On August 17, VACo hosted Auditor of Public Accounts (APA) Martha Mavredes and members of her staff for a webinar on the proposed “early warning system” for local government fiscal stress. As discussed in a previous article, language adopted in the state budget by the 2017 General Assembly requires the development of this system, which is intended to allow the APA to flag localities experiencing financial trouble for potential follow-up.
A proposed model based on Louisiana’s Financial Assessment Model (FAM) was released on July 31. This model uses data from localities’ Comprehensive Annual Financial Reports to calculate ten ratios for each locality, which are then converted into percentile rankings; these percentile rankings are then averaged to generate the overall FAM score. Information regarding the draft model was circulated to county administrators earlier this month, and initial feedback from counties was provided to APA staff.
During the webinar, the APA and Local Government Manager Rachel Reamy provided an overview of the ratios and how FAM scores would be calculated. They also discussed the follow-up that the APA intends to undertake with localities scoring below a certain level; for these localities, the APA would notify the local governing body and chief administrative officer and request the completion of a follow-up questionnaire. This document asks about qualitative factors such as changes in bond ratings or use of revenue anticipation notes, and allows the locality to provide some contextual information about its financial situation, such as circumstances outside the locality’s control affecting its budget or borrowing practices. Localities scoring above the threshold of concern generally would not be asked to provide additional information, although the APA does intend to have further discussions with localities whose scores are trending downward and approaching the threshold for follow-up.
The APA will soon be transmitting a letter to localities to provide information about the process and following up with those localities whose initial FAM scores fell under the cutoff point. Ms. Mavredes indicated on the webinar that the model is a work in progress and will continue to be refined. She subsequently provided an update to the Joint Subcommittee on Local Government Fiscal Stress on the proposed model; legislators serving on that body expressed an interest in being notified about localities in their respective districts whose FAM scores trigger follow-up by the APA.
The webinar is available for viewing on VACo’s YouTube channel. VACo is continuing to work with the APA to refine the model and ensure that it provides an accurate picture of local finances. VACo will also be making a presentation to the Joint Subcommittee on Local Government Fiscal Stress later this fall and will be discussing localities’ financial situation more broadly, including stressors in the state-local partnership with respect to funding shared services.
VACo Contact: Katie Boyle