On a conceptual level, most frameworks for evaluating the financial health of governments consider both short-term and long-term factors. Until recently, however, little information was available to inform the long-term aspects of a government’s finances. One of the primary motivations for GASB Statement 34 was to round out financial reporting by state and local governments by adding more comprehensive information, covering both the short and long term, to complement the existing short-run, fund-based information the public was already getting.
Now that the basic implementation deadlines for Statement 34 have passed, any government following GAAP — and any analyst examining such a government — has new long-term financial information at its fingertips. This chapter sets forth an example of how this new information can be incorporated into a facile, but thorough, assessment of a govern- ment’s economic condition. The capital asset, long-term liability, full accrual, and other information needed to calculate the ratios in this chapter’s new 10-point test of economic condition is now available, and trends can be constructed with each succeeding year of reporting under the GASB 34 model.
The issuance of GASB Statement 44 in 2004 will also be a beneficial development for the analysis of economic condition. Statement 44 updates and revises the requirements for the statistical section of a government’s
comprehensive annual financial report (CAFR) for the first time in 25 years.
The information in the statistical section is highly valuable to municipal bond analysts and others who make assessments of governmental financial health.
The deadline for implementing Statement 44 is fiscal years ending after June 15, 2006.
When a government presents a statistical section with its annual finan- cial statements, it contains schedules of financial, economic, demographic, and operating information for the past ten years. These schedules include all of the basic information necessary to calculate nine of the ten ratios described in this chapter (the exception being the enterprise funds cover- age ratio). Analysts examining governments that prepare CAFRs will have readily available trends in long-term financial information extending back to a government’s implementation of Statement 34. The final hurdles to comprehensive assessments of governmental economic condition are now being cleared.
Acknowledgment
The opinions expressed in this manuscript are those of the author. Official positions of the GASB are established only after extensive due process.
A Manageable System of Economic Condition Analysis for Governments g 403
Appendix
Table 15.A1 City of Port Hayley, Statement of Net Assets, June 30, 200X
Primary Government Governmental
Activities
Business-type
Activities Total ASSETS
Cash and investments $19,600,901 $17,110,793 $36,711,694
Receivables, net 2,328,271 911,057 3,239,328
Internal balances 143,125 (143,125) -
Due from other governments 1,176,789 179,565 1,356,354
Inventories 150,689 124,822 275,511
Prepaid items and deposits 2,182,444 534 2,182,978
Other assets - 2,786,819 2,786,819
Restricted cash and investments 20,606 1,789,339 1,809,945 Capital assets, not depreciable 18,347,986 11,715,956 30,063,942 Capital assets, depreciable 37,938,666 35,277,445 73,216,111 Total Assets $81,889,477 $69,753,205 $151,642,682 LIABILITIES
Accounts payable $1,144,939 $787,995 $1,932,934
Accrued interest payable 392,055 - 392,055
Due to other governments 230,052 80,525 310,577
Deferred revenue 179,857 - 179,857
Deposits 2,497,489 34,185 2,531,674
Liabilities payable from restricted assets
Due to other governments - 67,213 67,213
Revenue bonds payable due within one year
- 332,115 332,115
Accrued interest - 229,389 229,389
Noncurrent assets
Due within one year 2,136,933 318,913 2,455,846
Due in more than one year 23,803,602 11,205,999 35,009,601 Total Liabilities $30,384,927 $13,056,334 $43,441,261
Table 15.A1 Continued
Primary Government Governmental
Activities
Business-type
Activities Total
NET ASSETS
Invested in capital assets, net of related debt
$32,965,759 $35,719,964 $68,685,723 Restricted for:
Encumbrances 61,443 3,350,881 3,412,324
Public works, transportation projects
885,630 - 885,630
Police programs 9,507 - 9,507
Grant funded programs 1,842,618 - 1,842,618
Debt service 542,576 124,520 667,096
Capital projects - 90,802 90,802
Culture and recreation 38,994 - 38,994
Other purposes 105,927 - 105,927
Unrestricted 15,052,096 17,410,704 32,462,800
Total Net Assets $51,504,550 $56,696,871 $108,201,421 The accompanying notes are an integral part of these statements.
A Manageable System of Economic Condition Analysis for Governments g 405
Program Revenues Net (Expense) Revenues
Functions/Programs Expenses
Charges for Services
Operating Grants and Contributions
Capital Grants and Contributions
Governmental Activities
Business-type
Activities Total Governmental activities:
General government $2,559,258 $1,672,218 $ 28,043 $ - $ (858,997) $ - $ (858,997)
Community and
economic development
2,246,394 77,507 879,648 22,231 (1,267,008) - (1,267,008)
Public works 1,428,077 423,776 130,953 151,992 (721,356) - (721,356)
Police 6,378,778 416,363 171,732 - (5,790,683) - (5,790,683)
Fire and EMS 3,331,929 991,426 37,179 2,555 (2,300,769) - (2,300,769)
Recreation and culture 5,149,158 919,267 165,851 216,121 (3,847,919) - (3,847,919)
Interest on long-term debt 1,134,469 - - - (1,134,469) - (1,134,469)
Total governmental activities
22,228,063 4,500,557 1,413,406 392,899 (15,921,202) - (15,921,202) Business-type activities:
Water and wastewater 7,276,199 6,840,671 9,970 169,900 - (255,658) (255,658)
Stormwater 820,173 868,273 - 3,053 - 51,153 51,153
Sanitation 3,287,614 3,021,852 2,004 - - (263,758) (263,758)
Port and marina 267,412 268,533 - 61,963 - 63,084 63,084
Golf courses 363,049 336,530 - - - (26,519) (26,519)
Evanston Complex 45,471 40,922 - - - (4,549) (4,549) Total business-type
activities
12,059,918 11,376,782 11,974 234,916 - (436,246) (436,246)
Total Primary Government $34,287,981 $15,877,339 $1,425,380 $627,815 (15,921,202) (436,246) (16 ,357,448) General Revenues:
Taxes:
Property 6,477,373 - 6,477,373
Franchise 1,383,926 - 1,383,926
Utility 3,537,288 - 3,537,288
Sales 1,520,196 - 1,520,196
Other 1,523,224 - 1,523,224
Unrestricted intergovernmental aid 2,666,347 - 2,666,347 Earnings on unrestricted investments 748,524 1,013,673 1,762,197
Rentals 204,794 - 204,794
Miscellaneous 247,697 77,297 324,994
Gain on the sale of capital assets 501,167 27,071 528,238
Transfers 890,286 (890,286) -
Total General Revenues and Transfers 19,700,822 227,756 19,928,578
Change in Net Assets 3,779,620 (208,490) 3,571,130
Net Assets - Beginning 47,724,930 56,905,361 104,630,291
Net Assets - Ending $51,504,550 $56,696,871 $108,201,421
The accompanying notes are an integral part of these statements.
Table 15.A3 City of Port Hayley, Balance Sheet, Governmental Funds, June 30, 200X
General Fund
Neighborhood Improvement
Grants Fund
Nonmajor Governmental
Funds
Total Governmental
Funds ASSETS
Cash and investments $4,377,368 $3,552,041 $66,250 $6,057,986 $14,053,645
Accounts receivable 52,075 - - 208,411 260,486
Taxes receivable 5,849 - - 557,384 563,234
Accrued interest receivable 18,692 25,047 - 14,114 57,853
Notes receivable 145,932 - 889,167 523,704 1,558,803
Due from other funds 74,200 - - - 74,200
Due from other governments 113,740 108,352 67,127 931,407 1,220,625
Inventory 26,885 - - 6,755 33,640
Deposits 7,433 - 1,900,110 19,210 1,926,753
Restricted cash and investments
- - - 11,034 11,034
Total Assets $4,822,176 $3,685,440 $2,922,653 $8,330,004 $19,760,273
LIABILITIES AND FUND BALANCES Liabilities:
Accounts payable $146,317 $258,249 $8,042 $75,505 $488,113
Salaries payable 284,385 - 1,802 20,968 307,155
Other accrued liabilities - 136,678 - 4,343 141,021
Due to other governments 324 4 120 151,161 151,609
gDebt,WorkingBalances,andFinancialConditionAnalysis
Due to other funds - - 50,000 24,200 74,200
Deposits 58,559 - 1,906,562 39,985 2,005,106
Deferred revenues 306,473 - 889,167 667,741 1,863,380
Total Liabilities 796,058 394,931 2,855,694 983,902 5,030,585
Fund balances:
Reserved for:
Encumbrances 88,371 672,894 - 173,465 934,729
Inventories 26,885 - - 25,803 52,689
Capital improvements - - - 38,944 38,944
Library - - - 29,470 29,470
Arboretum - - - 9,548 9,548
Prepaid items and deposits 7,433 - - - 7,433
Unreserved, reported in:
General fund 3,903,429 - - - 3,903,429
Special revenue funds - - 66,959 4,202,440 4,269,400
Capital projects funds - 2,617,615 - 1,179,386 3,797,001
Debt service funds - - - 1,413,127 1,413,127
Permanent funds - - - 273,918 273,918
Total Fund Balances 4,026,118 672,894 66,959 9,963,717 14,729,688
Total Liabilities and Fund Balances $4,822,176 $1,067,825 $2,922,653 $10,947,619 $19,760,273 The accompanying notes are an integral part of these statements.
Note: The required reconciliation of total governmental fund balance to total governmental activities net assets is not illustrated.
AManageableSystemofEconomicConditionAnalysisforGovernmentsg409
Table 15.A4 City of Port Hayley, Statement of Revenues, Expenditures, and Changes in Fund Balances, Governmental Funds, June 30, 200X
General Fund
Neighborhood Improvement
Grants Fund
Nonmajor Governmental
Funds
Total Governmental
Funds REVENUES
Taxes $ 6,816,538 $ - $ - $4,870,957 $11,687,496
Licenses and permits 396,776 - - - 396,776
Fines and forfeitures 207,103 - - 127,498 334,602
Charges 1,670,901 - - 1,473,682 3,144,582
Intergovernmental 580,589 218,938 571,701 5,213,957 6,585,185
Investment earnings 255,385 141,359 5,392 408,726 810,861
Miscellaneous 539,098 130,454 175,274 372,884 1,217,710
Total Revenues 10,466,389 490,752 752,367 12,467,703 24,177,211
EXPENDITURES
General government $1,482,256 $ - $ - $23,381 $1,505,637
Community and economic development 1,277,207 - 484,562 686,543 2,448,312
Public works 825,638 16,047 - 60,153 901,838
Police 6,031,489 821 - 987,558 7,019,867
gDebt,WorkingBalances,andFinancialConditionAnalysis
Fire and EMS 2,396,349 - - - 2,396,349
Recreation and culture 2,966,838 18,115 - 1,160,406 4,145,359
Debt service - - - 3,500,823 3,500,823
Capital outlay 176,769 3,302,475 236,439 884,832 4,600,514
Total Expenditures 15,156,546 3,337,456 721,000 7,303,695 26,518,698
EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES
(4,690,157) (2,846,705) 31,367 5,164,008 (2,341,487)
OTHER FINANCING SOURCES (USES)
Transfers in 6,831,073 2,046,139 - 3,951,538 12,828,749
Transfers out (1,415,643) (290,400) - (10,189,624) (11,895,666)
Bond proceeds - - - 5,663,464 5,663,464
Payment to escrow agent - - - (5,416,926) (5,416,926)
Total Other Financing Sources (Uses) 5,415,430 1,755,739 - (5,991,548) 1,179,621
NET CHANGE IN FUND BALANCES 725,273 (1,090,966) 31,367 (827,540) (1,161,866)
FUND BALANCES – BEGINNING 3,300,845 4,381,476 35,592 8,173,642 15,891,555
FUND BALANCES – ENDING $4,026,118 $3,290,509 $66,959 $7,346,102 $14,729,688
The accompanying notes are an integral part of these statements.
AManageableSystemofEconomicConditionAnalysisforGovernmentsg411
Table 15.A5 City of Port Hayley, Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities, June 30, 200X
Net change in fund balances, total governmental funds (1,161,866)
Capital outlay, reported as expenditures in governmental funds, are shown as capital assets in the statement of net assets
4,601,515
Depreciation expenses on governmental capital assets included in the governmental activities in the statement of activities
(2,023,072)
The issuance of long-term debt provides current financial resources to governmental funds, but has no effect on net assets:
Long-term debt proceeds (5,663,464)
Long-term debt issuance expense 83,171
Long-term debt refunding payments to escrow agents 6,395,742
Repayment of long-term debt is reported as an expenditure in governmental funds, but is a reduction of long-term liabilities in the statement of net assets
1,507,000
The net revenues of the internal service funds are reported with governmental activities 123,852 Some governmental revenues will not be collected for several months or years after the fiscal year and
are deferred in the governmental funds
286,342
Certain items reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds
(369,599)
Changes in net assets, governmental activities 3,779,620
The accompanying notes are an integral part of these statements.
gDebt,WorkingBalances,andFinancialConditionAnalysis
Table 15.A6 City of Port Hayley, Statement of Revenues, Expenses, and Changes in Fund Net Assets, June 30, 200X Business-type Activities-Enterprises Funds
Governmental Activities—
Internal Service Fund Water and
Wastewater Stormwater Sanitation
Nonmajor Enterprise Funds
Total Enterprise
Funds OPERATING REVENUES
Sales and concessions $3,129,306 $ - $ - $ 54,041 $ 3,183,347 $ 3,206
Service charges and fees 3,588,246 868,273 3,021,852 259,837 7,738,207 5,873,661
Rentals and parking - - - 332,005 332,005 635,459
Other 4,232 - - 102 4,334 -
Total Revenues 6,721,783 868,273 3,021,852 645,985 11,257,893 6,512,326
OPERATING EXPENSES
Personal services and benefits 1,748,824 330,217 1,155,854 313,032 3,547,926 1,676,708 Supplies, services and claims 3,931,417 198,373 1,662,201 186,609 5,978,599 4,084,801
General administrative charges 388,800 40,200 204,600 44,801 678,401 -
Depreciation 887,758 214,228 231,758 121,678 1,455,422 837,394
Total Expenses 6,956,799 783,017 3,254,413 666,119 11,660,349 6,598,904
OPERATING INCOME (LOSS) (235,016) 85,255 (232,561) (20,134) (402,456) (86,577)
(Continued)
AManageableSystemofEconomicConditionAnalysisforGovernmentsg413
Business-type Activities-Enterprises Funds
Governmental Activities—
Internal Service Fund Water and
Wastewater Stormwater Sanitation
Nonmajor Enterprise Funds
Total Enterprise
Funds NONOPERATING REVENUES (EXPENSES)
Intergovernmental revenues 15,497 897 2,004 61,963 80,361 -
Pass-through grant - - - (3,567) (3,567) -
Earnings on investments 767,414 124,482 116,978 8,867 1,017,741 188,641
Interest expense (205,599) (24,174) - (3,135) (232,908) (15,316)
Financing fees and premiums (1,232) - - (2,337) (3,569) -
Amortization of bond discount (4,341) - - (1,585) (5,926) -
Gain (loss) on sale of fixed assets 7,061 2,133 17,877 - 27,071 45,244
Miscellaneous revenue 60,353 885 8,955 7,104 77,297 81,040
Total Nonoperating Revenues (Expenses) 639,153 104,224 145,814 67,309 956,500 299,609 INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS 404,137 189,479 (86,747) 47,175 554,044 213,032
CAPITAL CONTRIBUTIONS 164,363 2,156 (1,192) - 165,327 9,840
TRANSFERS IN - 169,000 - 24,000 193,000 -
TRANSFERS OUT (668,460) (123,436) (233,524) (56,664) (1,082,083) (44,000)
NET CHANGE IN FUND BALANCES (99,960) 237,200 (321,463) 14,511 (169,712) 178,872
FUND BALANCES - BEGINNING 40,965,394 10,043,607 3,914,593 2,086,113 57,009,708 6,449,450 FUND BALANCES - ENDING $40,865,434 $10,280,807 $3,593,130 $2,100,624 $56,839,995 $6,628,322 The accompanying notes are an integral part of these statements.
gDebt,WorkingBalances,andFinancialConditionAnalysis
Table 15.A7 City of Port Hayley, Note Disclosure of Changes in Capital Assets
Capital asset activity for the year ended June 30, 200X, was as follows:
Beginning Balance Additions Retirements Ending Balance Governmental activities:
Capital assets not being depreciated:
Land $12,260,684 $ 828,246 $ 85,201 $13,003,729
Construction in progress 4,179,128 4,290,673 3,125,544 5,344,257
Total capital assets not being depreciated 16,439,812 5,118,919 3,210,745 18,347,986 Capital assets being depreciated:
Buildings and systems 29,994,675 351,964 5,875 30,340,764
Improvements and infrastructure 23,061,293 1,668,920 48,867 24,681,346
Machinery and equipment 12,917,677 1,001,161 735,755 13,183,083
Total capital assets being depreciated 65,973,646 3,022,045 790,497 68,205,193 Less accumulated depreciation for:
Buildings and systems 7,996,958 749,357 5,115 8,741,200
Improvements and infrastructure 12,465,547 811,369 39,000 13,237,916
Machinery and equipment 7,668,466 1,335,535 716,590 8,287,411
Total accumulated depreciation 28,130,971 2,896,261 760,705 30,266,527 Total capital assets being depreciated, net 37,842,675 125,784 29,792 37,938,666 Governmental activities capital assets, net $54,282,487 $5,244,703 $3,240,537 $56,286,652
(Continued)
AManageableSystemofEconomicConditionAnalysisforGovernmentsg415
Capital asset activity for the year ended June 30, 200X, was as follows:
Beginning Balance Additions Retirements Ending Balance Business-type activities:
Capital assets not being depreciated:
Land $1,119,617 $ - $ - $ 1,119,617
Construction in progress 6,621,090 5,329,372 1,354,123 10,596,339
Total capital assets not being depreciated 7,740,708 5,329,372 1,354,123 11,715,956 Capital assets being depreciated:
Buildings and systems 1,514,719 23,577 - 1,538,295
Improvements other than buildings 2,086,817 46,196 2,052 2,130,961
Machinery and equipment 4,047,075 131,675 64,485 4,114,265
Utility systems 49,711,708 1,116,129 909,455 49,918,382
Total capital assets being depreciated 57,360,319 1,317,576 975,992 57,701,903 Less accumulated depreciation for:
Buildings and systems 521,985 60,522 - 582,507
Improvements other than buildings 1,396,327 72,510 2,052 1,466,785
Machinery and equipment 2,856,784 203,070 44,439 3,015,415
Utility systems 16,366,252 1,037,129 43,629 17,359,752
Total accumulated depreciation 21,141,347 1,373,230 90,119 22,424,458
Total capital assets being depreciated, net 36,218,972 (55,654) 885,872 35,277,445 Business-type activities capital assets, net $43,959,679 $5,273,718 $2,239,996 $46,993,402 Note: The required explanation of how depreciation was allocated to functional expense categories is not illustrated.
gDebt,WorkingBalances,andFinancialConditionAnalysis
Table 15.A8 City of Port Hayley, Note Disclosure of Changes in Long-term Liabilities
The following is a summary of changes in long-term liabilities of the city for the fiscal year ended June 30, 200X. (dollars in thousands) Beginning
Balance Additions Retirements
Ending Balance
Due Within One Year Governmental activities:
Bonds and notes payable:
General obligations bonds $ 140 $ - $ (140) $ - $ -
Revenue bonds 19,952 3,464 (5,073) 18,343 1,286
Notes 5,198 1,708 (2,268) 4,638 342
Total bonds and notes payable 25,289 5,172 (7,480) 22,981 1,628
Claims and judgments 1,935 483 (585) 1,833 437
Compensated absences 1,066 130 (70) 1,126 72
Total long-term liabilities, governmental activities $28,290 $5,786 $(8,135) $25,941 $2,137 Business-type activities:
Bonds and notes payable:
Revenue bonds $10,145 $ - $(347) $ 9,798 $243
Notes 1,500 - (235) 1,265 53
Total bonds and notes payable 11,645 - (581) 11,063 296
Compensated absences 458 27 (24) 462 23
Total long-term liabilities, business-type activities $12,103 $27 $(605) $11,525 $319 Note: The required explanation of which governmental funds typically have been used to liquidate other long-term liabilities in prior years is not illustrated.
AManageableSystemofEconomicConditionAnalysisforGovernmentsg417
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A Manageable System of Economic Condition Analysis for Governments g 419