communicating financial condition to elected officials in ... › lgcreport › doc › how model...

4 p o p u l a r g ov e r n m e n t

T he public expects much of itselected officials in local govern-ment, who in many cases assume

their positions facing a steep learningcurve on a wide range of complex is-sues. A critical part of this learningcurve involves financial management, inlocalities where elected officials possessthe ultimate responsibility for the fiscalmatters of their organizations.1 To carryout this responsibility, the law requiresan annual independent audit of thefinancial statements and requires thatthe auditor be selected by and reportdirectly to the governing board.2 Onegoal of this process is for the locality toreceive an “unqualified audit opinion,”meaning that its financial statementswere prepared in conformity withgenerally accepted accounting principles(GAAP) and present, in all materialrespects, the financial position of theorganization. Another goal, which maybe overlooked by elected officials, is toanalyze and interpret the financialstatements to determine the financialcondition of the local government.

Administrators play an extremelyimportant role in helping elected offi-cials manage the fiscal matters of localgovernments. They ensure that profes-sional management practices are used tobudget and account for the financialresources of the organization, they pre-pare monthly financial reports for elected officials to review budget-to-

actual variances, and they ensure thatannual financial statements are pre-pared in conformity with GAAP. In1999, as part of their role, they wereresponsible for implementing Govern-mental Accounting Standards Board(GASB) Statement No. 34, Basic Finan-cial Statements—and Management’sDiscussion and Analysis—for State andLocal Governments. This pronounce-ment expanded the financial reportingmodel for local governments to includegovernment-wide and fund statements.One reason for expanding the modelwas to provide a more complete pictureof financial position.3 Another reasonwas to increase a local government’sability to compare itself financially withother local governments and thus tohelp readers of financial statementsevaluate the financial condition of localgovernments through benchmarking.4

GASB Statement No. 34 now hasbeen fully implemented in North Caro-

lina local governments, so the naturalnext step for administrators is to takeadvantage of the expanded model offinancial reporting and provide electedofficials with more robust informationon the financial condition of their localgovernments. The purpose of this articleis to present administrators with an ap-proach for analyzing, interpreting, andcommunicating financial condition toelected officials. First, we define financialcondition, responding to the lack ofagreement on this concept in our profes-sion.5 Next, we present the criteria thatwe identified for creating our approachto evaluating financial condition. Thenwe describe how the approach relates tothe expanded model of financial report-ing, the dimensions and the indicatorsthat we selected to measure financialcondition, and the “dashboard,” or thegauges, that are needed to communicatefinancial condition to elected officials ina written, numerical, and visual format.

P O P U L A R G O V E R N M E N T

Communicating Financial Condition to Elected Officials in Local GovernmentWilliam C. Rivenbark, Dale J. Roenigk, and Gregory S. Allison

Rivenbark is a School of Government facultymember specializing in local governmentadministration. Roenigk is the director ofthe North Carolina Benchmarking Pro-ject. Allison is a School faculty memberspecializing in governmental accountingand financial reporting. Contact them [email protected], [email protected], and [email protected].

f a l l 2 0 0 9 5

Defining Financial Condition

The definitions of financial condition inthe professional literature are eitherspecific in nature or broad in scope.6

Therefore, in search of middle ground,we turned to the work of Robert Berneand Richard Schramm to guide ourapproach for evaluating financialcondition.7 These scholars maintain thatthere are two basic reasons for howresources are presented in financialstatements: to report on the flow ofresources during a given period and toreport on the stock of resources at agiven point. Operating statementsreport on the inflow and the outflow offinancial resources during the fiscalyear. Balance sheets report on the stockof assets, liabilities, and net assets orfund balances at the end of the fiscalyear. We concluded that a logicaldefinition of financial condition wouldalign with resource flow and stock asreported in annual financial statements.

Berne offers a definition of financialcondition that is closely related to theconcept of resource flow and stock: theprobability that a government will meet,currently and in the future, its financialobligations to creditors, consumers, em-ployees, taxpayers, suppliers, constitu-ents, and others as they become due,and its service obligations to constituents.8

The probability that a local governmentcan meet these obligations, as interpretedfrom financial statements, increases withadequate resource flow to meet currentobligations and with adequate resourcestock to meet obligations over time.

An implied but missing element ofBerne’s definition is provision of capitalassets. In response to this and otherconsiderations, we offer the followingdefinition of financial condition: a localgovernment’s ability to meet its ongoingfinancial, service, and capital obligationsbased on the status of resource flow andstock as interpreted from annual finan-cial statements.

Although a local government’s abilityto meet its ongoing financial, service, andcapital obligations is broad in scope, thespecific component of our definition ishow a local government’s ability tomeet them aligns with resource flowand stock as interpreted from annualfinancial statements.

Another important aspect of ourdefinition is that it focuses solely onfinancial condition. One of the mostfrequently cited definitions of financialcondition comes from the InternationalCity/County Management Association(ICMA): a government’s ability to fi-nance its services on a continuing basis.9

This definition aligns with financialfactors that show financial conditionand with economic factors that affectfinancial condition. However, this align-ment represents a different form ofanalysis and requires data from sourcesoutside annual financial statements.10

Criteria for Creating an Approachto Evaluating Financial Condition

Similar to the situation with definingfinancial condition, our profession doesnot have an agreed-on approach foranalyzing, interpreting, and communi-cating financial condition in local gov-ernment. And again, the approachesthat exist are either specific in nature orbroad in scope. As an integral part ofthe development of our model, we re-viewed and analyzed approaches con-tained in the literature. Ken Browncreated the 10-point test (which wasupdated in response to GASB StatementNo. 34) as an easy-to-use approach toevaluate the financial condition of alocal government.11 An advantage of the10-point test is the use of benchmarkdata for interpreting each financial in-dicator. A disadvantage is the limitedanalysis across all major funds.

The ICMA’s model, on the other hand,provides a comprehensive approach toevaluating the financial condition of alocal government, similar to bond-rating agencies’ approach to evaluatinga local government’s ability to managesystematic and unsystematic risk in therepayment of debt over time.12 The dis-advantage of this approach is the sheernumber of indicators used to analyzeboth financial and economic factors offinancial condition, making it a feasibletool for larger local governments only.

Because of the broad continuum ofcurrent methods for evaluating financialcondition in local government, we startedwith the following criteria to guide ourapproach: systematicness, comprehen-siveness, flexibility, comparability, and

manageability. We based the criteria on a literature review and our ownprofessional backgrounds.

Designing a systematic approach toevaluating financial condition was para-mount, given the expanded financial-reporting model created by GASB Statement No. 34. More specifically, the approach had to systematicallyevaluate the financial condition of theorganization as a whole as reported ingovernment-wide statements, andsystematically evaluate the financialcondition of each major fund.

The approach also had to be com-prehensive, providing a thorough analy-sis of resource flow and stock at thegovernment-wide and fund levels of theorganization. The focus on resourceflow and stock supported our definitionof financial condition.

The criterion of flexibility acknowl-edged that administrators might want toaugment our approach with additionalfinancial indicators or even replace afinancial indicator that we had selectedwith another. We have used the quickratio to analyze the liquidity of a localgovernment, for example, whereas otherssupport the use of the current ratio.13

Although we relied on the most prevalentindicators in the literature, individualcircumstances might warrant change.

Comparability was one of the primaryreasons for the passage of GASB State-ment No. 34. Calculating a financialindicator like the quick ratio at one pointwould provide only limited information.Calculating it over time for trend analysisand benchmarking it against other localgovernments would provide the neces-sary context for interpreting the results.The reality is that evaluating financialcondition is relative, requiring com-parative information for analyzing,interpreting, and communicating it toelected officials.

Evaluating financial condition alsohad to be manageable, unlike the ICMA’smodel. Local governments of all sizeshad to be able to implement it accuratelyfrom financial data taken from their an-nual financial statements—consistent withour definition of financial condition—and had to have the organizational re-sources to manage it over time. Anotherimportant aspect of this criterion wasthe ability to use our approach success-


fully to communicate financial conditionto elected officials. Doing so would re-quire a careful balance of financial indi-cators selected for the evaluation. If theapproach relied on a limited number offinancial indicators, then communicatinga comprehensive analysis to electedofficials would not be possible. If theapproach relied on too many financialindicators, then communicating theanalysis would be unwieldy.

Understanding the Financial Reporting Model

Because our approach is designed to besystematic across the government-wideand fund statements, to use it, electedofficials must possess some under-standing of the model of financialreporting used in local government (forthe model in which our approach isapplied, see Figure 1). Elected officialsmust have a basic understanding of threeimportant aspects of this model beforethey can be expected to use financialcondition information effectively. First,financial statements in local govern-ment have two levels of reporting, thegovernment-wide level and the fund

level. Second, financial statements forgovernment-wide activities and enter-prise funds measure economic resourcesusing the accrual basis of accounting,whereas financial statements for gov-ernmental funds measure financialresources using the modified accrualbasis of accounting.14 Third, all NorthCarolina counties and municipalities arerequired to have a general fund, whichis the main operating fund and one ofseveral potential governmental funds.However, not all local governmentshave enterprise funds, which are used toaccount for the resource flow and stockof utilities (for example, water, waste-water, electricity, and natural gas).

Two important resources for under-standing the aspects of the financialreporting model in local government

appear in previous issues of PopularGovernment: “How to Read Govern-mental Financial Statements, Part 1,” by Gregory S. Allison, which explainsthe fund structure of governmentalaccounting; and “How to ReadGovernmental Financial Statements,Part 2,” also by Allison, which explainsthe financial statements for govern-mental activities and business-typeactivities prepared at the government-wide level.15 The purpose of thosearticles is not to make elected officialsexperts in governmental accounting. It is to provide them with basic informa-tion on reading financial statements,which will be extremely useful in com-municating financial condition to them. In other words, they need enoughinformation to ask questions about the

Figure 1. Revised Financial-Reporting Model for Analysis of Financial Condition

Primary Government

Government-Wide Level Governmental Activities Business-Type Activities(Economic Resources) (Economic Resources)

Fund Level Governmental Funds Enterprise Funds(Financial Resources) (Economic Resources)

Table 1. Resource Flow for Government-Wide Activities and Enterprise Funds (Focusing on Economic Resources and Accounted for on an Accrual Basis)

Government-Wide Activities Enterprise Funds

Financial Dimension Description Financial Indicator Calculation Data Source Calculation Data Source Interpretation

Interperiod Equity Addresses whether government Total margin ratio Total resource inflow (program revenues Statement of activities Total resource inflow (operating and Statement of revenues, expenses, Ratio of 1.0 or higher indicateslived within its financial means plus total general revenues and net nonoperating revenues plus transfers and changes in fund net assets that government lived within itsduring fiscal year transfers) divided by total resource in) divided by total resource outflow financial means.

outflow (total expenses) (

Financial Performance Addresses extent to which govern- Percentage change in net assets Change in net assets divided by net Statement of activities Change in net assets divided by net Statement of revenues, expenses, Positive percentage change ment’s financial position improved assets, beginning assets, beginning and changes in fund net assets indicates that government’sor deteriorated as result of fresource flow

Self-Sufficiency Addresses extent to which service Charge-to-expense ratio Charges for services (fees, fines, and Statement of activities Charges for services divided by Statement of revenues, expenses, Ratio of 1.0 or higher indicatescharges covered total expenses charges for services) divided by total operating and nonoperating expenses and changes in fund net assets that service is self-supporting.

expenses2

Financing Obligation Addresses service flexibility, or Debt service ratio Debt service (principal and interest Statement of activitiesamount of total expenses committed payments on long-term debt) divided payments on long-term debt) divided and changes in fund net assetsto annual debt service by total expenses plus principal4

1. Trend and benchmark data are needed for a more robust interpretation of each financial indicator.2. Depending on how self-sufficiency is defined for government-wide activities, some local governments may choose to use total program revenues

rather than charges for services as the numerator.3. Self-sufficiency may be defined as below 1.0 for selected enterprise funds, responding to state law and local policy.4. Principal is added to the denominator because it is not included in expenses.

f a l l 2 0 0 9 7

financial position and condition of thelocal government.

Figure 1 does not contain fiduciaryfunds because the resources accountedfor in pension trust, investment trust,private-purpose trust, and agency fundsare owned by parties other than thelocal government.

Figure 1 also does not contain inter-nal service funds, one of the two typesof proprietary funds (the other typebeing enterprise funds) because theyinherently create redundancy in finan-cial reporting.16 To overcome this prob-lem, the accumulated resources of thesefunds are disbursed back to either gov-ernmental activities or business-typeactivities at the end of the fiscal year onthe basis of which group of activitiesused them the most. The profits or thelosses of these funds then are dividedbetween governmental activities andbusiness-type activities on the basis ofactual use. We acknowledge that localgovernments may want to use our ap-proach to evaluate the financial con-dition of selected internal service fundson a case-by-case basis. Internal servicefunds that account for activities like fleetservices may be appropriate for thisform of analysis. An actuarial analysis

may be more appropriate for internalservice funds that account for activitieslike health benefits, given the knownand unknown risks involved with them.

Selecting Financial Dimensionsand Indicators

Fortunately theliterature contains alarge number offinancial dimensionsand indicators tochoose from in eval-uating financialcondition.17 Our taskwas to pare themdown so that our approach would resultin a comprehensive financial evaluation,but be manageable for localgovernments of all sizes in NorthCarolina. To begin selection, we usedour definition of financial condition,which focuses on the status of resourceflow and stock as interpreted fromannual financial statements. We thenidentified fundamental financialdimensions that support the analysis ofresource flow and stock.

Our intent was to identify one set offlow indicators and one set of stock

indicators for evaluating the financialdimensions that we selected. Doing sowas not possible, however, given thatcertain financial statements measureeconomic resources, whereas otherstatements measure financial resources.We responded by selecting one set offlow and stock indicators for evaluating

the financial condition ofgovernment-wideactivities and enterprisefunds, given that theirfinancial statementsmeasure economicresources. We thenselected another set offlow and stock indicators

for evaluating the financial condition ofgovernmental funds, given that theirfinancial statements measure financialresources. Although some overlap existsbetween the two sets of flow and stockindicators, there are some fundamentaldifferences between them because of theaccounting differences.18

Evaluating the Financial Condition of Government-Wide Activities andEnterprise FundsWe selected four financial dimensionsand four financial indicators for eval-

Activities Enterprise Funds

Data Source Calculation Data Source Interpretation1

Statement of activities Total resource inflow (operating and Statement of revenues, expenses, Ratio of 1.0 or higher indicatesnonoperating revenues plus transfers and changes in fund net assets that government lived within itsin) divided by total resource outflow financial means.(operating and nonoperating expenses plus transfers out)

Statement of activities Change in net assets divided by net Statement of revenues, expenses, Positive percentage change assets, beginning and changes in fund net assets indicates that government’s

financial position improved.

Statement of activities Charges for services divided by Statement of revenues, expenses, Ratio of 1.0 or higher indicatesoperating and nonoperating expenses and changes in fund net assets that service is self-supporting.3

Statement of activities5 Debt service (principal and interest Statement of revenues, expenses, Service flexibility decreases as payments on long-term debt) divided and changes in fund net assets7 more resources are committedby operating and nonoperating to annual debt service.expenses plus principal6

5. Principal and interest payments on long-term debt for governmental activities are located on the statement of revenues, expenditures, and changes infund balances. Principal payments on long-term debt for business-type activities are located in the notes to financial statements. Interest payments onlong-term debt for business-type activities are located on the statement of revenues, expenses, and changes in fund net assets.

6. Principal is added to the denominator because it is not included in expenses. 7. Principal payments on long-term debt for enterprise funds are located in the notes to financial statements. Interest payments on long-term debt for

enterprise funds are located on the statement of revenues, expenses, and changes in fund net assets.

North Carolina local govern-ments of all sizes will findour approach to evaluatingfinancial condition compre-hensive, but manageable.


uating resource flow for government-wide activities and enterprise funds (see Table 1). The first dimension, inter-period equity, addresses whether agovernment lived within its meansduring the fiscal year.19 The total marginratio is used to evaluate this dimension.It represents the total inflow of re-sources divided by the total outflow ofresources for government-wide activitiesand for enterprise funds. A ratio of 1.0 or higher indicates that thegovernment lived within its means forthe respective activity or fund. Forgovernment-wide activities, resourceinflow includes the net of transfers inand out between governmental activitiesand business-type activities. For theenterprise funds, transfers in from other funds are included as resourceinflow, and transfers out to other fundsare included as resource outflow. Theseassumptions are consistent with theGAAP reporting format.

Whereas the total margin ratioanalyzes the relationship between totalresources available and total resourcesconsumed, the financial indicator ofpercentage change in net assets used toevaluate our second financial dimen-sion, financial performance, providesfeedback on the extent to which agovernment’s net assets improved ordeteriorated as a result of resourceflow.20 A positive percentage change

indicates that a government’s financialposition improved from the resourceflow that occurred during the fiscalyear. Periodic modest fluctuations aregenerally to be expected. Fluctuationsthat are significant in nature (in eitherdirection) should be obvious andevaluated accordingly.

The financial dimension of self-sufficiency addresses the extent to whichthe government used service charges tocover total expenses. This dimension isespecially important to business-typeactivities and to enterprise funds, forwhich the goal often is to cover totalexpenses on a charge-for-service basis.The charge-to-expense ratio is used toanalyze this dimension. A ratio of 1.0 orhigher indicates that the activity or thefund was self-sufficient.

An argument could be made that thisfinancial dimension is not applicable forgovernmental activities because govern-mental services with public-good char-acteristics are not designed to be self-supporting. However, elected officialsand administrators often are interestedin the mix between general taxation anduser-fee revenue when preparing andadopting budgets for the forthcomingfiscal year. To this end, the financial-indicator calculation does not includegrants and contributions, which are aninherent part of program revenues in thegovernment-wide financial statements.

Our final dimension for resourceflow for government-wide activities andenterprise funds is financing obligation.This dimension is analyzed with thedebt service ratio, which is calculated bydividing annual debt service of principaland interest payments by total expensesplus principal. Because of their measure-ment focus, both government-wideactivities and enterprise funds do notreport principal repayments on debt asan expense. To achieve a proper calcu-lation of this debt service ratio, theprincipal amounts must be included inboth the numerator and the denomina-tor. The purpose of this ratio is to provide feedback on service flexibility,which decreases as more resources arecommitted to annual debt service.

We selected four financial dimensionsand four financial indicators for eval-uating resource stock for government-wide activities and enterprise funds (seeTable 2). An advantage of the stockindicators over the flow indicators isthat they tend to be more recognizablein the profession because they are asso-ciated with the balance sheet, whichmore often is used to evaluate financialcondition in the public and privatesectors. In other words, balance sheetsreport on equity, or net position, at agiven point.

Liquidity is the financial dimensionused to analyze an organization’s ability

Table 2. Resource Stock for Government-Wide Activities and Enterprise Funds (Focusing on Economic Resources and Accounted for on an Accrual Basis)

Government-Wide Activities Enterprise Funds

Financial Dimension Description Financial Indicator Calculation Data Source Calculation Data Source Interpretation

Liquidity Addresses government’s ability to Quick ratio Cash and investments divided by Statement of net assetsmeet short-term obligations current liabilities (not including c

deferred revenue) deferred revenue)

Solvency Addresses government’s ability to Net assets ratio Unrestricted net assets divided by Statement of net assets Unrestricted net assets divided by Statement of net assets— High ratio suggests that govern-meet long-term obligations total liabilities5

Leverage Addresses extent to which total assets Debt-to-assets ratio Long-term debt divided by total assets Statement of net assets Long-term debt divided by total assets Statement of net assets— High ratio suggests that govern- are financed with long-term debt p

Capital Addresses condition of capital assets Capital-assets condition ratio 1.0 – (accumulated depreciation divided by Notes to financial 1.0 – (accumulated depreciation divided Notes to financial statements High ratio suggests that govern- as defined by remaining useful life capital assets being depreciated) statements by capital assets being depreciated) ment is investing in capital assets.

1. Trend and benchmark data are needed for a more robust interpretation of each financial indicator. 2. Deferred revenues are located either on the statement of net assets or in the notes to financial statements. 3. The Local Government Commission uses a different ratio for calculating the quick ratio for enterprise funds: current assets (less inventory and

prepaid expenses) divided by current liabilities.4. Deferred revenues are located either on the statement of net assets—proprietary funds, or in the notes to financial statements.

f a l l 2 0 0 9 9

Activities Enterprise Funds

Data Source Calculation Data Source Interpretation1

Statement of net assets2 Cash and investments divided by Statement of net assets— High ratio suggests that govern-current liabilities (not including proprietary funds4 ment is able to meet short- termdeferred revenue)3 obligations.

Statement of net assets Unrestricted net assets divided by Statement of net assets— High ratio suggests that govern-total liabilities proprietary funds ment is able to meet long-term

obligations.

Statement of net assets Long-term debt divided by total assets Statement of net assets— High ratio suggests that govern- proprietary funds ment is overly reliant on debt

for financing assets.

Notes to financial 1.0 – (accumulated depreciation divided Notes to financial statements High ratio suggests that govern- statements by capital assets being depreciated) ment is investing in capital assets.

5. The value of unrestricted net assets for governmental activities often is negative for North Carolina counties because the value of school assetsfinanced with county debt is not included on the statement of net assets. Although the interpretation of the financial indicator remains the same,the fact that these assets are not included should be footnoted for explanation.

to meet short-term obligations. It is cal-culated with the quick ratio: cash andinvestments divided by current liabil-ities. A high ratio suggests that thegovernment is more likely to meet itsshort-term obligations.

Solvency, on theother hand, is thefinancial dimensionused to analyze anorganization’s abilityto meet long-termobligations. It is calcu-lated with the net as-sets ratio: unrestrictednet assets divided bytotal liabilities. As with the quick ratio,a high ratio suggests that the govern-ment is more likely to meet long-termobligations.

Some advocate using total assets asthe denominator for this calculationrather than total liabilities.21 We believethat standardizing unrestricted net assetswith total liabilities provides a strongerindication of an organization’s ability tomeet long-term obligations. Furthermore,we believe that restricted net assetsshould not be a part of this equationbecause such assets are typically notdirectly related to an entity’s ability tomeet current or long-term obligations.

Leverage is the financial dimensionthat addresses the extent to which totalassets are financed with long-term debt.The financial indicator used to analyzethis dimension is debt-to-assets ratio:

long-term debt divided by total assets. If a government becomes too reliant ondebt financing to secure capital assets, itmay compromise service flexibility as itcommits more resource flow to annualdebt-service obligations. An overreliance

on debt also may haveunfavorable implicationsfor bond ratings.

This financial indi-cator may present chal-lenges for North Carolinacounties because schooldebt is included on theirfinancial statements andthe value of school in-

frastructure financed with that debt isnot. One approach to getting aroundthis problem is to use the flexibilitycriterion, eliminating or replacing thedebt-to-asset ratio. The preferredapproach is to calculate the indicator on the basis of the data contained in the financial statements, footnoting the discrepancy for the reader.22 Thereality is that counties are responsiblefor school debt but do not own therelated infrastructure.

Capital, the final financial dimensionof resource stock for government-wideactivities and enterprise funds, is used to analyze the condition of capital assetsas defined by their remaining useful life.The financial indicator to measure thisdimension is capital-assets conditionratio. The data used for this calculationare located in the capital assets section

of the notes to financial statements. Tocalculate the indicator, accumulateddepreciation is first divided by capitalassets subject to depreciation. The re-sulting percentage is then subtractedfrom 1.0, which results in the remaininguseful life of the total capital assetsbeing depreciated. A high ratio suggeststhat a government is investing in itscapital assets.

Evaluating the Financial Condition of Governmental Funds We selected three financial dimensionsand three financial indicators for eval-uating resource flow for governmentalfunds (see Table 3). This evaluationapplies primarily to the general fund. Attimes a local government may want toanalyze the financial condition of specialrevenue funds, debt service funds,capital project funds, or permanentfunds. Our indicators may be used toevaluate the financial condition of thesefunds. However, we propose that theybe captured as part of governmentalactivities unless a local government hasa specific reason for disaggregatingthem. For example, a local governmentmay have a major special revenue fundthat it wants to disaggregate, given theamount of resources involved or theimportance of services and activitiesbeing accounted for in the fund.

Service obligation is the first financialdimension for evaluating the resourceflow for governmental funds. The

Big problem: North Carolinacounties must include schooldebt on their financial state-ments, but they can’t includethe value of the infrastructurethat they finance with that debt.


operations ratio, representing totalrevenues divided by total expenditures,is used to analyze this dimension. Thedata for this calculation come directlyfrom the statement of revenues, expen-ditures, and changes in fund balances,and a ratio of 1.0 or higher indicates thata government lived within its means.

Transfers out are not part of thiscalculation unless the transfer is to adebt service fund. Also, GAAP requiregovernmental funds to report the presentvalue of the minimum payments on acapital lease or installment purchases asan expenditure in the year of the agree-ment’s inception. If the total expendi-tures do include this amount (as wouldbe evidenced by another financingsource of an equal amount), they shouldnot be included for purposes of thiscalculation and should be subtractedfrom total expenditures.

The remaining two dimensionscapture important aspects of revenuesand expenditures. Dependency is usedto determine the extent to which gov-ernments rely on other governments forresources, as measured by the inter-governmental ratio: intergovernmentalrevenue divided by total revenue. Fi-nancing obligation is used to providefeedback on service flexibility bymeasuring, with the debt service ratio,the amount of resources committed to

annual debt obligations. If transfers to adebt service fund have been made by thegovernmental fund, the transfer shouldbe included in both the numerator andthe denominator.

We selected three financial dimen-sions and three financial indicators forevaluating resource stock for govern-mental funds (see Table 4). The financialdimension of liquidity uses the quick ra-tio, which follows the same philosophyand calculation as the liquidity dimen-sion for government-wide activities andenterprise funds.

The financial dimension of solvencyis evaluated with one of the most recog-nized financial indicators in local gov-ernment: fund balance as a percentageof expenditures, as calculated withavailable fund balance divided by totalexpenditures plus transfers out.23 Trans-fers out is included in the denominatorbecause the Local Government Com-mission standardizes available fundbalance for comparison purposes bydividing it by expenditures and transfersout less the present value of any capitalleases or installment purchases enteredinto during the fiscal year.24

The final financial dimension for eval-uating resource stock for governmentalfunds is leverage, which is supportedwith the financial indicator of debt as apercentage of assessed value. The defi-

nition of “debt” is tax-supported, long-term debt, which is the amount preparedfor a local government’s sworn state-ment of debt.25 The debt is standardizedby dividing it by assessed value. Statelaw prevents local governments from is-suing debt that would result in net debtexceeding 8 percent of assessed value.26

This financial indicator also plays a ma-jor role with bond-rating agencies whenthey are conducting a general-obligationrating assignment.27

Using a Dashboard toCommunicate Financial Condition

Communicating with dashboards is be-coming more common in local govern-ment.28 One possible reason is people’sability to create them with commonsoftware packages like Excel. Anotherpossible reason is our understandingthat most people are visual learners.Dashboards capitalize on this reality by communicating critical informationin a visual format. We selected the dash-board because it supports our approachof communicating financial condition ina written, numerical, and visual format,including a comparative analysis for amore robust interpretation of eachfinancial indicator.

We created a four-page dashboard forcommunicating the financial condition

Table 3. Resource Flow for Governmental Funds (Focusing on Financial Resources and Accounted for on a Modified Accrual Basis)

Financial Dimension Description Financial Indicator Calculation Data Source Interpretation1

Service Obligation Addresses whether Operations ratio Total revenues divided Statement of reve- Ratio of 1.0 or higher government’s annual by total expenditures nues, expenditures, indicates that govern-revenues were (plus transfers to debt and changes in fund ment lived within sufficient to pay for service fund and less balances annual revenues.annual operations proceeds from capital

leases and installment purchases)

Dependency Addresses extent to Intergovernmental Total intergovernmental Statement of reve- High ratio may indicate which government ratio revenue divided by total nues, expenditures, that government is too relies on other govern- revenue and changes in fund reliant on other ments for resources balances governments.

Financing Obligation Addresses service Debt service ratio Debt service (principal Statement of reve- Service flexibility de-flexibility, or amount and interest payments nues, expenditures, creases as moreof expenditures com- on long-term debt, inclu- and changes in fund expenditures are com-mitted to annual debt ding transfers to debt balances mitted to annual debtservice service fund) divided services.

by total expendituresplus transfers to debt service fund2

1. Trend and benchmark data are needed for a more robust interpretation of each financial indicator. 2. Debt service may be part of expenditures, a transfer to the debt service fund, or both.

f a l l 2 0 0 9 11

of local governments to elected officials(for an excerpt, see Figure 2).29 Page 1,the cover of the dashboard, contains thewritten interpretation of the analysis,which includes an overview of funds, aninterpretation of the financialdimensions and indicators, a discussionof policy implications, and a summaryof financial condition. The overview offunds is optional, given that thisinformation also is contained in thenotes to the financial statements. Thediscussion of policy implications also isoptional, given that some administra-tors may want elected officials to drawtheir own conclusions about how thelocal government’s financial conditionaffects organizational policy.

The interpretation of the financialdimensions and indicators should becompleted with a written analysis ofselected results. In other words, thefocus is on the financial strengths andweaknesses of the organization. Tryingto provide written information on eachfinancial indicator would not reconcilewith our criterion of manageability. In the previous section, we presentedthe first aspect of manageability: thatlocal governments of all sizes in NorthCarolina should be able to implementour approach. Another aspect is thatinformation should be presented in amanageable way for interpreting theresults and making decisions. There-fore, the interpretation of this section

should focus on outliers, importanttrends, and key comparisons with thebenchmark group.

The summary of financial conditionis used to communicate to elected of-ficials the overall financial conditionwith aggregate conclusions. For exam-ple: “The financial condition of CapitalCity is relatively strong on the basis of liquidity and leverage.30 Capital City also has improved its ability to live within its meansover the past fiveyears.” Althoughelected officials maywant concludingstatements like“Capital City’sfinancial condition isstrong,” adminis-trators understand that evaluating thefinancial condition of any organization,public or private, involves a subjectiveelement that often prevents matter-of-fact conclusions.

The remaining pages of the dashboard,shown in the background in Figure 2,contain the financial indicators that weselected to evaluate the financial conditionof local governments. They are presentedin a manner consistent with our approachto communicating financial condition toelected officials. Adhering to the criterionof systematicness, we have displayed thefinancial indicators for the governmentalactivities on page 2 and the financial

indicators for the major funds of thelocal government on pages 3–4. Adher-ing to the criterion of comprehensive-ness, we have aligned the financial di-mensions with the financial indicatorsthat support the analysis of resourceflow and stock for Capital City’s gov-ernmental activities, enterprise fund(water and sewer), and general fund.31

The criterion of comparability wasthe primary driver for the dashboard’s

design. The results of thefinancial indicators arebased on the most recentfiscal year, plus four yearsof historical data. Thecharts take advantage oftrend analysis, placing each indicator in thecontext of change over

time. The results of the financialindicators are then evaluated againstaverages that are calculated from thebenchmark group, adding anothercomparative dimension.32

An issue in local government is selecting appropriate benchmarkpartners. We support two approachesfor making this selection. One is toselect local governments of a similarpopulation size. Another is to selectlocal governments that offer similarservices, paying close attention to thosethat operate the same type of utilitysystems. This approach follows thestrategy used by the Local Government

Local governments shouldchoose as benchmark part-ners either jurisdictions of asimilar size or jurisdictionsthat offer similar services.

Table 4. Resource Stock for Governmental Funds (Focusing on Financial Resources and Accounted for on a Modified Accrual Basis)

Financial Dimension Description Financial Indicator Calculation Data Source Interpretation1

Liquidity Addresses govern- Quick ratio Cash and investments Balance sheet2 High ratio suggests thatment’s ability to meet divided by current government can meet short-term obligations liabilities (not including short-term obligations.

deferred revenue)

Solvency Addresses govern- Fund balance as Available fund balance Balance sheet High ratio suggests thatment’s ability to meet percentage of divided by total government can meet long-term obligations expenditures expenditures (less long-term obligations.

proceeds from capital leases) plus transfers out3

Leverage Addresses extent Debt as Tax-supported, long- Notes to High ratio suggests thatto which government percentage of term debt divided by financial government is overly relies on tax-supported assessed value assessed value4 statements reliant on debt.debt

1. Trend and benchmark data are needed for a more robust interpretation of each financial indicator. 2. Deferred revenues are located either on the balance sheet of governmental funds or in the notes to financial statements. 3. G.S. 159-8 defines “available fund balance for appropriation” as the sum of cash and investments minus the sum of liabilities, encumbrances,

and deferred revenues arising from cash receipts. 4. This calculation follows the requirement of G.S. 159-55 that the net debt of the unit not exceed 8 percent of assessed valuation.


Commission to report on fund balanceas a percentage of expenditures forcities that operate electric utilities andcities that do not. When data fromother local governments are not usedfor establishing benchmarks, profes-sional standards and internal policiesmay be used for establishing them.

We explain how the dashboardis designed because it is not simply acollection of financial indicators. It isspecifically designed to increase the ability to communicate financialcondition effectively to elected officialsin local government. It also is designedto support our definition of financialcondition and the financial dimensionsthat we have selected to analyzeresource flow and stock in annualfinancial statements.

Summary

Local officials, both elected and non-elected, may never reach a consensus ona professionally accepted set of financialindicators for evaluating the financialcondition of local governments. Althoughthere are pros and cons associated withany individual financial indicator (orany set of indicators), our focus is onproviding administrators with an effec-tive approach for analyzing, interpre-ting, and communicating financialcondition to elected officials. We haveoffered the following definition offinancial condition to guide our ap-proach: a local government’s ability tomeet its ongoing financial, service, andcapital obligations based on the statusof resource flow and stock as inter-

preted from annual financial statements.We then selected financial dimensionsand indicators that supported the analy-sis of resource flow and stock as shownon the numerous operating statementsand balance sheets contained in annualfinancial statements.

Unlike previous models for evalua-ting the financial condition of localgovernments, our approach recognizesthat financial reporting containsgovernment-wide and fund statementsand that some financial statements measure economic resources whileothers measure financial resources. This recognition provides a more sys-tematic and comprehensive approach to evaluating financial condition, re-sponding to the complexities of localgovernment financial statements. We

Key: Capital City Benchmark Group

GGoovveerrnnmmeennttaall AAccttiivviittiieess

RReessoouurrccee FFlloowwIInntteerrppeerriioodd EEqquuiittyy

Total margin ratio

Capital City =

1.10,

Benchmark =

1.02

FFiinnaanncciiaall PPeerrffoorrmmaanncceePercentage change in net

assets Capital City =

5.4%,

Benchmark =

2.0%

SSeellff--SSuufffificciieennccyyCharge-to-expense ratio

Capital City =

12.3%,

Benchmark =

10.0%

FFiinnaanncciinngg OObblliiggaattiioonnDebt service ratio

Capital City =

0.05,

Benchmark =

0.07

RReessoouurrccee SSttoocckkLLiiqquuiiddiittyy

Quick ratio

Capital City =

6.01,

Benchmark =

3.00

SSoollvveennccyyNet assets ratio

Capital City =

0.36,

Benchmark =

0.70

LLeevveerraaggeeDebt-to-assets ratio

Capital City =

0.19,

Benchmark =

0.20

CCaappiittaallCapital-assets condition ratio

Capital City =

0.39,

Benchmark =

0.50

Capital is the condition of capital assets as defined by

their remaining useful life. The capital-assets condition

ratio is calculated as accumulated depreciation divided by

capital assets being depreciated. The result is then

subtracted from 1.0.

AAsssseessssmmeenntt ooff FFiinnaanncciiaall CCoonnddiittiioonn aatt tthhee GGoovveerrnnmmeenntt--WWiiddee LLeevveell

Self-sufficiency addresses the extent to which service

charges covered total expenses. The charge-to-expense

ratio is calculated as charges for services divided by total

expenses.

Financing obligation addresses service flexibility, or the

amount of total expenses committed to annual debt

service. The debt service ratio is calculated as annual

debt service divided by total expenses.

Liquidity measures a government's ability to meet its

short-term obligations. The quick ratio is calculated as

cash and investments divided by current liabilities.

Solvency measures a government's ability to meet long-

term obligations. The net assets ratio is calculated as

unrestricted net assets divided by total liabilities.

Leverage measures the extent to which total assets are

financed with long-term debt. The debt-to-assets ratio is

calculated as long-term debt divided by total assets.

Interperiod equity measures whether a local government

lived within its financial means. The total margin ratio is

calculated as total financial resources divided by total

financial obligations.

Financial performance shows how much a government's

financial position improved or deteriorated as a result of

resource flow. The percentage change in net assets is

calculated as the change in net assets divided by net

assets, beginning.

0.800.901.001.101.201.30

2003 2004 2005 2006 2007

-10%

-5%

0%

5%

10%

2003 2004 2005 2006 2007

0%

5%

10%

15%

20%

2003 2004 2005 2006 2007

0%

5%

10%

2003 2004 2005 2006 2007

0

2

4

6

8

2003 2004 2005 2006 2007

0.000.200.40

0.600.801.00

2003 2004 2005 2006 2007

0.00

0.10

0.20

0.30

0.40

2003 2004 2005 2006 2007

0.00

0.25

0.50

0.75

2003 2004 2005 2006 2007


WWaatteerr aanndd SSeewweerr FFuunndd


Total margin ratioCapital City =

1.30,

Benchmark =

1.09

FFiinnaanncciiaall PPeerrffoorrmmaannccee

Percentage change in net

assetsCapital City =

10.4%,

Benchmark =

2.0%

SSeellff--SSuufffificciieennccyyCharge-to-expense ratio

Capital City =

138.0%,

Benchmark =

110.0%

FFiinnaanncciinngg OObblliiggaattiioonn

Debt service ratioCapital City =

0.44,

Benchmark =

0.25


Quick ratio

Capital City =

2.92,

Benchmark =

3.00

SSoollvveennccyyNet assets ratio

Capital City =

0.23,

Benchmark =

0.40

LLeevveerraaggeeDebt-to-assets ratio

Capital City =

0.45,

Benchmark =

0.35

CCaappiittaallCapital-assets condition ratio

Capital City =

0.68,

Benchmark =

0.50

AAsssseessssmmeenntt ooff FFiinnaanncciiaall CCoonnddiittiioonn ffoorr tthhee EEnntteerrpprriissee FFuunndd





Financial performance shows how much a government's

financial position improved or deteriorated as a result of

resource flow. The percentage change in net assets is

calculated as the change in net assets divided by net

assets, beginning.

Self-sufficiency addresses the extent to which service

charges covered total expenses. The charge-to-expense

ratio is calculated as charges for services divided by total

expenses.



service. The debt service ratio is calculated as annual

debt service divided by total expenses.

Capital is the condition of capital assets as defined by

their remaining useful life. The capital-assets condition

ratio is calculated as accumulated depreciation divided by

capital assets being depreciated. The result is then

subtracted from 1.0.

Leverage measures the extent to which total assets are

financed with long-term debt. The debt-to-assets ratio is

calculated as long-term debt divided by total assets.


term obligations. The net assets ratio is calculated as

unrestricted net assets divided by total liabilities.




0.80

1.00

1.20

1.40

2003 2004 2005 2006 2007

0%

5%

10%

15%

2003 2004 2005 2006 2007

90%100%110%120%130%140%

2003 2004 2005 2006 2007

0%

10%

20%

30%

40%

50%

2003 2004 2005 2006 2007

0

2

4

6

2003 2004 2005 2006 2007

0.00

0.20

0.40

0.60

2003 2004 2005 2006 2007

0.000.100.200.300.400.500.60

2003 2004 2005 2006 2007

0.00

0.25

0.50

0.75

2003 2004 2005 2006 2007


GGeenneerraall FFuunndd

RReessoouurrccee FFlloowwSSeerrvviiccee OObblliiggaattiioonn

Operations ratio

Capital City =

1.02,

Benchmark =

1.02

DDeeppeennddeennccyyIntergovernmental ratio

Capital City =

13.2%,

Benchmark =

20.0%

FFiinnaanncciinngg OObblliiggaattiioonnDebt service ratio

Capital City =

7.2%,

Benchmark =

6.0%


Quick ratio

Capital City =

6.10,

Benchmark =

3.00

SSoollvveennccyyFund balance as percentage of

expendituresCapital City =

19.1%,

Benchmark =

40.0%

LLeevveerraaggeeDebt as percentage of

assessed valueCapital City =

0.7%,

Benchmark =

2.5%

Leverage measures the extent to which a government

relies on tax-supported debt. Debt as a percentage of

assessed value is calculated as tax-supported, long-

term debt divided by assessed value.

AAsssseessssmmeenntt ooff FFiinnaanncciiaall CCoonnddiittiioonn ffoorr tthhee GGeenneerraall FFuunndd

Service obligation measures whether a government's

annual revenues were sufficient to pay for annual

operations. The operations ratio is calculated as total

revenues divided by total expenditures (plus transfers

to the debt service fund).

Dependency measures the extent to which a

government relies on other governments for resources.

The intergovernmental ratio is calculated as total

intergovernmental revenue divided by total revenue.



service. The debt service ratio is calculated as debt

service divided by total expenditures (plus transfers to

the debt service fund).





term obligations. Fund balance as a percentage of

expenditures is calculated as available fund balance

divided by expenditures plus transfers out.

0.90

1.00

1.10

1.20

2003 2004 2005 2006 2007

0%

10%

20%

30%

2003 2004 2005 2006 2007

0%

2%

4%

6%

8%

10%

2003 2004 2005 2006 2007

0

5

10

15

20

2003 2004 2005 2006 2007

0%

20%

40%

60%

2003 2004 2005 2006 2007

0%

1%

2%

3%

2003 2004 2005 2006 2007

Figure 2. Excerpt from a Dashboard for a Hypothetical City

Capital City Evaluation of Financial Condition June 30, 2008


GGoovveerrnnmmeennttaall AAccttiivviittiieess


Total margin ratio

Capital City =

1.10,

Benchmark =

1.02

AAsssseessssmmeenntt ooff FFiinnaanncciiaall CCoonnddiittiioonn aatt tthhee GGoovveerrnnmmeenntt--WWiiddee LLeevveell





F

0.800.901.001.101.201.30

2003 2004 2005 2006 2007

f a l l 2 0 0 9 13

also capitalize on the strengths of adashboard for communicating finan-cial condition to elected officials, using trend and benchmark data fora more robust interpretation of eachfinancial indicator.

Historically, more attention has beenplaced on financial position in localgovernment than on financial condition.With the implementation of GASBStatement No. 34, an opportunity hasbeen created to shift the focus to finan-cial position and condition in local gov-ernment. This represents the ultimategoal of our approach: to give adminis-trators a management tool that facili-tates their including financial conditionwhen they are helping elected officialsembrace the responsibility of managingthe fiscal matters of local governments.

Notes

1. For a complete definition of financialmanagement, see Jerome B. McKinney,Effective Financial Management in Publicand Nonprofit Agencies (3d ed. Westport,CT: Praeger, 2004). G.S. 160A-67 states that the government and the general man-agement of the city shall be invested in thecouncil. G.S. 153A-101 is even morespecific, stating that the board of commis-sioners shall exercise the responsibility ofdeveloping and directing the fiscal policy ofcounty government.

2. See G.S. 159-34(a). 3. Dean Michael Mead, An Analyst’s

Guide to Government Financial Statements(Norwalk, CT: Governmental AccountingStandards Board, 2001).

4. Governmental Accounting StandardsBoard Statement No. 34, Basic FinancialStatements—and Management’s Discussionand Analysis—for State and Local Govern-ments (Norwalk, CT: Governmental Ac-counting Standards Board, 1999). AlthoughGASB Statement No. 34 applies to both stateand local governments, this article focusessolely on local governments.

5. Xiaohu Wang, Lynda Dennis, andYuan Sen (Jeff) Tu, “Measuring FinancialCondition: A Study of U.S. States,” PublicBudgeting & Finance 27, no. 2: 1–21 (2007).

6. Ibid.7. Robert Berne and Richard Schramm,

The Financial Analysis of Governments(Englewood Cliffs, NJ: Prentice Hall, 1986).

8. Robert Berne, “Measuring and Re-porting Financial Condition,” in Handbook

of Public Administration, ed. James L. Perry(2d ed. San Francisco: Jossey-Bass, 1996),66–96.

9. International City/County Manage-ment Association, Evaluating Financial Con-dition (4th ed. Washington, DC: Interna-tional City/County Management Associa-tion, 2003).

10. A financial factor that shows financialcondition is fund balance as a percentage ofexpenditures. An economic factor thataffects financial condition is the annualgrowth rate of the assessed value of thecommunity’s property.

11. For information on the original test,see Ken W. Brown, “The 10-Point Test ofFinancial Condition: Toward an Easy-to-UseAssessment Tool for Smaller Cities,”Government Finance Review 9, no. 6: 21–26(1993). For information on the updated test,see Dean Michael Mead, “A ManageableSystem of Economic Condition Analysis forGovernments,” in Public FinancialManagement, ed. Howard Frank (BocaRaton, FL: Taylor & Francis, 2006),383–419.

12. International City/County ManagementAssociation, Evaluating Financial Condition.

13. The quick ratio represents a moreconversational approach to evaluating anorganization’s ability to meet its short-termobligations, preventing current assets likeinventory from increasing a local govern-ment’s liquidity. For more information onquick and current ratios, see Earl R. Wilson,Susan C. Kattelus, and Jacqueline L. Reck,Accounting for Governmental and Non-profit Entities (14th ed. Boston: McGraw-Hill Irwin, 2007).

14. Robert J. Freeman, Craig D. Shoulders,and Gregory S. Allison, Governmental andNonprofit Accounting (9th ed. Upper SaddleRiver, NJ: Prentice Hall, 2009).

15. Gregory S. Allison, “How to ReadGovernmental Financial Statements, Part 1,”Popular Government, Spring 2000, pp. 23–34;“How to Read Governmental FinancialStatements, Part 2,” Popular Government,Fall 2001, pp. 24–31.

16. Stephen J. Gauthier, GovernmentalAccounting, Auditing, and FinancialReporting (Chicago: Government FinanceOfficers Association, 2001).

17. See, for example, Wilson, Kattelus,and Reck, Accounting for Governmental andNonprofit Entities.

18. If a local government chooses to in-clude an internal service fund in its analysis,it would use the set of financial dimensionsand indicators selected to evaluate thefinancial condition of governmental activitiesand enterprise funds, given that financial

statements for internal service funds measureeconomic resources using the accrual basis ofaccounting.

19. Wilson, Kattelus, and Reck, Account-ing for Governmental and Nonprofit Entities.

20. Financial performance represents arelatively new financial dimension in localgovernment. For more information, seeStephen J. Gauthier, “Interpreting LocalGovernment Financial Statements,” Govern-ment Finance Review 23, no. 3: 8–14(2007).

21. Wang, Dennis, and Tu, “MeasuringFinancial Condition.”

22. The authors, in consultation with theLocal Government Commission, recommendthis approach.

23. G.S. 159-8(a) defines “available fundbalance” as the sum of cash and investmentsminus the sum of liabilities, encumbrances,and deferred revenues arising from cashreceipts.

24. The Government Finance Officers As-sociation standardizes available fund balanceby dividing it by general-fund operatingrevenues. For more information, see Appro-priate Level of Unreserved Fund Balance inthe General Fund, which was adopted by theexecutive board of the Government FinanceOfficers Association on February 15, 2002.It can be found at www.gfoa.org. Click onGFOA Recommended Practices.

25. See G.S. 159-55. 26. G.S. 159-55(c). 27. Linda Hird Lipnick and Yaffa Rattner,

The Determinants of Credit Quality (NewYork: Moody’s Investors Service, 2002).

28. See, for example, David Edwards andJohn Clayton Thomas, “Developing a Mu-nicipal Performance-Measurement System:Reflections on the Atlanta Dashboard,”Public Administration Review 65: 369–76(2005).

29. The full dashboard is available as anappendix to the online version of this article.Go to www.sog.unc/edu/popgov/.

30. We used actual data from a localgovernment to construct the dashboard forCapital City. However, the purpose is topresent the approach rather than to drawspecific conclusions from an actual localgovernment.

31. Because Capital City, like many localgovernments in North Carolina, has onlyone enterprise fund, the dashboard does notcontain business-type activities, given thatthe data would be approximately the sameas for the enterprise (water and sewer) fund.

32. We used hypothetical benchmarks forCapital City, realizing that local governmentsmay use a variety of sources for establishingtheir benchmarks.

Fa l l O n l i n e S u p p l e m e n t 2 0 0 9 1

P O P U L A R G O V E R N M E N T • FALL ONLINE SUPPLEMENT 2009

Appendix A. A Dashboard for a Hypothetical City

Capital City Dashboard

Evaluation of Financial Condition, June 30, 2008

Overview of Funds (optional)

Interpretation of Financial Dimensions and Indicators

Discussion of Policy Implications (optional)

Summary of Financial Condition

Capital City is a pseudonym for a North Carolina municipality. The benchmark-group data are hypothetical.

Fa l l O n l i n e S u p p l e m e n t 2 0 0 9 3

!"#$%&"'(&)$*$%&+,'(

-$./,%0$&+1/*

2'#$%3$%4/(&56,4#7!"#$%&'$()*+&($,"

-$.*#$%&-*#/&0

12345

67+89'$(:&0

124;

+4'"'04"1&8$%9/%:"'0$

<7(87+#$)7&89$+)7&*+&+7#&$==7#=-$.*#$%&-*#/&0

142>?5

67+89'$(:&0

@24?

)$19;),<04$'07-9$()7A#"A7B.7+=7&($,"&

-$.*#$%&-*#/&0

13C24?5

67+89'$(:&0

11424?

+4'"'04'=&>?14="@/'

D7E#&=7(F*87&($,"-$.*#$%&-*#/&0

>>?5

67+89'$(:&0

@G?

-$./,%0$&)#/0A

B46,4(4#7HI*8:&($,"

-$.*#$%&-*#/&0

@2;@5

67+89'$(:&0

3244

)/1C$'07J7#&$==7#=&($,"

-$.*#$%&-*#/&0

42@35

67+89'$(:&0

42>4

B$C$%"=$D7E#A#"A$==7#=&($,"

-$.*#$%&-*#/&0

42>G5

67+89'$(:&0

423G

D"34#"1-$.*#$%A$==7#=&8"+K*,"+&($,"

-$.*#$%&-*#/&0

42LC5

67+89'$(:&0

42G4

M+#7(.7(*"K&7NI*#/&'7$=I(7=&O97#97(&$&%"8$%&)"F7(+'7+#&

%*F7K&O*#9*+&*#=&P+$+8*$%&'7$+=2&!97&#"#$%&'$()*+&($,"&*=&

8$%8I%$#7K&$=&#"#$%&P+$+8*$%&(7="I(87=&K*F*K7K&E/&#"#$%&

P+$+8*$%&"E%*)$,"+=2

Q*+$+8*$%&.7(R"('$+87&=9"O=&9"O&'I89&$&)"F7(+'7+#S=&

P+$+8*$%&."=*,"+&*'.("F7K&"(&K7#7(*"($#7K&$=&$&(7=I%#&"R&

(7="I(87&T"O2&!97&.7(87+#$)7&89$+)7&*+&+7#&$==7#=&*=&

8$%8I%$#7K&$=&#97&89$+)7&*+&+7#&$==7#=&K*F*K7K&E/&+7#&

$==7#=5&E7)*++*+)2

U7%RA=IV8*7+8/&$KK(7==7=&#97&7B#7+#&#"&O9*89&=7(F*87&

89$()7=&8"F7(7K&#"#$%&7B.7+=7=2&!97&89$()7A#"A7B.7+=7&

($,"&*=&8$%8I%$#7K&$=&89$()7=&R"(&=7(F*87=&K*F*K7K&E/&#"#$%&

7B.7+=7=2

Q*+$+8*+)&"E%*)$,"+&$KK(7==7=&=7(F*87&T7B*E*%*#/5&"(&#97&

$'"I+#&"R&#"#$%&7B.7+=7=&8"''*W7K&#"&$++I$%&K7E#&

=7(F*872&!97&K7E#&=7(F*87&($,"&*=&8$%8I%$#7K&$=&$++I$%&K7E#&

=7(F*87&K*F*K7K&E/&#"#$%&7B.7+=7=2

-$.*#$%&*=&#97&8"+K*,"+&"R&8$.*#$%&$==7#=&$=&K7P+7K&E/&#97*(&

(7'$*+*+)&I=7RI%&%*R72&!97&8$.*#$%A$==7#=&8"+K*,"+&($,"&*=&

8$%8I%$#7K&$=&$88I'I%$#7K&K7.(78*$,"+&K*F*K7K&E/&8$.*#$%&

$==7#=&E7*+)&K7.(78*$#7K2&!97&(7=I%#&*=&#97+&=IE#($8#7K&

R("'&1242

X7F7($)7&'7$=I(7=&#97&7B#7+#&#"&O9*89&#"#$%&$==7#=&$(7&

P+$+87K&O*#9&%"+)A#7('&K7E#2&!97&K7E#A#"A$==7#=&($,"&*=&

8$%8I%$#7K&$=&%"+)A#7('&K7E#&K*F*K7K&E/&#"#$%&$==7#=2&

U"%F7+8/&'7$=I(7=&$&)"F7(+'7+#S=&$E*%*#/&#"&'77#&%"+)A

#7('&"E%*)$,"+=2&!97&+7#&$==7#=&($,"&*=&8$%8I%$#7K&$=&

I+(7=#(*8#7K&+7#&$==7#=&K*F*K7K&E/&#"#$%&%*$E*%*,7=2

X*NI*K*#/&'7$=I(7=&$&)"F7(+'7+#S=&$E*%*#/&#"&'77#&*#=&=9"(#A

#7('&"E%*)$,"+=2&!97&NI*8:&($,"&*=&8$%8I%$#7K&$=&8$=9&$+K&

*+F7=#'7+#=&K*F*K7K&E/&8I((7+#&%*$E*%*,7=2

42C4&

1244&

12@4&

12>4&

@443 @44> @44G @44L @44Y

4?

G?&

14?&

1G?&

@443 @44> @44G @44L @44Y

;4?&144?&114?&1@4?&134?&1>4?&

@443 @44> @44G @44L @44Y

4?&

14?&

@4?&

34?&

>4?&

G4?&

@443 @44> @44G @44L @44Y

4

@

>

L

@443 @44> @44G @44L @44Y

4244&

42@4&

42>4&

42L4&

@443 @44> @44G @44L @44Y

4244&4214&42@4&4234&42>4&42G4&42L4&

@443 @44> @44G @44L @44Y

4244&

42@G&

42G4&

42YG&

@443 @44> @44G @44L @44Y

!"#$%&'()*'+%&)*#%%%%%%%%%%%%,"-./0'12%3145(%

!

E..$..:$'#&/9&+4'"'04"1&D/'(4@/'&9/%&#F$&5'#$%3%4.$&+,'(

4 P o p u l a r G ov e r n m e n t

!"#$%&'()*'+%&)*#%%%%%%%%%%%%,"-./0'12%3145(%

!"#"$%&'()#*

+",-)$."'(&-/

0"$12."'34&25%6-#6("1'74-8%1'74

&'()*'+%&)*#%9

:;<=>

,"-./0'12%9

:;<=

7"8"#*"#.9?-*"1@4A"1-0"-*'+%1'74

&'()*'+%&)*#%9

:B;=C>

,"-./0'12%9

=<;<C

(2#%#.2#5'34&25%6-#D"E*%8"1A)."%1'74

&'()*'+%&)*#%9

F;=C>

,"-./0'12%9

G;<C

+",-)$."'0:-.;

<2=)2*2:9H5).2%1'74

&'()*'+%&)*#%9

G;:<>

,"-./0'12%9

B;<<

0-&1"#.9I5-J%E'+'-."%'8%("1."-*'@"%4K%

"L("-J)*51"8

&'()*'+%&)*#%9

:M;:C>

,"-./0'12%9

N<;<C

<"1"$%5"D"E*%'8%("1."-*'@"%4K%'88"88"J%

A'+5"

&'()*'+%&)*#%9

<;FC>

,"-./0'12%9

=;OC

P"A"1'@"%0"'851"8%*/"%"L*"-*%*4%Q/)./%'%@4A"1-0"-*%

1"+)"8%4-%*'LR85((41*"J%J"E*;%D"E*%'8%'%("1."-*'@"%4K%

'88"88"J%A'+5"%)8%.'+.5+'*"J%'8%*'LR85((41*"J>%+4-@R*"10%

J"E*%J)A)J"J%E#%'88"88"J%A'+5";

>,,",,?"#:'-@'(2#%#.2%&'A-#*26-#'@-$':B"'!"#"$%&'()#*

S"1A)."%4E+)@'74-%0"'851"8%Q/"*/"1%'%@4A"1-0"-*T8%

'--5'+%1"A"-5"8%Q"1"%85U.)"-*%*4%('#%K41%'--5'+%

4("1'74-8;%V/"%4("1'74-8%1'74%)8%.'+.5+'*"J%'8%*4*'+%

1"A"-5"8%J)A)J"J%E#%*4*'+%"L("-J)*51"8%W(+58%*1'-8K"18%*4%

*/"%J"E*%8"1A)."%K5-JX;

D"("-J"-.#%0"'851"8%*/"%"L*"-*%*4%Q/)./%'%

@4A"1-0"-*%1"+)"8%4-%4*/"1%@4A"1-0"-*8%K41%1"8451."8;%

V/"%)-*"1@4A"1-0"-*'+%1'74%)8%.'+.5+'*"J%'8%*4*'+%

)-*"1@4A"1-0"-*'+%1"A"-5"%J)A)J"J%E#%*4*'+%1"A"-5";%

I)-'-.)-@%4E+)@'74-%'JJ1"88"8%8"1A)."%Y"L)E)+)*#>%41%*/"%

'045-*%4K%*4*'+%"L("-8"8%.400)Z"J%*4%'--5'+%J"E*%

8"1A).";%V/"%J"E*%8"1A)."%1'74%)8%.'+.5+'*"J%'8%J"E*%

8"1A)."%J)A)J"J%E#%*4*'+%"L("-J)*51"8%W(+58%*1'-8K"18%*4%

*/"%J"E*%8"1A)."%K5-JX;

P)[5)J)*#%0"'851"8%'%@4A"1-0"-*T8%'E)+)*#%*4%0""*%)*8%

8/41*R*"10%4E+)@'74-8;%V/"%[5).2%1'74%)8%.'+.5+'*"J%'8%

.'8/%'-J%)-A"8*0"-*8%J)A)J"J%E#%.511"-*%+)'E)+)7"8;

S4+A"-.#%0"'851"8%'%@4A"1-0"-*T8%'E)+)*#%*4%0""*%+4-@R

*"10%4E+)@'74-8;%I5-J%E'+'-."%'8%'%("1."-*'@"%4K%

"L("-J)*51"8%)8%.'+.5+'*"J%'8%'A')+'E+"%K5-J%E'+'-."%

J)A)J"J%E#%"L("-J)*51"8%(+58%*1'-8K"18%45*;

<;M<%

:;<<%

:;:<%

:;=<%

=<<B =<<N =<<O =<<G =<<F

<C%

:<C%

=<C%

B<C%

=<<B =<<N =<<O =<<G =<<F

<C%

=C%

NC%

GC%

\C%

:<C%

=<<B =<<N =<<O =<<G =<<F

<

O

:<%

:O%

=<%

=<<B =<<N =<<O =<<G =<<F

<C%

=<C%

N<C%

G<C%

=<<B =<<N =<<O =<<G =<<F

<C%

:C%

=C%

BC%

=<<B =<<N =<<O =<<G =<<F

communicating financial condition to elected officials in ... › lgcreport › doc › how model...

Documents