What suggestions would you make for the Culpeper County CAFR (Below) if you were hired by the Mayor as a consultant? Your responses must further the discussion - do not just agree or disagree with the original poster (Culpeper County). Using the information provided by the original poster and what you learned from your own analysis, support your position. Your discussion must include at least 7 financial ratios (identify, calculate, and explain why you chose them) and several factors from each of the areas - environmental, organizational, and financial. You must include an overall summary of your conclusions.
v Culpeper County CAFR Review Example
1. What challenges does the city face based on a review of the Management, Discussion, and Analysis?
According to the Management Discussion and Analysis, Culpeper County does not seem to be facing many challenges. As of June 30, 2012, the County's assets exceeded their liabilities by $88 million. Culpeper County has about $23 million in the unassigned fund balance. The County seems to be in better financial position than in 2008, where it had to make spending cuts and freeze hiring. The County has planned to increase wages for FY 2013 as well add 3 new positions.
2. What are specific key performance (operating or financial) metrics used to gauge performance of city services?
- Some of the economic indicators used by the County are:Population, School enrollment, Unemployment rate, Personal income, Per capita personal income
- Some of the Operating indicators used are: Sheriff - Physical arrest, Traffic violations, Fire Protection - Number of stations, Community development - residential building permits
Parks and recreations:Number of parks and recreation facilities, Number of libraries
- Do you agree these are good metrics to use? Why or why not?
I think these are good metrics to use, because the County's overall health and position can be based on its unemployment rate. Additionally, the county is able to compare the number of public service resources it provides and the increase or decrease over time. The County bases its employment decisions based on public safety and public service needs. The County can use the populations statistics coupled with the operating indicators to identify if they are over or understaffed based on the population and number of incidents.
3. Identify the Bond Rating of the reporting entity?
What is the economic outlook and financial challenges for the city?
I believe that the economic outlook is positive for the County. The County has been able to have $23 million in unassigned funds that the County is able to spend at its discretion. However, given the history of the County, it would need to ensure that it keeps its spending and budgets under control to avoid a shortfall similar to what occurred in 2008. In 2008, the County suffered a shortfall and ended up having to freeze hiring and cut positions, to avoid that happing again the County should forecast its budget carefully.
4. Determine the following ratios, discuss and analyze the city's performance accordingly: 1) long-term debt vs. total assets, 2) debt service payments from the bond and interest fund vs. governmental expenditures, and 3) amount of general obligation bonds outstanding vs. population
1. Long term debt vs. total assets:
91,871,302 / 190,901,653 = 48.1%
I think the County's long term debt to asset ratio is pretty high. Give the County's history; it should try to minimize the amount of debt it takes on to lower its debt to asset ratio.
1. Total debt service payments from the bond and interest were $8,411,635. The total governmental expenditures were $79,817,880. This ends up around 10.5%. I think that the County should work on lowering this ratio as well. It could help the County to lessen its dependence on debt instruments used to provide services to the residents.
2. The County had $2,546,000 in County General Obligation Bonds and $6,932,590 in School General Obligation Bonds, for a total of $9,478,590. The total population was 47,114. This works out to be about $201.18 in general obligation bonds per person. I think this is a very good ratio, because the County can operate efficiently with only each person requiring a small amount of general obligation debt.