18843_Authority_Dec

F inanciaL r eporTinG and F inanciaL p LanninG G o h and in h and inTo The F uTure By David Busch, Keystone Alliance Consulting, Inc. occur for the next year considering the expected changes for the next year. Depending on your authority’s resources, the annual budget may be prepared by a staff member or it may require more direct involvement by the board members. The budget should be approved by the prior to the start of the next fiscal year. Once approved the authority should share this information with the creating body of the authority, the trustee or financial institution holding the debt, and adopt the budget at a public meeting. Good budgeting and regular financial reporting on a monthly or quarterly basis are some of the most important financial responsibilities of an authority. This information is critical to the system’s operations and provides a picture of the financial stability of the system. Understanding the authority’s responsibilities in the Trust Indenture or Loan Documents is critical to staying in compliance and keeping the authority in good financial standing. The most recent tapping fee report and the rate study should be reviewed so you understand the basis for the revenues of the system. If these documents have not been updated in the last five years, updates should be considered to ensure the authority is generating sufficient revenue and that the fees and charges of the authority are applied on a fair and uniform basis as required by the Municipality Authorities Act. The Rules and Regulations of the authority should be reviewed to determine if they are clear and that For the last five years, it has been my pleasure to participate in the PMAA Board Member Training sessions held across the state during the month of March. The presentation titled Authority Board Members’ Financial Responsibilities historically has been held the first session of the day starting bright and early at 8:30 am. Conducting this session has provided some challenges, particularly given that the audience of authority board members, managers and staff are just starting with their first cup of coffee of the day. One challenge that is a constant is presenting valuable content that is relevant to the entire audience. The audience arrives with different backgrounds in the area of finance as well as different challenges, as all authorities are unique in size, resources, staffing, and goals for the future. The Financial Responsibility session topics typically addresses the following key areas: • Financial Reporting • Operating Budgets • User Rates • Tapping Fees • Capital Budgeting • Financial Planning • Debt Financing • Financial Goals In my opinion, within these topics, two areas standout in importance as takeaways for the day: Financial Reporting and Financial Planning . Financial Reporting starts with what some might think are mundane financial documents including: • Annual Audit Report • Operating Budget • Trust Indenture/Loan Documents • Tapping Fee Calculation Report • Rate Study Report • Rules and Regulations Each of these documents offer key insight into your authority’s financial situation as well being building blocks for your system’s financial future. All authority board members and management staff should be familiar with these documents and their contents. The Management Discussion and Analysis (MDA) section, typically found on pages three to seven of your annual audit will provide you with a summary of the financial results of the authority operations for the last year. Reviewing and comparing the MDA Section from the last three audit reports will show the direction the authority is headed. If there is a positive trend you have something to build upon for the future. If the trend is in the wrong direction, it should be considered a wake-up call and efforts to change the direction of the authority’s finances should be taken. The Authority Operating Budget is a projection of what revenues and expenses will be over the next 12-month period. As each year nears the end, each authority should prepare an operating budget for the next year. This is a critical step of looking at the past nine months results and estimating what will