Assessing the Relationship Between Objective and Subjective Measures of Fiscal Condition Using Government‐<scp>W</scp>ide Statements

The rate of expansion and the breadth of COVID‐19 caught the world by surprise. From the perspective of nonprofit and public entities responsible for service provision, this pandemic is also unprecedented. The authors offer a RISE framework for navigating the fiscal effects of COVID‐19 and rely on recent surveys to assess the response strategies of local governments and nonprofit organizations. They find that many nonprofits were hit fastest and hardest by the pandemic and that local governments are, essentially, trying to figure out their financial condition moving into the next budget cycle.

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“…5. 5.It is important to note that these responses are based on perceptions and not actual financial condition (see Maher and Deller 2011, 2013). …”

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confidence: 99%

Fiscal Responses toCOVID‐19: Evidence from Local Governments and Nonprofits

Maher

Hoang

Hindery³

2020

Public Administration Review

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144

120

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“…First, more studies are needed on how the Great Recession impacted capital spending in local government, which was clearly described by Bates and Santerre (2015) in response to studies that relied on subnational financial data rather than sub-state financial data. Second, very few studies beyond the work of Maher and Deller (2013) and Ross et al (2015) have responded to the research call made by Wallace (2000) on exploring the utility of government-wide financial statements.…”

Section: Hypotheses Data and Methodologymentioning

confidence: 99%

“…Maher and Deller (2013) delved into the financial condition of Wisconsin counties during the Great Recession. The authors calculated five fiscal indicators for governmental, business-type and total activities for 55 of the 72 counties in Wisconsin.…”

Section: Previous Studiesmentioning

confidence: 99%

“…34 that it is replete with research opportunities, including the themes of valuation, depreciation, intergenerational equity and user comprehension. However, there has been surprisingly little research on using the government-wide financial statements to explore the fiscal health of local government, which includes the net value of capital assets (Maher and Deller, 2013). An issue that magnifies this absence of research is that studies conducted on governmental expenditures are primarily focused on federal and state government rather than local government, overlooking the services and capital assets most visible to citizens (Afonso, 2013).…”

Section: Introductionmentioning

confidence: 99%

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Capital spending in local government

Rivenbark

Afonso

Roenigk

2018

JPBAFM

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Purpose The purpose of this paper is to understand the impact of the Great Recession on the capital assets being depreciated and the capital assets condition ratio for the governmental activities of the government-wide financial statements, while identifying possible socioeconomic and financial variables that help explain capital investment behavior in local government. Design/methodology/approach Based on capital spending from fiscal year 2005–2006 (FY06) to fiscal year 2012–2013 (FY13) for the governmental activities of 471 North Carolina municipalities as reported on their government-wide financial statements, the authors use a fixed effects model to test our two hypotheses. Findings The authors find that most municipalities consistently invested in capital assets before, during, and after the Great Recession but were not able to maintain pace with depreciation. The authors also find that the capital assets being depreciated is affected by numerous socioeconomic and financial variables, while the capital assets condition ratio is not. Research limitations/implications The study continues to build on previous research, demonstrating that different results are produced when the analysis is based on local data rather than sub-national data. Practical implications An implication from our study that expands across research and practice is that capital investment and capital value are two different dimensions of capital management in local government, which drives research in terms of how this multidimensional concept is specified and drives practices in terms of how this multidimensional concept is approached within annual capital budgets and capital improvement programs. Originality/value The study represents one of the first studies that focuses on capital spending in local government based on data from the government-wide financial statements.

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“…Other literature on GASB 34 primarily relates to uses and effects of the general reporting model, rather than the infrastructure data specifically: this includes the use of GASB 34 for financial condition evaluation (Chaney et al , 2002; Johnson et al , 2012; Maher and Deller, 2013; Plummer et al , 2007; Pridgen and Mark, 2013; Wang et al , 2007), and the effects of GASB 34 on credit ratings and the cost of bond insurance (Benson and Marks, 2014; Johnson et al , 2012; Plummer et al , 2007; Pridgen and Mark, 2013). Surveys and case studies have found limited use of GASB 34 by public officials in decision making (International City/County Management Association (ICMA), 2013; Frank and Gianakis, 2010; Lu, 2007).…”

Section: Literature Reviewmentioning

confidence: 99%

Effects of the GASB No. 34 infrastructure reporting standards on state highway infrastructure quality

Kim

Chen

Ebdon

2018

JPBAFM

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Purpose The purpose of this paper is to evaluate whether the additional infrastructure information in US state financial statements improves infrastructure quality. Design/methodology/approach Based on institutional theory, the authors developed six models and estimated them on a state panel data set. Findings The authors found that the implementation of the Government Accounting Standard Board (GASB) Statement No. 34 improved state highway infrastructure quality, and the states using the modified approach had a larger effect compared to the states using depreciation accounting. The authors further used a two-step path analysis and found that the implementation of GASB 34 indirectly improved highway quality through increasing state highway maintenance expenditures. From the empirical results, the authors conclude that the exercise of collecting and developing systems to track the additional data has provided the opportunity for officials to use the information to prioritize limited funding and improve their asset management practices. Practical implications Future research may extend this research by exploring the detailed micro-mechanisms of how decision makers use infrastructure information in their asset management practices, as well as by increasing the number of years in the panel data set to fully capture changes in behavior. Social implications In addition, governments currently using depreciation should be encouraged to move to the modified approach. Originality/value This is the first attempt to empirically examine the effects of GASB 34 on infrastructure condition.

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Assessing the Relationship Between Objective and Subjective Measures of Fiscal Condition Using Government‐Wide Statements

Cited by 18 publications

References 12 publications

Fiscal Responses toCOVID‐19: Evidence from Local Governments and Nonprofits

Fiscal Responses toCOVID‐19: Evidence from Local Governments and Nonprofits

Capital spending in local government

Effects of the GASB No. 34 infrastructure reporting standards on state highway infrastructure quality

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