State Agency - NASACT



TOPIC: Database of Local Government Financial InformationOFFICE: AuditorSTATE: LADATE: 08/19/2013QUESTION / ISSUE: The Louisiana Legislative Auditor is interested in building a database of Louisiana local government financial information that would be the backbone of an early warning system of financial stress. Three local governments in Louisiana were recently put under control of a fiscal administrator (similar to Detroit being put under the control of an emergency manager). The Louisiana Legislative Auditor would like to intervene earlier than after collapse as he believes it would be easier to prop these governments up when they still have cash left.?If your state has developed a database of local government financial information and use the database for analytics and/or early warning of impending financial troubles, please respond to Elizabeth Martin at egmartin@lla. and copy me at srowland@.StateCommentsColoradoThe Colorado Office of the State Auditor conducts a fiscal health analysis of Colorado’s 178 school districts on an annual basis. The analysis is composed of a set of financial ratios that assess the financial health of each district using a three-year rolling period to assess trends. This is the fifth year the OSA has conducted this analysis. I have attached the most recent Fiscal Health Analysis of Colorado School District report that was released by the OSA in July 2013.In 2013 the OSA will release a fiscal health analysis tool to assist citizens, employees, decision makers, or any interested party evaluate the fiscal health of their cities, towns and counties. The report will provide the following information:Ratios that local governments can use, at their discretion Questions to ask when considering financial indicators Helpful examples of how to calculate the ratios using information from the audited financial statements The Fiscal Health Analysis Tool for Cities, Towns, and Counties has not been released, but I have attached the set of ratios we intend for citizens to use to assess the financial health of their counties and municipalities. The local government audit division of the OSA maintains an Access database that tracks local government audit reports that are required by statute to be submitted annually to the state auditor. As part of the database the division also compiles financial information that is taken directly from the audit reports for the purpose of using the data for fiscal health analysis. \s GeorgiaAt this time, the Georgia Department of Audits and Accounts is not aware of a database that provides this type of information or functionality. However, our office is currently working with the Georgia Department of Community Affairs (DCA) on a Local Government Financial Health and Assistance Project. The purpose of this project is for DCA and other entities to identify local governments that are in or are approaching noteworthy financial situations. This project is in the very early stages of development and specifics related to its scope, functionality, and structure are not yet available.MinnesotaThe Minnesota Office of the State Auditor collects, analyzes, compiles and reports out local government financial information annually by entity type. The data reported is housed in a database. The reports include the revenues, expenditures and debt of the entities. Our reports include fund balance information, which can be an indicator of fiscal health. We do not have a formal early warning system for monitoring local government health. We do, however, annually review the audits conducted by private CPA firms of the over 800 cities in Minnesota. When reviewing, we look for a combination of factors that could indicate problems and follow up with a letter to the city (i.e., low fund balance, deficits, losses in Enterprise Funds, etc.).The following links will take you to a few of our annual summary financial reports:Cities: law or regulation, this office receives various types of local government financial information; however, there is no comprehensive review of such information as part of an early warning system for financial problems. Our auditors do typically review financial condition during county, school district, and other local government audits.North CarolinaAll local governments and public authorities in North Carolina are overseen by the Local Government Commission (LGC). The LGC was formed in the early 30s by the General Assembly as a result of the high number of municipal debt defaults in NC during the Great Depression. While its processes and procedures have of course changed over the years, the underlying role of the LGC has not significantly changed since its inception. The statutory authority for the LGC is the Local Government Budget and Fiscal Control Act (NCGS 159). In addition to creating the LGC this statute lays out the requirements under which all local government and public authorities in NC must operate financially, including having a comprehensive accounting system, a balanced budget, and a finance officer. The statute also limits the amount of fund balance a unit can appropriate in a given year, and requires that the finance officer certify that each obligation is legally appropriate and budgeted before it can legally be paid. Finally, the statute requires that most debt issued by local governments be approved by the LGC.The LGC is housed in the Department of State Treasurer and is staffed by employees of that department. The State and Local Government Finance Division oversees local governments, public authorities, and State debt issuance as well. The LGC staff is divided into two sections – Fiscal Management and Debt Management. Fiscal management oversees the fiscal health of the locals, provides assistance to them with implementation of accounting standards and other financial matters. Debt Management accepts, reviews and potentially recommends approval by the LGC of most debt agreements entered into by local governments, including all bonded debt and most installment purchase and capital lease debt. Units can enter into some routine debt (installment purchases for rolling stock for example) without LGC approval. All local governments and public authorities are required to file an annual audited financial report with the LGC. The audits are contracted for by the local units with an auditing firm of their choosing. The LGC staff approves those contracts, which are on a standard form, and all invoices associated with the audit. Local governments cannot legally pay their auditor without LGC staff approval. The audit reports must be prepared in accordance with generally accepted accounting principles (GAAP) with no exception. Compliance audits are conducted in accordance with OMB Circular A-133 and/or the State Single Audit Act as applicable, and those reports come in to the LGC staff as well. The reports are reviewed for both presentation and fiscal benchmarks. Data culled from the reports is fed into a database. Units and their auditors are contacted in writing regarding our concerns about presentation and financial condition. Local government officials are requested to respond to our financial concerns in writing. From the data and the responses we develop a “troubled unit” list of those units we believe are at the highest risk of having serious financial issues. Interim financial information is requested and reviewed, and staff may visit the unit and work with staff and/or meet with elected officials depending on the nature of the problems. The vast majority of units welcome this assistance and with LGC help improve their financial conditions and operations. However, on occasion we have invoked our ability to assume control of a unit’s finances. This occurs when a government will not comply with our repeated requests to make changes to bring it into compliance with the LGBFCA or if the unit is in danger of defaulting on debt. When the LGC assumes control, it takes the place of the unit’s elected board for all financial decisions. An LGC staff member is appointed finance officer and assumes control of the unit’s funds, expenditures, receipts and budget. The LGC has invoked these powers 5 times over its history. The LGC meets at least monthly to consider approval of debt agreements by local governments. The Debt Management staff pulls together the debt documents, works with the units to determine the most feasible and cost effective financing method, and makes the determination if an agreement should go before the LGC for approval. By statute, certain findings must be made by the Debt staff before an agreement can move forward, including that the unit is practicing good debt management and has the wherewithal to repay the debt. Fiscal staff weighs in on this process by evaluating the financial condition as indicated in the audit, written communications and the unit’s responses to that communication, and alerting Debt staff to any concerns. If bonded debt is approved, the Debt Management staff conducts the sale of that debt. Other services provided by LGC staff include written guidance issued on topics of interest, new accounting standards, illustrative financial statements, and general statute ore regulation changes. We provide training opportunities during the year for local government finance staff and auditors that perform local government audits. We also publish annual statistical reports using the data pulled from the annual audits, and populate a fiscal tools website which allows users to compare up to 5 counties or municipalities at once using various financial benchmarks. OhioThe Auditor of State of Ohio is in the process of developing a series of Financial Health Indicators to aid in predicting financial stability. The Financial Health Indicators are a series of financial information, percentages, and ratios gathered from annual financial statements, filed by the local governments used to recognize early signs of fiscal stress at specific local governments in order to take a proactive approach to monitoring or assisting these local governments, rather than only a reactive approach. The Auditor of State of Ohio is currently evaluating the proposed listing of Financial Health Indicators to determine their usefulness in determining signs of fiscal stress.OregonThe State of Oregon does not have a database of local government financial information. However, in May 2012 we issued a report on the financial condition of Oregon counties, which may be of interest to you. The report includes information on the financial indicators we used to assess the health of Oregon counties. Financial data included in the report was obtained from each county's respective financial statements. The report also includes a summary of approaches used by states, including Oregon, to monitor local government finances. A copy of the report is available on the OR Secretary of State website at . ................
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