Cherry Bekaert LLP Government Services Group Report on the Results from our Government Benchmarking Study

Learning Objectives  At the end of this course, participants should be able to:  Understand current management trends for local government entities  Gain insight into the current areas of concern shared by government finance professionals  Gain an understanding of what finance professionals believe the future holds for government financial management 2

Presentation Objectives  Review data on respondents  Review responses in the following functional areas:  Work force and benefits  Financial reporting and GASB standards  Use of technology  Green initiatives  Long term borrowing  Infrastructure  External auditor and internal monitoring  ARRA funding  Budgeting 3

Respondent Information

Respondent summary  Surveys were taken over the summer of 2011  Good representation from counties, cities and school districts  Most respondents had oversight responsibilities of the accounting function  The size of the responding localities was pretty evenly distributed. 5

Type of Entity 6

Position held by Respondent 7

Size of Entity (by number of employees) 8

Size of Entity (by $ revenue) 9

Workforce and Benefits Objective: to gauge the ability of localities to properly staff and maintain their accounting function

Workforce and Benefits  Do you agree with the following statement: It is easier today to find qualified candidates for vacant financial and accounting positions compared to two years ago. 11

Workforce and Benefits  Has your staffing level for financial and accounting positions over the past two years increased, decreased or stayed the same? 12

Workforce and Benefits  Do you agree with the following statement: We have been able to adapt to the reduction in our workforce by finding ways to do things more efficiently. 13

Workforce and Benefits  Do you agree with the following statement: The reduction in our workforce has increased the risk of fraud in our entity. 14

Workforce and Benefits  In the next budget cycle, do you anticipate that the number of filled financial and accounting staff positions will: 15

Workforce and Benefits  Has the benefits package you offer to new employees decreased in value over the last two years? 16

Workforce and Benefits  Have other post-employment benefits (OPEB) been reduced following the adoption of GASB 45? 17

GASB Reporting Model Objective: To measure opinion of the current financial reporting model and certificate programs

GASB Reporting Model  Do you agree with the following statement: New GASB standards issued over the last 5 years have improved overall financial reporting for my government. 19

GASB Reporting Model  Do you agree with the following statement: GASB 54 will improve understanding of the makeup of governmental fund balances. 20

GASB Reporting Model  Do you agree with the following statement: The current financial reporting model is too long and complicated. How does this answer reconcile with the previous question regarding new GASB standards? 21

GASB Reporting Model  Do you agree with the following statement: The current financial model is of value to elected officials and constituents. What would the pie chart look like if we had surveyed elected officials? 22

GASB Reporting Model  Do you agree with the following statement: Given the current uncertainty of state and federal funding, information regarding intergovernmental dependency should be included in the financial report. 23

GASB Reporting Model  Other survey results:  Over 85% of localities responding post their CAFR to their web site.  Why not 100%?  80% of respondents believe that participation in the GFOA or ASBO certificate program has a positive impact on the perception of financial accountability.  Is this a fair conclusion? GASB Reporting Model 24

Use of Technology Objective: to assess the condition of IT systems

Use of Technology  When did you last upgrade your IT system? 26

Use of Technology  When do you plan to upgrade your IT system? 27

Use of Technology  Do you believe the increased use of technology will be necessary to keep cost under control? 28

Use of Technology  Which of the following social media websites does your entity use? 29

Green Initiatives Objective: To assess the extent to which green projects have been implemented and gauge whether green projects have had a positive impact on the locality

Green Initiatives  Do you currently have any green initiative projects? 31

Green Initiatives  How long has your green initiative project been implemented? Green Initiatives 32

Green Initiatives  Where have you implemented your green initiatives? 33

Green Initiatives  Other findings  Only 15% of those localities who bid green projects felt that they received fewer bids as a result of going green.  Over two thirds of respondents believe that the benefits outweigh the cost  90% believe that green project initiatives create goodwill with the public 34

Long Term Borrowing Objective: To assess current plans and prospects for selling bonds and the use of derivative instruments to manage costs

Long-Term Borrowing  Do you plan to incur debt in the next…? 36

Long-Term Borrowing  What will you use your next financing for? Long term borrowing 37

Long-Term Borrowing  What is your outlook on bond ratings in the future based on the current state of the economy? Long term borrowing What about Jefferson County Alabama? 38

Long-Term Borrowing  Do you use derivatives to hedge your interest rate? 39

Long-Term Borrowing  Other findings: For those localities that have derivative instruments, over 85% are currently reported as liabilities. Only 3% of respondents believe they will use derivatives to hedge interest rates in the future. 40

Infrastructure Objective: Obtain views on the condition of the localities infrastructure assets

Infrastructure  Do you feel that existing infrastructure assets are being adequately maintained? 42

Infrastructure  Would you consider your existing infrastructure outdated? 43

Infrastructure  Are you currently extending the lives on your existing infrastructure assets more than in the prior years? 44

External Audits and Internal Monitoring Objective: cover questions regarding external audit services as well as internal procedures relating to audit committees and fraud hotlines

External Auditing and Internal Monitoring  Which of the following statements best describes how well trained your external auditor’s staff are in regards to financial statement auditing, OMB Circular A-133, and financial reporting? 46

External Auditing and Internal Monitoring  Which of the following best describes the allotted time your internal audit department assists the external auditor? 47

External Auditing and Internal Monitoring  Which of the following best describes your views of any management letter comments that have been provided to you over the past three years? 48

External Auditing and Internal Monitoring  Our fraud hotline is an effective tool in preventing fraud and abuse. 49

External Auditing and Internal Monitoring  How valuable and effective is your Audit committee? 50

ARRA Objective: To determine what types of expenditures ARRA funds were used for and how the end of ARRA funding might affect localities

ARRA  What percentage of your revenue does the ARRA funding make up? 75% of localities who responded to the survey received ARRA funding 52

ARRA  Do you feel that the ARRA grant accomplished its purpose? The same percentage also believed that ARRA funding was beneficial to the locality. ARRA 53

ARRA  Check all of the following ways the ARRA grant was/is used for: 54

ARRA  How will you replace ARRA grant money when the funding ceases? 55

Budget Objective: To measure trends in budgeting and the availability of resources

Budget  Actual revenues have fallen short of budget in the most recent fiscal year. 57

Budget  To address budget shortfalls, is your entity contemplating an increase in existing user or service fees? 58

Budget  To address budget shortfalls, is your entity contemplating new user or service fees? 59

Budget  The organization is willing at this time or in the near future to consider a more aggressive investment strategy to increase investment earnings. 60

Budget  Do you believe reliance on federal/state government for funding will increase or decrease? 61

Budget  Has your entity investigated any outsourcing opportunities that can reduce costs? 62

Budget  What is the Board or Commission position on property taxes? 63

Survey Summary  Work force and benefits: Benefit packages have declined in value, making it more difficult to be competitive in the marketplace. While the ability to hire qualified people may have improved, funding will limit available resources to either the same or less than previous years. 64

Survey Summary  GASB reporting model and technology Increased use of technology will be necessary in order to manage costs. A majority of respondents believe that, while the overall model is too complicated, recent standards, including GASB 54 have improved financial reporting. 65

Survey Summary  Infrastructure and green initiatives A majority of localities believe that they have benefitted from green initiatives, both through cost savings and through increased goodwill. Over two thirds of respondents believe that their infrastructure assets are adequately maintained, and are not outdated. 66

Survey Summary  External audits and internal monitoring Only 11% of respondents who have fraud hotlines fully agree that it is an effective tool to prevent fraud and abuse. Over 80% believe their external auditor is well trained and knowledgeable, and believe that their management letters are at least somewhat beneficial. 67

Survey Summary  Budget and ARRA funds ARRA funds were most used for construction. The second highest use was to “maintain current positions” which may lead to tough decisions once ARRA funding is completed. Over two thirds of respondents indicate that actual revenues were under budget. The same percentage also believe that their governing board will reduce services and cut costs rather than raise taxes. 68

Survey Summary  Other takeaways from the survey?  Other questions or comments? 69

Thank you for your time Contact information: Rob Churchman, Partner