Published: August 20, 2020
Financial indicators have received a meaningful update in our Financial Intelligence Tool (FIT), making them even more useful by capitalizing on the power of FIT’s statewide collection of financial data.
Each financial health indicator now shows both the mean and median for other governments of your type. A local government can view how its indicator compares to those of similar governments across the state.
A fund is at the core of all local government accounting, budgeting and reporting. Rather than focusing on the indicators themselves within a government’s profile, FIT now focuses on the fund. By expanding the fund, users can again see the individual indicators. This solution saves time and was recommended by local governments themselves!
We’ve adjusted the logic behind outlooks for a handful of indicators. The following changes are the most significant:
- Cash Balance Sufficiency now shows a “concerning” outlook whenever cash on hand falls below the benchmark of 60 days. At the same time, it shows a “cautionary” outlook only when the average change in days over the past three years would cause the next fiscal year to fall below the benchmark. This aims to give local governments a year of advance notice that a trend suggests their cash balance sufficiency might fall below 60 days in the year to come. Early detection and remediation is key when recovering from a cash shortage.
- Change in Cash outlooks now show a “concerning” outlook only when this measure stays below the benchmark for three consecutive years. Governments aren’t meant to accumulate cash, and often spending cash reserves is appropriate to provide meaningful services and update equipment and facilities for a year or two.
- Enterprise funds for governments reporting using generally accepted accounting principles (GAAP) now see cash balance sufficiency as a replacement to change in net position, which duplicated other measures. Further, GAAP governments did not have an equivalent tool to assess cash reserves. This replacement solved both problems!
All local governments should be aware that FIT financial health indicators are only one way to assess financial health, and often require additional context to understand. At the same time, these measures are valuable for both management and auditors to determine if certain risks are present and require further evaluation based on financial statement data.
If you’re new to FIT or would like information on how to use FIT, check out our Get FIT in 15 Minutes tutorial. Keep your eye out for more tips, tutorials, and feature announcements about the new version of the Financial Intelligence Tool.