ACG6505 Advance Governmental and Fund Accounting Essay
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ACG6505 Advance Governmental and Fund Accounting Essay
The report gives a brief history of City of Doral, how it incorporated and its current financial performance. The city makes its annual budgets by involving its resident who priorities which projects and programs should be funded based on the projected revenue.
Based on the comprehensive financial reports, the corporation continues to register increase in assets; however, during the last two years, it registered a reduction in its liabilities. Such trend is beneficial for the financial stability of the corporation. The City of Doral is one of the city’s that is managed well thanks to its management format that includes manager, the council, and mayor.
The city is managed as a corporation after incorporating in 2003. Due to the good management, the city attracted many investors and diversified the investments. The investment in capital assets coupled with good management led to increase in population, business opportunities and revenue.
The more the business opportunities the more the city collected property taxes and served many people who paid for the services. The strategy increased its revenue base and increased its net worth. Whereas there are improvements, the analysis of the financial position shows that more controls on the liabilities are needed to reduce liabilities and increase revenue.
Keywords: net worth, assets, liabilities
Report on the Financial Performance City of Doral
Since the incorporation of City of Doral in 2003, population increased and more developments were carried out that led to increase in cash flow and revenue. More developments and investments led to increase in the city’s revenue collections. For example, in 2018 the city raised $ 12,081 billion from revenue and other charges.
It is in cognizance of the city’s development and investment that the paper focuses on analyzing the trend of the value of assets, liabilities and the general net worth of the organization. Specifically, the analysis will be done by calculating relevant financial ratios appropriate in making informed judgment about the issues identified.
Furthermore, the paper will document the analysis results in simple and clear terms understandable to external stakeholders of the corporation. Importantly, the report highlights the conclusions derived from the analysis and highlights appropriate recommendations based on the conclusions. The final part of the paper is the summary of the report.
The City of Doral started as a real estate site after Doris and Alfred Kaskel bought land in the state of Florida in 1950s. The two were real estate developers who bought land for purposes of developing it, they bought 2400 acres of land. The land was swampy; it was located between NW 36 and 74 streets and from NW 79 to NW 117 avenues.
They bought the land for $ 49,000 with the aim of building a hotel and a golf course. The Kaskel’s constructed the Carillon Hotel and Doral Beach Hotel on Miami Beach. On the bought land, they constructed a country club and established a hotel, which they named as Doral, which is a combination of their names.
So guests at the Miami Beach would be transported to the country club, which featured blue, red and par 3 golf courses. Among the events that were hosted at the country club was Florida’s major PGA event, which was the first Doral Open Invitational (City of Doral, 2020). Subsequently, guests frequented the hotels and the country club.
Between 1980 and 2000, Doral’s grandson called Bill built Doral estates and engaged in a joint venture to build the Doral park. Because of building the estate, younger families flooded the area for shopping sprees because the area had not parks, stores, or schools.
The tenants and buyers of the Doral estate came together as a community; whereas there were no traffic problems the rapid construction of the estate and the attraction of many buyers and tenants due to the low cost led the county to impose a building moratorium (City of Doral, 2020).
The high population and lack of amenities led to increase in the cost of services. The community in the area established a West Dade Federation of Homeowner Associations in 1989 to safeguard the welfare of the community. As a result of the federations’ effort, there was establishment of police station, lighting, landscaping and roads in the area.
After years of development, and the resultant strain on the resource, the management formalized the operations in the city. There was need to incorporate the city so that revenues could collected and necessary services provided. Incorporation led the area to be managed in a professional way.
The city was incorporated in 2003; the incorporation attracted more investments that included the buying of hotels and the Doral Country club. For instance, Donald Trump bought the Doral county club and hotel in 2012 for $ 150 million. Due to change in ownership, the name of the club changed to Trump National Doral Gold Club.
The reputation of the club for its golf courses continued and expanded internationally; for example, the Blue Monster continued to host PGA Tour Tournament until 2016. Apparently, the City of Doral attracts many companies, families, businesses and retires (City of Doral, 2020).
Between 2010 and 2016, the population of City of Dorol increased by 26.1% by 12,000 people to 64,000 residents (Madan, 2017). The city is now managed under the Mayor-Council-Manager format. The format allows effective operations and reduces political interferences in some core in some functions that would otherwise affect decision-making.
Each party in the management has a specific responsibility to carry out.
The governing council is mandated to formulate legislations and policy, the council has the mayor and the council members. The council is mandated to adopt resolutions and ordinances; it also adopts the annual budget in addition to appointing the city Attorney, the City Manager and the City Clerk.
The city manager engages in implementing directives and policies of the council. The manager also appoints the departmental head as part of overseeing the operations of the government.
After the incorporation of the city, the management kept the financial records in accordance with the government accounting standards. It kept records of assets, liabilities, expenses, and the net worth of the city. The city makes the annual budget, which acts as the basis of financial control and planning.
It is based on the financial information kept that the report focuses on analyzing the financial status of the incorporation by focusing on its assets, its liabilities and its net worth. The table below is a summary of the four-year status of the three issues
2015 2016 2017 2018 Total assets 315,068,814 337,519,822 346,143,957 356,376,077 Total liabilities 41,585,954 57,775,513 57,672,302 55,528,269 Net Position 276,044,345 291,877,613 300,590,734 311,036,836
Asset is any resource of value to the organization, government, or individual that means it can be converted into cash within a short notice such as short-term assets or in the long -term such as long-term assets (Folger, 2020). In government accounting, assets include public land including parks and infrastructure such as the water and sewerage system, and charges from service offered and taxes.
There are also business type activities that include investment earnings and moneys raised from charges (City of Doral, 2018). The city’s assets include capital assets such as improvements in public works, upgrades in information technology, construction and improvements in parks and levies from vehicles.
A liability is what an organization, government or individual owns to another entity. Examples of liability in government accounting include loans, accrued interests, accounts payable, and escrow deposits among others (Hayes, 2019).
The net position is the difference between the assets and the liabilities in the organization. The net worth shows that financial stability of the entity; whenever the assets are higher than the liabilities, the net worth is higher.
The ideal situation in organization is to ensure the entity is solvent such that the liabilities are lower than the value of the assets.
The method used for analyzing the mentioned issues is calculation of financial ratios. The specific ratios considered are total-debt-to-total-assets ratio, calculation of liability, and determination of the net worth. It is important to consider the ratio because it shows the financial leverage of the corporation.
Specifically, it considers all the total assets of the corporation including tangible and intangible assets. The ratio measures how much of the corporation’s assets are financed by debt. The ratio indicates how the corporation has grown its assets over time. It helps planners to determine if the corporation has enough assets to meet its debt obligations.
The total-debt-to-total-assets ratio analyses the city’s balance sheet to determine the value of debt relative to its asset. The ratio determines the financially stability of the corporation. When the total-debt-to-total-assets ratio is high, it means the degree of advantage is high (Kenton, 2020).
As a result, it is risky to invest in the organization because most of the assets are financed by debts. The formula used for determining the total-debt-to-total-assets ratio is total debt divided by the total assets. The rationale of using the ratio is because as a leverage ratio it highlights how the corporation has grown (Williams, 2017).
As a city, the ratio is necessary in attracting funding from creditors who use the ratio to determine if the city can repay the existing debt. For purposes of the research, it shows the extent to which the organization has improved without relying on debt. The table below shows the total-debt-to-total-assets ratio for the four years
2015 2016 2017 2018 Total assets 315,068,814 337,519,822 346,143,957 356,376,077 Total debt 41,585,954 57,775,513 57,672,302 55,528,269 total-debt-to-total-assets ratio 0.131 0.171 0.167 0.156
During the last four years, the City of Doral experienced increased construction of buildings and growth of investments that increased the city’s tax base.
In 2018, the corporation raised $12.081 billion; the expansion in the tax base arose due to diversification of investments in areas such as retail and wholesale trade, light manufacturing, construction and tourism (City of Doral, 2018). Generally, the corporation’s assets exceeded its deferred inflows of resources and liabilities. The table below shows the a summary of the net position of City of Doral
2015 2016 2017 2018 Net Position 276,044,345 291,877,613 300,590,734 311,036,836
Analysis of total-debt-to-total-assets ratio shows that the city’s assets are relatively higher than the liabilities that mean very few of the city’s assets are financed by debt. Consequently, the city is able to attract creditors because it is able to pay its debts.
The calculation of the liabilities considered financial aspects that contribute to liabilities in in the city. It includes loans, accrued interests, accounts payable, and escrow deposits. The city’s liabilities have been reducing since 2016.
The city’s net worth increased over the four years. The increment in the city’s net worth is attributed to the increment in the government activities and business type activities. Among the government activities include investments in land, buildings, equipment, and infrastructure.
The net worth of the city includes information on the value of assets, liabilities, deferred outflows, and inflows. There has been a gradual increase in the net worth of city, which indicates that the financial position is improving. Importantly, the improvement in the net worth of the city is also attributed to the comprehensive internal controls that protect the city’s assets from loss, misuse, or theft.
Whereas the city’s total-debt-to-total-assets ratio is relatively low, during the last three years, it has been decreasing. The assets have been increasing. Based on the analysis, the economic outlook of the city is promising. There is improved city’s fleet of vehicles, and improved infrastructure and parks.
Furthermore, the city’s airport provides opportunities for international trade and trade with other cities within Florida. The improvement in the airport attracted international passengers who increased the cash flow within the city.
The financial information provided and the resultant analysis shows that the city continues to expand its budget as part of meeting the necessary capital projects with the aim of improving, preserving, creating, and enhancing the city’s infrastructure and public facilities. In fact, the capital development attracts more investments that improve its revenue base (City of Doral, 2018).
Based on the summary of the net position, the corporation’s liabilities reduced during the last two years; namely 2018 and 2017. However, its total assets increased leading to increase in its net position. Based on the positive financial performance of the corporation, it can meet its budget estimates and effectively plan for future development activities.
Notably, during the budget making process, the city of Doral engages the public through public participation policy in order prioritize development areas and ways of expanding or maintaining its revenue base. Among the corporation’s assets that are, the highest are transport, energy and buildings.
- In order to sustain the development and improvement, the city should continue collaborating with private entities located within it. For instance, as part of increasing revenue the city should collaborate with schools to use its parks and other suitable infrastructure for suitable activities such as sporting or picnics. The city may use the schools’ facilities for activities such as additional parking in suitable places.
- In addition, the city’s levies and property taxes should be competitive in order to continue attracting high value investments. Attraction of investment is necessary in increasing the city’s revenue.
- In terms of deferred inflows and outflows, the city should continue reducing the deferred inflows. Moreover, it should increase the deferred outflow.
- Whereas the city has sound financial position, it is exposed to some risks that include theft, intentional misuse, and destruction of assets. In order to reduce risk, the city should insure of the high-risk assets and put stringent control mechanisms.
- Furthermore, part of the city’s liabilities is attributed to the leases; for example, the city leased the land that was used to construct the police station (Doral City, 2018). The lease expires in 2058. In order to avoid liabilities related to leases, the city should invest in land and construct a police station. The strategy will reduce the liabilities.
The above ratio and calculations show that the financial position of the city is gradually increasing based on the management strategies initiated. By reducing wastage, controlling theft and loss, the city’s assets increase. Furthermore, the city has invested in necessary capital assets that ensure sustained revenue collection; the situation reduces its liabilities relative to the assets.
The city should continue investing in capital projects in the long term such as improving storm water drainage system; the measure will increase the long-term revenue from both business and government activities because an appealing city will continue attracting more investors and settlers.
City of Doral, (2018). 2018 Comprehensive Annual Financial Report. Web. Accessed on 23/4/2020.
Folger, J (2020). What is an Asset? Web. Accessed on 23/4/2020
Hayes, A (2019). Liability Definition. Web. Accessed on 23/4/2020.
Kenton, W (2020). The Total-Debt-to-Total Assets ratio Definition. Web. Accessed on 23/4/2020
Madan, M. O (2017). Why is Everyone Moving to Doral? Census says it’s the Fastest Growing City in Florida. Web. Accessed on 23/4/2020.
ACG6505 Advance Governmental and Fund Accounting Essay
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