Alternative expenditure limitation-UERS Reporting

1. Pat Walker, Pat Walker Consulting & Dennis Maschke, CliftonLarsonAllen Alternative expenditure limitation-UERS Reporting

2. Overview Why, What, How & When? Home Rule (Alternative Exp. Limitation) Permanent Base Adjustment One-time Override Election/ Timeline Requirements Resources Questions?

3. Why & How… 1979-80 Legislation was designed to “limit” city & town expenditures Property taxes were rising Debt was rising ARS §41-1279.07 & Arizona State Constitution, Sections 20 & 21 to Article IX limit city & town spending

4. Why & How… State expenditure limitation base year is 1979-80 actual expenditures Economics Estimate Commission (EEC) adjusts 79-80 baseline exp. annually for population & inflation Exclusions are allowed – Exp. from specific revenues such as federal grants, bond proceeds, debt, etc. Result—alternatives developed

5. Why and How… State Expenditure limitation formula: 1979-80 Base Limit X Population Factor X Inflation Factor = State Imposed Limitation + Exclusions = Total Allowable Expenditures Under State Imposed Limit

6. Home Rule (Alternative Exp. Limitation) Does what it says “Home Rules” Expenditure limitation set by budget each year Must be renewed every 4 years beginning with fiscal year after voter approval If fails, must wait 2 years Requires resolution by Council and voter approval

7. Home Rule (Alternative Exp. Limitation) Projection of state imposed expenditure limitation & alternative expenditure limitation Uses EEC, ADOA population projections & ADOR inflation factors Determination of whether you need an alternative first! Must estimate revenues by Federal, State or Local Source

8. Home Rule (Alternative Exp. Limitation) Estimate expenditures by “specific areas” not funds Must hold 2 public hearings and publish notice of hearings two consecutive weeks “Projections” provided to Auditor General contained in Detailed and Summary Analysis with approved Council resolution

9. Home Rule (Alternative Exp. Limitation) Projections must be submitted to Auditor General for approval 60 days before election Publicity pamphlet submittal to Auditor General for comment If August 26, 2014 election, you are too late! If November 4, 2014 election, you have until the first week in July.

10. Permanent Base Adjustment No limitation on amount of adjustment Same analysis as HR must be approved by Auditor General Same deadlines No public hearings required Passage of resolution by Council required

11. Detailed Analysis for HR Or Permanent Base Estimate expenditure amounts for next 4 years Areas that they will be spent in i.e. General Government, Public Safety, etc. Estimate revenues for next 4 years with assumptions These is hardest step and will be unique to each community.

12. Summary Analysis Worksheet For HR or Permanent First Formula: 2015-16 Population from ADOA for FY14 Divided by 1978 Population = Population Factor.

13. Summary Analysis Worksheet For HR or Permanent Second Formula: Then to calculate state imposed limitation for next 4 years is taking 1979-80 base limit (provided by EEC) X Population Factor (Calculated in first formula) X Inflation factor (provided by ADOR) = State Imposed Limitation + Exclusions = Total Expenditures allowed under state imposed limit.

14. Summary Analysis For HR or Permanent Takes information from Detailed Analysis and Summary Analysis Worksheet & Summarizes Must be placed in publicity pamphlet Make sure totals match on all analysis & forms!

15. One-Time Override Requires 2 public hearings and Council approval of resolution Requires voter approval of a specific amount Can be at special election (third Tuesday in May) or regular election prior to fiscal year needed Effective 1 year No Auditor General review

16. Elections/Timing • Home Rule • Regularly scheduled election for nomination or election of council members • 2 year waiting period before re-proposal • Permanent Base Adjustment • Regularly scheduled general election, or nonpartisan election for nomination or election of governing board members • One-Time Override • Regularly scheduled election for nomination or election of governing board members, or special election on the third Tuesday in May

17. Assistance Arizona League of Cities & Towns at www.azleague.org (Tom Belshe is a great resource! Accounting Services Division at asd@azauditor.gov, call (602) 553-0333 Check out the webinar and forms as well as the FAQ’s on the Auditor General’s website!

18. Questions? Pat Walker Consulting pwalkerconsulting @aol.com (480) 694-7179

19. UERS Report Dennis V Maschke, CPA, MBA Audit Manager CliftonLarsonAllen LLP

20. Expenditure Limitation Report - Format

21. Reconciliation

22. Reconciliation – Items not requiring working capital

23. Reconciliation - Example Flows through to Part II – Line A

24. Reconciliation – Example (continued) – Statement of Expenditures, Revenues, and Changes in Fund Balance

25. Reconciliation – Example (continued) – Statement of Revenues, Expenses, and Changes in Net Position

26. Reconciliation – Example (continued) – Footnotes

27. Reconciliation – Example – Statement of Cash Flows

28. Part II - Exclusions Vs

29. Part II – Exclusions

30. Part II – Exclusions (continued)

31. Part II – Exclusions (continued)

32. Part II - Example

33. Part II – Example (continued)

34. Footnotes - Example • Note 1 – Should explain where amounts can be found in the financial statements • Subsequent notes should recap how additional amounts can be derived

35. Part II – HURF Calculation CY Exclusion Used

36. Part I • Calculates the “bottom line” • The individual signing the report needs to be communicated to the AG’s office • Adjustments • Disasters declared by Governor • Voter approval one time excess • If over budget – a hearing will be held and entity may lose tax revenue

37. Common Pitfalls

38. Dennis V Maschke, MBA, CPA Manager, State and Local Government Dennis.Maschke@CLAconnect.com 480-678-7462