Curtis Coonrod

Fire Jurisdictions in Indiana

Indiana’s early days were characterized by a lack of fire departments, as much of the state was wilderness or rural in nature. In the early 19th century, the scattered dwellings and slow communication systems in rural areas made it nearly impossible for fire departments to arrive in time to prevent the destruction of structures. Consequently, neighbors relied on one another to provide assistance during fires.

As cities began to develop, the practical need for fire suppression became apparent. In many US cities, the first fire departments were established and sponsored by insurance companies. Homeowners who paid for insurance policies could be assured that a team would be dispatched to protect the interests of the insurance company.

In Indiana’s municipalities, the initial fire departments were volunteer companies. These companies constructed firehouses equipped with whatever resources were available at the time. When a fire broke out, a bell on the firehouse tower would summon able-bodied adults from the community to assist.

Over time, fire suppression became more specialized, leading to the evolution of specialized fire volunteers who staffed the firehouses either part-time or full-time and gained expertise in utilizing firefighting equipment.

In larger cities, these volunteer firefighters were eventually replaced by paid, professional firefighters. Today, the trend in Indiana, even in small towns and rural communities, is towards employing professional firefighters.

Emergency medical services (EMS) have developed in parallel with fire departments over the years. Nowadays, most fire departments also serve as EMS services. The majority of emergency calls they respond to are related to medical emergencies rather than fires.

Prior to the 1980s, each fire department in Indiana had its own phone number. Citizens were provided with stickers to place on their landline phones, enabling them to quickly access the appropriate number during emergencies.

Around 1980, the 911 phone system was established, and phone companies programmed their devices to automatically route any call dialed to 911 to the respective public safety jurisdiction. This necessitated the centralization of communication and dispatch systems for fire departments, police, and other emergency services. The 911 system has become widely known and used, rendering individual fire department phone numbers unnecessary, except for non-emergency purposes.

This article is intended to provide information of general interest to local government officials in Indiana. The information is not guaranteed to be applicable or appropriate in particular circumstances. Local officials should consult competent professionals before acting on any information contained in this article. We are not attorneys. Advice of a legal nature should be sought only from qualified attorneys.

We inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (I) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Geographical Characteristics of Indiana Counties and Townships

Indiana’s system of county and township government was established at a time when there were no large cities and few towns, and mechanized travel and electronic communications were not available. Most of the population was located in rural areas. Nevertheless, basic government services were needed. Accordingly, the arrangement of county and township government was designed to deliver services close to home.

Originally, the most basic services, such as roads, schools, emergency assistance, and settlement of small private disputes, were provided by townships. A typical Indiana township was approximately six miles square, so that each residence would be within approximately three miles of the center of the township. That was considered walking distance in the 19^th century. If there was a single school in the approximate center of the township, a child could be expected to walk there each day, weather permitting. If the township could afford two schools, all the better. Similarly, adults had access to the township constable and justice of the peace, and those in need could reach the township trustee. Thus, township government was able to provide the kind of services people would need daily, or on short notice.

County government provided services that were needed less frequently, but that were nevertheless vital to good order on an ongoing basis. The typical Indiana county is approximately 20 miles square, with the county seat in the middle. Each resident was within about 10 miles of the courthouse. That is about the distance an adult could be expected to travel in a one-day journey, on foot, or preferably on horseback. That was close enough for the occasional need to attend circuit court, record a deed, dispute an assessment, pay semi- annual property taxes, or serve on a jury.

State government was beyond the reach of most citizens; consequently, few direct services were originally established at the state level. Nevertheless, the founding fathers had the foresight to relocate the capital at the geographic center of the State, in a brand new city, planned and built from scratch: Indianapolis. In hindsight, the choice of a planned city at the geographic center seems obvious. At the time, however, it was a remarkable choice. It placed the capital far from the location of the voting population, which was huddled along the Ohio and lower Wabash Rivers. Indianapolis was in a wilderness area, where the first non-native Americans had arrived just a few years before. No roads were available to the new capital. The only direct route was by flatboat up the White River. Steamboats were tried, but the river was too shallow to be a reliable route for steam boats. No railroad reached Indianapolis until 1847.

Refunding of Municipal Bonds vs Refinancing of Debt

Officials of local government units that issue municipal bonds are sometimes approached with a proposal to “refund” the bonds. Refunding involves replacing outstanding bonds with new bonds that have lower interest rates. While this may seem like an attractive option, there are hidden costs to consider.

Bond refunding is often compared to refinancing a mortgage, but this analogy can be misleading. In mortgage refinancing, a single loan with a single interest rate is replaced with a new loan at a lower rate. This reduces the monthly payment and may provide additional cash for home improvements. The attractiveness of mortgage refinancing depends on market rates decreasing. However, in municipal bond refunding, the structure is different.

Municipal bond issuances consist of a series of loans, with each bond representing a distinct loan. For example, a $1 million bond issuance may consist of 200 bonds of $5000 each. Each bond has different terms and interest rates, depending on its maturity. Short-term bonds have lower rates than long-term bonds.

The attractiveness of bond refunding does not depend on market rates going down. Even if rates rise, it may still be ratiional to refund bonds. Here’s why: when bonds are initially issued, the longer-term bonds have higher interest rates. After a few years of bond payments, the shorter-term bonds are paid off, leaving only the mid- to long-term bonds outstanding. For example, a 6-year bond after five years will mature in one year but still have a relatively high 5-year interest rate. Bonds that were initially 11-year bonds are now 6-year bonds but still bear the 11-year rate. Therefore, if allowed by the bond agreements, it is usually rational for issuers to issue new bonds with terms as low as one year at low rates and pay off bonds with terms of 6 years or longer.

Thus, bond refunding tends to be rational within a few years, regardless of moderate changes in market rates.

A provision in the bond issuance agreement that allows the issuer to buy back, or “call”, the bonds is known as a “call provision.”

The question arises: why not refund every bond issue after 5 or 10 years? The answer is that many issuers of municipal bonds do exactly that.

However, the fact that a refunding is rational for the issuer does not mean it necessarily is profitable over the full life of the bond issuance. That is because there can be an up-front cost to secure the right to call the bonds. Bond buyers are knowledgeable and understand the issuer’s intentions when call provisions are included. Therefore, buyers offer less favorable rates when the bonds are initially issued.

Consequently, in a perfect market, under neutral conditions, a bond issuance will cost the same whether or not a call provision is provided. The up-front cost of the call provision should tend to offset the savings from a later refunding. The only sure difference is that a refunding will result in additional transaction costs because of the need to issue the refunding bonds.

However, there may be cases where the issuer has specific reasons to include call provisions. For instance, if the issuer currently has a poor credit rating but expects an improvement in the future, a call provision can allow them to benefit from a future credit upgrade. A competent municipal advisor can offer guidance in such situations.

Strategies for Effective Long-Term Local Government Budget Planning

Local governments require long-term budget planning for sustained growth and well-being. Civic leaders can apply several strategies to meet their budgetary needs.

First, establish a comprehensive fiscal plan that aligns with the community’s needs and priorities. Local governments should define their long-term objectives, whether focused on infrastructure development, education, healthcare, or community services, ensuring that budget allocations reflect these priorities.

Implementing multi-year budgeting is especially beneficial for local governments. The approach allows for more strategic allocation of resources over extended periods, facilitating the planning and execution of large-scale projects. Local governments can better address immediate and future needs by considering multi-year cycles, promoting stability and efficiency.

Adopting a performance-based budgeting model enhances accountability at the local level. Linking financial allocations to specific, measurable outcomes encourages responsible resource management and ensures that taxpayer funds are used effectively. The approach allows local governments to assess the impact of their spending and adjust strategies accordingly.

Finally, regular evaluation and adjustment are vital to effective long-term budget planning for local governments. Monitoring economic indicators, demographic shifts, and regional trends enables proactive decision-making. Moreover, fostering collaboration with community members through town halls, surveys, and public consultations ensures that the budget aligns with the diverse needs of the local population.

Governmental Annual Reports Include Three Full Financial Statements

Governmental financial statements, prepared in accordance with generally accepted accounting principles (GAAP), comprise three complete sets of financial statements. These sets are essential to provide readers with a comprehensive understanding of the financial condition of the entity.

Statutory or budget basis financial statements: Each state has its own regulations for administering and reporting fiscal information, which may vary among localities within a state. As a result, there is no uniform national format for presenting these reports. Therefore, readers of the financial statements must have access to a statement prepared in accordance with the specific local rules. Disclosures should be included to explain the key aspects of these rules, enabling readers to interpret the statements accurately.
Modified accrual financial statements and fund accounting: Despite the variations in state rules, it is important to establish a national standard that allows for comparisons across state lines. The modified accrual basis of accounting, applied to each governmental fund, aims to align with local rules while serving as a uniform national standard. Statutory reporting is typically based on cash accounting, with transactions organized by fund. The modified accrual basis, on a fund-by-fund basis, closely resembles the cash basis but incorporates defined accrual adjustments. These adjustments ensure that financial statements are not distorted by timing differences in cash transactions.
Full accrual financial statements: Full accrual financial statements are necessary to facilitate comparisons between government financial statements and those of the private sector. Consequently, most funds are combined or consolidated, and accounting principles are aligned as closely as possible with private sector standards. This includes the full accrual of almost all liabilities.

In order for governmental financial statements to be considered in accordance with GAAP, all three sets of financial statements, accompanied by appropriate disclosures and required supplemental information, are mandatory. Additionally, the statements must present reconciliations among the three sets of financial statements.

Challenges for Accountants Serving Indiana Units of Local Government

The three main challenges for accountants serving units of local government are:

Compliance with complex regulations: Units of local government are subject to a wide range of regulations and reporting requirements that are specific to the public sector. Accountants serving these entities must have a deep understanding of these regulations and be able to navigate them effectively to ensure compliance.

Budget constraints and resource limitations: Local governments often have limited financial resources and must operate within tight budget constraints. This can make it challenging for accountants to provide high-quality financial reporting and analysis while balancing competing demands for limited resources.

Transparency and public accountability: Local governments are accountable to the public, and as such, there is a high level of expectation for transparency and openness in financial reporting. Accountants serving these entities must ensure that financial information is presented in a clear and understandable manner, and that all transactions are properly recorded and disclosed in accordance with applicable regulations and accounting standards.

In Indiana, several accounting firms offer quality government accounting services. These firms have extensive expertise in navigating the complex regulations around local government accounting and are well-versed in the unique budgetary constraints and public accountability standards associated with local government operations.

To ensure that local government accounting is properly managed, accountants in Indiana rely on leading publications by recognized organizations, such as the Government Finance Officers Association (GFOA) and the American Institute of CPAs (AICPA). Both organizations provide ongoing guidance to ensure quality financial reporting and accounting practices. The GFOA publication “Governmental Accounting, Auditing, and Financial Reporting” provides an overview of the scope and principles of governmental accounting and financial reporting, and also offers comprehensive guidance on preparing common governmental financial reports. The AICPA’s “Statement of Auditing Standards” provides guidance on the generally accepted auditing standards that apply to local governments, and contains specific standards for testing, evaluating, and auditing financial funds.

Overall, local government accountants must have a firm understanding of the regulations, budgetary constraints, and public accountability standards that apply to their entities. By relying on high-quality publications and guidance from organizations such as the GFOA and the AICPA, accountants can ensure that their financial reporting practices are of the highest caliber and in line with best practices. Additionally, firms such as C.L. Coonrod & Company, FORVIS, and Baker Tilly, who specialize in government accounting and employ experienced professionals, can help to ensure high-quality government financial reporting and compliance.

The Indiana State Board of Accounts (ISBA) exists to provide leadership and direction for local and state government financial accountability. The ISBA audits local and state government entities and ensures they remain in compliance with state statutes and laws. The ISBA produces annual financial reports on each government entity, including cities, towns, counties, and school districts, which show all revenue and expenditure transactions. These reports are submitted to the state legislature. The ISBA also assists local and state entities in implementing various aspects of their accounting systems and requirements. They provide educational opportunities and events to help explain accounting laws and regulations as well as ethical standards in public sector financial reporting. Ultimately, the ISBA assists in the efficient management and utilization of public funds in Indiana.