definition from wikipedia: tells the user these things ... · guidelines available from gfoa and...
TRANSCRIPT
Definition from Wikipedia:
› Modeling of an entity’s future financial
liquidity over a specific timeframe
Tells the user these things about our
cash:
› How much is available now?
› When will it be available in the future?
› How much will be available in the future?
› For how long will it be available?
2 2
Guidelines available from GFOA and the
American Institute of Certified Public
Accountants (AICPA)
Best-practice forecasting models are:
› Prepared in good faith using best information
available at the time
› Prepared by qualified personnel using appropriate
accounting principles
› Are consistent with the long-range plans of the entity
› Assumptions are appropriate and include key factors
that impact the entity
3
Best-practice forecasting models have:
› Adequate documentation of financial
information
› Understanding of process used to develop them
› Regular reviews of variances; comparing
with actual results
› Adequate review with and approval at
appropriate levels of authority
4
For investing township funds
In developing a budget
For strategic or long-term planning
In capital improvement planning
To help determine if a levy is needed
If township has a levy, is it enough to
last?
5 5
Time, Staff and Software all needed to:
› Gather information – both current and historical
› Create a model – with timeframe to be used
› Make assumptions – for increases/decreases
› Input information – using which software
› Compare and evaluate data – what does it tell us?
6 6
Establish a base year
Assess past revenue and expenditure trends
Clearly specify underlying assumptions
Assess the reliability of data used in assumptions
Select a forecasting method
Monitor actual revenue and expenditure levels against forecast; explain variances
Update forecast based on changes; new data
7
Most recently balanced bank reconciliation
Investment balances if separate
Historical analysis of cash receipts and disbursements
Analysis of current fiscal year’s budget › Current receipts
› Current disbursements
Assumptions for the future
8 8
Short-term:
› Weekly – you provide daily estimates of cash
position
› Monthly – provide daily or weekly estimates
Mid-term:
› Annual – provide monthly estimates
Long-term:
› Multi-year – provide annual estimates
9 9
Time and resources available for
forecasting
Amount of funds available to forecast
Level of commitment of your entity and
your staff to forecasting
Amount of accurate information
available for forecasting
10 10
What will inflation and the economy look like?
What is our revenue projected to be?
Operating expenses?
How might collective bargaining affect our
budget?
Do we plan to increase or decrease our
contract spending?
Are we planning to add or reduce services?
What will our vehicle situation look like?
11 11
Worst-case scenario -- Ohio’s economy drops, general revenue taxes drop by 30% -- Local Government Fund (LGF) revenues drop accordingly
Conservative scenario -- LGF Revenue will be flat for several years
Best-case scenario -- state notifies us that XYZ Company owes Ohio $2 billion in taxes that went to another state and they are getting it back -- we hit the jackpot!
12 12
Daily Cash flow Worksheet › Enter all transactions on a daily basis
› Takes very little time but gives you an immediate snapshot of your cash flow
› Allows you to figure out if you have enough cash in your bank account
Do I have an upcoming payroll? Are OPERS or Police and Fire pension payments due soon?
Are there large A/P expenses coming up ?
› Allows you to figure out if you need to sell or buy investments, transfer funds, etc.
13
Try forecasting for the next 3, 5 or 10 years
If you have a levy
› Try forecasting through the end of the current
levy
› Then go beyond it to see if it renewing at
same level will provide sufficient income
Longer term forecasting helps
administrators plan well into the future
UAN has forecasting tool available
14
15 15
Public Library
Fund
37.56%
Property Taxes
58.17%
Fines and Fees
3.31%
Investment
Income
0.26% Miscellaneous
0.70%
Becomes very difficult as Ohio Legislature: › Made drastic cuts in this biennium budget
› Changed the funding formula
› Phased out the Tangible Personal Property Tax distributions
› Eliminated Inheritance Tax for 2013
› Overall, townships lost nearly $117 million in state revenue plus losses in Inheritance Tax
› Is now tied again to Ohio’s General Revenue Fund tax revenue
16 16
Forecasting your township’s cash flow is more important that ever
Recommend a multi-year forecast, 3 years minimum
Distribution information is available on Ohio Department of Taxation’s website http://tax.ohio.gov/channels/government/Ohio DepartmentofTaxation.stm
Office of Budget Management posts a monthly report on Ohio’s State Finances on their website: http://obm.ohio.gov
17
Tax bills issued twice a year by County
Treasurer to homeowners and businesses
Townships can request advances on tax
dollars collected from the County Auditor
(ORC 321.34)
Check with your County Auditor settlement
officer for your county’s procedure
State Homestead/Personal Property
Reimbursements – sign up for Direct Deposit
18 18
Fines/Fees
› May be a good time to review your policies
› Consider increasing meeting room rental fees, fees for services, others
Interest Income
› What interest income???
› Rates are starting to move upward
› It’s important to protect principal
19
20
Salaries and Benefits
60.42%
Supplies
1.56%
Contracted Services
19.66%
Library Materials
16.36%
Furniture &
Equipment
0.74%
Dues &
Members/Other
0.32% Transfer to Capital
Fund
0.94%
Townships are service organizations –
usually largest expenses are Salaries &
Benefits
› Recommend forecasting future changes
in staffing and budget, include cost of
benefits
› Minimum wage increases, State of Ohio
adjusted annually by rate of inflation of
prior 12 months (Ohio Dept of Commerce) http://www.com.ohio.gov/laws/
21 21
Health insurance costs continue to rise
It is too soon to tell how the Affordable
Care Act will affect us as employers
Layoffs imminent? Consider the cost of
unemployment in your projections
› Besides unemployment amounts, your
township may be required to pay benefits
awarded to a former employee who
becomes laid off from their current job
22
Controllable Expenses
› Non-union salaries/benefits
› Non essential equipment purchases
› Non essential supplies
Uncontrollable Expenses
› Union salaries/benefits
› Debt Payments
› Utilities
23
Watch for the unusual
Be prepared
› If you pay bi-weekly, you could have 27
pay dates instead of 26 next year
› Cold, snowy weather means higher utility
bills, snowplowing and salt
› Be sure to plan, save financially for very
large expenses down the road
24
How does our position look compared to last year? Three years ago?
Can we spot any trends in our revenues or expenses?
How far off were our actuals from our estimates? What happened to cause this?
Do we need to figure reduce expenses? Or find new sources of funding – levy, pay to play, increase in fees, etc?
25 25
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Jan
Feb
Mar
Ap
r
May Jun
Jul
Au
g
Sep
t
Oct
No
v
Dec
2013 Projected vs. Actual Revenue
Projected
Actual
26 26
Being Conservative is Best
› Estimate variable revenues like interest on
investments low
› Estimate variable expenses like utilities higher
than what you may spend
This will help to provide “emergency”
dollars if your revenue does come in
lower and/or expenses are higher
27 27
Projections are actually estimates of future operating results
There are times where you will be wrong! We really don’t have a crystal ball – so prepare for being wrong!
Projections can backfire on you › The “Chicken Little” Syndrome – don’t use
projections as a scare tactic
28 28
Forecasting is not an exact science!
› It is both an art (best ‘guesstimates’) and a
science (actual past figures)
Forecasting is not carved in stone
› Once completed, it is not done forever
› Things change, unexpected expenses happen
› To be meaningful, it must be regularly updated
Practice makes perfect! The more you work
on your forecast, the better you will
become at forecasting!
29 29
