We live in an era of accountability. Some years ago, the Ohio Department of Education shared yearly “report cards” that profiled a school district’s health in terms of given indicators.
Now it’s the turn for Ohio counties and cities, including those in north central Ohio, to get the same type of attention.
In a Thursday release, the Ohio Auditor’s Office released a new tool to gauge their financial health and make better financial decisions, while at the same time providing all Ohioans with an indication of how each is faring from a fiscal perspective.
“This effort has one goal: Help improve the financial health of our communities by providing a ‘fiscal physical’ to pinpoint potential problem areas,” Auditor Dave Yost said. “Not every financial problem can be avoided, but this tool provides an early warning system to help identify those that can.”
Based on research, programming and testing, the Auditor’s office developed the new tool which generates “financial health indicators” (FHI) for all 247 cities and 88 counties in Ohio. The underlying data used to create the indicators comes from the annual financial statements cities and counties submit to the Auditor’s office. The initial release of information is based on data up through 2015.
Using data from a rolling four-year period, up to 17 financial indicators are generated for all counties and cities, each analyzing a significant piece of financial information. Depending on the data, each condition is designated as either having a “critical outlook,” “cautionary outlook” or “positive outlook.” The financial stress of a city or county is higher as the number of critical or cautionary indicators increases. The greater the number of indicators, the greater the risk.
Based on 2015 data, 16 cities and 1 county meet the historical threshold for having high fiscal stress. Another 13 cities and 2 counties are within one “cautionary” or “critical” indicator from meeting that high-stress threshold. In all, 82 percent of counties and 92 percent of cities have at least one “cautionary” or “critical” indicator.
In establishing the benchmarks for the financial indicators, audit staff researched cities and counties that had been in either fiscal caution, fiscal watch or fiscal emergency, studying their financial data in the years leading up to being declared in a state of high fiscal stress. Those data points and trends were used to determine how many “critical” or “cautionary” indicators were indicative of future financial stress.
Historical data indicates that entities with at least six “critical” indicators or a combination of eight “critical” and “cautionary” indicators have ended up in a state of high fiscal stress. (For cities and counties using a cash or modified cash basis of accounting, four critical indicators or a combination of six critical or cautionary indicators is the threshold).
“Our local leaders have performed well in navigating the financial storms they’ve faced, as only 16 cities and one county currently meet the historical thresholds for having high fiscal stress,” Yost said. “This report suggests to me that the financial condition of our cities and counties isn’t as great as some believe, nor is it as bad as some others believe.”
Based on the information provided, both Richland County and the City of Mansfield are not nearing the point of high fiscal stress. Richland County had a positive outlook in 15 of the 17 indicator areas (the other two registering as “cautionary,” where the City of Mansfield fared even better, with just one cautionary indicator out of the 17. Both were among the best performers in the north central Ohio area.
Although not as serious as an FHI with a Critical Outlook, an indicator with a Cautionary Outlook signals a situation of which the entity should be aware. The entity should review the cause of the Cautionary Outlook indicator since, left unchecked, it could develop into a Critical Outlook indicator.
Reports for all cities and counties in Ohio can be accessed here, as well as data sets that provided the background for each report.
