Meagan M. Jordan

For the People: Popular Financial Reporting Practices of Local Governments

Popular financial reports are reports distributed to citizens and other interested parties who lack a background in formal government financial reporting but who desire an overview of the governments financial status and activities. This paper examines the current state of local government popular financial reporting in the U.S. The results of a survey of large cities and counties indicate that 75 percent of these local governments have issued popular financial reports and that the types of reports and methods of distribution vary. Many of the reasons for providing popular reports relate to providing information and improving transparency and accountability by providing more user friendly financial reports. This paper concludes with a discussion on popular financial reporting in the context of government transparency and accountability, and offers a research agenda for continued study of the topic.

Revenue Diversification in Arkansas Cities: The Budgetary and Tax Effort Impacts

The consequences of revenue shortfalls for cities are particularly dramatic due to the balanced-budget requirement. Revenue diversification is one method of stabilizing revenue streams because diversified revenue structures can mitigate the revenue fluctuations often associated with single source revenue. Using audited financial reports, this study examines the impact of revenue diversification in Arkansas cities over 10 years. To address the issue of revenue adequacy, this study examines diversifications impact on current year budget changes in revenue and expenditures as well as its impact on tax effort.

The Role of State Revenue Structure in the Occurrence and Magnitude of Negative Revenue Variance

A negative revenue variance (also known as a revenue shortfall) is generated when the actual inflow of revenue falls short of the budgeted revenue. In an environment constrained by a balanced budget requirement, a negative revenue variance may result in a compensating cut in program expenditures. As such, it is imperative to explore the drivers of negative revenue variance. To answer these questions, we take a look at the states’ revenue mix, specifically, the diversification and elasticity of a state’s revenue structure. We establish a quantitative model to capture factors that affect the occurrence and magnitude of negative revenue variance. Our findings suggest that revenue diversification reduces both the occurrence and the size of a negative revenue variance. Elasticity, on the contrary, increases the occurrence but reduces the magnitude of the negative revenue variance. These findings provide additional evidence for the importance of fiscal planning and design of revenue structure that includes consideration of both diversification and elasticity of the revenue portfolio. Specifically, elasticity and diversification can be used in tandem to address an existing revenue shortfall.

Popular Financial Reports as Fiscal Transparency Mechanisms: An Assessment Using the Fiscal Transparency Index for the Citizen User

ABSTRACT Popular financial reports (PFRs) are intended to increase transparency by providing financial information to a non-technical, citizen audience. We examine the extent to which PFRs are meeting the goal of transparency by developing a 23-criteria fiscal transparency index for the citizen user (FTI-CU) and applying it to a sample of PFRs (popular annual financial reports and citizen-centric reports) issued by local governments in the U.S. These criteria are organized into five areas: comprehension, access, financials, appearance, and community-focused. The analysis finds that, while there are areas for improvement, the PFRs rated the highest in the access and appearance criteria.

What Citizens Want to Know about their Government's Finances: Closing the Information Gap

Abstract There is an information gap between citizens and their governments when it comes to government finances. The inherent complexity of fiscal policy makes it exceedingly difficult for effective public participation. Effective public participation in fiscal decision making must address informing or educating the citizenry with accurate and meaningful government financial data. Better understanding citizen wants and perceptions is critical to closing the information gap between users and providers of financial information. This study uses information gathered from focus groups with residents of Norfolk, Virginia that asks what government financial information they want and how to make that information useful. Results suggest that citizens are interested in some types of information over others and that such information must be timely, made relevant and contextualized.

An Illustrated Conceptual Model of Key Factors Impacting Perceived Interlocal Agreement Outcomes

ABSTRACT The increasing use of interlocal agreements (ILAs) to provide government services makes it important to understand the development of the ILA process and its potential effects on outcomes. This article develops a conceptual model that identifies and organizes factors that may contribute to perceptions of ILA effectiveness and service outcomes. The model is illustrated using examples from two ILAs in Pulaski County, Arkansas, that have the same players within the same political landscape. This allows examination of how the characteristics of the agreements may result in very different service outcomes and perceptions of effectiveness. The study’s focus on key factors contributes to the understanding of ILA development and its connection to service outcomes.

Arkansas Revenue Stabilization Act: Stabilizing Programmatic Impact through Prioritized Revenue Distribution

Revenue stabilization efforts seek to minimize the negative effect of short-term periods of fi scal stress on programs or service delivery. Fiscal stress is usually defi ned as revenue shortfalls or decline. The revenue shortfall requires elected offi cials to either increase taxes, reduce spending, or both. Stabilization efforts often are employed to minimize or reduce the burden on taxpayers and recipients of services. Rainy day funds (or budget stabilization funds) are the most common method of state revenue stabilization and are used to address cyclical (as opposed to structural) defi cits (Zahradnik and Johnson 2002). Rainy day funds are surplus fund balances that may be used for supplementing revenue shortfalls. “The idea is to put more money in during periods of economic growth and take money out when the economy is in a slump, without running defi cits” (Rubin 2000, 206). Due largely to economic downturns, the number of states using rainy day funds grew in the 1980s. There were only 12 states with rainy day funds in 1982, 38 in 1989, and 44 by 1997 (Sobel and Holcombe 1996; Joyce 2001; Douglas and Gaddie 2002). More recently, the National Association of State Budget Offi cers has identifi ed 48 states with budget stabilization funds (NASBO 2002). Although Arkansas does not have a rainy day fund (Joyoce 2001; NASBO 2002), it does have a revenue stabilization policy. The Arkansas Revenue Stabilization Act ([ARSA] 311 AR Code Ann. §§1-3) of 1945 responds to revenue fl uctuations by prioritizing fund distributions. Programmatic priorities are classifi ed by a lettering system. For example, the highest priority level is Level A; these budgetary items are the fi rst to be funded. The number of priority levels varies per program, and the amount of funding for each level varies by the amount of revenue received. This article examines how Arkansas’s revenue stabilization policy addresses fl uctuations in state revenue. Like other states, Arkansas has had to respond to reduced revenue or slowed revenue growth, but unlike other states, it does not have a fund set aside to help soften the blow. Instead, the priority funding created by ARSA is intended to protect the most important programs in the event of a revenue shortfall.

State Transportation Planning: Linking Quantifiable Performance Measures and Infrastructure Condition Outcomes:

This study focuses on whether state Departments of Transportations (DOTs) with quantifiable performance targets have better road repair and maintenance outcomes than DOTs without quantifiable performance targets. We also examine state DOT use of quantifiable pavement condition targets to examine differences across states in terms of agency and governance/legislative factors. While the results are mixed, they suggest that state agency capacity may be related to the use of concrete and specific performance measures. Furthermore, these concrete and specific performance measures may be related to the use of external accountability bodies and citizen participation. This suggests that quantifiable performance targets may be a useful tool for decision making, planning, and resource allocation in pursuit of desired performance outcomes.

Accessibility of the Management's Discussion and Analysis to Citizen Users of Government Financial Reports

This study focuses on the accessibility of Managements Discussion and Analysis (MD&A), a key part of the GASB 34 financial reporting framework. We analyze MD&As extracted from Comprehensive Annual Financial Reports issued by the 50 state governments to answer the question: How accessible is the MD&A to citizen users of government financial reports? Using three dimensions of accessibility—size, readability, and timeliness—our results point to the inadequacy of MD&As in providing information to citizens about governments finances and financial condition. Our results make the case that existing financial reporting is neither transparent nor user‐friendly for citizens.