1. ELEMENTS OF A FINANCIAL SYSTEM Teresa Rotschafer Finance Director City of Johnston 515-727-7783trotschafer@ci.johnston.ia.us July ’11

2. Chemistry????

3. Elements Economic Issues State Law Outside Agencies Federal Law Budget Valuations Funds Debt Capital Projects

4. Economic Influences Global United States State Local

5. Economic Influences Global Economy –Business in your community –Foreign Markets –Cost of doing your business –Cost of Oil, Metals, Building Materials

6. Economic Influences (cont) US Economy –Federal Laws and Mandates How many of you know someone that is or has been in Iraq or Afghanistan? –IRS Rulings –Fed Bank –Grants and Endowments

7. Economic Influences (cont..) ä State Economy ä State Laws and Mandates ä Revenue Sharing ä Grants and Endowments ä Local Economy ä Employment ä Affluence ä Crime ä Education ä Other Local Governments

8. Other Economic Influences Mother Nature –FEMA

9. Other Government Influences Those taxing agencies within any given community- city, school, county, assessors, community college, extension, state which service the citizens of that community. City School County Community College City/County Assessor Extension State –DNR –DOT –DOM –State Auditor’s Office

10. Other Agencies that influence us GASB-Government Accounting Standards Board CFC-City Finance Committee 411/IPERS Worker’s Compensation Homeland Security/National Guard EOC and Township Trustees Non Profit and Not for Profits –United Way or Community Chest –Churches and Charitable Organizations

11. Inputs and Outcomes Council/Legislature Citizens Other staff Employees

12. LET’S GET DOWN TO BRASS TACKS Tell us something we REALLY need to know

13. MUNICIPAL FUNDING BACK TO CHEMISTRY…. –General Fund –Special Revenue Fund –Fund Transfers –Permanent Funds –Debt Service Funds –Capital Projects Funds –Enterprise Funds

14. General Ledger Cash Basis Vs GAAP Chart of Accounts –Standardization Is Very Critical Financial Reporting –To Council, Citizens, other governments and Bond Buyers –GASB 34, 44, 45 and 54 Budget and Reports

15. Valuations- Assessed vs Taxable vs Market ASSESSED VALUE-Value given to property by the City/County Assessor TAXABLE VALUE-Value available for taxation by various taxing agencies. –How is the taxable value determined? Assessed value minus any rollback applied to that class of property. –Residential, Commercial, Industrial, AgLand Other influences: Multi family, condominium –What about those tax exempt properties? What role do they play in this?

17. http://www.dom.state.ia.us/

19. BudgetBudget Planning-A Business Plan Control Monitoring/Reporting Amending

20. Important Budget Terms Budget Certification –The formal filing of an approved budget to the Department of Revenue and Finance and the County Auditor’s office. Public Hearing Notice –A prescribed form which must be completed and published (or posted) no less than 10 and no more than 20 days before the budget public hearing. Each city must conduct a public hearing before the budget or amendment can be approved.

22. Snap Quiz Using the information on Slide 18, how would you fill in the form on slide 21?

23. More Important Budget Terms Taxes –Any general or special tax levied against persons, property or business for public purposes as provided by law, but shall not include any special assessments. $8.10 levy limit –The limit imposed by state statue for the general fund levy. $8.10/$1,000 of TAXABLE value.

24. More Important Budget Terms Other taxes –Employee Benefits Emergency –Insurance Hotel/Motel tax –Local Option Tax –http://www.iowa.gov/taxhttp://www.iowa.gov/tax

25. Still More Important Budget Terms Per Capita –A calculation based upon population. Example, Road Use Tax allocation. WARNING: All allocations are not equal…

26. More Important Budget Terms User Fees or service charges –Water and sewer rental charges which generate enough revenue to run the activity. –How does the Council determine what the user fees should be? Rents and Royalties –Rents paid only by those using the service. Example, renting City hall or park rental fees. Revenue Bonds –Bonds supported by user fees, usually from a proprietary activity such as water user fees or sewer rent.

27. More Important Budget Terms General Fund –Chief operating fund of the city – used to account for & report all financial resources not accounted for or reported in another fund. Capital Project Funds - –Used to account for & report financial resources restricted, committed or assigned for capital outlays, construction of capital facilities and other capital assets.

28. More Important Budget Terms Special Revenue Funds –Funds that have special restrictions. For example, Road Use Tax (RUT) or grants. Proprietary Funds –Enterprise fund accounts for a city’s acquisition, operation and maintenance of facilities and services which are all or mostly self supporting by user fees. Debt Service –Fund or funds used to account for funding and payment of interest and principal of general obligation and special assessment debt of the City. (Sec 384.4)

29. More Important Budget Terms Permanent Fund – –Used to account for resources that are legally restricted so that only the earnings, and not the principal, may be used to support a governmental operation. Fund Transfers – –Cities often make transfers between funds in order to accurately portray their expenditures.

30. Treasurer and Budget Reports Treasurer Report –Cash on Hand/In Bank and Investments –Receivables (how much has been billed out but not received— good idea even on cash basis –Unappropriated Surplus Budget Report –By function: Police, Fire, Library –By Program: Public Safety, Public Works –Balance Remaining

31. FINANCE/TREASURER AND CASH MANAGEMENT

32. Cash Management Cash Flow –Timing of Revenues –Timing for Expenditures –Checks-ACHs-Wires –Banking services Investments –Safety –Liquidity –Rate of Return Fraud

33. Cash Flow--Who Cares? What are idle Funds? –Cash on hand (in checking or savings account) not currently needed for expenses. What is Cash Float? –The balance in an account which has been pledged (a check written) but not yet needed (the check has not been presented to a bank for payment. What is Cash Flow? –Cash flow is the activity of revenues and expenditures though out any given period.

34. Cash Flow Methods By Fund By Date By Type –Revenue Taxes vs fees vs state shared –Expenditures By Program By Department By Cycle By Bank Account –Electronic Banking –ACH-Automated Clearing House used for debits and credits against another account. –Wires-same day debits or credits on another bank –Sweep Accounts-account which is cleaned out at 2:30 and returned the next day in order to earn one day’s interest All of the Above

35. Cash vs. Investments Liquidity –The availability of funds from an account or conversion of an investment to secure cash. What kind of money are you investing? –Co-mingled Funds: A mixture of fund balances used to create a larger balance without loosing identity of ownership. –Pro Rated Interest: The allocation interest earned on an investment or interest bearing account which is made up of various funds. This allocation is usually based upon ownership of balance.

36. Helpful Methods for Investments IA Code 12C –Interest on Checking Negotiate banking services –Timing the length of your investment Banking Calendars Cash flow charts Discussions with Departments/Contractors –Gantt Chart: A chart to show a schedule for a project. –Other information-electronic banking and Treasurer of State Website –http://www.treasurer.state.ia.us –Flexible CDs

37. Slide 37 to be used in snap quiz. Slide 37 to be used in snap quiz.

39. Charts and Graphs

40. One Magic Formula How to determine liquidity: Look at the lowest balance over the last two years + Add the smallest amount of monthly revenue –Subtract the highest monthly expense

41. Snap Quiz Using slides 37 and 39determine the liquidity of this community. Answer: Lowest balance Smallest amount of monthly revenue Highest monthly expense $159,041+$18,808-$168,754 = $9,095

42. Charts and Graphs (cont)

43. Investment Charts

46. Where does one start??? Historical information-Get the big picture before you look at the pieces Discussions with Departments/Contractors Discussions with Banker/Treasurer Engineers, Architects, Financial Advisors

47. Other Software Options Other forms of spreadsheets Software as simple as MS Money or Quicken Complex packages –Trace your cash and investments –Help you forecast cash needs Patterns –Know when you get what and when you’ll spend $$

48. DANGER!!! BEWARE!!! Safety of Principal Safety of Assets Fraud Prevention

49. Fraud and Theft What kinds of fraud or theft are we looking for? –The obvious? –Someone walking out the door with cash? –Someone disconnecting the water meter to water the lawn? –Investing in “a sure thing”? –“Investing in our own Community” Buyer beware. Do your homework.

53. Are you loosing too many tools? What happened to all that copy paper, city gas? Is someone using city equipment for personal purposes? Are purchases done thru competitive bidding? Or are you paying the price no matter what? How do you know if it is too high?

54. Safety of Assets People are assets (Intellectual Assets) –Employees are people too Do you have safety training? –Driver>>>Confined spaces>>>Ergonomics Fire/Property Losses---Insurance? Flood Plan What will you do if a Pandemic hits your community?

55. WHAT ABOUT ETHICS? A salesman calls to confirm an order for soap. You didn’t order it. He says Bob ordered it but since he is on vacation, you have to accept it. You’re not sure. He agrees to give you a free CD player for accepting this before the end of the month-- he really needs to complete his sales for the month. Since Bob ordered the soap, anyway, what does it hurt?

56. Other Aspects of the Financial System

57. City Spending Purchasing Policies –When to purchase –How much to purchase –How to purchase Capitalization Policies –Projects –Equipment/Buildings

58. Capital Improvements POLICY-POLICY-POLICY Equipment Projects Buildings Infrastructure

59. Debt Management POLICY-POLICY-POLICY General Obligation Revenue Bonds Leases-Operating vs Capital Tax Increment Financing (TIF) Registrars

60. Risk Management Insurance Policies –28E Agreements –Contracts-Performance Bonds Worker’s Compensation Policies Safety Programs

61. Annual Reports - to name a few Annual Debt Report – State Treasurer’s Office (on line) Road Use Tax Report - Department of Transportation(on line) Annual Financial Report –State Auditor’s Office (can get e-report from DOM)

62. AUDITAUDIT It’s not a dirty word (there are 5 letters) Helps your understanding Helps your credibility Good references

63. Calendar of Events Iowa League of Cities Web Site –See appendix for this year’s calendar

64. SummarySummary Lots of pieces Lots of questions Lots of responsibility Lots of help

65. At the end of your rope?

66. Who can help? City Attorney Other city staff Local Bankers ISU Iowa League of Cities –Mentor Program Department of Management State Auditor’s Office State Treasurer’s Office Department of Natural Resources City Finance Committee IMFOA and GFOA Each other-call, network, share Me

67. TERESA ROTSCHAFER FINANCE DIRECTOR CITY OF JOHNSTON (515) 727-7783 trotschafer@ci.johnston.ia.us