, 283 Total exp 273, 198 350, 032 266, 468 264, 503 292, 872 7. 7% 7% 7. 8% 8. 1% 9. 7% Public works as % of total exp 12 3
SPECIFIC EXPENDITURES AS % OF TOTAL EXPENDITURES l Increase may indicate – – l 12 4 New policies Change in priorities Question: Are services increasing or is it simply the cost which is increasing?
ABILITY TO MEET SHORT-TERM COMMITMENTS l Adequacy of fund balance – l Adequacy of working capital – 12 5 Unreserved fund balance Operating revenues Cash, short-term investments, and receivables Current liabilities APIPA 2009
ADEQUACY OF FUND BALANCE 2008 Unreserved fund balance - GF Unreserved FB SRF Total unreserved FB Operating revenues Adequacy of FB 12 6
ADEQUACY OF FUND BALANCE 2008 Unreserved fund balance - GF 12, 168, 104 Unreserved FB SRF 6, 854, 198 Total unreserved FB 19, 022, 302 Operating revenues 280, 511, 803 Adequacy of FB 12 7 6. 8%
ADEQUACY OF FUND BALANCE Per Standard & Poor’s, >8% is strong l See p. 13 in MD&A l – – 12 8 Unreserved FB – GF 12, 168, 104 Total GF expenditures 165, 413, 740 1/12 of GF expenditures 13, 784, 478 Less than 1 month’s expenditures!!!
ADEQUACY OF WORKING CAPITAL 2008 Cash and investments Receivables Total quick assets Total current liabilities Quick ratio 12 9
ADEQUACY OF WORKING CAPITAL 2008 Cash and investments 95, 435, 334 Receivables 4, 418, 717 Total quick assets 99, 854, 051 Total current liabilities 53, 615, 045 Quick ratio 13 0 1. 86
ADEQUACY OF WORKING CAPITAL Should be greater than 1. 0 l Higher is better! l 13 1
ABILITY TO MEET LONG-TERM COMMITMENTS l l 13 2 Debt burden – Debt service costs Total general fund and debt service expenditures Debt per capita = Total debt outstanding for governmental activities Total population APIPA 2009
DEBT BURDEN 2004 Interest Principal Bond costs Fiscal charges Total debt costs 13 3 Total exp Debt burden 2005 2006 2007 2008
DEBT BURDEN 2004 2006 2007 2008 Interest 17, 430 16, 790 11, 703 18, 350 18, 518 Principal 8, 206 9, 399 9, 830 9, 491 9, 756 Bond costs 53 120 8, 807 1, 054 9, 379 Fiscal charges 122 433 885 810 1, 022 Total debt costs 13 4 2005 25, 811 26, 742 31, 226 29, 705 38, 674 Total exp 273, 198 350, 032 266, 468 264, 503 292, 872 Debt burden 9. 4% 7. 6% 11. 7% 11. 2% 13. 2%
DEBT BURDEN Lower ratios are better as they indicate that the government is able to pay its debt service requirements when due. l Per Standard & Poor’s: l – – 13 5 – 5% or below = low carrying charge 10% = moderate carrying charge 15% or more = high carrying charge
DEBT PER CAPITA 2004 Total debt Total population Debt per capita 13 6 2005 2006 2007 2008
DEBT PER CAPITA 2004 2005 2006 2007 2008 Total debt 76, 540 72, 280 93, 630 131, 826 156, 606 Total population 199, 249 206, 735 214, 371 220, 613 225, 246 384 350 437 598 695 Debt per capita 13 7
DEBT PER CAPITA l 13 8 Per Standard & Poor’s: Anything below $1, 000 indicates low fiscal stress
STEP FOUR: THE FUTURE n 13 9 Forecast the future (next five years), taking expected changes and likely responses into account APIPA 2009
STEP FOUR: THE FUTURE l l 14 0 Will the City of Reno have the financial wherewithal to provide the services expected of it in the next years? What are the key risks and uncertainties facing the City of Reno that might impair the ability of the government to provide these services and how can these risks be best managed? APIPA 2009
RESOURCES l 14 1 Government and Not-For-Profit Accounting, 4 th Edition, 2007, Granof APIPA 2009
THE END! Go Forth and Evaluate Well! 14 2 APIPA 2009
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