The Use of Inter-Fund Transfers to Manage the “Bottom Line” in the Municipal Context

Felix, Robert H.

doi:10.2308/ogna-51000

Cited by 17 publications

(34 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Dichev and Tang (2008) demonstrated that earnings volatility varied with the volatility of economic shocks. Graham et al (2005) and Felix (2015) showed that CFOs and municipal managers preferred smoothness in earnings and SR, respectively. Erickson et al (2016) provided evidence of differential risk levels in the presence of both earnings and cash flow volatility.…”

Section: Discussionmentioning

confidence: 99%

“…In the municipal setting, the optimal "earnings" benchmark is at SR equilibrium, or when revenues equal expenditures in the general fund (Apostolou et al, 1985;Apostolou et al, 2014). Municipal managers have an incentive to maintain SR at or near zero, despite a prior surplus or deficit (Felix, 2015). Large surpluses (SR>0) can signal excessive collection of tax revenue or insufficient spending of expenditures for public services (Felix, 2015).…”

Section: Information Content Of Historic Volatility In Earnings and Smentioning

confidence: 99%

“…Municipal managers have an incentive to maintain SR at or near zero, despite a prior surplus or deficit (Felix, 2015). Large surpluses (SR>0) can signal excessive collection of tax revenue or insufficient spending of expenditures for public services (Felix, 2015). On the other hand, large deficits (SR<0) might signal poor management of public resources and/or an inability to adhere to balanced budget rules (Felix, 2015;Costello et al, 2017).…”

Section: Information Content Of Historic Volatility In Earnings and Smentioning

confidence: 99%

“…Large surpluses (SR>0) can signal excessive collection of tax revenue or insufficient spending of expenditures for public services (Felix, 2015). On the other hand, large deficits (SR<0) might signal poor management of public resources and/or an inability to adhere to balanced budget rules (Felix, 2015;Costello et al, 2017). Based on a hand-collected sample of municipalities (n = 103) from 2001 through 2003, Felix (2015) found that municipal managers used inter-fund transfers to maintain SR near zero across the sample period.…”

Section: Information Content Of Historic Volatility In Earnings and Smentioning

confidence: 99%

“…On the other hand, large deficits (SR<0) might signal poor management of public resources and/or an inability to adhere to balanced budget rules (Felix, 2015;Costello et al, 2017). Based on a hand-collected sample of municipalities (n = 103) from 2001 through 2003, Felix (2015) found that municipal managers used inter-fund transfers to maintain SR near zero across the sample period. Furthermore, this practice was most pronounced when municipal managers were subject to greater oversight and credit monitoring.…”

Section: Information Content Of Historic Volatility In Earnings and Smentioning

confidence: 99%

See 4 more Smart Citations

Economic Activity and the Association of Spending Rate and Spending Rate Volatility on Borrowing Cost

Hickey¹

View full text Add to dashboard Cite

Achieving minimum borrowing cost for municipal bonds is an ongoing concern. Apostolou, Apostolou, and Dorminey (2014) demonstrated that a fund accounting measure, spending rate magnitude (i.e., the absolute value of general fund revenues minus general fund expenditures) proxied for management's ability to balance revenues and expenditures. Their findings indicated that achieving balance at spending rate equilibrium (i.e., where general fund revenues equal general fund expenditures) was associated with minimum borrowing cost, and that the magnitude of departure from spending rate equilibrium was associated with higher borrowing cost. Little is known regarding the information content of spending rate in the years during and after the financial crisis that started in 2007. Given the crash of the housing bubble and severe reductions to property tax revenues, municipalities experienced a prolonged recovery that was characterized by a change to borrowing patterns and deficit spending. In this study, I extended from Apostolou et al. (2014) and examined whether the information content of spending rate was conditional to levels of economic activity. I accomplished this by using state leading indexes compiled by the Federal Reserve Bank to proxy for local economic activity. Based on a sample of 1,970 general obligations bonds that were issued by U. S. counties between 1995 through 2014, I tested three conditional hypotheses for significant interaction between economic activity and spending rate magnitude. Results indicated that the association between spending rate magnitude and borrowing cost was positively moderated by economic activity. Positive moderation was also significant for spending rate surpluses (i.e., where general fund revenues exceed general fund expenditures). These results suggest that departures from spending rate equilibrium are more severely assessed on borrowing cost when economic activity is positive, and less severely assessed on borrowing cost when economic activity is negative. Overall, my findings provide preliminary evidence that managerial competence over the balance of revenues and expenditures is evaluated more severely when economic conditions are goodnot when they are bad.

show abstract

Section: Discussionmentioning

confidence: 99%

Section: Information Content Of Historic Volatility In Earnings and Smentioning

confidence: 99%

Section: Information Content Of Historic Volatility In Earnings and Smentioning

confidence: 99%

Section: Information Content Of Historic Volatility In Earnings and Smentioning

confidence: 99%

Section: Information Content Of Historic Volatility In Earnings and Smentioning

confidence: 99%

See 3 more Smart Citations

Economic Activity and the Association of Spending Rate and Spending Rate Volatility on Borrowing Cost

Hickey¹

View full text Add to dashboard Cite

show abstract

Opportunistic financial reporting around municipal bond issues

Beck

2018

Rev Account Stud

View full text Add to dashboard Cite

Differences in government accounting conservatism across jurisdictions, their determinants, and consequences: the case of Canada and the United States

2022

View full text Add to dashboard Cite

We use the year-end adjustments to the provisions for student loan losses of state and provincial governments in the United States and Canada to study government accounting conservatism and how it varies between these adjacent and highly integrated countries. Building on Canada’s more conservative cultural attributes, we hypothesize and find that Canadian provincial governments report more conservative provisions for student loan losses than U.S. state governments. Moreover, the year-end adjustments to the provisions in Canada are excessively conservative; they are larger than the audit materiality threshold. We further find that the political ideology of the government, government reporting incentives, government debt, and political competition are important determinants of government accounting conservatism. Finally, we find a negative association between the year-end adjustment to the provision and future student lending. This result suggests that government accounting conservatism leads to credit rationing and significant societal consequences for students. Overall, our study highlights important aspects of the determinants and consequences of government accounting conservatism. To the best of our knowledge, this study is the first to examine government unconditional accounting conservatism.

show abstract

The Use of Inter-Fund Transfers to Manage the “Bottom Line” in the Municipal Context

Cited by 17 publications

References 18 publications

Economic Activity and the Association of Spending Rate and Spending Rate Volatility on Borrowing Cost

Economic Activity and the Association of Spending Rate and Spending Rate Volatility on Borrowing Cost

Opportunistic financial reporting around municipal bond issues

Differences in government accounting conservatism across jurisdictions, their determinants, and consequences: the case of Canada and the United States

Contact Info

Product

Resources

About