Fiscal condition analysis - Varna Municipality, Bulgaria

Varna Municipality:Fiscal Condition

Analysis

Neda PetkovaStudent ID: 20099374

email: [email protected] 544: Financial Management of Public and

Not-For-Profit OrganizationsProf. Eric Abhyankar

Varna Municipality, Bulgaria

Facts:

The town of Varna is the administrative center of this independent municipality. Municipality of Varna is located on 237.5 square km.

Budget of Municipality Varna for 2012 and 2013

From the table aside, it could be noted that

Budget 2013 will be with 26.7 million BGN larger than Budget 2012 from Municipality Varna. The change is nearly 15 %.

*Legend: 1 EUR =1.95583 BGN

It could be concluded that majority of the sectors will

have at their disposal additional means in their

separate budgets.

Budget /in thousand leva/

Sector Year 2012 Year 2013Difference in

%

Road construction and maintenance

8 500 16 574 94,99%

Program for social development

2 671 2 766 3,56%

Education 71 130 76 958 8,19%

Healthcare 13 480 15 330 13,72%

Culture 7 800 11 817 51,50%

Public Transport 9 700 8 000 -17,53%

Vicarious activities from government

79 357 88 036 10,94%

Others 12 900 2 356 -81,74%

Overall budget: 184 200 210 927 14,51%

Budget Revenues Analysis

Budget 2013 of the Municipality of Varna has adopted a Decision 56-8/15.03.2013 , the Municipal Council of Varna dispose with the amount of BGN 210 927 000 and they include the following:

1. Revenues from government activities: BGN 88 036 157 2. Revenues from local activities: BGN 122 890 843.

1. Revenue from government activitiesRevenues from vicarious activities are transferred by regularly and proportionately by the Ministry of Finance on a monthly basis by the 5th day of the current month.• General subsidiary for funding of vicarious government activities: BGN 81 153 400. •General adjusting subsidiary/transfers for local activities: BGN 2 176 700. •Objective subsidiary for capital expenditures: BGN 1 178 000.

Budget Revenues Analysis Cont.

2 . Revenues from local activitiesVarna Municipality revenues that are associated with financing of

local activities are could be divided generally into two groups: 1) Property taxes and 2) Non-tax revenue.           1. Tax revenues – BGN 63 177 0006 2. Non-tax revenues – BGN 54 949 513 (they include selling of goods and services, rent, taxes, fines, VAT, concessions, etc.)

There is another generator in this section of revenues and it is revenues from selling municipality’s properties. For Budget 2013 they amount BGN 5 220 000.

Budget Expenditures AnalysisBudget 2013 of Varna Municipality has expenditures of BGN 210 927 000 and they include the following:

1.Expenditures from delegated by the state activities: BGN 88 036 1572.Expenditures from additional funding of government activities: BGN 5 252 6133.Expenditures from Municipality activities: BGN 117 638 230.

Expenditures/in thousand leva/

Sector Year 2013

State Services 14 161

Civil Defense and Security 2 889

Education 76 958

Healthcare 15 330

Culture 11 817

Social services 9 625

Municipality economy 60 096

Economic activities 17 695

Others 2 356

Overall expenditures: 210 927

Main Projects in 2013Reconstruction of the sublimate station in summer resort Golden Sands – BGN 48 million/ 24% from the overall budget.

Regional system for waste management – BGN 30 million/ 15 % from the overall budget. Varna Municipality expects in 2015 nearly 43 % from the waste to be recycled.

Varna Municipality Plan for Development

Economic Priorities of Varna Municipality for 2007-2013

Strategic goal 1: Reaching economic development through improvement of the overall business environment in the Municipality of Varna.

Priority 1: Boosting enterprises.• Specific goal 1.1. Increasing the capacity and competitiveness

of SME. • Specific goal 1.2. Adding support for the development of all

main business sectors of Varna Municipality and construction of a second terminal of International Airport Varna. The International Airport Varna is in the role of connection between 35 countries and 101 cities around the world.

Economic Priorities of Varna Municipality for 2007-2013 Cont.

Priority 2. Improve education quality.Varna Municipality has 5 universities, 3 colleges, 5 acknowledged

research universities.

•Specific priority 1. Securing the existence of affordable education of quality for the development of the needs of individuals through modernizing the educational system that should adapt towards the needs of labor market. •Specific priority 2. Increasing the share of the young generation with bachelor and master’s degrees in correspondence with the requirements of the regional and national economics.

Economic Priorities of Varna Municipality for 2007-2013 Cont.Strategic goal 2: Improve life standards through creating conditions for - efficient social embrace, affordable healthcare of quality and sport facilities.In Varna Municipality there are 7,35 medical doctors/1000, which is above the average in Bulgaria.

Priority 1. Lowering the unemployment rates, reducing poverty and encouraging citizens to participate in social activities.

• Specific priority 1. Increasing the work load with young people and improving labor force average income. • Specific priority 2. Development of social services and social integration.

Economic Priorities of Varna Municipality for 2007-2013 Cont.

Priority 2. Improvement of the healthcare system, including activities during disasters and accidents.

Specific priority 1. Increasing efficiency and quality of healthcare services.

Specific priority 2. Ensuring protection of the well-being of citizens as well as the physical surrounding environment during meteorological disasters and accidents and in times of crises.

Financial Analysis for 2010,2011,2012

Financial statement figures Hist. Hist. Hist. Financial statement figures Hist. Hist. Hist.

(Figures in million BGN) 2012 2011 2010 (Figures in million BGN) 2012 2011 2010

A. Long-term assets A. Equity

I. Intangible assets 10,170 3,051 2,884 I. Equity capital 393,678 312,443 282,146

II. Property, plant & equipment II. Net income 0,000 0,000 0,000

1. Land & buildings 251,186 211,054 151,218 III. Profit carried forward 0,000 0,000 0,000

2. Plant & equipment 67,984 48,727 61,646 Total equity 393,678 312,443 282,146

III. Investments 97,073 101,477 103,221 B. Provisions

1. Pension provisions 0,000 0,000 0,000

B. Current assets 2. Other provisions 2,105 2,598 4,022

I. Inventory 9,342 8,086 6,718 Total provisions 2,105 2,598 4,022

II. Receivables and other current assets C. Liabilities

1. Receivables 17,154 11,547 6,916 1. Long term debt 65,884 70,827 59,568

2. Receivables from affiliated companies 7,925 8,230 3,460 2. Payables to affiliated companies 3,037 8,230 3,450

3. Other current assets 5,520 2,008 1,684 3. Payables 10,886 2,537 2,742

Total current assets 39,941 29,871 18,778 4. Advances from suppliers 0,859 3,213 0,778

5. Other current liabilities 7,590 6,738 5,908

III. Cash 17,685 12,406 20,867 Total liabilities 88,256 91,545 72,446

484,039 406,586 358,614 484,039 406,586 358,614

Results from the financial statements

By the comparison of the financial data from the last 3 periods, the following trends were noted:

Varna Municipality invests heavily in buildings. For the year 2012, they have increased with 19,02 %.

The equity capital is continuing to grow with every single year. For the last fiscal year, the capital has increased with 26,00 %.

During the last 3 years, current assets are also constantly increasing, which is due to increased amount of receivables. This indicates that associated partners are not able to pay their liabilities on time. Current assets have increased in 2012 by 33,71 %.

SWOT AnalysisStrengths Weaknesses

Geographical location Tourism center Well developed transportation

systems The third largest town in Bulgaria Funding programs Good financial indexes for the

business segment in the Municipality

Away from the capital Sofia – 440 km

Unfavorable climate for construction – erosion of ground

Migration of the young population towards the capital of Bulgaria

Quality of the educational system

Opportunities Threats Expansion of International

Airport Varna Logistics development of Varna

Port Social awareness and programs

for sustainable development

Corruption = > unable to direct all government funding in fair business projects

Healthcare development at standstill

Conclusion

Municipality Varna and the town of Varna itself are in the constant strive for sustainable development.

It had already created the required conditions to be named the best town for living in Bulgaria (3 years in a row, according to Darik Radio survey).

If the Municipality of Varna manages to lower anyhow the high expenditure on infrastructure development, it would be able to increase its credit exposure to meet the investment needs in infrastructure in the future.

ReferencesMunicipality Varna (2013). Balance Sheet Statements. Retrieved August 28, 2013 from

http://www.varna.bg/bg/search.html/offset/0/files/%25D0%25B1%25D0%25B0%25D0%25BB%25D0%25B0%25D0%25BD%25D1%2581

Municipality Varna (2013). Budget 2013. Retrieved August 28, 2013 from http://www.varna.bg/bg/articles/3686/%D0%91%D1%8E%D0%B4%D0%B6%D0%B5%D1%82_%D0%BD%D0%B0_%D0%9E%D0%B1%D1%89%D0%B8%D0%BD%D0%B0_%D0%92%D0%B0%D1%80%D0%BD%D0%B0_%D0%B7%D0%B0_2013_%D0%B3..html

Penkova, D. (2012). Increase in the Budget 2013 of Municipality Varna. Retrieved August 28, 2013 from http://www.varnautre.bg/2012/12/12/146576-obshtina_varna_razvurzva_kesiata_byudzhetut_s_145_mln_leva_poveche

Radev, D. (2013). Plan for Development of Municipality Varna 2014-2020. Retrieved August 29, 2013 from  http://www.varna.bg/bg/getfile.html/id/f5f3b8d720f34ebebceb7765e447268b.