Local governments in Missouri are in the pink of fiscal health
According to a new analysis, finance officers from Missouri municipalities report that their current financial conditions are favorable and that they are cautiously optimistic about their future.
The “2007 Public Sector Statistics Analysis,” released by the Public Sector Services Group of the accounting and consulting firm RubinBrown, offers municipal finance officers a measure of how their cities compare to others of similar size and geographic area in key financial measurements.
RubinBrown team members surveyed finance officers from the St. Louis and Kansas City metropolitan areas to collect 2006 financial information for the study’s ratio calculations. The team also gathered information from the cities’ 2006 comprehensive annual financial reports or 2006 audited financial statements. The team calculated ratios in governmentwide, governmental funds and general-fund information categories.
“Overall, we are seeing a strong and improving financial condition, as well as operating results, for most of the surveyed municipalities,” said Jeff Winter, CPA, who is partner-in-charge of RubinBrown’s Public Sector Services Group.
However, Winter cautioned that “cities across the country should pay close attention to the impact that the adoption of GASB Statement 45, ‘Accounting for Other Postemployment Benefits,’ could have on many of the municipalities’ financial positions.”
“The standard, which requires accrual-based accounting, becomes effective over the next three years,” Winter added.
A key ratio for government administrators across the country, Winter said, is the change in net assets, which is the government entity’s surplus or deficit for the year.
“From a governmental fund basis, one of the most important ratios that I think all public officials hone in on is their unreserved fund balance as a percent of either revenues or expenditures,” Winter explained to GovPro.com. “How much do they have in reserve, and how much can they cover if there is a shortfall of revenues or deterioration in revenues over a period of time-—what kind of cushion do they have.”
Read your financial statements
For government administrators everywhere, Winter has this advice: “Take the time to read the financial statements to understand the financial condition of the entity or organization that you are responsible for—that is key.”
City administrators need to make sure that their communities don’t become overly leveraged from a debt standpoint, Winter added. He also urged administrators to monitor key financial ratios for a minimum of two-year time frames, with the optimum being three- or four-year periods.
To download a PDF of the 2007 Public Sector Statistical Analysis, click here.
The Government Finance Officers Association issues a Financial Indicators Database that has files of data on counties and municipalities in the United States categorized by population-size classes.
“We do not issue a report comparing any of the cities or counties, specifically. We just have the data, and it is up to cities and counties to do their own comparisons,” said Karen Utterback, who is the association’s editor, research and consulting. The data can be purchased at the association’s e-store on its Web site.