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HomeMy WebLinkAbout06.B- City Manager i DOC ID: 3522 A CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION Information/Report From: Allen Parker M/CC Meeting Date: 10/20/2014 Prepared by: Chris Lopez, (909) 384-5122 Dept: City Manager Ward(s): All Subject: Report on Financial Transparency Platform (#3522) Current Business Registration Certificate: Not Applicable Financial Impact: Account Budgeted Amount: <<Insert Amount» Account No. <<Insert Account No.>> Account Description: <<Insert Account Description Balance as of. <<Insert Date>> Balance after approval of this item: <<Insert Amount>> Please note this balance does not indicate available funding. It does not include non-encumbered reoccurring expenses or expenses incurred,but not yet processed. Motion: Receive and file. Synopsis of Previous Council Action: October 8, 2014: The Ways and Means Committee recommended this item be referred to the October 20, 2014 meeting of the Mayor and Common Council meeting. Synopsis of Previous Council Action None. Background The City of San Bernardino adopted its FY 2014-2015 budget on June 30, 2014. The City Manager's Office took the lead in preparing the budget, and has been researching ways to allow public access to the document to encourage transparency. The idea of open government provides citizens with an opportunity to learn and become involved in government's functions which is facilitated through access to information. As San Bernardino continues its way through bankruptcy, staff has been in contact with OpenGov discussing the idea of budget transparency. This organization provides a platform by which municipalities can publish their budget online in an interactive manner to visualize a city's revenues and expenditures. Staff has gone through a demonstration with the organization and has been provided a proposal to incorporate this platform into the City's website. Updated: 10/15/2014 by Jolena E. Grider A Packet Pg.'315 3522 Proposal On September 25, 2014 OpenGov hosted a demonstration for staff along with a question and answer session. In this demonstration, OpenGov presented their platform which offers the following: 1. A turnkey standalone solution specialized for government and financial data presentation 2. Works with virtually all accounting systems 3. Enables the city to communicate financial information to citizens via the web 4. Multiple years of financial data can be shown to determine trends and generate charts and graphs 5. A user friendly interface to introduce users to municipal finance which is accessible from any computer or tablet at any location at any time through all major browsers and operating systems 6. View and compare revenue and expense trends to budget and to historical spending trends 7. The option to update data monthly or quarterly Over 100 governmental organizations have implemented the OpenGov platform including the cities of Riverside, Palo Alto, Los Angeles, Anaheim, Calabasas, Monterey, Santa Cruz, and Bell. Implementation Once the agreement is agreed upon by both parties, the implementation of the OpenGov platform begins. The steps for implementation are summarized below: 1. Kick-off Conference Call: This call introduces all members of the OpenGov and Customer teams, and confirms the timeline and responsibilities for the implementation. Members of the IT,Finance, City Clerk's Office, and City Manager's Office will be present. 2. Preliminary Site Build: City staff provides at least one year of general lefger data and a copy of the Chart of Accounts. OpenGov will then review the data and provide feedback to staff. 3. Data Upload: OpenGov technical staff will walk staff through the data upload process. Staff will upload additional yearly and monthly data sets. OpenGov will review upload and communication any issues to staff. Updated: 10/15/2014 by Jolena E. Grider A Packet Pg. 316 3522 4. Report Acceptance: OpenGov will release reports to staff. Staff will confirm and approve reports for final acceptance. 5. Platform Publication: OpenGov will work with staff with publicity template materials and best practice suggestions in advance of public release. In the initial demonstration, staff from IT was present and concluded that their platform would not pose a threat to the IT system. Cost The cost for the OpenGov platform is $14,500. The City Manager's Office will cover this cost from within its budget. Recommendation Receive and File. Supporting Documents: A_Guide_to_Local_Government_and_Finance (PDF) ThousandOaks Case_Study (PDF) Updated: 10/15/2014 by Jolena E.Grider A D A Guide to LOCAL GOVERNMENT AND FINANCE (E) OPENGOV AOPWAL Introduction Local governments in the United States spend over 1.6 trillion taxpayer dollars per year, or more than ten percent of national GDP. This guide serves as a starting point for those who want to learn more about how local governments operate, manage, and communicate their finances. The guide begins with an overview of the different types of M governments in the United States. It explores the role local governments play, their areas of responsibility, and their internal organization. The guide then moves to municipal finance, starting with an introduction to the Fund Accounting model that cities and other governments use to track their revenues and expenses. It explores the common types of revenues and expenses at the city level, and discusses how government accounting works in practice. M The guide concludes with a section on budgeting, the decision-making process that guides local government activities. It explains the common approaches to budgeting and walks through how budgeting works in practice. An appendix contains further suggested reading on the topics covered in this guide. M � Table of Contents Section 1: Governments in the U.S. .......... ...............__......... 4 1.1 An Overview of Government .----------------------------------------------------- 5 1.2 City Organization ..------------------------------------------------- ---------- --------- 7 1.3 Typical City Departments and Services ------------------------------- _---------_-- 8 1.4 County Governments ----- --- ------ ----------- ---------------------- ----------- ... 9 1.5 School Disctricts ----- ------------ -------- ---------------------- ---------- ---- 10 1.6 Special Districts - ------------ ------- 11 Section 2: Municipal Finance ....... ............. ...... ...... ....... 13 2.1 Fund Accounting ------------------------------------------------------------------------ 14 2.2 Fund Types ------------------__------------- ------------------------------------------- 14 Governmental Funds --------------------------------------------------------------------- Proprietary Funds --------- ------- -------- -----------__-------------- --------Fiduciary Funds ---- --------- -------------------------------- ---------------_---------- 2.3 Revenues -------------------------------------- --------------------------------------------- 16 2.4 Expenses ---------- ------------__--------------------------------- ----------------- 17 2.5 Purchasing ............................................. ------------------------------------- 17 2.6 Accounting .............._...._------- ....................... ----------------- ------- 18 Section3: Budgeting --------------- -----------------------------------------_-------------- 19 3.1 The Budget Process ------ --------------------- --------------------_ ---------------- 20 3.2 Common Approaches to Budgeting -------------------------------------------------- 21 Line-item Budgets --------_---------------- ------_---------------- -------------------- ProgramBudgets ------------------------------------------------------------------------- 3.3 Other Approaches To Budgeting ----_._--------- ------------- ----------------- ... 21 Performance Budgeting------------------------- -------------------_--------------- Participatory Budgeting -- -- -------------------------------------------------------- 3.4 The Capital Budget --------------- ------------------------__--------------------_ 22 3.5 The Budget Document ----------- --------------------- ---------------------- 22 Conclusion ......................... ................................... ....................... 24 Appendix: Further Suggested Reading ................................................... 26 L 0 a m L _ L _ _ N N i1Y M V = lC _ LL I _ co .+I d _ L V _I V O J I � 7 � IE U:777 Section 1 Government in the U . S . I I.-, - - - - - - - - - - - - - 8 13 131118' C r i li i i i i i i i • , n n • i i i i i i i i Q Packet Pg. 321'' 1.1 An Overview of Government governments,transportation, infrastructure, and setting laws to govern every-thing outside the The United States has a federal system of govern- scope of the federal government. ment in which fifty independent states share their sovereignty with a central government.The United Local States Constitution allocates some powers specifi- Local government refers to the county, municipal, cally to the Federal government,and reserves the and special district governments that exist within rest for the states. States are subdivided into states. Local governments provide most domestic administrative regions called counties.Within and services in the United States,and the majority of around counties are various types of municipal citizen-to-government interactions occur at the governments, including cities. local level.There are different types of local governments: The municipal and county level is often referred to as local government.A resident of the United States is governed by laws from at least three different levels of government. Counties Every state contains counties,though in Louisiana they are called parishes and in Federal Alaska they are called boroughs. Counties are The Federal government has a budget of nearly$4 subdivisions of states and®are responsible for trillion. For comparison,California,the largest state, their geographical region (ranging from 12 has a $100 billion budget.The Federal government square miles in Kalawo County, Hawaii to is primarily responsible for national defense, 20,057 square miles in San Bernardino County, printing and regulating currency, entering into California), and they are directly responsible for treaties with foreign governments, regulating serving any territory that has not been incorpo- commerce between states, and managing rated into a city. programs like Medicare and Social Security. Depending on the state, counties may have State limited scope and provide only courts and a Each of the fifty states constitutes its own political sheriff's office,or they may have broad scope entity with an executive branch, court system, and take care of everything from roads and legislative branch, and constitution.The arrange- libraries to public health and education. ment is similar to that of the Federal government, with an elected chief executive(the governor),a Depending on the state structure,cities may series of trial courts that feed into appellate courts, fall within counties or exist separately. Forty and an elected legislature that is bicameral (in major cities in the U.S., such as Philadelphia, every state except Nebraska). Denver,and San Francisco, have consolidated governments that are both cities and counties The responsibilities of states overlap with those of and carry the full powers of each. the federal government, but they center on provid- ing for public health and welfare, establishing local A Guide to Local Government and Finance 1 5 Municipalities Municipal governments in the Special Purpose Governments Special U.S. can have a number of names,including purpose governments are organizational city, borough, district,township,or village. entities created by states or municipalities to When it comes to organization and financial provide one service to a specific geographical management,there are important similarities. region.They can be financially and administra- tively independent from other local govern- Municipalities are incorporated by state ments,with their own leadership and revenue governments under state law, and may be a sources or with limited connections. subdivision of a county.They are responsible for meeting the needs of their communities Special purpose governments are often called and providing a range of services,from public districts, boards, commissions, or authorities, safety and utilities to recreation and public and the number of special purpose govern- works. In these areas,they are the primary ments in the U.S. has tripled in the last fifty service providers to citizens in the U.S. years to over 52,000. Examples of special purpose governments include: While municipalities in the U.S. range in School Districts population from 1 person(Monowi, Nebraska) Waste Districts to nearly 9 million (New York City),the average Housing Authorities has about 10,000 people and a budget of a few Utility Districts million dollars. They can pass their own laws Port and Transit Authorities and regulations, provided they do not contra- Air Quality Commissions vene state and federal legislation. There are even special districts responsible for mosquito abatement and flood control Federal and State Government Local Government SI School District The structure of government A Guide to Local Government and Finance 1 6 1.2 City Organization exerted on cities. J Four-fifths of people in the U.S. live in cities(broad- Most large cities today retain "strong" mayor ly defined to include municipalities),and therefore systems,where the mayor is elected by the people interact with municipal governments. For cities, and acts as the chief executive.Whether a strong councils act as the legislative branch;they are mayor or city manager runs the city,this executive responsible for approving the budget,setting oversees a series of departments,each responsi- policy priorities, establishing taxes, borrowing ble for a specific area of government service. money, and passing or changing laws or ordinanc- es. Department heads report directly to the mayor or In many cities,the mayor is a member of the city manager,and departments are often separated council.This arrangement is called a "weak" mayor into divisions with even narrower responsibilities. system, because the mayor is not the chief execu- Each municipality has a unique department and M tive and usually does not have veto power over the division structure tailored to meet its needs and council. In a weak mayor system,the council constraints. appoints a manager or administrator as the chief executive officer.The concept of a manager first emerged in Stanton,Virginia in 1908 as a Progres- sive Era reform to limit the control political parties F-1 Mayor &Council City Attorney City M Manager Citizens . . Judges Public Library Finance Public Works Police Dept Municipal Animal Control Water&Sewer Community Development Dist ibution Maintenance M An example organizational chart for a small or medium-sized city A Guide to Local Government and Finance 1 7 1.3 Typical CI Departments and Human Resources or Personnel Depart- Yp City p Services ment that recruits employees and ensures applicable labor laws are met Typical cities display the following organization': Finance Department that collects reve- nues,assists in preparation of the city Police and Fire budget,and manages the city's finances In most cities,the largest expenses stem from the Information Technology department that provision of police and fire services,often including oversees computer systems, networks, emergency medical response.These expenses phone systems,and the city website often account for over half,and sometimes two-thirds, of a city's expenses. In many cities,some or all of these services are provided by outside contractors or another level of Community Development (Planning government. Small cities and rural areas,for and Building) example, may rely on the county sheriff for polic- Community Development(Planning and Building). ing,and on a state agency for fire prevention. All cities prepare and update development plans as Special purpose governments often handle utilities well as review development proposals for consis- such as water and electricity. A small number of tency with applicable laws and standards.The city cities operate services such as airports or marinas. checks plans for compliance with applicable building codes and inspects new construction projects in the field. 'Adapted from the Guide to Local Government Finance in California(GLGFC),Chapter 2 Parks and Recreation Most cities maintain local parks and offer recre- ation programs such as youth and adult sports, exercise,and social programs like health enhance- ment,daycare,and senior services.The number and type of programs offered varies significantly from city to city. Public Works and Municipal Utilities Generally, public works and utility services encom- pass street and sidewalk maintenance,storm water drainage facilities,sewage collection and treat- ment,water supply and distribution,garbage collection and recycling programs, and tree maintenance. General Government The followings divisions manage different segments of the business of cities and administer its policies: • City Council and its appointed Commis- sions and committees • City Manager, City Attorney, and City Clerk, as well as their related staffs A Guide to Local Government and Finance 1 6 � I i I 1.4 County Governments independence in creating operating procedures and determining policy than other county depart- Counties are administrative divisions of the state in ments.Their budgets,however, are approved by which their boundaries are down.There are 3,144 the county's governing board and they are subject counties and county equivalents in the United to many of the same rules as departments headed States.Counties generally form an intermediate tier by officials appointed by the county's chief execu- of government, lying between the state and tive or governing board. lower-level local governments such as cities, towns,or villages. In most states,cities govern 48 of the 50 states have counties. States have portions of counties. In some states, however,cities widely varying numbers of counties: Delaware has and counties are entirely separate entities that do three while Texas has 254.Of the 48 states with not have overlapping jurisdictions. In these states, counties,46 use the term "county"while Alaska a given city or county will provide the full array of and Louisiana use the terms "borough" and services to its population. "parish," respectively,for analogous jurisdictions. Two states, Connecticut and Rhode Island, have County governments are created through state abolished their counties as functional entities and legislation and receive their authority and responsi- Massachusetts is in the process of doing so. bilities from their state. In many states,counties provide the majority of direct social services, Counties generally contain other local government judicial services,and large cultural institutions. entities,such as cities,villages,towns,townships, Often,departments within a county provide or other municipal corporations. In some cases, services to other local governments via service these entities may be subject to direct or indirect agreements. For example,a county might provide county control while in others they operate police services to a city within that county. Counties independently. In some states,counties can be typically provide prisons and support local law subdivided into administratively subordinate enforcement efforts by cities with specialized labs entities,such as townships, hundreds,or towns in and investigations.When a county contains areas New England, New York,and Wisconsin. Michigan, that are not part of a city, known as unincorporated since 1947, has distinguished between "townships," areas,the county normally provides all direct which are not self-governing, and "charter town- services to these areas. ships,"which are. Like cities,counties have an elected governing Some states have distinctive systems. In Virginia, board,such as a council or board of supervisors, all cities are independent and report directly to the and either an elected or appointed chief executive commonwealth government. Though they are not or administrative officer. Specific departments may part of a county,they might still operate as a be headed by officials who have more autonomy county seat. For example,the Independent City of and who receive direction either from the state or a Fairfax is the seat of Fairfax County even though it separately appointed board. For example,Sheriffs is not within Fairfax County. California has are often elected and receive guidance from the abolished its townships,though many general law 10 state while health departments often report cities continue to use the word "Town" as part of primarily to a separately appointed governing their name.Thus,Atherton refers to itself as the board.These departments typically exercise more Town of Atherton when it is, legally,the City of A Guide to Local Government and Finance 1 9 Atherton. Some New England states use the term unique example of the merger of some functional- shire town to mean "county seat". ity resulting in a two tier arrangement of govern- mental authority and administrative responsibility. In New York, 57 of 62 counties are independent Braselton,Georgia is widely known for being in administrative divisions of the state with normal four counties:Jackson County, Barrow County, county executive powers. The remaining five, Gwinnett County, and Hall County. however,are administrative divisions of the City of New York.These five are each referred to as 1.5 School Districts boroughs in the context of city government and as counties in the context of state government. For School districts are local governments that general- example, Manhattan's courthouse is referred to as ly have powers similar to cities and counties,such the New York County Courthouse. New York as taxation and eminent domain. Their governing County corresponds to Manhattan, Bronx County to bodies are typically elected by direct popular vote, The Bronx,Queens County to Queens, Kings but are sometimes appointed by other governmen- County to Brooklyn,and Richmond County to tal officials. School district governing bodies are Staten Island. often called school boards, but may be known as boards of trustees, boards of education,or school In Connecticut, Rhode Island, and parts of Massa- committees. The district's governing body chusetts,counties exist only to designate boundar- appoints a superintendent, usually an experienced ies for such state-level functions as park districts public school administrator,to function as the (Connecticut)orjudicial offices(Connecticut and district's chief executive. The superintendent Massachusetts). In states where county govern- makes day-to-day decisions and implements policy. ment is nonexistent or weak(e.g., New Hampshire, The governing body may also exercise a quasi judi- Vermont),town government may provide some or cial function in serious employee or student all of the local government services. discipline matters. In many cases, a municipality has merged with a The U.S. contains approximately 13,500 school county to form a single jurisdiction in which the district governments;178 state-dependent school county seat is coextensive with the county. Exam- systems;1,330 local-dependent school systems; ples of this phenomenon include the City and and 1,196 education service agencies that provide County of Honolulu, Hawaii,the City and County of support services to public school systems. San Francisco,California,the City and County of Denver, Colorado and the City and County of A unified school district includes elementary and Philadelphia, Pennsylvania.A similar arrangement secondary(middle school and high school)educa- exists in the Metropolitan Government of Nashville tional levels.The word central in a district's name and Davidson County,where the metropolis of indicates that there is one central administration Nashville has merged into the county of Davidson. that oversees the entire district.The word union or A few municipalities other than Nashville still exist consolidated in a district's name indicates that it in the county and retain some administrative was formed from two or more districts.The word functions,such as Belle Meade. Jacksonville, joint in a district's name indicates that it includes Florida and Indianapolis, Indiana have similar territory from more than one county. By extension, arrangements. Miami-Dade in south Florida is a a joint state school district,such as Union Coun- A Guide to Local Government and Finance 1 10 ty—College Corner JSD, includes territory in more 1.6 Special Districts than one state. Special district governments in the U.S. are State variation is common. For example,some independent governmental units that exist sepa- school districts are known as independent school rately from general purpose local governments districts, but independent status has different such as county, municipal,township,and school meanings in different states. In Kentucky, indepen- districts. Special districts(also known as dent districts are separate from county districts,the special-purpose districts)are created by legislative latter being the standard form of school district. If a action,court action,or public referendum, and exist Kentucky county has no independent school in all states. In 2007,the U.S. had more than district, its school district boundaries are the same 39,000 special district governments.The state of as the county. In Texas, "Independent" denotes that California leads the nation in the number of special the district is separate from any county-or munici- districts with Illinois close behind. pal-level entity. School district boundaries rarely coincide with municipal limits or county lines. Special districts serve limited areas and accomplish In Michigan,there are Intermediate School Districts legislatively assigned functions using public funds. (ISD), Regional Education Service Districts(RESD), They provide specialized services to persons living or Regional Education Service Agencies(RESA) within their geographic area and may also contract largely at the county level.The local school to provide services outside their area. Special districts run the schools and most programs, but districts perform many functions, including provid- often bi-lingual aides, programs for the deaf and ing services like water, electric power,gas,fire blind, special education for the severely impaired, protection, recycling,solid waste disposal irriga- and career and technical education programs are tion, conservation, or sewerage,or managing run by the Intermediate School District or equiva- facilities such as airports,water ports, highways, lent. mass transit systems, parking structures, libraries, parks,cemeteries, hospitals , and stadiums. Most A few states have no school systems independent of these functions are also provided by private of county or municipal governments.One promi- companies. Most special districts provide only a nent example is Maryland,where all school single service or a smaller array of services to a systems are run at the county or, in the case of narrowly defined area. Baltimore City,the county-equivalent level. Other states,such as New York and Tennessee, have Special districts often cross the lines of towns, both independent school districts and school villages,and cities and sometimes cross county systems that are subordinate to cities. The Hawaii lines. Increasingly, regional special districts are State Department of Education functions as a being created that serve a large portion of single single state-wide school district.This is unique state or portions of more than one state. among the states, but the District of Columbia Public Schools operates district public schools in Each special district is governed by a board of Washington, DC and the Puerto Rico Department directors, commissioners,or board of supervisors. of Education operates all public schools in the These boards may be appointed by public officials Commonwealth of Puerto Rico. or private entities,or elected by all citizens in their area or by citizens who benefit from their services, A Guide to Local Government and Finance 1 11 P8CI1 such as local property owners. Sometimes, public officials from overlapping jurisdictions such as cities or counties will serve on the special district's board. The board of a special district serves primarily in a management capacity and often appoints a chief executive for day-to-day operations, decision making, and policy implementation. Most districts have employees, but some districts exist solely to raise funds by issuing bonds and/or providing tax increment financing. 0 A Guide to Local Government and Finance 1 12 Section Municipal E L Finance >, d L Q. N C N L _ _ N N M d V C !0 C -a I _ eo C d C d O I O O J O �I N �3 �I a r a ��a et Ag�"33Q 2.1 Fund Accounting In some circumstances,a city may transfer revenue from one fund to another.An inter-fund transfer In corporate or personal finance,the goal is to does not leave the city coffers and has no net maximize revenue streams while minimizing the effect on the city's financial position. use of resources. In government finance,the converse is true:agencies strive to maximize services to the citizenry while minimizing their 2.2 Fund Type52 collections of revenue. Government revenues come from dozens of sources and go to hundreds Generally Accepted Accounting Principles(GAAP), of programs.Governments rely on specialized the prevailing national standard for presenting and accountants and accounting systems to track these reporting financial information, sets forth three flows. main fund categories: Governmental, Proprietary, and Fiduciary. In contrast to corporate accounting,government accountants use fund accounting. Fund accounting Proprietary funds stem from municipal operations is designed to maximize accountability rather than that run similar to businesses in the private sector profitability. Funds are essentially pots of money, in that they provide services to some users and similar to bank accounts,each with a designated recover the costs through fees or charges for those purpose. Some funds are general-purpose funds services. Fiduciary funds account for money held that can be spent for any purpose; other funds are for another party,and which cannot be used for the restricted. For example, a city may set up a fund to government's general operations. Employee receive money from the federal Department of pensions are held in fiduciary funds,for example. Homeland Security to combat terrorism.This Governmental funds account for all other city money cannot be used for another purpose, even if operations and activities. it is sitting unused while another city fund has a deficit, and is traded separately to show it is used the way the grant requires.This system can be Sections adapted from GLGFC,Chapter 3 confusing when some programs are cut while other funds are left untapped. Governmental Proprietary Fiduciary 0 Fund types A Guide to Local Government and Finance 1 14 Governmental Funds Permanent Funds These funds account for • General Fund The general fund is typically an resources where only the investment earnings entity's largest fund. Most revenues assigned on an endowment are available to provide to the general fund are considered to be services,such as a perpetual care cemetery. "general purpose" in nature;that is,they have The principal may not be reduced to pay for "no strings attached". services.These funds are not common in local In local governments, public safety services governments. usually account for the largest general fund expenditures.The general fund is also the source of money for long-range planning, Proprietary Funds street maintenance, parks and recreation,and There are two types of Proprietary Funds: libraries. Revenues to the general fund come Enterprise and Internal Service funds. primarily from taxes, but also from fees,fines and forfeitures, leases, investments,and grants Enterprise Funds Enterprise funds track from other governmental agencies. finances for municipal services where fees or charges to the users of those services pay wholly or in part for such services. • Special Revenue Funds These funds account for proceeds from revenue sources that are Enterprise funds can be thought of like restricted externally by state or federal law. businesses. Unlike most private businesses, Gas tax funds,for example,account for monies however,the funded entity frequently has a provided to cities and counties by the state local monopoly over the service(consider and which are limited to transportation-related water,sewer, and garbage collection).Also, purposes.Likewise, community development rates charged to customers are set by the block grants(CDBG)from the federal govern- elected officials through a political process, not ment can be used only for housing and other solely by the open market. In addition, munici- specifically defined purposes. Special revenue pal enterprises do not seek a profit;they seek funds also account for the use of income from to recover the reasonable cost of providing the benefit assessments such as downtown public service. business improvement districts or lighting and landscape maintenance districts. In many communities,services such as water supply or garbage collection are in fact • Capital Project Funds These funds account for contracted to private entities,and fees for money used in the construction or acquisition those services are paid to the private service of major facilities or equipment, apart from provider.The public entity overseeing the those financed through Proprietary or Fiduciary contract can then review and alter the funds. Sources include the proceeds from debt contracts under different circumstances so that financing, development impact fees, or trans- it retains overall control over the level of fers from the general fund. service and costs. • Debt Service Funds These funds account for Internal Service Funds These funds may be the accumulation of resources needed to pay used in accounting for services provided off long-term debt obligations with interest internally to the government,such as printing, (apart from debt service obligations included fleet maintenance, or computer services. Each specifically in the Proprietary or Fiduciary department is charged for the specific services funds).They are typically established to as if they were external customers. account for dedicated revenues from general obligation bond financing. A Guide to Local Government and Finance 1 15 Fiduciary Funds fees for those services. For example,cities may In these funds, an agency holds money in a trustee inspect businesses for code compliance,and can or third-party agent capacity.As such,the resourc- charge a fee to cover its expenses. User fees are es cannot be used to support the local govern- imposed on individuals who use city services such ment's operations. Fiduciary funds include pension as recreational facilities or classes,and often fund and other employee benefit trust funds,or situa- those services directly. tions where the local government is holding money on behalf of another agency or organization. Utility Rates Citizens and businesses that use government-run utilities(such as water,electricity, or trash pickup) 2.3 Revenues pay the agency for the resources they use.These services may be provided by independent Most cities take in the majority of their funding from businesses in some regions. taxes.Although some revenue sources flow into multiple funds, many tie to one fund.The most Assessments common revenue sources include: Assessments are charges imposed on property owners and are used to pay for facilities or services Taxes that would directly benefit the property owners in a Most cities take in the majority of their funding from given area.Assessments are a common means of taxes. Cities may impose any taxes that are not financing infrastructure projects but often require preempted or prohibited by state or federal law. majority consent from the property owners being While some taxes accrue to different funds,the assessed. majority of municipal tax revenues go to the General Fund. Rent and Franchise Fees Governments often rent property such as buildings Some common municipal tax types include: or advertisement space to citizens, businesses, or Property Tax Every year property owners pay a other governments. Business that use wide-scale tax rate proportional to the assessed value of government infrastructure,such as phone compa- their property. nies or pipeline operators, may pay the jurisdiction Sales and Use Tax Cities, counties,and the a franchise fee in lieu of rent. state might impose a sales tax on every transaction that occurs within their borders. Fines and Penalties States typically set limits on the rates that can Civil or criminal penalties are imposed on people or be set by local authorities. In California,for businesses that violate local ordinance.Cities and example,cities may add up to 1%on top of the counties can also collect penalties on violations of state sales tax rate of 6.25%. state laws, as long as the state allows it. Utility Tax Imposed on citizens or businesses that use city utilities. Grants Business License Tax Imposed on businesses State or federal governments can give money to that operate within the city. other governments to fund specific programs or Transient Occupancy Tax Imposed on individ- initiatives. For example,the federal government uals who stay in a hotel within the city for less often gives grants to support crime-reduction or than 30 days. low-cost housing development. Private foundations Other Taxes on Specific Goods or Services may also award grants to governments for specific projects or programs. Charges for Service Governments provide services that some business- es may need to operate, and the agencies charge A Guide to Local Government and Finance 1 16 2.4 Expenses document,which answers the questions of"what" p and "how much"to purchase. If a department is In general, most government expenses will fall into allocated $4,500 for office supplies,the depart- one of these categories: ment is required to spend that amount and no more. Department heads will usually have some Personnel discretionary funding to spend as needed. Because governments are service oriented,the majority of their budgets are spent staff expenses. The purchasing process differs depending on the Personnel expenses include not only base salaries, size of the purchase. Many governments have a but such components as overtime, health benefits, dollar-amount limit that determine whether a uniform allowances,vacation pay,and transporta- competitive bidding process is required. If a tion costs. purchase falls below a pre-set limit,the department can select a vendor and make a request to Contracts purchase the goods without much "red tape:' Governments rely on outside contractors for both internal and external services.A city or county If a purchase falls into the competitive bidding might contract out legal services to a law firm or range,the city issues a Request for Bids or Request might pay consultants to maintain the agency's IT for Proposal (RFP).The city places the RFP in a infrastructure. Some entities also contract out forum and asks vendors to submit proposals and entire areas of responsibility,such as public safety, price estimates. The city will then evaluate the to another government. proposals, or bids, and selects the vendor that offers the best value for the lowest price. For very Materials and Supplies large RFPs,the city council may be required to Standard business expenses—from office supplies approve the selection through a vote. In cases to electricity—need to be accounted for as where only one vendor can provide a particular expenses in the budget. service,cities may issue a "sole source" contract without the need for an RFP. Other There are other expenses that do not fit neatly into one of the above categories. Some examples include insurance payments and debt servicing (where the government pays back borrowed money). 2.5 Purchasing After employee expenses, most of the remaining funds are spent on payments to vendors for goods and services. Governments have developed process-intensive purchasing systems that empha- size fair and balanced decision-making.The purchase is limited to the parameters of the budget 0 A Guide to Local Government and Finance 1 17 2.6 Accounting to expense type.Combining the Chart of Accounts with the General Ledger gives a comprehensive Government accountants record the source and picture of a city's financial history. use of every dollar that passes through their agency.To do this, electronic systems are either purchased externally or built in-house.A modern accounting system is a database that stores revenue and expense data and an interface that facilitates storing and retrieving the data. Accounting systems store two important files,the Chart of Accounts and the General Ledger.The Chart of Accounts outlines how the agency is organized. It usually contains three hierarchies,one describing the fund structure,one describing the organizational structure(e.g. departments), and another describing the expense and revenue account structure. The Chart of Accounts acts as a map.Associated with each entity in the Chart of Accounts is a unique number,or"account string,"that the accounting system uses to identify it. For example, the "Police Department" might be associated with the number 500. This means that any item starting with a 5 is a unit or division of that department. Similarly, "Patrol Division" might be assigned the number 520.The "K9 Unit" might have the number 523.These account strings are important to accountants because the title "K9 Unit" alone does not reveal any information about how that unit fits into the city hierarchy.The number 523, however, indicates the department, division, and program name.The number of digits and segments varies. Accounting systems store every line of expense and revenue data in a general ledger(GL). While GLs can vary in complexity, it can be thought of as a spreadsheet with three columns:year,account string, and dollar amount.The account string is a long number that maps(via the Chart of Accounts) to a specific combination of account type,fund, and organization. Thus, each line in the GL indicates one complete half of a "flow,"from revenue type to fund,or from fund to organization A Guide to Local Government and Finance 1 18 0 L C N N M V C C LL I C �I C d C L d 'O V _I V O J O •+I d �3 a' d a Section 3 Budgeting Packet Pg. 336 3.1 The Budget Process other major revenue-generating events. Budget analysts then plug this data into models that Budgeting for one's household might reflect a attempt to predict how much revenue the agency flexible approach: "I earned $50,000 this year and will receive during the coming year.The organiza- $25,000 needs to go to the mortgage and car tion uses these projections to set its overall budget payments, so I'll spend the rest on food,gas, and limit. vacations,and save whatever is left." In contrast, governments decide in advance how nearly all Budget guidelines revenues will be spent.This approach to budgeting The organization executive develops guidelines helps guarantee that governments provide that set the high-level and long-term goals for the constant and stable service. budget.The guidelines also contain specific instructions that may ask departments to cut costs When complete,the budget acts as a guideline for or add specific programs. how the entity will use its resources for the next year(or in some cases,the next two years). Department budgets Because of the importance of the budget docu- Each department drafts its own budget. Operating ment, governments go through a long and inten- within the guidelines,a department director works sive budget creation period that takes much of the with internal analysts to craft a budget that gives calendar year to complete. Many governments the department adequate resources to meet its mark the beginning of their fiscal years in June or goals for the year. Department directors rarely start July,so budgets are usually finalized in May or from scratch and instead try to work off the previ- June and then take effect on the first of the follow- ous year's budget, making changes as necessary ing month.About two months later, usually around to meet new demands or constraints. September,the government begins crafting next year's budget. Central budget The executive collects each department's budget, A final budget is an intricate balance of policy goals reviews them to ensure they follow the guidelines, and practical requirements. The governing body, as and makes changes as necessary. Department the ultimate decision-making authority,approves heads may appeal if parts of their requested the budget. However,the budget creation process budget are denied. Once the departments finalize is a collaborative exercise that involves employees their budgets,the executive compiles them into a at every level and in every department. Proposed Budget. A budgeting cycle might go through the following phases: Budget review, amendment, and adoption®Once the Proposed Budget is complete,the finance staff Financial forecasting presents it to the governing body and the public. This is the first stage in the budget creation The elected officials usually hold at least one process.Analysts in the finance or budget depart- public hearing where citizens can voice concerns ment review historical revenue trends and collect about the budget,and the group will review and data on the current economic state of the agency. suggest modifications as well.The Proposed This data could include projected business reve- budget may go through multiple rounds of amend- nue,the number of expected home purchases, or ments before the council approves it. A Guide to Local Government and Finance 1 20 Budget implementation goals,activities in delivering program services, and g p After the governing body approves the budget, it objectives for improving service delivery and becomes the Adopted Budget.Accountants enter program cost. the Adopted Budget into the accounting system, starting a new accounting cycle,and the spending With a program budget,the focus shifts from a limits laid out in the Adopted Budget instantly take specific line item to the cost of delivering effect for the following year. programs. Compared with line-item budgets, program budgets may better direct the budget discussions between elected officials and the 3.2 Common Approaches to community on how the city wants to achieve its Budgeting3 goals,focusing attention on the"what and why"of the organization, rather than just"how much" Governments approach the budgeting process in different ways.Though budgeting practices have evolved over time and continue to change, most 3.3 Other Approaches to cities currently use either Line-item budgets or Budgeting Program budgets. Performance budgeting Line-Item Budgets The line-item and program-based budgeting Line-item budgets focus on costs,showing in detail processes create documents that specify exactly what goods or services will be purchased,such as where and how a government should spend its office supplies, asphalt,chemicals, phones,gas, money. But how do officials know whether they ` T electricity,and contract services. Implemented constructed a good budget?What if a different initially as a response to early 20th-Century allocation of spending could have achieved better government corruption, line-item budgets ensure results?To better address these questions,the financial control.They appropriate specific concept of performance budgeting has emerged. amounts of money for specific types of expendi- tures. The budgeting systems described above tie each dollar in the budget to a specific expense,while a They also help monitor and hold down costs by performance budget attempts to tie each dollar to allowing easy comparisons with prior years.About a specific outcome. Some examples of outcomes 60 percent of all local governments prepare their could be repairing potholes, reviewing permits, or budget using a line-item system. protecting buildings from vandalism.These desired outcomes should be aligned with the overall goals Program Budgets that the leadership has set for the year. Program budgets shift the focus to service delivery by answering two key questions:What is the city A well-constructed performance budget indicates trying to accomplish?And, how much will it cost to how dollars spent lead to these results, outlining do so? the chain of cause and effect. But since perfor- mance budgets do not specify how funds should This approach organizes budgets by similar be spent, department and division managers need functions and related programs,which may often greater freedom and discretion when it comes to cross departmental lines. It offers narrative(rather allocating spending. than line item detail)on program purpose(mission), Section adapted from GLGFC A Guide to Local Government and Finance 1 21 i Participatory budgeting Participatory budgeting is driven by the notion that citizens should have direct say in how govern- ments spend money.A participatory budgeting process encourages citizens to propose, debate, and vote on high-level priorities for the organiza- tion. Citizens might vote to make crime prevention a higher priority,for example,or might choose to spend surplus funds on a new library. Like perfor- mance budgeting, participatory budgeting is growing in popularity and is enabled by affordable and accessible web technologies. Participatory budgeting first emerged in Porto Alegre, Brazil in 1989.Though only a handful of US cities use participatory budgeting,thousands do so worldwide.A recent example is Vallejo,CA,who used participatory budgeting to determine capital projects during their bankruptcy recovery. 3.4 The Capital Budget LO Sometimes governments need to undertake larger projects that span multiple budget years.These projects are generally capital-intensive and related to construction,such as the building of a new bridge or library. To plan for these projects,agen- cies produce separate Capital Budgets or Capital Improvement Plans(CIPs)that lay out the multi-year project plan and set aside funding for the project. 3.5 The Budget Document Governments typically produce three budget documents:a proposed budget,an amended budget,and the adopted budget.The budget document is printed and distributed in a thick booklet,the bulk of which consists of a series of tables containing General Ledger data attached to their Chart of Account labels. Because each fund represents a separate accounting entity,the budget is often broken into separate sections for each fund,then each fund section is further broken down by department. A Guide to Local Government and Finance 1 22 Below is an example of expenses by department for the City of Palo Alto's budget: 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL BUDGET Utilities $204,008,331 $ 196,754,627 $ 186,611,909 $200,932,761 $201,856,709 $211,331,770 Public Works 127,579,270 96,186,383 107,981,519 106,159,762 104,241,986 110,585,691 Non-Departmental 63,150,759 60,396,398 64,505,150 70,315,681 65,122,478 73,521,335 Police 28,319,083 28,970,091 31,903,560 33,745,134 32,280,872 32,650,020 Fire 23,580,850 27,997,040 28,740,097 29,409,971 28,531,479 28,538,423 Community Services 21,856,971 21,273,443 20,929,960 21,412,314 22,571,926 24,462,944 Administrative Services 27,827,889 26,569,664 20,034,129 8,305,088 8,104,110 8,802,386 Planning and Community 10,556,157 10,242,787 11,130,069 12,503,727 15,325,037 17,267,196 Library 6,224,400 6,387,758 6,589,801 7,200,866 7,653,173 7,793,072 Information Technology 0 0 0 12,784,862 15,018,604 12,568,588 People Strategy and Operations 2,700,271 2,706,557 2,571,528 2,676,421 2,854,522 3,265,173 City Attorney 2,473,694 2,582,976 2,338,366 2,752,799 2,412,499 2,453,053 City Manager 1,780,005 2,086,545 2,193,082 2,355,062 2,437,141 2,300,828 City Clerk 1,149,525 1,454,670 1,245,685 1,500,460 1,278,026 1,257,921 City Auditor 816,784 958,326 946,288 917,961 983,864 1,088,195 City Council 279,234 287,389 182,930 400,804 393,297 496,566 Office of Sustainability 168,484 195,617 106,402 169,032 45,275 197,697 TOTAL: $522,471,707 $485,050,271 $488,010,472 $513,542,705 $511,110,999 $538,580,856 A Guide to Local Government and Finance 1 23 0 Conclusion Municipal finance continues to evolve. New practices are emerging that have the potential to transform the way local governments operate and make decisions. One of these practices, performance management, attempts to use data and information to improve service quality while reducing the use of resources. Like performance budgeting, performance management uses pre-determined outcomes and results to measure government performance. The data then informs how the government should adjust its spending and focus in future years. The benefits of adopting a performance management system impact all (now the stakeholders in a city. Department heads can use performance data to determine which areas of operation function most effectively, and they can use the same data to justify budget requests. Performance data benefits elected officials, since it can help them decide how to allocate resources. Historical data can also help leaders predict the costs of expanding services and the impacts of spending reductions. Although citizens benefit whenever their city governments function more efficiently, they can also use performance data to gain insight into how their governments operate. The City of Baltimore, for example, set up a system to track the cost and performance of their street-sweeping programs. Evaluating historical data, the City management discovered that by changing the amount they spend on equipment versus labor, they could realize cost savings while maintaining the same productivity. A Guide to Local Government and Finance 1 24 p Other tools are emerging to help officials measure the financial health of their governments. One example is the Financial Trends Monitoring System (FTMS), already in use by governments across the U.S. Like other financial health indicators, FTMS establishes a series of benchmarks that are designed to give early warning of future financial problems. Some of the benchmarks are tied to the community (Are people buying homes? What's the employment rate?), some are tied to current operations (How are expenses tracking relative to revenues?), and some are tied to the government's long-term financial position (Is debt at a healthy and sustainable level?). Recent years have been difficult for many local governments. California alone saw three bankruptcies in 2012, and across the country governments are being asked to provide more services with smaller budgets. While performance management and financial health measurement systems may not resolve policy issues, they can direct valuable government resources to where they are needed most. Historically, performance and financial measurement efforts have been hindered by slow and discon- nected technology. With the advent of the Internet and the prevalence of computers in government offices, however, new doors have opened. A Guide to Local Government and Finance 1 25 A pp endix: Further Suggested Reading Multari,Coleman, Hampian,Statler. Guide to Local Government Finance in California, Solano Press books, 2012 Wood, Len.Local Government Dollars and Sense, The Training Shoppe,1998. Groves, Sanford and Maureen Valente.Evaluating Financial Condition:A Handbook for Local Government, ICMA Publications,2003 Guathier,Stephen. Governmental Accounting,Auditing, and Financial Reporting, Government Finance Officers Association,2012 Slack, Enid. Guide to Municipal Finance, United Nations Human Settlements Program, 2009 Fishbein,John. Building a Better Budget Document, Government Finance Officers Association,2013 Walters,Jonathan.Measuring Up:Governing's Guide to Performance Measurement for Geniuses(And Other Public Managers), Governing Books, 2007 Q A Guide to Local Government and Finance 1 26 Thousand E L 0 i+ 0. imbury-Park r ?r�k Park v Th usand = la 0 S, > U. a t CM Agoura Hills N Cn C)RGP"N!7 A T10N 1YPF= P( ry; ATd0;": AfdN,.iA1 IL f*-'E i' d� N City Government 128,000 $152 million N 0 N Thousand Oaks Transforms Financial Data ° with the OpenGov Platform w To Thousand Oaks, good governance means leveraging new a tools and technologies that help make governments more efficient, open, and transparent. For Jaime Boscarino, Deputy Finance Director for the City of Thousand Oaks, this was especially important with respect to the city's finances. "It is extremely important to us that we earn and maintain a Packet Pg.344' reputation as a responsible and open government," she said. "If there is technology out there that helps us achieve that goal by making our financial information more easily accessible and user friendly, why not use it?" THE CHALLENGE 0 Like most governments, the City of Thousand Oaks would publish its CAFR (Comprehensive Annual Financial Report) and budget documents online in a PDF. Together, these massive documents number over 800 pages, making it difficult to sort through or find specific data. Although available to government employees and the public, the information was not presented in C4 LO a usable format. Cn "Our citizens would only see the budget information in the way (n 0 CZ 0 the city used the data, not in a way that they wanted to see it or Ln 0 in a way where it could answer their questions," shared Boscarino. Vt is extremely difficult to sort through 800 pages of 0 financial information to find what you're looking for, especially if you are looking at data from multiple years." E U THE IMPLEMENTATION Thousand Oaks' Finance Director, John Adams, and Assistant City Manager, Drew Powers, first learned of OpenGov while speaking with Mike McCann, a former government finance I Packet Pg. 345 officer now with OpenGov. Adams and Powers thought the OpenGov platform would help achieve openness and transparency with the citizens of Thousand Oaks. OpenGov's web-based software allows users to access, visualize, and understand a city's financial information in an intuitive manner. Implementing OpenGov's software is The entire straightforward. The City of Thousand Oaks 0 process took a sent their chart of accounts and general month t0 ledger data to OpenGov in an Excel file. L OpenGov's Technical Services Department, N complete. cu composed of government finance veterans, combined the data files and chart of accounts using OpenGov's state-of-the-art software. The entire ►L process, from gathering and submitting the data to reviewing M and publishing the site, took a month to complete. V `Acquiring new software for a U government can be a very "All we had to do was cumbersome and time-consuming gather our financial 0 task," explained Boscarino. `At first, 1 data and send It to was worried this was going to be a OpenGov. It was a lengthy and difficult project, but with E very smooth and OpenGov, the process was very easy. Q We didn't have to rely on our IT staff easy process." All we had to do was gather our financial data, send it to OpenGov, and inform them how we wanted the data to be able to be sorted on our OpenGov site. Once we sent the data and decided all the formatting, OpenGov took over from there. It was a very smooth and easy process." Packet Pg.346 THE RESULTS Thousand Oaks published 10 years of financial information on the OpenGov platform. Citizens and government officials alike can now easily access, visualize, and understand how the city operates financially. "The ease-of-use is great," shared Boscarino. "For the first time, government officials and citizens can take our financial data and transform it into useful information." L Q The City's Finance Department also uses the OpenGov platform. Often [ 10 years of financial information tasked with making reports and charts C� Site ready within 1 month c U- for department heads, meetings, and C� Citizens and government officials N budget planning sessions, the Finance now have instant access to the budget Team at Thousand Oaks can find, export, and share information directly R U from their OpenGov site. This new workflow saves them time, and also helps them plan for the future. "We are currently updating our 90 year financial strategic plan for the City of o Thousand Oaks, and the 90 years of historical data on the OpenGov platform will prove to be extremely valuable during this E process," said Boscarino. a Packet Pg.347 Thousand Oaks Case Study i OpenGov F http://yourgovernment.opengov.com Departments Y Expenses HELP SHARE� AOWl�OAD t,�ah.a r�n�~x <--BACK C RESET Annjal .. .. 161.2M Expenses SORT!LARGE-)SMALL Departments 120.9M ®Phc11'Cr ■Law Ento;vcment m ss.TEIEDLr AI> T .-' K"tanre Funds > n 80.6M L bta:y Departments $ �'; Communxy De �pment AC Mtts > O Theatres r Expense Type > 403M _ `�� CayManager (L` _____♦ It Hurian Resoxces V ftre tE g,ouped) Q (Q L -40.3M ~ 2004.05 2005-06 20D&07 2W­08 200&09 20o9-10 2010.11 2011-12 2012-13 2013-14 Actual Actual Actual Actual AcAaal Actual Actual Actual Actual Budget .V C Hide Menu fsalyear C U. N N LC> 3 r to d I N U I N lC 0 Getting started is straightforward. 3 O w No Integrations Minimal Staff Time E No integrations, implementations, or Send us financial information in an installations. Give your IT staff a break! exported CSV or Excel file.We have most a sites ready within a week. System Agnostic First-class Support We work with data from any financial We build software specifically for system—from SAP to Quickbooks. government and our team of government finance veterans will help you along the way. Packet Pg.348 bC g �-h O � ' � n n D Q CD n gt m m 3 �o J � z aSD 5 �► Q c n m co Z C 0 c ((D O O � orgy o Q � N O OIQ fD (D O�-A V Q. r+ O � � N V) N O - Lq cu C: �• o O .0 �• m o C37 Z W CL o orq O r. C � O o -0 Q n O V C'p n. (D m O Q e-+ ul — cn G. 3 ° ° N' O _0 3 < �D O r+ O L t O r* u O O 3 o r: r-+ crt CU r* e-+ o cu �. cu p -+1 D -� r* � o � m 0 CL Z � � {CO C '-+ 0 4 O . 1 —t' 0 O -0 rt rD C �' m 'o -i rat "�h � C) w_ N 3 O C O N 75 fu H � `G 3 �' 0 3 (7 r+ ! 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