Financial Performance Indicators of Concern

A sample of the “Financial Performance Indictors of Concern” tab of the Data Input Worksheet is provided below along with sample values that would exceed the thresholds established for each value. If the values entered for your unit exceed one or more of the thresholds, a response to the LGC is required. Please click on “Response” next to each indicator to view sample text that may be used in your unit’s response to the LGC. 

Sample text for all indictors aw well as additional resources are available on the webpage below.

FPIC Sample Responses and Resources

Financial Performance Indicator Worksheet
Unit Name: Dogwood      
Unit Number: 50999 Fiscal Year 2021 Explanation of Performance Indicator Sample
Responses
GENERAL FUND:    
  Fund Balance Available Minimum Threshold Unit Results
40.00%       34% -- Average of
similar units is 63%
24.45%
30.00%

29.62

   
20.00%

24.45

24.45
10.00%
0.00%

                             2019    2020    2021

Fund balance available for appropriation is an important reserve for local governments to provide cash flow during periods of declining revenues and to be used for emergencies and unforeseen expenditures. The information to the left indicates the amount of available cash on hand. You will also see the average for units of your size. Note that 8.33% represents enough fund balance to cover one month of expenditures. Normally, a unit has to either increase revenues or decrease expenditures to increase fund balance available.

This calculation looks at fund balance available plus debt service fund balance (if applicable) less Powell Bill. This number is them divided by the total of total expenditures plus transfers out less bond proceeds.

 

 

Response

WATER SEWER FUND    
  Quick Ratio-Water and Sewer Minimum Threshold Unit Results
8.00

7.36

    Equal or greater than 1 .84
6.00

6.96

 
4.00
2.00
0.00 .84

                             2019    2020    2021

 

 

It is not uncommon for a Water Sewer System with multiple performance indicators of concern to find that a proposed solution to one of the indicators also solves other performance indicators of concern.

A Quick Ratio less than 1 indicates that the unit owes mores for its current bills than what it has on hand in unrestricted cash and investments plus what is owed from customers (accounts receivable). This could indicate that the fund may have difficulty paying its current bills. If this pattern continues, the water and/or sewer system may not be sustainable.

 

 

Response

  2019 2020 2021 Minimum Threshold Unit Results

Operating Net Income (loss) excluding depreciation+ debt service principal

 

$2,402,473 $1,926,800 $1,926,800 Greater than zero $(10,543)

Unrestricted cash / Total expenses less depreciation+debt service principal

 

 

 

 

107.23 89.38% 89.38% Greater than 16% (2 months) 15.30%
It appears your Water Sewer fund(s) have  transfers-in for the support of operations that are greater than 3% of the total of operating and non-operating expenses.  Please discuss the purpose of such transfers-in and if you plan to continue these transfers-in. Yes    

 

This calculation subtracts operating expenses (which also includes depreciation and debt principal paid) from operating revenues. A negative balance indicates that your rates are not covering your operating expenses. 

This indicator calculates how many month's worth of expenses (including debt principal but not depreciation) a unit can pay based on the amount of unrestricted cash at year-end. The typical billing cycle is one month (8.33%) and one extra month usually gives a local government enough cash  to handle unusual monthly expenses (16.66%). This 16% would be the bare minimum necessary to keep the fund from experiencing cash flow issues.

The rate structure of the Water Sewer fund should support the expenses of the Fund without operating subsidies or transfers from other funds.

 

 

Response

 

 

 

Response

 

 

 

 

 

Response

ELECTRIC FUND:  
  Quick Ratio-Electric Minimum Threshhold Unit Results
4.30

 

  Equal or greater than 1 .85
4.20

4.26

4.26
4.10
4.00 4.01
3.90
3.80

 

 

A Quick Ratio less than 1 indicates that the unit owes mores for its current bills than what it has on hand in unrestricted cash and investments plus what is owed from customers (accounts receivable). This could indicate that the fund may have difficulty paying its current bills. If this pattern continues, the electric system may not be sustainable.

 

Response

 

  2019 2020 2021 Minimum Threshold Unit Results
Operating Net Income (loss) excluding depreciation+ debt service principal+ debt service principal $1,760,354 $1,694,260 $1,694,260 Less than zero is below threshold (11.632)
Unrestricted cash / Total expenses less depreciation+debt service principal 26.42% 7.65% 7.65% Greater than 16% (2 months) 7.65%

 

This calculation subtracts operating expenses (which also includes depreciation and debt principal paid) from operating revenues. A negative balance in this indicates that your rates are not covering your operating expenses.

 

This indicator calculates how many month's worth of expenses (including debt principal but not depreciation) a unit can pay based on the amount of unrestricted cash at year-end. The typical billing cycle is one month (8.33%) and one extra month usually gives a local government enough cash  to handle unusual monthly expenses (16.66%). This 16% would be the bare minimum necessary to keep the fund from experiencing cash flow issues.

 

 

Response

 

 

Response

General Performance Indicators: 2021 Target      
The 2021 Audit Report is expected to be submitted by the date set by the LGC (not the October 31st date) according to the Auditor? Yes Before December 1 for 2021 No As stewards of the public’s resources, the governing body is responsible for ensuring that the audited financial statements are available to the public in a timely manner. External groups such as the North Carolina General Assembly, federal and State agencies that provide funding, and other public associations need current financial information about your local government as well. Response
  2021 Target      
The budgeted tax levy for the General fund had more than 3% uncollected for the fiscal year audited - decreases are shown by a negative % -33% Less than 3% -33% This indicator shows that the local government did not collect 3% (or more) of its budgeted tax levy. This could be an indicator of negative economic events, inaccurate budgeting, and/or issues with the collection process. Uncollected revenues at the 3% level represent several pennies of the tax rate. Response
  2021 Target      
You indicated that you expect a decrease in property value for your next property revaluation.   In your Response Letter please discuss the magnitude of the drop in valuation, the overall cause of the drop and how your County plans to recover the lost revenues. Decrease Any estimated decrease Decrease You indicated that you expect a decrease in property value for your next property revaluation which could result in lost tax revenue. Response
  2021 Target      
Does the entity have an  effective pre-audit process to ensure that pervasive budgetary over- expenditures do not occur at the budget ordinance level? Yes No over-expenditures No The unit had expenditures that exceeded the legal budget ordinance. This indicates that the unit's purchase order system, contract approval process and/or payment process is not in compliance with North Carolina General Statute 159. Response
  2021 Target      
The local government had a mandate placed on them by DEQ, a court order or some similar requirement (that has no realistic appeal path) that the financial effect will be greater than 3% of the WS Budget and is not yet budgeted. No   Yes The local government has indicated there is substantial unbudgeted costs that could significantly impact their operations and/or customer rates.  Response
  2021 Target      
If a unit has no performance indicators of concern that would require them to submit a Response to Audit Findings, Recommendations and Fiscal Matters, but they are currently on the  Unit Assistance List, they must still submit a Response to Audit Findings, Recommendations and Fiscal Matters.  Their response should discuss the financial plan they have developed to address the issues that placed them on the Unit Assistance List and the progress they have made to date. Yes On the Unit Assistance List Yes N/A-Unit is not on the Unit Assistance List. Response
  2021 Target      
The Unit had Statutory Violations listed in the Audit Report that should be addressed in the Unit Response Letter No   Yes This indicator lists whether the unit has a statutory violation. Response
  2021 Target      
The unit had problems with debt service payments being late and/or did not comply with the bond covenants? No   Yes This indicator lists whether or not the unit has issues with debt service payments or bond covenants. Response
  2021 Target      
You have indicated that you have a  landfill that will be closing  or have a significant portion closing within the next 5 years  and will have the closure/postclosure cost fully funded by the date of closure. Yes   Yes This indicator tells if you have a landfill that is estimated to close within 5 years but the unit may not have enough funds for the closure/post closure costs. Response
  2021 Target      
The unit must address the material and/or significant findings or any other findings that the auditor reported to them. 5   5 This indicator states whether or not your auditor has identified material and/or significant findings or any other findings for your unit. Response
  2021 Target      
Electric Transfers-out have exceeded the amounts described in GS 159B-39.  If your unit is a member of the North Carolina Eastern Municipal Power Agency it appears you have violated the GS.  If you are not a member of the Eastern Municipal Power Agency we would like to understand what you are funding with the transfers-out and do you plan to continue this practice.  Yes   Yes This indicator shows if there were transfer out of the Electric Fund. This only applies to units that are subject to GS 159B-39: Apex, Ayden, Belhaven, Benson, Clayton, Edenton, Elizabeth City, Farmville, Fremont, Greenville, Hamilton, Hertford, Hobgood, Hookerton, Kinston, LaGrange, Laurinburg, Louisburg, Lumberton, New Bern, Pikeville, Red Springs, Robersonville, Rocky Mount, Scotland Neck, Selma, Smithfield, Southport, Tarboro, Wake Forest, Washington, and Wilson. Response
  2021 Target      
In addition to the any significant and material findings the Auditor can describe any additional issues the unit should address that affect the fiscal health or internal controls of the unit that were communicated to the unit during the Audit Presentation. 2   2 This indicator lists any other issues that the unit should address. Response