Michael H. Granof

An Analysis of Municipal Budget Variances

The objective of this research was to determine the extent to which municipal budget variances are systematically biased, the direction of any biases, and the relationship between the biases and various political, economic, demographic and organisational factors. We compared budgeted and actual revenues and expenditures for 125 of the largest US cities and developed regression models to explain the magnitude of differences. Our results indicate that budget variances are decidedly conservative and are most significantly influenced by the extent of political competition and the percentage of funding from inter‐governmental grants. Inasmuch as unreliable budget estimates can thwart the political process, our findings suggest that there may be a need for both citizens and legislative bodies to review more thoroughly the budgets presented to them by city officials.

A fundamental flaw of debt limitations for state and local governments

Abstract Debt limitations, though adopted with the noblest of intentions, have failed to reduce governmental borrowing because of the ease with which they can be circumvented. This article identifies a critical deficiency of debt limitations: the difficulty of developing a definition of debt that is broad enough to prevent governments from using subterfuges to increase borrowing capacity and yet is sufficiently narrow to enable them to carry out their assigned functions. It reviews the history of debt limitations and the judicial interpretations of them. It shows how courts have analyzed leases and other executory contracts that create debts so as to permit form to take precedence over economic substance.

A Delphi study of goals and evaluation criteria of state and privately owned Latin American airlines

Abstract Goals of State Owned Enterprises (SOEs) and Privately Owned Enterprises (POEs) are here studied along with criteria that these organizations use to evaluate performance. The study was conducted with Delphi procedures using internal auditors of Latin American airlines as panel members. No statistically significant differences appeared to distinguish between the goals reported to be important by SOEs and POEs, but substantial differences in priority occurred in the criteria used to evaluate actual performance.

Depreciation and capital investment decisions: Experimental evidence in a governmental setting

Abstract This study tested the premise that depreciation may serve as a cognitive reminder to decision-makers in governmental organizations of the need to replace long-lived assets as they physically deteriorate. This premise is grounded in recent work on melioration theory , which suggests that individuals tend to maximize current benefits at the cost of underweighting negetive long-run consequences of current decisions. In this framework, the present research addresses whether depreciation cues have a mitigating effect on melioration bias. Subjects ( n = 216) were randomly assigned to one of twelve cells in a computerized between-subjects laboratory experiment with monetary incentives. The experimental cells represent twelve possible combinations relating to two levels of depreciation, the presence or absence of historical data on past decisions, and three levels of initial expenditures. The task required subjects to allocate a governmental budget between current and capital expenditures over multiple periods. A governmental context was used because of its relevance to the current controversy over the role of depreciation in governments and other nonbusiness entities. The study found a significant interaction between depreciation and historical information, a relationship which is consistent with the contention that depreciation is a useful cognitive surrogate for explicit information on prior period capital expenditures.