EVALUATING FINANCIAL
PERFORMANCE
Objective: To enable
participants to
evaluate and report
on financial
performance for
governmental
entities
1
APIPA 2009
ANALYZING GOVERNMENT
FINANCIAL PERFORMANCE

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



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


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


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?


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

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

Use financial reports to
–
8
Ascertain ability of government to repay its debt
APIPA 2009
LEGISLATIVE AND OVERSIGHT
OFFICIALS

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. 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)
10
APIPA 2009
STEP ONE: OPERATING
ENVIRONMENT
 Consider the current state of and trends in
economic, political, and social
environments
11
APIPA 2009
ECONOMIC ENVIRONMENT

Population
–
–
–
–
Age of population
Wealth and income distribution
Educational and skill level
Other relevant demographic factors


12
Immigration
Density
APIPA 2009
ECONOMIC ENVIRONMENT





13
Major industries (and stability)
Unemployment rates
Value of property per capita
Sales tax base
Elasticity of revenues
APIPA 2009
POLITICAL ENVIRONMENT






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




15
Crime rates
Percentage of citizens requiring public
assistance
Percentage of residents owning their own
homes
Health!!!
APIPA 2009
STEP TWO: KEY FACTORS
 Identify and consider key factors that affect
the environment
16
APIPA 2009
POPULATION



17
Growing? Shrinking? Aging?
How? e.g. immigration
Effect on geographical boundaries?
APIPA 2009
POPULATION

Impact on infrastructure
–
–


18
Highways and streets
Utilities
Impact on operating revenues
Impact on operating expenses
APIPA 2009
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)
–

19
Pressure to privatize
Mandated services
APIPA 2009
POLITICS AND ORGANIZATION


20
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)
APIPA 2009
POLITICAL ATTITUDES AND
INTERGOVERNMENTAL RELATIONSHIPS




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

Technological changes
–
Increased use of computers


–

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


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


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
 Assess the government’s current financial
condition
25
APIPA 2009
CURRENT FINANCIAL CONDITION




26
Overall quality of disclosure
Auditor’s opinion
GFOA certificate
Letter of transmittal
APIPA 2009
KEY ACCOUNTING POLICIES




27
Reporting entity
Number, type, and character (purpose) of
funds
Revenue and expenditure recognition
Accounting changes
APIPA 2009
BUDGET- AND ACCOUNTINGRELATED PRACTICES






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



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”


Account for transaction in internal service or
proprietary fund instead of in general fund
Finance capital acquisitions by incurring “offbalance-sheet” obligations rather than with general
obligation debt
–

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”


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

No reliable “rules of thumb” as to an
acceptable or nonacceptable ratio
–

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

Preference for higher or lower ratio not clear
–
–
Depends on issue and perspective of user
For example: General fund revenues / general
fund expenditures


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

Stage of maturity impacts level of ratios
–
–

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

Which financial statements do we use?
–
–
–

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




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
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



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

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

Intergovernmental revenues
Total operating revenues

Maximize use of “other peoples’ money”
BUT can be taken away so risky
Low % preferred


40
APIPA 2009
REVENUE STABILITY RATIOS

Restricted revenues
Total operating revenues

Decrease flexibility
Can lead to misallocation of resources
Low % preferred


41
APIPA 2009
REVENUE STABILITY RATIOS

Property tax revenues
Total operating revenues

Considered to be stable source
High % preferred

42
APIPA 2009
REVENUE STABILITY RATIOS

Uncollected property tax revenues
Total property taxes levied

Warning sign of underlying weakness in
economy
Could predict future drop in other revenues
Low % preferred


43
APIPA 2009
EXPENDITURE TRENDS

Changes in spending can result from
–
–
–
–

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



45
Number of employees
Population
Payroll expenditures
Total expenditures
Expenditures for specific functions
Total expenditures
APIPA 2009
ABILITY TO MEET SHORT-TERM
COMMITMENTS

Adequacy of fund balance
–

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
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

Financial condition
–

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




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
 Forecast the future (next five years), taking
expected changes and likely responses into
account
50
APIPA 2009
FISCAL FORECASTS


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


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)

Introductory Section
–
–
–

Financial Section
–
–
–

53
Letter of Transmittal
Organizational Chart
List of Principal Officials
Independent Auditor’s Report
MD&A
Financial Statements
Statistical Section
APIPA 2009
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
54
APIPA 2009
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
–
55
Notes to the financial statements
APIPA 2009
MD&A

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

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

Selected sections
–
–
–
–
–

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



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

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

Population – Wealth and income
–
–

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

Population – Immigration – Diversity
–
–
–
–
–

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

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

Unemployment rates (see page 198)
–
–
–
–
65
2005 – 3.8%
2006 – 4.0%
2007 – 4.5%
2008 – 6.4%
APIPA 2009
ECONOMIC ENVIRONMENT

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%


66
Sales tax
Room tax
APIPA 2009
ECONOMIC ENVIRONMENT

Value of property per capita - 2008
–

Value of property per capita - 2007
–

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

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?

68
Grants, Property tax, Sales tax, Room tax
APIPA 2009
POLITICAL ENVIRONMENT

Formal structure of government
–
–
–
–

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

Competence and integrity of government officials
–
–
–



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

Crime rates
–
Total crime risk index




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

Percentage of residents owning their own
homes
–

Owner-occupied homes – 45.11%
Health!!!
–
Consider:



72
Age of population
Activity level
Access to healthcare
APIPA 2009
STEP TWO: KEY FACTORS
 Change!!
73
APIPA 2009
POPULATION

Growth
–
–
–
–
–

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

How
–
–
–

75
New construction
Expansion of city boundaries
Inflow from California
Effect on geographical boundaries expanded
APIPA 2009
POPULATION

Impact on infrastructure (see p. 202)
–
–
–
–
76
Paved streets
Sewer lines
Storm drains
Police and fire stations
APIPA 2009
POPULATION

Impact on operating revenues
–
–
–

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

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

Enterprise activities carried out
–
–
–
–

Mandated services
–
–
79
Sewer
Building permits and inspection
Dispatch center
Golf course
Sewer
Building permits and inspection
APIPA 2009
POLITICS AND ORGANIZATION

Political climate (e.g., pro- or anti-growth,
pro- or anti-business)
–
–
–
80
History of pro-growth
Increasing growth control sentiment
Passage of sustainable water sources
APIPA 2009
POLITICAL ATTITUDES AND
INTERGOVERNMENTAL RELATIONSHIPS

Changing views toward the role of
government
–

Relations with legislature
–

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

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

Technological changes – efforts to conserve
–
Increasing “green” efforts




83
Recycling
Green building
Truckee River restoration
Energy conservation
APIPA 2009
TECHNOLOGY AND SOCIAL SYSTEM

Social changes
–
–
–
84
Annual residential turnover = 20%
Average household size = 2
Households with children = 26.5%
APIPA 2009
COMMERCE AND INDUSTRY

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

Impact on property tax revenues (see pp. 19-20
and 191)
–
–
–
Declining assessments, challenges and revisions
Abatements for downtown redevelopment area
New construction



–
86
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)
APIPA 2009
COMMERCE AND INDUSTRY

Impact on expenditures (e.g., infrastructure
improvements)
–
–
87
Demand for services for increased population
Demand for services due to economy
APIPA 2009
OTHER

Wealth and income of population
–
–
88
Increasing unemployment
Decline in household wealth (e.g., stock market
holdings)
APIPA 2009
STEP THREE: CURRENT STATUS
 Assess the City of Reno’s current financial
condition
89
APIPA 2009
CURRENT FINANCIAL CONDITION



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
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
92
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
2005
2006
2007
2008
OPERATING REVENUES PER CAPITA
93
2004
2005
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.
199,249
206,735
214,371
220,613
225,246
Oper. rev.
per capita
597
648
644
681
871
OPERATING REVENUES PER CAPITA


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
95
Rev from
own
sources
118,988
Total
appraised
value of
property
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
.009
.009
.009
.010
Rev from
own
sources
96
OPERATING REVENUES TO
PROPERTY VALUES


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


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
10
0
2004
2005
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
43.6%
38.3%
51.8%
56.8%
67%
REVENUES TO EXPENDITURES

10
1
Higher ratios are better. A high value
indicates that a government’s revenues are
adequately covering its expenditures.
REVENUE STABILITY RATIOS




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
10
3
Intergov’t
revenues
91,675
Tot. gov’t
fund rev
210,663
Outside
to tot. rev.
43.5%
2005
2006
2007
2008
INTERGOVERNMENTAL REVENUES
TO TOTAL OPERATING REVENUES
10
4
2004
2005
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.
43.5%
43.4%
42%
42.1%
30%
INTERGOVERNMENTAL REVENUES
TO TOTAL OPERATING REVENUES


Shows how much of a government’s
revenues are received from other
governments.
Remember that other governments can
arbitrarily STOP providing these revenues.
–

10
5

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
10
6
280,511,803
(180,864,147)
Restricted revenues
99,647,656
Restricted revenues
to total revenues
35.5%
RESTRICTED REVENUES TO TOTAL
OPERATING REVENUES


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
10
8
Property
tax
revenues
45,156
Total
operating
revenues
210,663
Property
tax rev. to
total
revenues
21.4%
2005
2006
2007
2008
PROPERTY TAX REVENUES TO
OPERATING REVENUES
10
9
2004
2005
2006
2007
2008
Property
tax
revenues
45,156
47,836
51,203
59,075
64,058
Total
operating
revenues
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%
PROPERTY TAX REVENUES TO
OPERATING REVENUES

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
11
2
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
2.6%
.4%
1.4%
.6%
.2%
Not
collected
to taxes
levied
UNCOLLECTED PROPERTY TAX
REVENUES TO TOTAL PROPERTY TAXES
LEVIED


11
3
Low ratios are better.
A high ratio may be a sign of a weak
economy or an inefficient department
EXPENDITURE TREND RATIOS


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
2005
2006
2007
2008
GOVERNMENT EMPLOYEES TO
TOTAL POPULATION
11
6
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%
GOVERNMENT EMPLOYEES TO
TOTAL POPULATION

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
11
9
2004
2005
2006
2007
2008
Judicial
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%
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

Increase may indicate
–
–

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

Adequacy of fund balance
–

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
 See p. 13 in MD&A

–
–
–
–
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
 Higher is better!

13
1
ABILITY TO MEET LONG-TERM
COMMITMENTS
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
13
4
2004
2005
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
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.
 Per Standard & Poor’s:

–
–
–
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

13
8
Per Standard & Poor’s: Anything below
$1,000 indicates low fiscal stress
STEP FOUR: THE FUTURE
 Forecast the future (next five years), taking
expected changes and likely responses into
account
13
9
APIPA 2009
STEP FOUR: THE FUTURE


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

14
1
Government and Not-For-Profit Accounting,
4th Edition, 2007, Granof
APIPA 2009
THE END!
14
2
APIPA 2009