Trend analysis evaluates the fiscal information of an organization over a given period. The periods can be divided into months, quarters or years depending on the state of affairs. It is a statistical technique of analyzing current trends to predict future pattern and is considered a form of comparative analysis. The researcher collects information from multiple periods and uses the data to get meaningful data. There is no specified time for getting a trend, but the longer the movement, the better the direction becomes. The City of Salina is relevant in identifying the financial factors affecting solvency.
Revenue
Revenue determines the capacity of a nation to provide services. When evaluating income, the vital issues to consider are diversity, economic growth, reliability, flexibility, and administration. Under ideal conditions, revenue should grow at a rate equal to or greater than all the effects of expenditures and inflation. Income should be flexible to allow adjustments to unpredictable operational and economic conditions. The country should ensure revenue is balanced between elastic and inelastic sources as per the monetary base and inflation. The revenue sources should be diverse to avoid over-dependency on residential, commercial, or external funding sources like federal grants (Salina & Pazenovna, 2017). To cover the total costs of services, user fees be constantly reevaluated. Analyzing the revenue structure will help isolate problems like changes in tax burden, deficiency in collection and administration of revenues, poor estimation practices and insufficient cost controls, decrease of the revenue base, overreliance on external sources of income and legislative policies that negatively affect revenue yields.
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Revenue per Capita shows revenue changes concerning the population size. An increase in the population directly calls for more services, indicating this revenue will remain constant. Salina's income per Capita was stable over a ten-year tenure (1997-2006). The stability in this revenue shows the City has handled the population increase effectively, and the service level was maintained without looking for new sources.
Intergovernmental revenues are obtained from other nations' entities, and overdependence can be dangerous on the financial condition because of the restrictions or stipulations attached to the income. The significance is to see whether the City is controlling its revenue or revenues manage the City. The tenure has overseen a substantial reduction in this revenue compared to the total payments due to loss of city-county sharing revenue. It also implies the City does not depend on intergovernmental revenue and could be missing on receiving funding opportunities.
Expenditures
Expenditures measure the City's estimated service output. The more amount it spends, the more service it is giving. However, this does not account for the effectiveness and efficiency of service delivery. The expenditure growth rate should primarily be considered to assess if the City is operating within the revenues it gets. The City is expected to have a balanced budget and would avoid expenditure growth to exceed revenue growth. However, the City might still balance the budget and experience long-term imbalances where expenses outdo revenues.
This imbalance may arise when the City uses bond proceeds to undertake its operations, reserve funds, defer the maintenance of streets and buildings. It may also defer funding contingent liabilities that have a balanced budget with deficits in the long run. Consideration should also be directed to the level of fixed or mandatory costs. The expenditure flexibility measures the City's freedom to change its service levels depending on the varying economic, political, and social conditions. When the mandatory costs increase substantially, the City will not be able to make adjustments. Spending decisions decrease when debt service, pension benefits, state mandates and contractual agreements increase.
Analyzing the City's expenses will help isolate problems like the decline in budget controls, rapid increase in expenditures in contrast to revenues, undesired increase in fixed costs, reduced personnel productivity and rapid growth in programs that create future liabilities. Salina City's expenses per Capita have increased for two years, stabilized for five years, reduced slightly in two years and increased rapidly in the last year, all happening in the ten-year tenure respectively. The addition of employees directly affects expenses since wages constitute a large percentage of the total operating expenses. Expenditure per Capita will also increase with the provision of new services and upgrading of current services.
Employees per Capita
Personnel costs make up a large percentage of the City's operating budget. Tracking the fluctuations in the employee numbers concerning the population measures the changes in expenditure. An increase in employees in contrast to population shows the expenses are rapidly increasing than revenues, the City becomes labour-intensive and reduced productivity. There has been an increment in the employees attributed to the constant increase in the police department, fire sector, and development service section. All these are products of the demand for enhanced services. The City's employee per Capita stabilized over the ten-year tenure during the evaluation period. This increase is attributed to the changes in city services, and there is nothing to show decreased productivity.
` Fringe benefits show a share of the City's operating costs. The most common are pension plans, health and life insurance, sick and holiday leave, vacation, disability insurance, education, and incentive pay. All these benefits represent the fixed costs that the City must pay. Making a keen analysis will enable the City to isolate increasing costs and adjust where necessary. The evaluation period has seen fringe benefits, which are a percentage of total wages and salaries, increase substantially.
Capital Outlay
It refers to the expenses for operating equipment like radios, computers, office equipment and vehicles bought from the operating budget. This involves equipment to last more than one year, and the expenses can be constant or decline when new equipment is purchased. The outlay in the evaluation period varied extensively; it raised and dropped for most of the period. The general trend is reducing capital outlay expenses and is not harmful unless the spending is put on hold.
Data Analysis
| Financial factor | Trend |
| Revenue | The stability indicates the City has managed population increase appropriately. Service level has been maintained without using new sources of revenue. |
| Expenditures | The evaluation period saw stable expenses for nine years and a shoot last year due to adjustments in the pay plan. |
| Employee per Capita | The City's employee per Capita remained stable over the evaluation period. Changes in services caused a slight increase in employee numbers. |
| Capital Outlay | The evaluation period did not experience three years of reduced capital outlay, indicating little spending on capital outlay. |
Policy Statement
The City should ensure the revenue sources remain stable and effective by managing the population shackles. The service levels have been maintained, and new sources are minimal (Osborne, 2019). The city should avoid overlooking external funding because it can create a surplus in the accounts. The expenditures should be effectively accounted for by ensuring proper adjustments like pay plans do not affect the economy. The number of employees and the service levels should have an equilibrium, and the employees should be flexible to adjust to the economic boom and recession. Capital outlay should be checked to ensure equipment run effectively and are changed every year.
References
Osborne, C. (2019, December 31). A note on the Medium-Term Budget Policy Statement. South African Journal of Social and Economic Policy, 75, 17-18
Salina, & Pazenovna, A. (2017). Financial soundness of Kazakhstan banks: Analysis and prediction.
