MAPP502 American Military Common Errors in Receiving Online Education Certification Paper Week 5 Assignment: “White Paper” Write a white paper on the topic

MAPP502 American Military Common Errors in Receiving Online Education Certification Paper Week 5 Assignment: “White Paper” Write a white paper on the topic. I have chosen the topic: Six Most Common Errors in Receiving an Online Education Certification. You can find assistance for writing a white paper at https://owl.purdue.edu/owl/subject_specific_writing/professional_technical_writing/white_papers/index.html (Attached) and examples at https://icma.org/white-papers (Attached). The paper should be 10-12 pages (cover page and reference page does not count), double spaced with 1-inch margins. Include at least four peer-reviewed journal references. Please follow the format outlined in the Purdue Owl (Word attached) for the paper. Management’s Perceptions of
Annual Financial Reporting
An International City/County Management Association (ICMA)
White Paper
December 2013
Contents
Acknowledgements……………………………………………………………………………………………………1
Overview……………………………………………………………………………………………………………………1
Executive Summary……………………………………………………………………………………………………2
Objectives, Methodology, and Scope…………………………………………………………………………4
Survey Results……………………………………………………………………………………………………………5
A. Management Effects ………………………………………………………………………………………….5
B. Net Benefits……………………………………………………………………………………………………….7
C. Professional Support/Outreach Mechanisms ………………………………………………………7
D. Recent Financial Reporting Changes and Recommendations……………………………….8
E. Limitations and Survey Respondents……………………………………………………………………9
Concluding Remarks and Recommendations…………………………………………………………….11
Appendix: Survey Responses……………………………………………………………………………………15
Management’s Perceptions of Annual Financial Reporting
A Policy Issue White Paper
Prepared on behalf of the ICMA Governmental Affairs and
Policy Committee
December 2013
Dr. Craig S. Maher
Associate Professor, Northern Illinois University
Dr. Shannon N. Sohl, CPA, Research Associate,
Northern Illinois University’s Center for
Governmental Studies
Copyright © 2013 by the International City/County Management
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obtained from the copyright proprietor.
About ICMA
ICMA advances professional local government worldwide.
Its mission is to create excellence in local governance
by developing and advancing professional management
of local government. ICMA, the International City/
County Management Association, provides member
support; publications, data, and information; peer and
results-oriented assistance; and training and professional
development to more than 9,000 city, town, and county
experts and other individuals and organizations throughout
the world. The management decisions made by ICMA’s
members affect 185 million individuals living in thousands
of communities, from small villages and towns to large
metropolitan areas.
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Management’s Perceptions of
Annual Financial Reporting
An International City/County Management Association (ICMA) white paper
Written by:
Dr. Craig S. Maher, Associate Professor, Northern Illinois University, teaches public budgeting and financial
management in the Division of Public Administration. His research emphasizes fiscal federalism and fiscal
condition analysis.
Dr. Shannon N. Sohl, CPA, is a Research Associate at Northern Illinois University’s Center for Governmental
Studies. Her current research and projects focus predominantly on developing a roadmap, strategies, and tools
for improving governmental financial reporting.
Overview
The Governmental Accounting Standards Board
(GASB) was established in 1984 as the second operating arm of the Financial Accounting Foundation (FAF),
to serve as the authoritative accounting standardsetting body for state and local governmental entities
in the United States.1 In 2009, GASB began the third
phase of Economic Condition Reporting: Financial
Projections and issued guidelines for Service Efforts
and Accomplishments Reporting (aka SEAs) in 2010.
To date GASB has issued 70 Statements, with the most
recent (No. 67 & No. 68) pertaining to accounting for
and reporting of pensions. By far, No. 34 (issued in
1999) was the most significant change GASB made in
its history. The ever-increasing evolution of our economy, governmental service provisions, and financing
options help explain the continued changes in financial reporting and disclosures.
In 2012, the Center for Governmental Studies
reviewed dozens of comprehensive annual financial
reports (CAFRs) from a variety of projects and found
that those municipal CAFRs generally ranged from 110
pages to more than 250 pages, depending on the size of
the community and its service offerings.2 Additionally,
this survey revealed that it can take approximately six
months for some entities to complete the CAFR, rendering the data stale when introduced. Furthermore, new
standards often require additional resources and system
changes, and can add to the length of the CAFR and
annual close. Yet, to describe the well-known, complex
state of public sector financial reporting without taking
action is of no use.
To better understand the current state of local
government financial reporting, the International City/
County Management Association (ICMA) engaged
Northern Illinois University (NIU) and its Center for
Governmental Studies (CGS) to explore management’s
perspectives on how the various financial statements
issued by GASB:
1. affect management;
2. provide a net benefit to its stakeholders; and
Acknowledgements
We would like to thank the International City/County Management Association (ICMA) staff for their input
and review of this report; the executive directors of the Illinois and Wisconsin ICMA and GFOA state
chapters for assisting with the distribution of the survey; and all of those who participated in the survey.
Without your input and assistance, this paper would not have been possible. We also appreciate the
support of the Center for Governmental Studies at Northern Illinois University, which provided the resources
to develop the survey as well as collect and compile the survey responses.
MAN AG EMEN T ’S P E R CE P T I O NS O F A NNU AL FI NANCI AL R E PO R TI NG
1
Almost 70 percent of the respondents believe the benefits of generating
the financial statements outweigh their costs.
3. are accompanied with professional support/outreach mechanisms from entities such as Governmental Accounting Standards Advisory Council
(GASAC) (providing feedback to GASB), as well as
assistance from organizations such as the Government Finance Officers Association (GFOA) and
audit firms to assist preparers with understanding
and implementing the changes to their year-end
financial statements.
This white paper focuses mainly on the following
two key local government consumers who, coincidentally, are also producers of the annual financial reports:
1. city/county managers and administrators, and
2. finance officers/directors/managers.
These two groups are collectively referred to as
“management” going forward. Furthermore, not all
local governments produce a CAFR; many produce
some form of an annual financial report (AFR). Those
that do not produce either a CAFR or AFR were
excluded from the survey. Going forward, the AFR and
CAFR will be used interchangeably and referred to as
an “annual financial report” (AFR).
Overwhelmingly, management perceives there to be
a net benefit to annual financial reports. However, there
are aspects of governmental reporting that are in need
of some improvements. Thus, the research team synthesized our findings with existing research and offered
recommendations at the end of this paper to improve
the state of governmental annual financial reporting.
Executive Summary
For entities reporting in accordance with generally
accepted accounting principles, annual financial
reports offer management a comprehensive view of
their finances that acknowledges economic events.
These annual financial reports are valuable resources
for assessing fiscal conditions, conducting comparisons to comparable entities and integrating their other
managerial roles such as capital improvement planning, budgeting, strategic planning, investing, financing, benchmarking, etc.
While this white paper reports management’s perceptions, the authors recognize that there are a variety
of consumers of public sector financial reports; i.e.,
2
auditors, elected officials, taxpayers, investors, regulators, and bond rating agencies (see Figure 1). We also
appreciate the fact that while management has access
to the primary source data and, therefore, may place
a greater emphasis on the production of CAFR data
rather than on its use, their perceptions of financial
reporting are valuable since the data in AFRs have
been linked to policies such as bond ratings.
The list below recaps the key findings from management’s survey responses.
• For the most part (64 percent), management uses
little to no audited financial statements to inform
their policy decisions; less than 25 percent use their
financial reports to inform their policy decisions.
• In those cases in which management uses their
financial statements to inform policy decisions,
more than a third tend to glean from the Management Discussion and Analysis (MD&A), note disclosures, and government-wide statements introduced
via GASB 34; more than two-thirds still rely on fund
financial statements, in particular, governmental
funds (pre-GASB 34).
• 80 percent of respondents whose population is
under 50,000 outsource their annual financial statements, compared with 50 percent of respondents
with populations over 50,000.
• Complexity of reporting, as evidenced by preparation costs, appears to increase with the size of the
organization. The larger the entity, the more complex
the set of financial transactions and the higher the
preparation costs. It is estimated that annual financial reporting costs taxpayers approximately $10,000
to $50,000, with some larger (more than 50,000 residents) communities spending more than $200,000.
• Almost 70 percent of the respondents feel that the benefits of generating the financial statements outweigh
their costs. Note: As mentioned earlier, management
perceives the purpose (or key benefit) of financial
statements to be for compliance and accountability,
not as useful information for informing decisions.
• Management relies heavily on their auditors for
assistance with their financial statements, followed
by assistance from GFOA; very little assistance is
sought from GASAC—an advisory body—or GASB.
In the future, management expects to continue to
M A NA GE M E NT’ S PE R CE PTI O NS O F ANNUAL FI NANCI AL REPOR TIN G
rely predominantly on their auditors for assistance.
They expect that they may seek out assistance from
GFOA, but very few to no managers anticipate
requesting help from GASB or GASAC. It should be
noted that auditors are heavily assisting as producers of financial reports (see third bullet) and might
be the ones seeking input from the GASB and
GASAC on behalf of management. This information
would be requested in any future assessments of
other financial report producers and consumers.
• More than 80 percent of the respondents implemented Statements No. 34, 43, 45, and 54. However, fewer than a third of those who implemented
these statements found them to be beneficial.
• While less than five percent of the respondents
intend to implement SEA or Economic Condition
Reporting, only 15 percent stated they would not
implement these changes in reporting. Other respondents cited reasons such as “cost prohibitive” or
“not sure of the benefits” for not implementing these
reporting changes, while the remaining managers felt
these changes encroach upon management practices.
Thus, there are those in the middle who might consider implementing the suggested changes, but this
might require more education on the benefits of SEA
and Economic Condition Reporting and the availability of tools or resources to facilitate the change.
The key recommendations of this white paper include:
1. Reassess content, semantics, and structure of
annual financial reports. More work must be done
to determine how detailed the annual financial
reports should be and how the information should
be defined, standardized, and structured in order to
increase its use in management’s decision-making.
Figure 1 Consumers of Annual Financial Reports
Citizens
Federal/Other
Governments
Banks
Credit Rating
Organizations
Legislators
Government
Agency
Government
Executives
Investors
Interest
Groups
Auditors
Media
Source: Association of Government Accountants (AGA) Corporate Partner Advisory Group Research Series Report No. 32 (July 2012).
MAN AG EMEN T ’S P E R CE P T I O NS O F A NNU AL FI NANCI AL R E PO R TI NG
3
Currently, most respondents feel that these reports are
predominantly a tool for compliance. However, there
is rich data in these financial statements that could be
used for added input in the decision-making process.
2. Leverage new technologies. New technologies
(i.e., extensible business reporting language, aka
XBRL) could lend themselves to include rich details
about government’s finances without all the “noise”
to better articulate the meaning of what is being
reported based on the audience/consumer of information. For instance, digitized financial information
could allow for consolidated reporting to present
the big picture but still allow for others such as taxpayers or investors to go more deeply into the data.
New technologies also allow for centrally managed
reporting tools to help reduce production costs, as
well as increase productivity and reporting timeliness, thanks to not having to change proprietary
systems every time new standards are introduced.
There are several other benefits to leveraging new
technologies (i.e., ease in integrating with other
data, increased data validation, etc.), but those
discussed here focus predominantly on the concepts of the research conducted in this white paper
(efficient preparation of the annual financial reports
and usefulness of these completed reports to inform
state and local governments’ policies).
3. Increase outreach/support efforts. Sometimes it is
difficult for management to understand the value
proposition of new standards or reporting requirements when they have not directly participated in
the deliberation process. Thus, it would be helpful
for local governments to receive a reminder of the
mechanisms available to them to participate in the
deliberation process (i.e., ability to sign up for email
notifications to participate in proposed changes) in
order to gain their direct participation whenever possible. Although GASB does have an option to “let us
know who you are” and sign up to receive additional
information, it might be helpful to advertise this
option in other frequently read managerial publications, such as the ICMA Newsletter. Additionally,
introduction of new standards or reporting needs
should communicate to management aspects of the
net benefit of the standard(s) or reporting recommendations. Added clarification is needed about how the
benefits of implementing new standards or changes
to existing standards outweigh the adoption costs.
Additionally, information and examples pertaining to
how management and/or their stakeholders can use
the new or revised information to enhance their decision making process would be helpful.
4
These recommendations are expanded upon
in greater detail in the Concluding Remarks and
Recommendations section.
Objectives, Methodology,
and Scope
The Center for Governmental Studies at Northern
Illinois University developed an online survey with
input from ICMA to capture management’s perspectives. The survey primarily intended to determine
management’s perceived impacts of the recent GASB
statements, including the net benefits or costs, and
understand which organizations were either assisting
them with the CAFR or allowing them to provide feedback for requesting changes to the reporting process.
ICMA distributed the survey in its member newsletter in June 2013, encouraging all city and county
managers/administrators to participate. Additionally,
the research team invited partner organizations—all
members of both the Wisconsin and the Illinois state
chapters of the Government Finance Officers Association—to complete the survey as well. We received 73
responses from city/county managers/administrators/
CAOs and 56 responses from finance/CFO-types. The
authors asked questions pertaining to the GASB statements issued, beginning with Statement No. 34 issued
in 1999, the most significant public sector financial
reporting change, and all subsequent standards.
The focus of the survey questions are recapped
below:
1. Are the recent GASB statements affecting management? If so, how?
a. Are managers (city, county, and assistant
managers) using audit reports to affect policy?
b. If so, to what extent and which section(s) of
their CAFRs are they using?
2. Measuring Managers’ Perceptions: Do the costs
outweigh the benefits?
a. What are the various practices employed for generating annual financial reports (i.e., outsource
all, some, or none)?
b. What are the organizations’ costs of preparing
audit reports for the city or county?
c. What are the managers’ perceived benefits of
having audit reports for the city or county?
d. Do managers perceive that the benefits of CAFRs
outweigh the costs?
3. Professional Support/Outreach (GASB, GASAC,
GFOA, NLC, AGA, etc.)
M A NA GE M E NT’ S PE R CE PTI O NS O F ANNUAL FI NANCI AL REPOR TIN G
a. What type of assistance are managers receiving
from the various organizations in preparing audit
reports?
b. Are they aware of these organizations and their
service offerings?
c. How often do they seek assistance?
d. How do they request assistance?
e. How often do they receive assistance?
f. How do they rate the assistance they receive? Is
it helpful or not?
g. How likely are they to use their services again?
h. How likely are they to recommend their services
to others?
i. Are there recommended changes in the annual
financial statement preparation process? Statement
deliberations process? Support process? Training?
Finally, the research team contacted survey
respondents who indicated their willingness to
answer follow-up questions. These questions were
also forwarded to 23 members of the Illinois GFOA
Technical Advisory Committee (TAC) to incorporate
their feedback with the findings of the survey. The
research team submitted the following follow-up
questions/requests for feedback from the survey
respondents and TAC:
1. Please discuss your opinions on the usefulness
and/or purposes of CAFRs beyond simply meeting
compliance requirements.
2. One of the goals of CAFRs is that they be used to
inform policy. Please discuss the extent to which
CAFRs are being used to inform policy (it would be
very helpful if you have specific examples). As a
follow-up, please discuss any suggestions/improvements to CAFRs (e.g., content, accessibility, format,
or timing) that would enhance their utility as a
policy-aiding document.
3. There have been some significant changes to financial reporting, including but certainly not limited to
GASB Statement 34, over the years. Please discuss
your perceptions of these recent CAFR statement
requirements. We are particularly interested in your
take on the extent to which recent changes are
helping to inform policy decisions.
4. Please discuss your assessment of GASB advising
and…
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