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Financial Analysis of City of Effingham

2019-05-29 来源: 51due教员组 类别: Essay范文

下面为大家整理一篇优秀的essay代写范文- Financial Analysis of City of Effingham,供大家参考学习,这篇论文讨论了艾芬厄姆市的财务分析。艾芬厄姆市是伊利诺斯州艾芬厄姆的一个地方政府。作为一个政府,它的收入主要来自征收财产税和地方销售税,以及获得部分国家共享收入。一般来说,城市使用的基金可以分为三类:信托基金、自营基金和政府基金。不过艾芬厄姆市有六个政府基金。一般基金、增税融资基金、资本项目基金;它们都是主要基金,其信息分别显示在政府基金的收入、支出和资金余额变动的财务报表中。从多个角度来看,存在着资金的轻微不足。

Effingham,艾芬厄姆市的财务分析,essay代写,作业代写,代写

The General Purpose of the Entity

The entity is called the City of Effingham, which is a local government of Effingham, Illinois. As a government, it serves the local population with its revenues (mainly from levying a property tax, and a local sales tax, and gaining part of the state shared revenues). With what it earns, it provide a series of municipal services—public safety, public works, library service, planning, and other general and administrative services, into which the City’s expenditures flow.

The City operates under a commission form of local government—an elected mayor and four commissioners constitute the City Council, which has the authority to make policies and legislate; besides, the mayor and the four commissioners have their individual powers and duties in terms of administration. Following the City Council is the City Administrator who serves the Mayor and the Council in daily operations of the city. The Accounting Administrator ensures the smoothness of daily management of the Treasurer’s Office and accountability of the City. There are also Directors of various departments after the City Administrator; they are responsible for corresponding development and problems solving of different departments.

As to standard-setting bodies, the City follows FASB as it requires the City to present the government, its component units, and its entities for which the government is considered to be financially accountable. Also, the City follows GASB as it has implemented several statements of GASB.

The Different Funds Used by the Entity

In general, the funds used by the City can be divided into three kinds: fiduciary funds proprietary funds, and governmental funds.

There are six governmental funds maintained by the City of Effingham. Of these funds, there are the general funds, the tax incremental financing fund, and the capital project fund; they are all major funds whose information is shown respectively in the financial statements of revenues, expenditures, and changes in the fund balances of the governmental funds. Also, there are other funds that are shown in the combining statements, which are nonmajor funds. As can be shown from page 27 to page 32 of the financial statements, the purpose of using these governmental funds is to develop various sections of the city’s functions, such as culture and recreation, economic development, general government, capital projects, highways and streets, public safety, public works, health and welfare, e.g. The governmental funds follow cash basis.

The City of Effingham also has two proprietary funds—one is the enterprise funds while the other is the internal service funds. The City uses the enterprise funds to report the government’s functions that are considered to be business-type activities. In this case, the enterprise funds of the City of Effingham account for the City’s water and sewer operation. At the same time, the internal service funds is used to cover an entity’s internal service projects. In this case, it is used to account for the City’s maintenance garage, because this service is set up to benefit the government internally. Detailed information of the two above—mentioned funds are shown in the proprietary fund financial statements. The proprietary funds follow accrual basis.

In addition, the government also holds a kind of funds for the benefit of other parties outside itself, which is fiduciary funds. This kind of funds cannot be combined into the governmental-wide financial statements because they cannot be used for the government. The City does not have any fiduciary funds, but it includes two fiduciary type component units that are presented separately—the Effingham Police Pension Fund, and the Effingham Firefighters Pension Fund. These two component units are for the pension granting for the police and firefighters in Effingham after they retire. The fiduciary funds follow accrual basis.

Also, the City has three component units—the library, the Effingham Police Pension Fund, and the Effingham Firefighters Pension Fund. Details of the library are presented in the governmental-wide financial statements, and details of the Effingham Police Pension Fund, and the Effingham Firefighters Pension Fund are presented in the financial statements of fiduciary funds.

The Sustainability (Interperiod Equity) of the Entity

Interperiod equity is a measurement to reflect whether an entity’s revenue of a certain period can cover its expenditure at the same period, which is an important indicator to measure the government’s sustainability. According to page 26, although unsteady changes of different activities (positive changes in some activities while negative changes in others) can still be found in corresponding activities, the financial statements have all shown that the City has maintained a positive financial position. However, it can be shown in page 31 that current revenues from 2015-2016 are not sufficient to cover the expenditures of this period for the part of governmental funds. The conflicts between the results of the financial statements of activities and those of the financial statements of governmental funds indicate that the City has difficulty in offering sufficient revenues for its operation to some degree, because governmental funds has a narrower focus than the governmental-wide financial statements.

When it comes to proprietary funds, an increase in net position can be observed according to page 35; that indicates a healthy management of operation in terms of business-type activities of the City.

With regard to the fiduciary funds, a slight decrease of net position is shown in page 39, meaning that the government lacks a slight portion of capital in terms of the Police Pension Fund and the Firefighters’ Pension Fund management.

Conclusion

In conclusion, the City of Effingham generally operates quite smoothly, but it also shows a slight lack of capital in its operations from several angles. Thus, more comparisons should be introduced to determine whether buying its general obligation bonds are attractive. Two ratios can help.

One is the debt ratio, which measures to which degree the assets are provided by debts.

According to page 25:

Account Debt Ratio = Total Debt/Total Assets = 32,772,833/107,284,504=0.3055

This is a rather normal debt ratio for a government, so it is OK to buy its general obligation bonds.

The other ratio can help is the operating margin, which observes an entity’s profitability. Because general obligation bonds of a government are repaied with its tax and other revenues (mainly by tax), the Operating Margin here chosen is the one of the governmental funds.

According to page 31:

Operating Margin = (Revenues-Expenses)/Expenses = (18,615,774-19,150,429)/19,150,429=-0.0279

As the governmental funds of a municipality sheds more light upon its financial health in a stricter way, it is recommended that people should not buy the general obligation bonds of the Effingham City.

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