Financial Condition Reporting

NASACT Conference, August 2011

OregonSecretary of State Audits Division

Gary BlackmerAudits Director

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Overview

Why assess financial condition?What does a report look like?Methods and tips

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Why assess financial condition?

• Identify emerging problems• Communicate complex ideas in a clear,

concise way• Extend the financial timeline beyond a year

or biennium• Recommend strategies to improve financial

condition

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• Recognize improvements resulting from actions and decisions

• Identify potential audit areas• Show your audit agency’s commitment to

on-going monitoring, to assure the public• Get greater value out of your financial

auditors

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What does a report look like?

• Revenues• Expenditures• Long-Term Debt• Fiscal Health• Demographics

Or some variation on

these sections…

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Approach

• International City and County Managers Association published “Evaluating Financial Condition” in 1985 based upon the municipal bankruptcies in the early 1980s.

• 36 indicators, which is more than necessary- GASB has more recent guidance

• Instead, identify 10-20 key indicators and put the extra effort into deeper analyses of any emerging trends.

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Why the auditor?

• Another mechanism of accountability/transparency

• An independent report is seen as more credible

• A professional challenge for audit staff• More likely to be sustained

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From Kate Brown, Oregon Secretary of State…It is my hope that the analysis provided by the Audits Division will give Oregonians and public officials the tools they need to understand the unfavorable trends the state experienced and identify potential solutions to forge a better future for our state and for our people. The data in this report covers a 9-year period from FY 2001 through FY 2010. The most favorable trends are: – Oregon’s unemployment fund helped cover the needs of many

Oregonians during this deep recession, unlike many other states that are borrowing from the federal government to support the unemployed;

– Payments to state PERS retirees appear to be leveling out in recent years; and

– Oregon continues to see a declining rate of violent property crimes. 8

Unfortunately, less favorable trends are prevalent in this report: – Basic conditions for Oregonians have worsened with

increased unemployment, increasing poverty rates, and greater dependence on Medicaid and other public assistance;

– K-12 education costs have grown substantially in the past 9 years;

– Oregon’s Rainy Day Fund, created 3 years ago, has already been reduced by two-thirds; and

– Oregon has doubled its long-term debt over the last 9 years, limiting its future options.

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Methods and tips

• Define your entity right• Detail the causes of positive or worrisome trends• Keep your graphics consistent and clear• Use GASB’s website for examples and guidance

– “Economic Condition Assessment”• Sustain the effort, because the big stuff sneaks up on you• How much work? 1700 hours, about 350 hours next time• We are looking at Oregon’s 36 counties right now

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Questions?

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