FROM THE CLERK OF COURTS
Accounting and importance of statistics
Special to The Sun
Hello from the Clerk’s Office! Have you ever read the County’s annual comprehensive financial report (ACFR)? Yeah, I didn’t think so since last year (FY20-21) it was 314 pages long!
You might ask why we write such a long report about the finances of the County every year if no one ever reads it! Well, there are a number of reasons including:
- The Florida Statutes require this comprehensive annual report.
- The Governmental Accounting Standards Board (GASB) require an annual comprehensive report.
- Industry experts actually read these annual reports. The reports help credit lenders, bond counsel, grant agencies and others ascertain the financial condition of the County.
Each year we summarize the lengthy annual report into a shorter version call the “Popular Annual Financial Report” (PAFR). It can be downloaded at wakullaclerk.org/county-financial-reports/ under the same title, “Popular Annual Financial Report”. This report summarizes 314 pages of financial information into 27 pages – still a long read! This report summarizes boring financial reports into easy-to-read pie charts and bar graphs. We also use these types of charts extensively in our annual Revenue Monitoring Report, annual Investment report, annual Debt report and others. These reports can be found at the same link mentioned above.
Statistics have become an increasingly important part of our accounting department. With the help of statistical methods, we are able to better understand and better explain financial information. This in turn helps us provide more accurate advice and the County make better financial decisions. Statistics allow accountants to look at financial data in a different way. By using statistical data, we can analyze the data to identify trends, patterns, and relationships that would otherwise be difficult to detect. This can help us make predictions about future financial performance and make more informed decisions.
For example, we can use statistical methods to analyze past financial data to identify trends in revenues as well as County spending. This can help the County forecast future revenues and expenses and plan accordingly. Similarly, we can use statistical methods to analyze financial data from different departments and find out how efficient each department is. We can also use statistical methods to analyze financial data from different counties around the State for comparison. This can help the County better understand the differences between counties and identify opportunities for growth or to do things a little differently. Moreover, statistical methods can be used to evaluate the performance of financial instruments. This helps us identify which investments are performing well and which ones are not. This can be used to make decisions about where to invest or what financial instruments to buy or sell. Overall, the use of statistics in accounting is becoming increasingly important. By utilizing statistical methods, we can better understand financial data and use this information to make more informed decisions. This can help us provide better advice and make better decisions for our citizens.
This year we will begin using another form of statistics – financial ratios. Financial ratios are used to compare different financial figures. This includes comparing different types of income and expenses, comparing how much debt we have, and comparing the profitability of various funds. By analyzing financial ratios, we can identify where the County is strong and where it needs to improve. For example, the debt-to-equity ratio is used to measure how much debt a county has compared to its equity. A higher debt-to-equity ratio indicates that a county is more leveraged and may be at greater risk of a financial crisis. Analyzing this ratio can also help us make better decisions about investments or financing.
Other financial ratios include liquidity ratios such as the current ratio, quick ratio, and fund balance ratio; solvency ratios such as the operating ratio and long-term liability ratio; debt service ratios such as the debt-to-equity ratio and debt service coverage ratio; and demographic ratios (based on per capita) such as the revenue per capita ratio and the expenses per capita ratios. These ratios, together, can be used to measure the financial health of a county. By analyzing these ratios, we can identify potential problems and take corrective action early.
These financial ratios will be monitored monthly, reported to County management monthly and published as part of our annual PAFR report each year.
As always, if you have any questions about our financial reporting or County finances, please call me (850-926-0325) or our accounting and finance department (850-926-0349).
Greg James is Wakulla County Clerk of Court and Comptroller.