18843_Authority_Dec

52 The Authority │ December controlled by the authority. There is a minimum of two components, the rate per billing unit, (gallons, customers, or EDUs) and the number of units. One way to summarize this information over time is to create a table(s) that shows the components for each prior year . It also provides a history of rates which allow you to compute the percentage rate increases over time. This percentage can then be compared to the consumer price index or increases in the cost of providing service. Because budgets are estimates, the calculation may be quite simple, but the total rate revenue may be more complex and include such things as peak demand charges, or surcharges for extra strength or usage. The complexities will vary from system to system, but the key is to identify the major revenue sources and identify the factors that generate them. If there is more than one customer class, you may want to have separate tables showing the rate and revenue from each class has changed over time. Track usage trends to predict how usage may change over the course of your planning window. Communities change over time, and those changes are not always apparent. Tracking usage and changes in the number of users are important . Declining population may be evident but reduced usage because of a decrease in the number of people per household may not be noticed. Likewise, subdivision plans filed with the municipality are usually monitored but conversions from single family to multi-family units may go unnoticed. In small numbers, these may not be important but might identify a trend. A summary table of customer count and usage for each year may provide valuable insight into future changes. Monitor delinquencies and factors that might cause them to fluctuate. Another analytical tool for monitoring rates and revenue is to look at interest and penalties paid by delinquent accounts both in terms of the dollar amount and as a percentage of the total revenue received . This is not a tool for directly measuring delinquencies but a tool for measuring the net amount that can be expected from a rate increase. This is especially true if rates need to be significantly increased over time. Sometimes there is a slight increase in delinquencies after a rate increase until the new, higher amount is worked into the user’s budget, but if delinquencies continue to increase after two or three quarters after rate the increase, it may signal the need to change the billing frequency. Going from quarterly to monthly billing can make it easier for some households to pay on time. This could be accompanied by a discount for annual payments. But the only way to monitor these changes is to track delinquencies from year to year. Forecasting Expenditures In some ways, expenditures are easier to project than revenues. Suppliers often send notices of price increases for major items, and the approval of monthly invoices keeps everyone abreast of current costs. But forecasting is still not easy. Often, authorities use a simple, incremental method to project expenses. They start with last year’s actual expenditures and add a fixed percentage for expected increases. They treat costs as uniform without analyzing which categories Budgeting article continued from page 22. [ thIs fInanCIal model ] wIll help you to develop a multI - year fInanCIal proJeCtIon that funds all the authorIty ’ s needs InCludIng adequate operatIng reserves and CapItal replaCements .