Comprehensive Annual Financial Reports Research Articles

Measuring Disclosure Content Within the MD&A: The Case of North Carolina Counties

Audit implementation of Government Accounting Standards Board (GASB) 34 guidelines has yielded increased levels of disclosure content within local government comprehensive annual financial reports (CAFRs). Of particular interest is the Management Discussion & Analysis (MD&A) content that provides a prelude to primary statements establishing unit overall financial position. In this study, the level of disclosure content is measured using net position, fund balance, and organizational factors among all 100 North Carolina County governments for fiscal year 2019. The empirical analysis suggests that disclosure content within area of foci changes depending on increased audit fees, state designated tier level, specific departmental spending, and lengthier MD&As. Additional information illuminates a very limited auditor pool and some recalcitrance concerning service provision. Overall, the findings point to audit disclosure practices including the MD&A as being predicated on unit overall needs versus illumination.

РАСКРЫТИЕ НЕФИНАНСОВОЙ ИНФОРМАЦИИ КОМПАНИЯМИ КАК ДЕЙСТВЕННЫЙ ИНСТРУМЕНТ КОРПОРАТИВНОГО УПРАВЛЕНИЯ

The sole purpose of a for-profit company is to maximize profits for shareholders. Because of this approach, the focus is on the sole financial performance of corporations, and for many years that was basically the only thing corporations had to report on, which was enshrined in statutory provisions requiring the preparation and publication of comprehensive annual financial reports and consolidated financial statements. Companies disclose information to a wide range of stakeholders, and for many of them, non-financial information is of greater interest than financial information. The article analyzes the role of non-financial information disclosure in improving the quality of corporate governance and reporting.

Applying XBRL to US State and Local Government Audited Financial Reports

Ten years after the Securities and Exchange Commission mandated the conversion of corporate financial statements to machine-readable formats, there is still no analogous mandate for state and local government Comprehensive Annual Financial Reports (CAFRs). We explore the challenges and benefits of migrating from PDF CAFRs to machine-readable filings using eXtensible Business Reporting Language (XBRL). After explaining the benefits of machine-readable audited municipal financial data, we consider the challenges of creating and implementing an XBRL taxonomy for this sector and the impact a filing mandate would have on state and local governments. To better assess the challenges, we update a CAFR taxonomy previously published by Neal M. Snow and Jacqueline L. Reck and apply it to a city in Florida. While corporate XBRL filers generally use third-party filing firms, they can also use open-source software, low-cost licensed software, or both to produce the filings. Providing a variety of low-cost alternatives to state and local governments helps mitigate the challenge of providing affordable filings.

ANALYSIS OF GEVERNMENTAL FUND PERFORMANCE: EVIDENCE FROM TEXAS MUNICIPALITIES

ABSTRACT This study attempts to analyze the governmental fund performance for the ten largest Texas cities using the financial indicators recommended by the ICMA handbook. These ratios cover the operating performance in six aspects: revenue measures, expenditure measures, operating position measures, debt indicators, unfunded liability measures, and capital plant indicators. We collect the data manually from the city’s Comprehensive Annual Financial Reports for the past three years, 2014 to 2016. The ratios are calculated for each city and year, and then are compared with the recommended benchmarks to evaluate the performance of these governments. In addition, change analyses are performed for each city to find out whether the financial performance has been improved, stable, or worsened. Policy implications are discussed based on the overall results. Keywords Governmental spending, Fund performance, State of Texas

Constrained or creative? Changes in financial condition and entrepreneurial orientation in public organizations

Public managers and organizations are often encouraged to take a proactive role in finding solutions to the challenges that face their communities. These challenges require meeting increasingly high expectations for public service provision with ever reducing resources. This research investigates the relationship between change in resource constraints—as measured by longer and shorter term financial condition—and the entrepreneurial orientation of US local governments. Theoretically, it remains unclear whether resource constraints foster or impede entrepreneurial actions (i.e., risk taking, proactivity, and innovation) in public organizations. While entrepreneurial actions may be related to increased organizational financial capacity, a decline in an organization's financial condition might motivate proactivity, innovation, and risk taking as problem‐solving mechanisms and a means to continue service provision. We explore this relationship using two sources of data: a 2012 national survey of managers in 500 cities and financial data from Comprehensive Annual Financial Reports. Our findings suggest that resource constraints are associated with increased entrepreneurial activity in US local governments.

Ranking the States by Fiscal Condition (2015)

Based on the fiscal year 2013 Comprehensive Annual Financial Reports of the 50 states, this study ranks states' fiscal solvency using 14 metrics that assess whether the states can meet their short-term bills and long-term obligations. State finances are analyzed according to five dimensions of solvency: cash, budget, long-run, service-level, and trust fund. These five dimensions are combined to produce an overall ranking of state fiscal solvency.

Ranking the States by Fiscal Condition, 2017 Edition

Based on the FY 2015 comprehensive annual financial reports of the 50 states, this study ranks states’ fiscal solvency using 13 metrics that assess the extent to which the states can pay short-term bills and meet longer-term obligations. State finances are analyzed according to five categories of solvency: cash, budget, longrun, service-level, and trust fund. These five categories are combined to produce an overall ranking of state fiscal solvency.

The Effectiveness of Setting Governmental Accounting Standards: The Case of Michigan Governments in Fiscal Distress

The purpose of setting accounting standards is to improve the quality of the financial statements on which users base their decisions. The financial reporting model set up by the Governmental Accounting Standards Board (GASB) is comprehensive and complex, as are the governments on which these statements report. We provide a framework for evaluating whether financial statements are used and understood by decision makers and explain the components of the GASB Statement No. 34 financial reporting model introduced in 1999. We present financial indicators from the Comprehensive Annual Financial Reports for 12 Michigan governments over three points in a 10-year period, along with an indication of whether trends are favorable or unfavorable. We suggest that governing bodies assess to what extent their members use financial statements in making decisions. If officials are trained to monitor financial performance on a regular basis, then decision-making may improve and fiscal crises may be averted.

Measuring and Modeling Determinants of Fiscal Stress in Us Municipalities

The Great Recession produced a wave of fiscal crises in American cities and counties. In addition to the high profile bankruptcies in Vallejo, Stockton, San Bernardino, many local governments were compelled to declare fiscal emergencies, raise tax rates, lay off or furlough workers, and undertake other unpopular strategies of fiscal retrenchment. Yet, other municipalities weathered the recession without taking such actions. Using a variation in local fiscal performance in the Great Recession and years that followed (FY2007-2012), we develop and test a model of fiscal distress for cities and counties. The model focuses on the relationship between fiscal distress and a set of its leading indicators. Our work contributes local fiscal management research in two ways. First, we work with data from local Comprehensive Annual Financial Reports (CAFRs), budgets and media coverage to construct a unique dependent variable of fiscal distress. And second, our models include a wide variety of fiscal and socio-economic variables as predictors. Such variables include measures of fiscal reserves, debt, pension funding discipline, as well as data on real estate pricing, local incomes, and unemployment. The study will also include fiscal structure variables and will highlight the role of revenue composition in local financial management.

Emergency Financial Management in Small Michigan Cities: Short-Term Fix Or Long-Term Sustainability?

Emergency financial management is a relatively recent and unique form of municipal governance that is designed to address local fiscal crises by concentrating the decision making power in the hands of a temporarily appointed chief executive. In this paper, we examine practices of emergency financial management in three Michigan cities in the Detroit metropolitan area to understand the role of emergency financial managers in helping the cities to address chronic fiscal distress. Through the analysis of data from comprehensive annual financial reports, we show that emergency financial management tends to produce budgetary-level improvements in fiscal condition. We also discuss policies that can assist emergency financial managers in bringing longer-term fiscal health to struggling cities.

Financial management conservatism under constraints: tax and expenditure limits and local deficit financing during the Great Recession

ABSTRACTThis paper investigates the relationship between tax and expenditure limits (TELs) and local government deficit financing decisions following the recent recession. Cities under the resource constraints are hypothesised to practise conservatism in financial management decisions and thus less likely to deficit finance during difficult times. Using data from 2005 to 2012 Comprehensive Annual Financial Reports of the 50 largest US cities, this paper finds that cities subject to a binding TEL are more likely to control expenditure growth from pre-crisis years to years following the recession; these cities are also less likely to increase deficit financing following the recession, as indicated by a relative increase in their net assets. Although continuous deficit erodes fiscal sustainability and is an undesirable management practice, deficit financing during recessions may be needed for smoothing expenditure and sustaining service provision. The management conservatism associated with the fiscal rules may contribute to the cyclicality of local spending.

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

This study focuses on the accessibility of Management's 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 government's finances and financial condition. Our results make the case that existing financial reporting is neither transparent nor user‐friendly for citizens.

Local Fiscal Distress: Measurement and Prediction

During and after the Great Recession, many local governments were compelled to declare fiscal emergencies, lay off workers, and cut services while others weathered the recession without needing to take such actions. In this paper, we construct an action‐based measure of fiscal distress using comprehensive annual financial reports, budgets, and media coverage and then use it as a dependent variable to model fiscal distress as a function of past financial performance and socio‐economic environment. The empirical models show the relative importance of fiscal reserves, debt, and revenue composition in predicting local fiscal distress.

Cost Accounting at the Service Level: An Analyis of Transaction Cost Influnces on Indirect Cost Measurment in the Cost Accounting Plans of Large US Cities

Cost accounting has been used in public organizations for over 100 years. In spite of cost accounting's history, there remains little empirical research of multiple organizations use of cost accounting at the department or service level. This paper uses the data from large U.S. cities’ central cost accounting plans, budgets, Comprehensive Annual Financial Reports, and common measures of transaction costs to examine the influence of economic transaction costs on the measurement of indirect cost measurement for services. The results indicate that indirect cost measurement is limited by the transaction costs that arise from asset specificity at the service level but measurement uncertainty is related with a higher likelihood of observing an indirect cost driver. Transaction cost theory may help explain the notable underutilization of cost accounting in public organizations, but it also highlights the need for understanding the different dimensions of transaction costs for cost accounting and performance measurement.

When Ties Bind: Public Managers’ Networking Behavior and Municipal Fiscal Health After the Great Recession

This study examines the relationship between managerial networking and the fiscal health of city governments in the United States that faced a serious budget crisis during and immediately after the Great Recession. Do public managers’ ties with external stakeholders help improve the fiscal health of these cities? Or do these ties bind city officials to decisions that further exacerbate the fiscal difficulties of their governments? These questions are answered using data from a survey of municipal governments across the United States with a population of 50,000 or more, and financial data from Comprehensive Annual Financial Reports (CAFR) covering more than 200 hundred cities and for three fiscal years. Using instrumental variable regression to address possible common source bias and simultaneous causation, there is strong evidence that an external networking orientation is associated with a decline in city government fiscal health, whether the measure used is perceptual or CAFR-based.

Ranking the States by Fiscal Condition, 2016 Edition

Based on the fiscal year 2014 comprehensive annual financial reports of the 50 states and Puerto Rico, this study ranks states’ fiscal solvency using 14 metrics that assess the extent to which the states can meet short-term bills and longer-term obligations. State finances are analyzed according to five dimensions of solvency: cash, budget, long-run, service-level, and trust fund solvency. These five dimensions are combined to produce an overall ranking of state fiscal solvency. Alaska, Nebraska, Wyoming, North Dakota, and South Dakota rank as the top five most fiscally solvent states. Kentucky, Illinois, New Jersey, Massachusetts, and Connecticut rank as the bottom five states, with Puerto Rico taking 51st place.

Ranking the States by Fiscal Condition, 2016 Edition

Based on the FY 2015 comprehensive annual financial reports of the 50 states, this study ranks states’ fiscal solvency using 13 metrics that assess the extent to which the states can pay short-term bills and meet longer-term obligations. State finances are analyzed according to five categories of solvency: cash, budget, longrun, service-level, and trust fund. These five categories are combined to produce an overall ranking of state fiscal solvency.

THE PUBLIC FINANCING OF AMERICA'S LARGEST CITIES: A STUDY OF CITY FINANCIAL RECORDS IN THE WAKE OF THE GREAT RECESSION

ABSTRACTThis paper employs Comprehensive Annual Financial Reports of the 35 largest population American cities from 2005 to 2011 to examine how these cities managed the Great Recession, which was a global macroeconomic shock particularly damaging to the housing sector. While broader surveys of local government suggest that the Great Recession has been associated with substantive revenue declines, particularly via the property tax, the Comprehensive Annual Financial Reports data indicate that large cities remained relatively stable in revenue by using higher property taxes to compensate for other revenue declines. Furthermore, these cities were able to rely on their net assets to engage in deficit spending. These findings indicate that cities are relying on traditional strengths of local governments, but are also able to engage in the deficit spending that is typically characteristic of national governments. It also seems to be the case that grants for capital projects were largely transferred into highly liquid and spendable assets.

Developing a Government Reporting Taxonomy

The municipal bond market is a $2.8 trillion market of which approximately 70 percent is held by private investors (SEC 2010). Municipal bondholders and potential buyers do not have the same level of information as those investors choosing to invest in public companies. In part this inequity is the result of poor data accessibility. Frequently the data provided is in a format that does not allow easy comparison across governments or over time. To increase comparability and consistency in government reporting we build a government reporting taxonomy using over 700 comprehensive annual financial reports (CAFR) statements. The completed taxonomy has 194 terms that cover all financial statements filed by municipalities. This study has implications for the municipal reporting market and those entities that regulate them by providing a validated municipal government reporting taxonomy.

Public Pensions and the Initiative Process: Winds of Change?

DOI 10.1515/cjpp-2013-0002 Calif. J. Politics Policy 2013; 5(4): 597–625 Jinping Sun a, * Public Pensions and the Initiative Process: Winds of Change? Abstract: The most recent recession has put considerable stress on state and local government budgets and has pushed public pension reforms to the spot- light. Through the lens of the initiative process, this paper intends to examine the impact of the Great Recession on public pensions in California local gov- ernments. Based on a review of the literature and a study of local government budgets, Comprehensive Annual Financial Reports and other reports, this paper reviews 13 pension reform measures passed by voters in California cities and counties in an attempt to answer the question: What has caused the pension measures to be put on the ballot? The paper finds that the recent economic downturn, market crash, poor public decision-making, negative coverage, and inability of the State to solve pension problems all contributed to the rise of local ballot measures on public pensions, and through the initiative process, the voters decided to take public pension reforms in their hands. Essentially, ballot- box pension reforms reveal the public’s distrust of government. The victories of local pension mea­sures in California have attracted national attention, and may inspire other cities and counties in California and other states to attempt similar actions. Keywords: public pension reform; the iniative process. a Jinping Sun’s research interests are in public budgeting and finance. *Corresponding author: Jinping Sun, Ph.D., Associate Professor, Department of Public Policy and Administration at California State University, Bakersfield, E-mail: jsun2@csub.edu 1 Introduction The most recent recession that officially began in December 2007 and ended in June 2009 is the longest and deepest economic downturn since the Great Depres- sion and has put considerable stress on state and local government budgets. To weather the economic and budgetary crisis, states and localities across the US have examined all possible alternatives to cut current costs and control future expenses, one of which has focused on public pensions. Pensions in the public sector have taken center stage and have spurred heated debate recently partly