week-7-application-assignment-1-2-pages-auditing-and-assessing-financial-condition

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Week 7 Application Assignment (1–2 pages)

Auditing and Assessing Financial
Condition

Swobodaville
is a hypothetical town that provides the context for this Application
Assignment. What follows is a table that presents 5 years of data.

Evaluate
Swobodaville’s financial condition based on the partial list of factors given.
That is, consider any observable trends in the data and what they could
potentially mean. To compare the data, in some cases it is best to convert dollar
figures to percentages. The best approach to analyzing this table is to look at
changes from year to year. Then explain what types of recommendations you would
make to the city.

YEAR

FACTOR

1

2

3

4

5

Revenue
per household

$321

$318

$329

$329

$328

Sales tax
as a percent of total revenue

.938

.936

.935

.935

.933

Expenditures
per household

$321

$321

$333

$334

$334

Low-income,
sales tax-exempt households as a percent of population

.139

.139

.142

.155

.156

Consider
the following:

Analyzing revenue structure
will help identify the following types of problems.

·
Deterioration
of revenue base

·
Internal
procedures or legislative/board policies that may adversely affect revenue
yields

·
Over-dependence
on obsolete or external revenue sources

·
User
fees that do not cover the cost of services

·
Changes
in tax burden

·
Lack
of cost controls and poor revenue estimating practices

·
Inefficiency
in the collection and administration of revenues

Analyzing an expenditureprofile can reveal the following:

·
Excessive
growth of overall expenditures as compared to revenue growth or growth in
wealth (personal and business income)

·
Undesirable
increases in fixed costs

·
Ineffective
budgetary controls

·
A
decline in personnel productivity

·
Excessive
growth in programs, which create future expenditures

Community needs and resourcesencompass economic and demographic characteristics,
including population, employment, personal income property value, and business
activity. An examination of demographic and economic characteristics can
identify the following:

·
A
decline in the tax or revenue base

·
A
need to shift public or customer service priorities

·
A
need to shift policies because of a loss of competitive position

·

Course Media:Finance and
Budgeting for the Public Sector

o “Budget Management Functions: Financial Evaluation” with
Jacqueline Byers (approximately 2 minutes)

Web
Sites

·
Association of Local Government
Auditors: 2006 presentation on Audit Committee and Auditor Independence

.org/DocumentCenter/Home/View/13″>http://algaonline.org/DocumentCenter/Home/View/13

·
Association of Local
Government Auditors: 2005 Financial Management Seminar: City Audits – The
Benefits and the Barriers – Establishing Independent Audit Committees and Supporting
Independent Performance Auditors

.org/DocumentCenter/Home/View/12″>http://algaonline.org/DocumentCenter/Home/View/12

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