How To Communicate Financial Information

to Elected Officials (or anyone else that doesn’t think

accounting is cool)Brad Harris, CPA, CMFO, CCW (see below)Finance and Accounting Consultant – MTASFormer Finance Director – City of Athens, TNFormer Financial Director – Rhea County, TNRhea County 2014 Chili Cookoff Winner!!

What’s this class all about?

Sometimes things are not always as they seem!!

What’s this class all about?

Too much PAPERWORK!

Too DIFFICULT to understand!

RESULT: no comprehension of our current financial condition

Key Decision Makers Need…

Information that is…

easy to read flows logically leads to a conclusion quickly They come away knowing they

are informed Accountability

Two Words: Your BFFs

Timeliness

Accuracy

Timeliness is essential

How often do you prepare and give management and elected officials financial reports?

Are they for the previous month or quarter?

If not: WHY??

How can they make important decisions without timely financial data?

Accuracy – no substitute!

Are the numbers right??

Does it look sensible??

How can they make important decisions if the information you give them is not reliable??

THINGS YOU MUST DO EVERY MONTH:

1) Reconcile EVERY bank statement!!!!!!!!!!!!

2) Review your trial balance

Balance sheet assets / liabilitiesDo the assets have debit balances?Do the liabilities have credit balances?Do the fund balances/net position match

the previous year audit?

2)

Income statement revenues / expenditures

Do revenues have credit balances?Do expenditures/expenses have debit

balancesDoes the trial balance equal -0- at the end?

(In other words, do debits = credits?)

3) Close the month out once you are comfortable with the account balances

August should not be your “current month” when the dogwood trees start blooming!! (Uh, Houston, we have a problem!)

Once you are happy with the trial balance numbers, go ahead a close the month and

prepare financial information for those that need it.

How to you avoid “information overload”?Give them what they want AND

what they need

KISS !!

A SIMPLE Spreadsheet

EASY to understand

NOT complicated

HELPS to see the financial picture

Current (Decrease) from 12-MonthYear From % Current Yr. Variance

12/31/2012 % Received 12/31/2013 Prior Year Collected to Prior Yr. (6/12=50%)GENERAL FUNDProperty Taxes 104,985 36.60% 204,409 99,424 36.16% -0.44% -13.8%Local Sales Taxes 294,406 54.50% 274,794 (19,612) 48.40% -6.10% -1.6%Wholesale Beer Taxes 66,575 53.30% 70,342 3,767 53.70% 0.40% 3.7%Gross Receipt Taxes 12,088 31.80% 13,130 1,042 38.00% 6.20% -12.0%State Sales Taxes 101,827 49.70% 104,970 3,143 50.50% 0.80% 0.5%Gas and Motor Fuel Taxes 42,961 50.00% 42,718 (243) 51.28% 1.28% 1.3%Court Fines/Costs 17,592 58.60% 39,824 22,232 72.40% 13.80% 22.4% Total Revenues/% of Budget 893,717 52.10% 1,039,150 145,433 50.10% -2.00% 0.10%

Prior Year

12/31/2013 Variance 12-Month

Incr.(Decr.) from VarianceActual % Expended Actual From % Expended Current Yr. (6/12=50%)

& Encumbered Prior Year & Encumbered to Prior Yr. GENERAL FUND Legislative 13,298 30.25% 24,630 11,332 41.92% 11.67% -8.08%Judicial 2,584 49.99% 2,584 0 49.99% 0.00% -0.01%Central Staff Agencies 103,542 52.91% 86,537 (17,005) 52.14% -0.77% 2.14%City Hall Buildings 2,392 32.59% 9,051 6,659 109.71% 77.12% 59.71%Other General Government 134,230 85.36% 118,273 (15,957) 88.26% 2.90% 38.26%Police 275,093 51.23% 271,287 (3,806) 49.74% -1.49% -0.26%Fire Protection 45,271 62.01% 38,353 (6,918) 50.68% -11.33% 0.68%Building Inspection 4,091 45.20% 4,148 57 49.82% 4.62% -0.18%

12/31/2012Current YearPrior Year

Highways and Streets 181,750 48.16% 197,881 16,131 50.42% 2.26% 0.42%State Street Aid 4,014 63.71% 376 (3,638) 3.13% -60.58% -46.87%Sanitation 0 0.00% 0 0 0.00% 0.00% -50.00%Animal Shelter 298 23.82% 662 364 33.28% 9.46% -16.72%Recreation 99,588 47.06% 93,224 (6,364) 45.11% -1.95% -4.89%Libraries 22,612 51.51% 24,150 1,538 55.01% 3.50% 5.01%Note Principal 9,227 100.00% 9,227 0 100.00% 0.00% 50.00%Operating Transfers 28,200 150.00% 59,289 31,089 15.79% -134.21% -34.21%

0 Total General Fund 926,190 53.94% 939,672 13,482 45.84% -8.10% -4.16% SANITATION Revenues: Charges for Service 79,082 43.90% 65,970 (13,112) 40.40% -3.50% -9.60%Total Revenues 84,590 45.99% 67,532 (17,058) 41.22% -4.77% -8.78%

Sanitation: Expenditures: 91,215 50.67% 84,138 (7,077) 46.74% -3.93% -3.26%

DEBT: Interest(City only - not incl. utilities) Balance Paid YTD

Local Government Energy Loan 9,227 434Fire Hall Capital Outlay Note 434,845 23,009

CASH IN BANKS: 12/31/2013 12/31/2012 Increase 12/31/2011 12/31/2010

General Fund 505,442 425,692 79,750 456,211 399,970Sanitation Fund 30,903 51,299 (20,396) 27,644 33,540Drug Fund 5,924 1,344 4,580 870 2,312Capital Projects Fund 17,091 40,707 (23,616) 112,300 650,030TOTAL Cash in Banks 559,360 519,042 40,318 597,025 1,085,852

A SIMPLE NarrativeGeneral Fund

Total revenues stand at 50.10% of budget, while total expenditures stand at 45.84%. This 4.36% difference indicates that while revenues are on pace to meet budget, expenditures may finish the fiscal year below budget. Through December we have collected $87,612 more in revenue than we have spent in expenditures.

Total revenues have increased over December 2012, by $145,433, but the percentage of total revenues to budget is down slightly (2.0%). We have collected more in property tax due to the increase in rate. However, property tax as a percentage of budget is slightly lower than last year. Local sales tax is lower than last year by about $19,600. Court fines and costs have also seen a substantial increase over the prior year. Total revenues are slightly above 50%, due primarily to the property tax increase and the insurance settlement from the flood. Last year we finished the fiscal year at 102.69% of budgeted revenues – we should approximate 100% this year.

PLEASE NOTE: on the financial spreadsheet that accompanies this report, at the top you will see General Fund revenues. I have only broken out major sources of revenue such as property taxes and sales taxes. The “total revenues” amount includes smaller items that I did not show in detail. A complete listing of all revenue accounts can be found on your computer-generated report titled “”Statement of Actual and Estimated Revenues”.

Expenditures and encumbrances for this year are $13,482 more than this time last year, showing 45.84% this year compared to 53.94% last year.

The Legislative line has increased because $10,000 in contingency funds has been spent through December because of the hosting of the National League of Cities Conference. Also, City Hall Buildings line has increased because last year we paid for the municipal code update and dues and registration fees were higher. The fire department has seen a decrease due to the chief’s retirement. State street aid has decreased because a new employee was hired with the first paycheck being posted to August and no retirement posted for this year. Operating transfers has shown a large percentage decrease from the prior year because the transfers were not budgeted in December.

Keys to Effective Communication of Financial Results

1) Keep it SIMPLE2) It doesn’t require detailed thought or analysis3) EASY to read4) Gives them a logical conclusion5) Shows them an accurate and timely snapshot

of where the city stands financially

Some GREAT websites

http://www.mtas.tennessee.edu/web2012.nsf/Financeshttp://www.comptroller.tn.gov/la/ReportsAudits.asphttp://www.gfoa.org/best-practiceshttp://www.comptroller.tn.gov/sl/index.asp

If I can help you further:

Brad Harris brad.harris@tennessee.edu423-718-0797