Chapter 10 - Chapter 10 Analysis of governmental financial...

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10.1 Chapter 10 Analysis of governmental financial performance Dangers: 1. Economic conditions 2. Mismanagement 3. Government corruption Questions Ability of the governmental unit to: 1. Sustain current level of services 2. Provide additional services 3. Pay recurring bills in a prompt manner 4. Meet interest and principal payments on long-term debt Financial position (balance sheet liquidity; ability to pay bills as they become due) Financial condition : Government’s ability to meet financial obligations to creditors, consumers, employees, taxpayers, suppliers, constituents, and others as they become due and service obligations to constituents, both currently and in the future 1. Pay bills on time 2. Withstand local and regional economic disruptions 3 Maintain existing service levels 4. Meet the demands of natural growth, decline, and change Per International City/County Management Association (ICMA) study: 1. Cash solvency : Ability to generate cash over 30-60 days to pay bills on time 2. Budgetary solvency : Ability to generate enough revenue over normal budgetary period to meet expenditures and not incur a deficit (interperiod equity) 3. Long-run solvency : Ability in the long-run to pay all costs of doing business such as expenditures that appear in normal budget and those that only appear in years in which they must be paid 4. Service-level solvency : Ability to provide services at the level and quality required for the health, safety, welfare of community and that its citizens desire Interperiod equity: 1. Whether current-year revenues are sufficient to pay for the services provided in that year 2. Whether future-year taxpayers will be required to assume burdens for services previously provided
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10.2 Economic condition: Composite of the financial health and the ability and willingness to meet financial obligations and commitments to provide services Fiscal capacity: Ongoing ability and willingness to raise revenues, incur debt, and meet financial obligations as they become due Service capacity: Ongoing ability and willingness to supply the capital and human resources needed to meet its commitments and provide services Internal financial trend monitoring: 1. Economy and demographics 2. Revenue base 3. Current and capital expenditures 4. Debt
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Chapter 10 - Chapter 10 Analysis of governmental financial...

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