1 apipa 2009 1 evaluating financial performance objective: to enable participants to evaluate and...

1 APIPA 20091

EVALUATING FINANCIAL PERFORMANCE

Objective: To enable participants to evaluate and report on financial performance for governmental entities

2 APIPA 20092

ANALYZING GOVERNMENT FINANCIAL PERFORMANCE

Why do we care?– 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

3 APIPA 20093

SAN FRANCISCO, CALIFORNIA

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

4 APIPA 20094

PORTLAND, OREGON

5/1/09 Adams releases basic services budget (cuts of $9 mm)

5/21/09 Superintendent proposes further Portland Public School cuts

5 APIPA 20095

SEATTLE, WASHINGTON

1/14/09 On top of school closures, layoffs proposed ($25 mm budget gap)

4/17/09 Midyear budget adjustment

6 APIPA 20096

WHO CARES?

GASB Study in 1985 Three primary users of government financial

reports– Citizen groups– Legislative and oversight officials– Investors and creditors

7 APIPA 20097

CITIZEN GROUPS

Use financial reports to– 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

8 APIPA 20098

INVESTORS AND CREDITORS

Use financial reports to – Ascertain ability of government to repay its debt

9 APIPA 20099

LEGISLATIVE AND OVERSIGHT OFFICIALS

Use financial reports to– 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

10 APIPA 200910

COMPREHENSIVE ANALYSIS

1. STEP ONE: Consider the environment in which the government operates

2. STEP TWO: Identify and consider key factors that affect the environment

3. STEP THREE: Assess the government’s current status

3. STEP FOUR: Forecast the future (next five years)

11 APIPA 200911

STEP ONE: OPERATING ENVIRONMENT

Consider the current state of and trends in economic, political, and social environments

12 APIPA 200912

ECONOMIC ENVIRONMENT

Population– Age of population– Wealth and income distribution– Educational and skill level– Other relevant demographic factors

Immigration Density

13 APIPA 200913


Major industries (and stability) Unemployment rates Value of property per capita Sales tax base Elasticity of revenues

14 APIPA 200914

POLITICAL ENVIRONMENT

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)

15 APIPA 200915

SOCIAL ENVIRONMENT

Crime rates Percentage of citizens requiring public

assistance Percentage of residents owning their own

homes Health!!!

16 APIPA 200916

STEP TWO: KEY FACTORS

Identify and consider key factors that affect the environment

17 APIPA 200917

POPULATION

Growing? Shrinking? Aging? How? e.g. immigration Effect on geographical boundaries?

18 APIPA 200918

POPULATION

Impact on infrastructure– Highways and streets– Utilities

Impact on operating revenues Impact on operating expenses

19 APIPA 200919

NATURE AND SCOPE

Nature and scope of government services to be performed

Nature and scope of enterprise activities carried out (e.g., future of electric utility)– Pressure to privatize

Mandated services

20 APIPA 200920

POLITICS AND ORGANIZATION

Political climate (e.g., pro- or anti-growth, pro- or anti-business)

Form and organization of government (e.g., possibility of single-member election districts)

21 APIPA 200921

POLITICAL ATTITUDES AND INTERGOVERNMENTAL RELATIONSHIPS

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)

22 APIPA 200922

TECHNOLOGY AND SOCIAL SYSTEM

Technological changes– Increased use of computers

May reduce operating costs Requires large capital investment

– Increased efforts to conserve?

Social changes– Changes in family structure resulting in need for

more government facilities to care for the elderly

23 APIPA 200923

COMMERCE AND INDUSTRY

Major employers (including stability and likelihood of relocating)

Impact on revenues (e.g., property taxes) and expenditures (e.g., infrastructure improvements)

24 APIPA 200924

OTHER

Wealth and income of population Other economic changes (e.g., those

affecting the electrical power and health care industries)

25 APIPA 200925

STEP THREE: CURRENT STATUS

Assess the government’s current financial condition

26 APIPA 200926

CURRENT FINANCIAL CONDITION

Overall quality of disclosure Auditor’s opinion GFOA certificate Letter of transmittal

27 APIPA 200927

KEY ACCOUNTING POLICIES

Reporting entity Number, type, and character (purpose) of

funds Revenue and expenditure recognition Accounting changes

28 APIPA 200928

BUDGET- AND ACCOUNTING-RELATED PRACTICES

“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

29 APIPA 200929

CASH BASIS VERSUS ACCRUAL BASIS

Budgets on cash basis Financial statements on accrual basis (full or

modified) Easier to manipulate budget than financial

statements

30 APIPA 200930

FINANCIAL STATEMENT “TRICKS”

Account for transaction in internal service or proprietary fund instead of in general fund

Finance capital acquisitions by incurring “off-balance-sheet” obligations rather than with general obligation debt

– Operating leases, service contracts Select “liberal” accounting practices that recognize

revenues sooner rather than later and delay recognition of expenditures

– Lengthen period of “availability” after YE– Reduce estimate of uncollectible

31 APIPA 200931

FINANCIAL STATEMENT “TRICKS”

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– Sales of capital assets– Refunding of debt

32 APIPA 200932

FINANCIAL RATIOS – CAUTIONARY NOTES

No reliable “rules of thumb” as to an acceptable or nonacceptable ratio– Governments carry out different functions making

it difficult to compare

Accounting for same operation in different ways– Governments may account for functions in

different funds, resulting in different accounting

33 APIPA 200933


Preference for higher or lower ratio not clear– Depends on issue and perspective of user– For example: General fund revenues / general

fund expenditures 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

34 APIPA 200934


Stage of maturity impacts level of ratios– 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

35 APIPA 200935

DETERMINING SCOPE OF A RATIO

Which financial statements do we use?– Government-wide– General fund only– Combination of funds

It depends!– Why measure is being calculated– How it will be interpreted

36 APIPA 200936

ASSESSING FISCAL EFFORT

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?

37 APIPA 200937

FISCAL EFFORT RATIOS

Per capita revenue from own sources (excluding grants from other government)

Median family income

Revenue from own sources

Total appraised value of property

38 APIPA 200938

ADEQUACY OF REVENUES

Need to be sufficient to cover expenditures Trend important, especially compared to

growth in expenditures Revenue adequacy ratio

Total revenues

Total expenditures

39 APIPA 200939

REVENUE STABILITY

Revenue base– 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

40 APIPA 200940

REVENUE STABILITY RATIOS

Intergovernmental revenues

Total operating revenues

Maximize use of “other peoples’ money” BUT can be taken away so risky Low % preferred

41 APIPA 200941


Restricted revenues


Decrease flexibility Can lead to misallocation of resources Low % preferred

42 APIPA 200942


Property tax revenues


Considered to be stable source High % preferred

43 APIPA 200943


Uncollected property tax revenues

Total property taxes levied

Warning sign of underlying weakness in economy

Could predict future drop in other revenues Low % preferred

44 APIPA 200944

EXPENDITURE TRENDS

Changes in spending can result from– 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

45 APIPA 200945

EXPENDITURE TREND RATIOS

Number of employees

Population Payroll expenditures

Total expenditures Expenditures for specific functions

Total expenditures

46 APIPA 200946

ABILITY TO MEET SHORT-TERM COMMITMENTS

Adequacy of fund balance– Unreserved fund balance

Operating revenues

Adequacy of working capital– Cash, short-term investments, and receivables

Current liabilities

47 APIPA 200947

ABILITY TO MEET LONG-TERM COMMITMENTS

Debt burden –

Debt service costs

Total general fund and debt service expenditures

Debt per capita =

Total debt outstanding for governmental activities

Total population

48 APIPA 200948

FINANCIAL PERFORMANCE CONCEPTS

Financial condition– Ability to maintain existing or provide increasing service

levels 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

– Excessive shifting of burden to future taxpayers a threat to ability to maintain or provide increasing service levels

49

INTERPERIOD EQUITY

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 200949

50 APIPA 200950

STEP FOUR: THE FUTURE

Forecast the future (next five years), taking expected changes and likely responses into account

51 APIPA 200951

FISCAL FORECASTS

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

52 APIPA 200952

IN THE END

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?

– How can the government best manage these risks?– What should be the key concerns of government managers,

especially those directly concerned with finance?

53

COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)

Introductory Section– Letter of Transmittal– Organizational Chart– List of Principal Officials

Financial Section– Independent Auditor’s Report– MD&A– Financial Statements

Statistical Section

APIPA 200953

54 APIPA 200954

FINANCIAL SECTION

Basic financial statements– Government-wide financial statements

Statement of net assets Statement of activities

– Fund financial statements Governmental funds

– Balance sheet– Statement of revenues, expenditures, and changes in fund

balance

55 APIPA 200955

FINANCIAL SECTION

– Fund financial statements Proprietary funds

– Statement of net assets– Statement of revenues, expenditures, and changes in fund

net assets– Statement of cash flows

Fiduciary funds– Statement of fiduciary net assets– Statement of changes in fiduciary net assets

– Notes to the financial statements

56 APIPA 200956

MD&A

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

57 APIPA 200957

MD&A 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 long-term 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

58 APIPA 200958

CITY OF RENO, NEVADA

59 APIPA 200959

RENO, NEVADACAFR

Selected sections– Letter of transmittal– Organizational chart– MD&A– Financial statements – government-wide,

governmental funds– Statistical section (portions)

Preformatted ratio analysis workpapers

60 APIPA 200960

RENO, NEVADASTEP ONE: OPERATING ENVIRONMENT

Largest community in northern Nevada

Third largest city in the state

Located in the Sierra Nevada mountains, 35 miles northeast of Lake Tahoe

61 APIPA 200961


Population – Age – Median 35.7– 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%

62 APIPA 200962


Population – Wealth and income– Median household income - $47,042 (2007)– Per capita personal income - $42,332

Population – Educational and skill level– High school graduates – 17%– Some college – 16%– Associate degree – 4%– Bachelor’s degree – 12%– Graduate degree – 8%

63 APIPA 200963


Population – Immigration – Diversity– American Indian – 2%– Asian or Pacific Islander – 7%– Black – 3%– Other – 17%– White – 72%

Population – Density– Median travel time to work – 16 minutes

64 APIPA 200964


Major industries (and stability)– Leisure and hospitality (includes gaming) – 18%– Construction and manufacturing – 15%– Trade, transportation, public utilities, finance-

related services – 27%– Government – 13%

65 APIPA 200965


Unemployment rates (see page 198)– 2005 – 3.8%– 2006 – 4.0%– 2007 – 4.5%– 2008 – 6.4%

66


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%

Sales tax Room tax

APIPA 200966

67 APIPA 200967


Value of property per capita - 2008– Estimated actual value = 19,445,997 = $86.33

Population 225,246 Value of property per capita - 2007

– Estimated actual value = 17,477,351 = $79.22

Population 220,613 Value of property per capita - 2006

– Estimated actual value = 15,991,361 = $74.60

Population 214,371

68 APIPA 200968


Sales tax base– 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?

Grants, Property tax, Sales tax, Room tax

69 APIPA 200969


Formal structure of government– 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

Degree of political competition– Currently cooperative

70 APIPA 200970


Competence and integrity of government officials– 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

71 APIPA 200971

SOCIAL ENVIRONMENT

Crime rates– Total crime risk index

Reno = 118 (higher than average) Nevada = 126 United States = 100 (national average)

Percentage of citizens requiring public assistance– Households with income $20,000 and below –

15.33%

72 APIPA 200972

SOCIAL ENVIRONMENT

Percentage of residents owning their own homes– Owner-occupied homes – 45.11%

Health!!!– Consider:

Age of population Activity level Access to healthcare

73 APIPA 200973

STEP TWO: KEY FACTORS

Change!!

74 APIPA 200974

POPULATION

Growth– 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

75 APIPA 200975

POPULATION

How– New construction– Expansion of city boundaries– Inflow from California

Effect on geographical boundaries - expanded

76 APIPA 200976

POPULATION

Impact on infrastructure (see p. 202)– Paved streets– Sewer lines– Storm drains– Police and fire stations

77 APIPA 200977

POPULATION

Impact on operating revenues– Revenues (p. 188)– Property taxes (see p. 192)– Licenses and permits (p. 193)

Impact on operating expenses– Expenditures (p. 188)

78 APIPA 200978

NATURE AND SCOPE

Government services to be provided– Public safety (police, fire, building inspection)– Public works– Public improvements– Planning and zoning– Community development– Parks and recreation– Wastewater treatment– General administrative services

79 APIPA 200979

NATURE AND SCOPE

Enterprise activities carried out– Sewer– Building permits and inspection– Dispatch center– Golf course

Mandated services– Sewer– Building permits and inspection

80 APIPA 200980

POLITICS AND ORGANIZATION

Political climate (e.g., pro- or anti-growth, pro- or anti-business)– History of pro-growth– Increasing growth control sentiment– Passage of sustainable water sources

81 APIPA 200981


Changing views toward the role of government– Public employee benefits

Relations with legislature– Biennial state budget – 2009-11 currently in

process

Extent of state and federal assistance– Look at grants

82 APIPA 200982


Additional costs imposed by overlapping governments (e.g., school districts)– Others share in sales tax and property tax

revenues– Overlapping debt (see p. 195)

83 APIPA 200983


Technological changes – efforts to conserve– Increasing “green” efforts

Recycling Green building Truckee River restoration Energy conservation

84 APIPA 200984


Social changes– Annual residential turnover = 20%– Average household size = 2– Households with children = 26.5%

85 APIPA 200985


Major employers (see p. 199)1. Washoe County School District

2. University of Nevada Reno

3. Washoe County

4. International Game Technology

5. Renown Regional Medical Center

6. Silver Legacy Resort Casino

7. Peppermill Hotel Casino

86 APIPA 200986


Impact on property tax revenues (see pp. 19-20 and 191) – Declining assessments, challenges and revisions– Abatements for downtown redevelopment area– New construction

Downtown Ballroom (completed Feb. 2008) Baseball complex (completed Apr. 2009) ReTRAC Enhancement Project (to be completed in 2009)

– Relocation of homeless (Community Assistance Center Campus)

87 APIPA 200987


Impact on expenditures (e.g., infrastructure improvements) – Demand for services for increased population– Demand for services due to economy

88 APIPA 200988

OTHER

Wealth and income of population– Increasing unemployment– Decline in household wealth (e.g., stock market

holdings)

89 APIPA 200989

STEP THREE: CURRENT STATUS

Assess the City of Reno’s current financial condition

90 APIPA 200990

CURRENT FINANCIAL CONDITION

Overall quality of disclosure – considered good (received Certificate of Achievement of Excellence in Financial Reporting)

Auditor’s opinion – clean Financial statements

– Government-wide – accrual basis– Governmental funds – modified accrual basis

91 APIPA 200991

FISCAL EFFORT RATIOS

Per capita revenue from own sources (excluding grants from other government)

Median family income

Revenue from own sources


92

OPERATING REVENUES PER CAPITA

2004 2005 2006 2007 2008

Tot. gov’t fund rev

210,663

Less: Intergov’t

(91,675)

Rev from own sources

118,988

Tot. pop. 199,249

Oper. rev. per capita

597

93


2004 2005 2006 2007 2008


210,663 229,721 237,966 259,313 280,512

Less: Intergov’t

(91,675) (95,758) (99,877) (109,092) (84,288)


118,988 133,963 214,371 220,613 225,246

Tot. pop. 199,249 206,735 214,371 220,613 225,246

Oper. rev. per capita

597 648 644 681 871

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.

95

OPERATING REVENUES TO PROPERTY VALUES

2004 2005 2006 2007 2008


118,988


13,593,000

Oper. rev. to property values

.009

96


2004 2005 2006 2007 2008


118,988 133,963 214,371 220,613 225,246


13,593 14,587 15,991 17,477 19,446

Oper. rev. to property values

.009 .009 .009 .009 .010

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.

98 APIPA 200998

ADEQUACY OF REVENUES

Revenue adequacy ratio

Total revenues

Total expenditures Used revenues from own sources (as

previously calculated)

99

REVENUES TO EXPENDITURES

2004 2005 2006 2007 2008

Rev. from own sources

210,663

Total expendi-tures

273,198

Rev to exp

77%

100


2004 2005 2006 2007 2008

Rev. from own sources

118,988 133,963 214,371 220,613 225,246

Total expendi-tures

273,198 350,032 266,468 264,503 292,872

Rev to exp

43.6% 38.3% 51.8% 56.8% 67%

101


Higher ratios are better. A high value indicates that a government’s revenues are adequately covering its expenditures.

102

APIPA 2009102


Intergovernmental revenues

Total operating revenues Restricted revenues

Total operating revenues Property tax revenues

Total operating revenues Uncollected property tax revenues

Total property taxes levied

103

INTERGOVERNMENTAL REVENUES TO TOTAL OPERATING REVENUES

2004 2005 2006 2007 2008

Intergov’t revenues

91,675


210,663

Outside to tot. rev.

43.5%

104


2004 2005 2006 2007 2008

Intergov’t revenues

91,675 95,758 99,877 109,092 84,288


210,663 229,721 237,966 259,313 280,512

Outside to tot. rev.

43.5% 43.4% 42% 42.1% 30%

105


Shows how much of a government’s revenues are received from other governments.

Remember that other governments can arbitrarily STOP providing these revenues.– 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?

106

RESTRICTED REVENUES TO TOTAL OPERATING REVENUES

2008

Total governmental fund revenues

280,511,803

Less: General Fund revenues

(180,864,147)

Restricted revenues 99,647,656

Restricted revenues to total revenues

35.5%

107

RESTRICTED REVENUES TO TOTAL OPERATING REVENUES

Shows how much of a government’s revenues are restricted in use.

High ratios indicate less flexibility– A high ratio makes it difficult for a government to

respond to changing conditions.

108

PROPERTY TAX REVENUES TO OPERATING REVENUES

2004 2005 2006 2007 2008


45,156


210,663

Property tax rev. to total revenues

21.4%

109


2004 2005 2006 2007 2008


45,156 47,836 51,203 59,075 64,058


210,663 229,721 237,966 259,313 280,512

Property tax rev. to total revenues

21.4% 20.8% 21.5% 22.8% 22.8%

110


Higher ratios are better – property taxes are considered a stable source of revenue– Not true in a volatile real estate market!!

111

UNCOLLECTED PROPERTY TAX REVENUES TO TOTAL PROPERTY TAXES LEVIED

2004 2005 2006 2007 2008

Taxes levied

Total collected

Total not collected

Not collected to taxes levied

112


2004 2005 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

1,228 190 746 342 127

Not collected to taxes levied

2.6% .4% 1.4% .6% .2%

113


Low ratios are better. A high ratio may be a sign of a weak

economy or an inefficient department

114

APIPA 2009114

EXPENDITURE TREND RATIOS

Number of employees

Population Expenditures for specific functions

Total expenditures

115

GOVERNMENT EMPLOYEES TO TOTAL POPULATION

2004 2005 2006 2007 2008

Tot. gov’t employees

Population

Gov’t empl to population

116


2004 2005 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 .75% .76% .74% .74% .72%

117


An increase may suggest– Decrease in governmental efficiency (a sign of

fiscal weakness) OR– Increase in governmental services provided (a

sign of fiscal strength)

118

PUBLIC SAFETY EXPENDITURES TO TOTAL EXPENDITURES

2004 2005 2006 2007 2008

Judicial

Police

Fire

Tot. Pub. Safety

Total Exp.

P/S as % of Total

119

PUBLIC SAFETY EXPENDITURES TO TOTAL EXPENDITURES

2004 2005 2006 2007 2008Judicial 4,524 4,915 5,615 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. 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%

120

GENERAL ADMINISTRATION EXPENDITURES TO TOTAL EXPENDITURES

2004 2005 2006 2007 2008

Gen. Admin.

Total Exp.

Gen. Admin. as % of Total

121

GENERAL ADMINISTRATION EXPENDITURES TO TOTAL EXPENDITURES

2004 2005 2006 2007 2008

Gen. Admin.

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%

122

PUBLIC WORKS EXPENDITURES TO TOTAL EXPENDITURES

2004 2005 2006 2007 2008

Public works exp

Total exp

Public works as % of total exp

123

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

Public works as % of total exp

7.7% 7% 7.8% 8.1% 9.7%

124

SPECIFIC EXPENDITURES AS % OF TOTAL EXPENDITURES

Increase may indicate– New policies– Change in priorities

Question: Are services increasing or is it simply the cost which is increasing?

125

APIPA 2009125

ABILITY TO MEET SHORT-TERM COMMITMENTS

Adequacy of fund balance– Unreserved fund balance

Operating revenues

Adequacy of working capital– Cash, short-term investments, and receivables

Current liabilities

126

ADEQUACY OF FUND BALANCE

2008

Unreserved fund balance - GF

Unreserved FB - SRF

Total unreserved FB

Operating revenues

Adequacy of FB

127


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 6.8%

128


Per Standard & Poor’s, >8% is strongSee p. 13 in MD&A

– 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!!!

129

ADEQUACY OF WORKING CAPITAL

2008

Cash and investments

Receivables

Total quick assets

Total current liabilities

Quick ratio

130


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 1.86

131


Should be greater than 1.0Higher is better!

132

APIPA 2009132

ABILITY TO MEET LONG-TERM COMMITMENTS

Debt burden –

Debt service costs

Total general fund and debt service expenditures

Debt per capita =

Total debt outstanding for governmental activities

Total population

133

DEBT BURDEN

2004 2005 2006 2007 2008Interest

Principal

Bond costs

Fiscal charges

Total debt costs

Total exp

Debt burden

134

DEBT BURDEN

2004 2005 2006 2007 2008Interest 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

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%

135

DEBT BURDEN

Lower ratios are better as they indicate that the government is able to pay its debt service requirements when due.

Per Standard & Poor’s:– 5% or below = low carrying charge– 10% = moderate carrying charge– 15% or more = high carrying charge

136

DEBT PER CAPITA

2004 2005 2006 2007 2008

Total debt

Total population

Debt per capita

137

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

Debt per capita

384 350 437 598 695

138

DEBT PER CAPITA

Per Standard & Poor’s: Anything below $1,000 indicates low fiscal stress

139

APIPA 2009139


Forecast the future (next five years), taking expected changes and likely responses into account

140

APIPA 2009140


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?

141

APIPA 2009141

RESOURCES

Government and Not-For-Profit Accounting, 4th Edition, 2007, Granof

142

THE END!

APIPA 2009

1 apipa 2009 1 evaluating financial performance objective: to enable participants to evaluate and...

Documents

debt slide

sound slide

financial condition

financial operations

financial position

ability of government

budget crisis

operating environment