Follow these best practices for completing Wisconsin’s Municipal Financial Report

March 27, 2017|David Maccoux

Preparing the Municipal Financial Report is about more than just crunching numbers. The data entered on the report has a direct effect on your budget. Follow these best practices to ensure you receive the correct General Transportation Aids reimbursement.

Why does Wisconsin require local governments to prepare a Municipal Financial Report? While many focus on the task of completing this report by its due date, few truly understand how amounts reported in this report determine your General Transportation Aids (GTA) eligible costs for 2016, therefore impacting your GTA reimbursement from 2018 through 2023.

Understanding which Municipal Financial Report lines are used by the state to determine your eligible GTA costs can assist you in maximizing eligible expenditures, while also allowing you to project future aid payments before the state releases their GTA calculations.

Let’s look at how the GTA calculations work

Recently, a client inquired why their GTA payment for 2017 decreased by approximately 10%. In reviewing their Calendar Year 2017 Final GTA Calculation, we determined that their six-year average costs decreased substantially in the current year, as 2009 road and storm sewer improvements incurred within a tax incremental financing (TIF) district were no longer included in their six-year average GTA costs.

Unfortunately, we also had to communicate that future GTA reimbursements were going to decrease, as they hit their minimum cushion in the GTA formula. The GTA formula ensures that local governments can receive increases from their previous year’s payments up to 15% while payment reductions are limited to 10%.

The GTA is an important part of your budget

Nearly $420 million was distributed during 2017 to offset the cost of road maintenance, construction and traffic operations to 1,925 local governments (all counties, cities, villages and towns). The following factors affect your GTA payment:

  • Road mileage under jurisdiction (municipalities only) used to calculate rate-per-mile (RPM) payments
  • Six-year average of GTA eligible costs, or the average amount of resources you spent on road maintenance, construction and traffic costs
  • Three-year average of GTA eligible costs (municipalities only) used to ensure GTA payments are not more than 85% of your three-year average costs
  • Population (municipalities only)
  • GTA appropriation in the state budget and
  • Total statewide GTA eligible costs, used to determine Share of Cost (SOC) percentage

The GTA program has two appropriations, one for counties ($98.4 million) and one for municipalities ($321.3 million), which remained unchanged from the prior year. The state’s SOC percentage for 2017 decreased to 17.5256% for counties and 15.6038% for municipalities.

How does your local government maximize your GTA eligible costs, which is the controllable factor in the GTA aid formula? It would be great if the Municipal Financial Report calculated your GTA eligible costs as you completed the report, to allow you to understand how certain lines impact this value. Many people are surprised that law enforcement costs are included in the GTA aid formula; however, as noted above, the GTA program is designed to recognize police patrol costs as a traffic operations.

Maximize your GTA reimbursement

As you complete your 2016 Municipal Financial Report, consider the following strategies:

  • Special assessments on infrastructure charges are not a deductible revenue, so ensure you properly report assessment collections
  • Insurance costs should be allocated to police and law enforcement (general government section)
  • General building costs (operating and capital) should be allocated to the law enforcement function if common facilities are maintained
  • Public works administration is not an aidable line, so allocations to this line have no effect in the GTA formula
  • Debt proceeds should be allocated based on intended use because debt issuance costs and future interest payments for law enforcement, highway and storm sewer functions are aidable
    • The GTA aid formula has not been updated to take into consideration the interest payments on storm sewer debt, when accounted for as an enterprise fund, so you may need to evaluate how you report these costs.
  • Capital costs for new detention facilities should be evaluated to determine law enforcement (aidable) versus detention (non-aidable), and appropriate allocations both in the capital outlay and debt service functions
  • Tax incremental district (TID) project costs often include infrastructure improvements, but may be classified as conservation and development in your ledger

Prior to submitting your report, take a final review to ensure you have properly allocated law enforcement and public works costs to aidable lines. We have developed an excel spreadsheet which allows you to input your past six years of Municipal Financial Reports to determine your three- and six-year average GTA costs and projected aid payment, based on a constant SOC percentage. If you would like a copy, please contact David Maccoux, CPA, shareholder, or any member of Schenck’s Government team at 800-236-2246.

David Maccoux, CPA, is a shareholder and a leader of Schenck’s Government & Not-For-Profit team. He has more than 25 years of experience providing auditing and consulting services to Wisconsin governments and not-for-profit entities, specializing in organizations that receive federal and state financial assistance.