7 Del. Admin. Code § 1352-D-12.0

Current through Register Vol. 28, No. 7, January 1, 2025

Section 1352-D-12.0 - Local Government Financial Test

12.1 Requirements for Use of Local Government Financial Test to Comply with Financial Responsibility

12.1.1 A local government Owner or Operator may satisfy the requirements of PART D, Section 3.0 by passing the financial test specified in this Section. To be eligible to use the financial test, the local government Owner or Operator shall have the ability and authority to assess and levy taxes or to freely establish fees and charges. To pass the local government financial test, the Owner or Operator shall meet the criteria of PART D, subsection 12.1.3 and PART D, subsection 12.1.4 based on year-end financial statements for the latest completed Financial Reporting Year.

12.1.2 The local government Owner or Operator shall have the following information available, as shown in the year-end financial statements for the latest completed fiscal year:

12.1.2.1 Total Revenues: Consists of the sum of general fund operating and non-operating revenues including net local taxes, licenses and permits, fines and forfeitures, revenues from use of money and property, charges for services, investment earnings, sales (property, publications, etc.), intergovernmental revenues (restricted and unrestricted), and total revenues from all other governmental funds including enterprise, debt service, capital projects, and special revenues, but excluding revenues to funds held in a trust or agency capacity. For purposes of this test, the calculation of total revenues shall exclude all transfers between funds under the direct control of the local government using the financial test (interfund transfers), liquidation of investments, and issuance of debt.

12.1.2.2 Total Expenditures: Consists of the sum of general fund operating and non-operating expenditures including public safety, public utilities, transportation, public works, environmental protection, cultural and recreational, community development, revenue sharing, employee benefits and compensation, office management, planning and zoning, capital projects, interest payments on debt, payments for retirement of debt principal, and total expenditures from all other governmental funds including enterprise, debt service, capital projects, and special revenues. For purposes of this test, the calculation of total expenditures shall exclude all transfers between funds under the direct control of the local government using the financial test (interfund transfers).

12.1.2.3 Local Revenues: Consists of total revenues (as defined in PART D, subsection 12.1.2.1) minus the sum of all transfers from other governmental entities, including all monies received from Federal, State, or local government sources.

12.1.2.4 Debt Service: Consists of the sum of all interest and principal payments on all long-term credit obligations and all interest-bearing short-term credit obligations. Includes interest and principal payments on general obligation bonds, revenue bonds, notes, mortgages, judgments, and interest bearing warrants. Excludes payments on non-interest bearing short-term obligations, interfund obligations, amounts owed in a trust or agency capacity, and advances and contingent loans from other governments.

12.1.2.5 Total Funds: Consists of the sum of cash and investment securities from all funds, including general, enterprise, debt service, capital projects, and special revenue funds, but excluding employee retirement funds, at the end of the local government's Financial Reporting Year. Includes Federal securities, Federal agency securities, State and local government securities, and other securities such as bonds, notes and mortgages. For purposes of this test, the calculation of total funds shall exclude agency funds, private trust funds, accounts receivable, value of real property, and other non-security assets.

12.1.2.6 Population: Consists of the number of people in the area served by the local government.

12.1.3 The local government's year-end financial statements, if independently audited, cannot include an adverse auditor's opinion or a disclaimer of opinion. The local government cannot have outstanding issues of general obligation or revenue bonds that are rated as less than investment grade.

12.1.4 The local government Owner or Operator shall have a letter signed by the Chief Financial Officer worded as specified in PART D, Section 29.0, Form L except that instructions in brackets are to be replaced with relevant information and the brackets deleted.

12.1.5 To demonstrate that it meets the financial test under PART D, subsection 12.1.2, the Chief Financial Officer of the local government Owner or Operator, shall sign, within 120 days of the close of each Financial Reporting Year, as defined by the twelve month period for which financial statements used to support the financial test are prepared, a letter worded as specified in PART D, Section 29.0, Form L except that instructions in brackets are to be replaced with relevant information and the brackets deleted.

12.1.6 If a local government Owner or Operator using the test to provide financial responsibility finds that it no longer meets the requirements of the financial test based on the year-end financial statements, the Owner or Operator shall obtain alternative coverage within 150 days of the end of the year for which financial statements have been prepared.

12.1.7 The Department may require reports of financial condition at any time from the local government Owner or Operator. If the Department finds, on the basis of such reports or other information, that the local government Owner or Operator no longer meets the financial test requirements of PART D, subsection §12.1.2 and PART D, subsection 12.1.5, the Owner or Operator shall obtain alternate coverage within 30 days after notification of such a finding.

12.1.8 If the local government Owner or Operator fails to obtain alternate assurance within o 150 days of finding that it no longer meets the requirements of the financial test based on the year-end financial statements or within 30 days of notification by the Department that it no longer meets the requirements of the financial test, the Owner or Operator shall notify the Department of such failure within 10 days.

7 Del. Admin. Code § 1352-D-12.0

20 DE Reg. 815 (4/1/2017)
27 DE Reg. 536 (1/1/2024) (Final)