The change in net position is found by subtracting total net expenses from total general revenues.
Essentially, the change in net position represents the difference between an entity's (like a government or organization) total revenues and its total expenses over a specific period. A positive change indicates an overall increase in net position, while a negative change signifies a decrease.
Here's a more detailed breakdown:
1. Identify Total General Revenues:
- General revenues are those not directly tied to specific programs or services. They include:
- Taxes: Sales tax, income tax, property tax, etc.
- Unrestricted grants and contributions: Money received without specific stipulations on how it should be spent.
- Investment income: Earnings from investments.
2. Identify Total Net Expenses:
- Net expenses represent the total cost of operating programs and services after deducting any related program revenues (like fees for services). Essentially, it's what remains after you've accounted for direct income associated with the expenses.
3. Calculate the Change in Net Position:
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Use the following formula:
Change in Net Position = Total General Revenues - Total Net Expenses
Example:
Let's say a municipality has:
- Total General Revenues: $10,000,000 (Taxes: $8,000,000, Investment Income: $2,000,000)
- Total Net Expenses: $9,000,000
Then, the Change in Net Position is:
$10,000,000 - $9,000,000 = $1,000,000
This indicates a $1,000,000 increase in the municipality's net position.
In summary, finding the change in net position provides a clear indication of the financial health and sustainability of an entity by showing whether it generated more revenue than it spent.
