Taxes and Revenue

Taxes and Revenue
Auditing and Assessing Financial Condition
Swobodaville is a hypothetical town that provides the context for this Application Assignment. What follows is a table that presents 5 years of data.
Evaluate Swobodaville’s financial condition based on the partial list of factors given. That is, consider any observable trends in the data and what they could potentially mean. To compare the data, in some cases it is best to convert dollar figures to percentages. The best approach to analyzing this table is to look at changes from year to year. Then explain what types of recommendations you would make to the city.
YEAR
FACTOR 1 2 3 4 5
Revenue per household $321 $318 $329 $329 $328
Sales tax as a percent of total revenue .938 .936 .935 .935 .933
Expenditures per household $321 $321 $333 $334 $334
Low-income, sales tax-exempt households as a percent of population
.139
.139
.142
.155
.156

Consider the following:
Analyzing revenue structure will help identify the following types of problems.

• Deterioration of revenue base
• Internal procedures or legislative/board policies that may adversely affect revenue yields
• Over-dependence on obsolete or external revenue sources
• User fees that do not cover the cost of services
• Changes in tax burden
• Lack of cost controls and poor revenue estimating practices
• Inefficiency in the collection and administration of revenues

Analyzing an expenditure profile can reveal the following:

• Excessive growth of overall expenditures as compared to revenue growth or growth in wealth (personal and business income)
• Undesirable increases in fixed costs
• Ineffective budgetary controls
• A decline in personnel productivity
• Excessive growth in programs, which create future expenditures

Community needs and resources encompass economic and demographic characteristics, including population, employment, personal income property value, and business activity. An examination of demographic and economic characteristics can identify the following:

• A decline in the tax or revenue base
• A need to shift public or customer service priorities
• A need to shift policies because of a loss of competitive position

 
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