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CHAPTER 10: ANALYSIS OF GOVERNMENTAL FINANCIAL PERFORMANCE OUTLINE Number Topic Type/Task Status (re: 13/e) Questions: 10-1 Causes of municipal financial crises Explain 10-1 revised 10-2 Financial position, financial condition, economic condition Compare 10-2 10-3 ICMA’s Financial Trend Monitoring System Describe 10-4 10-4 Financial condition Explain 10-3 10-5 Solvency and government-wide statements Describe 10-8 10-6 Unrestricted net assets and unreserved fund balance Compare, explain 10-6 10-7 Environmental factors Explain 10-9, revised 10-8 Organizational factors Explain 10-10 10-9 Financial indicators and short-term financial position. Identify, explain New 10-10 Benchmarks Explain 10-7 Cases: 10-1 Comparative ratios—Catalpa City Evaluate, calculate 10-1 revised 10-2 Municipal credit analysts and bond ratings Internet 10-2 10-3 Financial trends Internet New 10-4 Analysis of overall performance Calculate, analyze New Exercises/Problems: 10-1 Examine the CAFR Examine 10-1 10-2 Various Multiple choice 10-2 revised 10-3 Financial condition Match 10-3 10-4 Benchmarks – Town of Brookline, MA Analyze 10-4 revised 10-5 Financial Trends Monitoring System Assess 10-5 revised 10-6 Factors affecting financial condition Write memo New 10-7 Government-wide financial analysis Analyze New 10-1
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CHAPTER 10: EVALUATION OF GOVERNMENTAL FINANCIAL PERFORMANCE Answers to Questions 10.1. The primary cause of municipal financial crises is the failure of management to revise management practices appropriately in response to adverse environmental factors (see Illustration 10-1). Although adverse environmental factors, such as a declining economy, a natural disaster, or politicians who are unwilling to make politically unpopular decisions, may be major contributing factors, such factors do not have to lead to a financial crisis if management makes sound decisions in response to such factors. On the other hand, environmental factors are sometimes so severe that a financial crisis is unavoidable. In such cases, sound financial management can at least reduce the severity of the crisis and establish a long-term plan for financial recovery. An effective system for monitoring its financial condition will permit management to identify unfavorable financial trends in sufficient time to take preventive action to avoid financial distress. A monitoring system, such as the Financial Trends Monitoring System (FTMS), developed by the ICMA draws management’s attention to the factors and indicators that provide information about the financial condition of a government. Armed with this information, government managers can be proactive in addressing negative trends before they become crises. 10.2.
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This note was uploaded on 04/06/2010 for the course ACCT 100 taught by Professor Smith during the Spring '10 term at Harvard.

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