financial reporting the changing environment and how to respond karin smith, heinfeld, meech &...
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Financial Reporting The Changing Environment and How to Respond
Karin Smith, Heinfeld, Meech & Co.Alaska GFOA, November 16, 2015
•Merriam-Webster’s Dictionary defines
transparent as “free from pretense or deceit,
easily detected or seen through, readily
understood, characterized by visibility or
accessibility of information especially
concerning business practices.”
What is Transparency?
Why do we need Transparency?
Open and honest communication to stakeholders
Clarity of financial picture of the Organization
Public requests and inquiry
Communicate how the Organization receives its funding sources and spends each dollar
Build trust in your community
Who
What
WhenWhy
How
Effective Communication
Who
What
WhenWhy
How
Effective Communication
ENGAGEMENT
Who Is Your Audience?
WHO.
WHAT
WHEN
WHY
HOW
City Council MembersEmployeesCommunity MembersFuture Community MembersBusiness LeadersReal Estate AgentsElected Officials
Who Is Your Audience?
WHO.
WHAT
WHEN
WHY
HOW
City Council MembersEmployeesCommunity MembersFuture Community MembersBusiness LeadersReal Estate AgentsElected Officials
What Are Their Needs?
WHO.
WHAT
WHEN
WHY
HOW
What Do You Communicate
WHO.
WHAT
WHEN
WHY
HOW
Financial Statements Audit opinion
Audit Findings Control deficiency Significant deficiency Material weakness
What Do You Communicate
WHO.
WHAT
WHEN
WHY
HOW
The Good Help Management address needs
Staffing shortages, training, technology issues Identify problem areas
The Bad Critical, technical language used in findings Expectation of no audit findings False evaluation of the effort of staff
Are Audit Findings Bad?
WHO.
WHAT
WHEN
WHY
HOW
TerminologySimple, Real World ExamplesWhat People Can Relate ToKey Decision PointsBuilt In AssumptionsWho Is Deciding
What Do You Communicate
WHO.
WHAT
WHEN
WHY
HOW
Statutory RequirementsCouncil RequirementsCommunity Expectations
What Do You Communicate
WHO.
WHAT
WHEN
WHY
HOW
When To Communicate
WHO.
WHAT
WHEN
WHY
HOW
When do you begin the communication process?
What is your timeline? Statute requirements Council requirements Community expectations
When To Communicate
WHO.
WHAT
WHEN
WHY
HOW
Why Communicate?
WHO.
WHAT
WHEN
WHY
HOW
Why is the budget important to these audiences?
City Council Members Employees Community Members Future Community Members Business Leaders Real Estate Agents Elected Officials
Why Communicate?
WHO.
WHAT
WHEN
WHY
HOW
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective StrategiesIdentify what the big issues are
Cost driversFinancial forecasting
What are the financial policiesDo you have approved policies?Share them each year
Strategic plan Does it need to be updated?
Education starts with basic termsOpen Data
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Financial Communication Principles
Transparent
Easy to understand
Concise
Accurate
Complete
Timely
Available
Comparative
Effective Strategies Create, publish, and communicate a
CAFR annually Transmittal letter Statistics – 10 years of trend data
Effective Strategies Create, publish public financial reports
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Popular Annual Financial Reports
WHO.
WHAT
WHEN
WHY
HOW
PopularAnnual
FinancialReport
The GFOA established the Popular Annual
Financial Report (PAFR) program in 1991 Why is it called
“Popular”? Definition: Suitable to common
people; easy to comprehendPromotes the
preparation of high quality financial reports
Popular Annual Financial Reports
WHO.
WHAT
WHEN
WHY
HOW
Presents condensed financial data in
easily understandable
manner
Unaudited and presented on
non-GAAP basis
Information derived from
CAFR
Designed for the general
public
Do not need to be an accountant to understand!
Popular Annual Financial Reports
WHO.
WHAT
WHEN
WHY
HOW
•Educate the community on the organization’s financial position
Financial Position
•Report on sources of revenue in a community friendly, easy to understand manner
Revenues
•Report on general fund expenditures and other funds wish to highlight
Expenditures
•Educate community on primary and secondary tax rate calculations
Tax Rates
Popular Annual Financial Reports
WHO.
WHAT
WHEN
WHY
HOW
•Showcase accomplishments and celebrations
Accomplishments
•Summarize most requested information
Requested Information
•Can be used to comply with reporting requirements in some entities’ charters
Local Requiremen
ts
•Inform the community of future initiatives prior to an election
Future Initiatives
Effective Strategies Critical Items To Understand
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Statement of financial position (balance sheet)
Statement of activities (income statement)
Cash flow forecast
Actual results compared to budget
Effective Strategies Graphs are often easier to understand
than columns of numbers, and can provide a useful vehicle for sharing trending information
Use of ratios, which combine two or more pieces of financial data to provide a more comprehensive view
Use summarized information for income and expenses, rather than providing detailed line items
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies The Council set the tone for all budget
communications by adopting a “Three Rs” plan, focused on restoring the City’s financial stability, renewing trust, and refocusing the district on the education of its students. They publicly announced the plan, constantly demonstrated how they were implementing the plan, and reinforced how their key decision-making reflected their commitment to the plan.
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Creating targeted messages, delivered
using a team approach. Work with the City Manager, Finance Director and Council Chair to develop a clear and concise presentation, which they co-present
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Build a year-round communications plan
using every available tool. Include face-to-face meetings, open forums, print newsletters, newspaper columns, op-ed pieces, and electronic communications (web sites, e-mail, voicemail, cable TV). If it makes sense, offer to go on local radio talk shows.
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Consider adding a “Did You Know?” or
“Just the Facts” link to your web site to specifically address budget issues. Post only clear, factual information.
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Website Strategies http://spending.data.montgomerycountym
d.gov/#/
http://openbooks.az.gov/app/transparency/index.html
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
How to Communicate
Effective Strategies Social Media
Facebook page Blogs
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Newsletter Strategies Informational topics year round
How are cities funded What are the restrictions of funds Transportation funding Understanding your property tax bill
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Election Pamphlets
Add FAQs to your pamphlet Council pro statements
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Seek and respond to question and
feedback from taxpayers. Don’t wait to be invited. Call and offer to present the budget program. Include time for Q & A and provide feedback cards with a contact e-mail, phone number and web site.
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Respond swiftly to correct misinformation.
Correct any misinformation reported in the media before it is repeated in subsequent articles. Enlist your Key Communicators to squelch rumors.
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Explore local cable TV options. If your
district is capable of producing good quality programs, consider a short series explaining the budget, the process and the benefits to students and the community. Make it engaging and brief.
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
Effective Strategies Be honest Be forthright Be short Be concise Provide clarity Keep it simple Provide training Identify who is responsible for
communicating information within your organization
How to Communicate
WHO.
WHAT
WHEN
WHY
HOW
No single financial reporting approach or format works for every organization. Take the time to consider the audience and their level of financial expertise when determining how to convey the information they need to fulfill their responsibilities.
Closing
ENGAGEMENT
Karin M. Smith, MBA, SFO, CFE(602) 277-9449 x327
karins@heinfeldmeech.com
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