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Criteria I Governments I U.S. Public Finance: U.S. Local Governments General Obligation Ratings:Methodology <br /> And Assumptions <br /> accounting tolerate a lesser degree of completeness and consistency.Table 6 details the scoring for this measure. <br /> Table 6 <br /> Transparency Assessing . Accountability <br /> Score Description <br /> 1(very strong) State statutes or other provisions require annual financial statements that comply with GAAP. <br /> 2(strong) State statutes or other provisions require audited annual financial statements,but no GAAP requirement exists.Most <br /> audits utilize accrual and/or modified accrual accounting. <br /> 3(adequate) State statutes or other provisions require annual financial statements,but no GAAP requirement exists.Most audits <br /> utilize cash or modified cash accounting. <br /> 4(weak) No requirement for annual financial statements exists or there is no requirement for an audit.Interim reports provide the <br /> only source of financial information for most local governments in some years. <br /> 5(very weak) No requirement for financial statements exists.Cash-basis reports provide the sole source of financial information for <br /> most local governments in most years. <br /> 4. System support <br /> 40. System support addresses the extent to which local governments receive extraordinary support from a state <br /> government when the local government is under extreme stress.Forms of extraordinary support range from state <br /> government control and oversight to emergency loans or other liquidity assistance.Table 7 details the scoring for this <br /> measure. <br /> Table 7 <br /> Support Assessing System <br /> Score Description <br /> 1(very strong) A tested,formal mechanism for providing extraordinary support for local governments exists,which has restored fiscal <br /> stability.Such mechanisms may help with liquidity,capital market access,government management,or capital funding. <br /> 2(strong) Mechanisms for providing extraordinary support are less formalized,untested,or have not consistently restored fiscal <br /> stability but ongoing mechanisms to help with liquidity,capital market access,government management,or capital <br /> funding do exist. <br /> 3(adequate) No mechanisms for providing extraordinary support exist,but state statutes do not authorize local governments to file for <br /> bankruptcy or require further state approval. <br /> 4(weak) No mechanisms for providing extraordinary support exist and state statutes specifically authorize local governments to file <br /> for bankruptcy without state approval. <br /> 5(very weak) No mechanisms for providing extraordinary support exist,and the state has recently passed legislation that threatens the <br /> solvency of local governments without providing adjustment capabilities. <br /> D. Economic Score <br /> 41. The economic score assesses both the health of the asset base relied upon to provide both current and future locally <br /> derived revenues as well as the likelihood of additional service demands resulting from economic deterioration. <br /> Projected per capita EBI as a percentage of the U.S.level, and TMV per capita combine to form the initial economic <br /> score due to the data availability of these statistics at the local level and their correlation with overall economic activity <br /> and local government revenues.Table 8 details the manner in which different values of these two statistics combine to <br /> form the initial economic score. <br /> WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 12,2013 16 <br /> 1190266 1300881696 <br />