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

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.

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

You Got the Job

What do you do?

Good News and Bad News

Grab the last Audit Report

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

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)

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

` 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?

Budget!

Grab the budget book

Read the opening Budget Letter

Operating Budget

Capital Budget

Enterprise Budget

Operating Budget

• Budget Summaries, Broken Down – Line Items.

• Generally have to stay true to these guidelines.

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

Enterprise Budget

Business Accounts

Generally operate without the use of tax dollars.

Less Scrutiny

Fund Balance must take depreciation of assets into account.

ENTERPRISE EXAMPLES

Enterprise Examples

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.

BACKGROUND FINDINGS!

• Very few people attending programs and activities

• Recreation Budget has not increased in 10 years

• Population is growing

Exercise

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

Taxes and Taxation

What it is and how it effects you.

Taxation

Who Pays

• Residential

•Commercial

•Agricultural

•Industrial

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

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.

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.

Taxation and What you need to know.

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 %

• 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

Other Things

• Foundation • TIF Districts

In Summary

Set aside time to understand and grasp the FINANCIAL elements of the government in

which you work.

The End