Government Finance Concepts
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Transcript of Government Finance Concepts
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Government Finance Concepts
Revenue Management and Development
School
March 11, 2013
Tom O’Rourke, CPRP
Executive Director
Charleston County Park and Recreation Commission
Charleston, South Carolina
www.ccprc.com/orourke
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Learning Outcome
I want to make sure you can sit in the room and participate in a conversation pertaining to any government financial issue with your director, administrator, or elected official.
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There is a job opening!
The job opened because of financial improprieties.
The Department had a terrible reputation in the area of Credibility
Employee morale was at an all-time low
The Elected people did not have any trust for the position of Recreation Director
There was a vote to eliminate the department. The department was saved by a vote of 5-4.
You figure you are the person to turn it around because you went to Revenue
School. You decide to apply.
Recreation Director of the biggest city in your area– Salary $175,000
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You Got the Job
What do you do?
Good News and Bad News
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Grab the last Audit Report
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Audit Components
• Examination by a third party – Financial Statement Audit
• Performed usually by independent CPA firms
• Must utilize standards in which to complete the audit – (GAAS) Generally Accepted Accounting Standards
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Financial Statement Audits
• Goal is to assure that those statements are fairly presented.
• Fairness is represented by adhering to a set of criteria known as generally accepted accounting principles, (GAAP)
• The most important source of GAAP for state and local governments is the Governmental Accounting Standards Board (GASB)
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Audit is in your hand
• Read the Opinion Letter
• Statement of Net Assets – Usually right in the front. Assets – Liabilities = Net Assets
• FOOTNOTES!
• Management Letter
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` You Have Examined the Audit
• You actually have some assets
• The organization is, for the most part, financially organized efficiently
• Your tax base seems to be in line with other Tax Districts
• You have been hit, a little, on some cash control issues and policies.
• There was a report stating that you don’t have adequate internal financial policies.
• Your General Fund, fund balance is dangerously low
What do I look at next?
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Budget!
Grab the budget book
Read the opening Budget Letter
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Operating Budget
Capital Budget
Enterprise Budget
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Operating Budget
• Budget Summaries, Broken Down – Line Items.
• Generally have to stay true to these guidelines.
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Capital Budget
• Outstanding Debt, (Capital,) and Debt service tax collections
• Budget to construct things
• Usually Multi Year for everything that has a longer than normal life
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Enterprise Budget
Business Accounts
Generally operate without the use of tax dollars.
Less Scrutiny
Fund Balance must take depreciation of assets into account.
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ENTERPRISE EXAMPLES
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Enterprise Examples
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You’ve examined the Budgets – Here is what you discovered!
• There has been NO Capital spent in the Recreation Department in the past 7 years. NONE!
• Over 90% of the Department Revenues are derived from Tax Collection.
• A large disproportionate share of the budget is for Personnel Costs.
• There is no operating money to offer anything new • The opening budget letter talks about a public hearing where
the public has stated that they would like to see a new and improved Recreation Agency.
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BACKGROUND FINDINGS!
• Very few people attending programs and activities
• Recreation Budget has not increased in 10 years
• Population is growing
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Exercise
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Your first meeting is with your 6 senior managers. You want to
articulate a game plan.
1. What needs to be addressed 2. What is your conceptual Plan
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Taxes and Taxation
What it is and how it effects you.
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Taxation
Who Pays
• Residential
•Commercial
•Agricultural
•Industrial
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Determining the Rate of Taxation
• Establish the value of each taxable property – Assessed Value
• The assessment of all taxable properties are added together
• Budgets are established
• The governing body examines the total assessed values and equalizes them.
• A tax rate is established – (Millage Rate, Millage tax, Levy)
Mill Levy or Millage Tax
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Taxing Example
A mil = 1/10th of 1 cent
So, for $1,000 of assessed property value, one mill would be equal to one dollar.
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What can cause your taxes to increase
• The budgets increase and the value of the property stays the same
• The budgets and value of the individual’s property remain the same but the value of the property in the entire government decreases.
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Taxation and What you need to know.
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TAXATION EXAMPLE
What percentage of the whole pie does the recreation department
get?
Total Taxable Income $10 Million in 2002 - $15 million in 2012
Total Rec. Dept. Budget $ 1 Million in 2002 - $1 million in 2012
1
2
You are getting 10 %
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• What is the total tax bill on a $200,000 home.
If a citizen pays $400.00 year in taxes, and the Recreation
Department gets 10% of the total budget, this person REALLY,
pays $40.00/year for Recreation Dept. Taxes.
NEXT – Know what that person is getting for their $40.00
Taxation
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Other Things
• Foundation • TIF Districts
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In Summary
Set aside time to understand and grasp the FINANCIAL elements of the government in
which you work.
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The End