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A new data source for comparative analysis.

The GFOA recently announced the completion of a new database of selected financial indicators for three categories of government: Counties, municipalities and school districts. The information in this database was extracted from the GFOA's extensive library of comprehensive annual financial report/component unit financial reports (CAFRs/CUFRs), which includes submissions to the GFOA's Certificate of Achievement for Excellence in Financial Reporting program. This database is being made available to GFOA members and others both in diskette form (dBASE IV), and in hard-copy summary profile reports.

Purpose and Applications

The basic purpose of the GFOA database, both in its diskette and hard-copy forms, is to allow governments to evaluate their own financial indicators in relation to those of other governments. By doing so, governments should be in a better position to answer the perential question of "How do we compare?"

The hard-copy database reports, or CAFR Data Base: Selected Profiles, provide users with graphical and statistical presentations of selected financial indicators for a national cross section of governments in each of three categories (i.e., counties, municipalities and school districts). Governments using the hard-copy reports can compare their own financial profile to a national cross section of governments of similar size. For example, a government could compare the level of its own unreserved fund balance in the general fund to that of similar governments across the nation. By comparing their own government with other governments, finance officers and others can supplement traditional "rules of thumb" with empirical data when formulating financial policy decisions. Such comparisons can be even further enhanced by incorporating information from other databases (e.g., the Census Bureau's Local Government Finances).

Of course, practical considerations of space limit the hard-copy reports to about 25 financial indicators. This limitation can be easily overcome, however, by using the database diskettes, which provide direct access to all of t he data elements extracted from the CAFRs/CUFRs for each category of government. Also, in many instances governments may prefer to make comparisons on something other than a national basis (e.g., regional or state comparisons). The database diskettes allow governments to "target" their comparisons by selecting their own subset of peers from the national database.

Comparisons of selected financial indicators are useful, not only for internal management purposes, but for external purposes as well. For example, a school district seeking voter approval of a tax-rate increase potentially could enhance its case by providing voters with appropriate comparisons to similar school districts. Likewise, such comparisons may be useful in establishing a government's credit-worthiness, whether with a local bank or with a national rating agency. In fact, given that rating agencies already perform comparative analyses, a government may be well advised to make its own comparisons so as to be better prepared to place its own "spin on the ball" in discussing its financial condition.

Entities and Data Source

The GFOA limited the scope of the database to counties, municipalities and school districts. Although the GFOA's CAFR/CUFR library contains numerous reports from states, special districts and pension plans, such reports were considered too diverse in regard to the basic nature of their operations to allow for meaningful cross-sectional analysis.

Approximately 45 data elements were extracted from each of the more than 1,400 fiscal 1989 CAFRs/CUFRs selected for inclusion in the database. These data elements were then computer encoded and subjected to various edit and reasonableness verifications. The final database and report packages include data from 969 municipalities, 165 school districts and 271 counties.

Overview of the Report Package

As mentioned earlier, separate hard-copy reports are available for each of th e government types profiled (i.e., counties, municipalities and school districts). Each profile package contains the following information.

Graphical Presentations. Graphs are used to presetn the statistical profile of each of the selected financial variables. For example, Exhibit 1, "Total Unreserved and Undesignated General Fund Balance," shows the dollar amount of unreserved, undesignated fund balance on a per capita basis for each of eight separate population categories.

Statistical Profile. For each financial indicator analyzed, the range of variation (i.e., minimum and maximum values) is illustrated on the graph and summarized nummerically in an accompanying table. Mean values are used to present "averages," thus eliminating the impact of extreme values. Also, certain individual "outliers" (i.e., extreme values) have been eliminated, both from the graphical and tabular presentations, to avoid potentially misleading inferences.

Population Ranges. Each report utilizes "Moody's Medians" as the basis for the population range categories. This choice was based on the general acceptance and common usage of those statistics in practice. For municipalities, eight categories divide the range from "under 10,000" to "over 500,000." Four categories are used for counties, from "under 100,000" to "over 1,000,000." School districts are divided into six categories based on number of students. (Of course, governments using the diskette rather than the hard-copy reports can define their own population categories based on the population figures reported in the CAFR/CUFR.

Types of Financial Variables. Three primary types of financial variables are presented: 1) absolute measures (e.g., general fund operating results in dollars), 2) relative measures (e.g, total property tax levy per capita) and 3) composition measures (e.g., components of general long-term debt). Composition measures are reported in absolute and relative terms, including both per capita and percentage comparisons.

Report Categories. The following list briefly describes the major categories utilized in the hard-copy reports; unless otherwise noted, the focus of each analysis is the general fund.

1) Revenues less expenditures (dollars and per capita).

2) Fund balance composition (dollars, per capita and percentage of expenditures).

3) Revenue by source (dollars and per capita).

4) Expenditures by type (dollars and per capita).

5) Retained earnings of internal service funds (dollars and percentage of operating expenses).

6) Debt analyses (i.e., direct debt per capita, overlapping debt per capita, ratio of direct debt to fair value of property) along with the composition of general long-term debt and per capita measures of the pension benefit obligation.

Overview of Diskette

The GFOA is also making the database available in diskette form (dBASE IV). Such diskettes should be useful, as mentioned earlier, for targeted comparisons within specially selected peer groups. A separate diskette is available for each of the three categories of government (i.e., counties, municipalities and school districts) and permits the user direct access to any of the 45 individual database elements. A brief description of these data elements can be found in Exhibit 2.

Anticipated Future Developments

This is the first year the GFOA has offered a database of financial indicators extracted from its library of CAFRs/CUFRs. The GFOA intends to continue with the database for fiscal 1990 CAFRs. In doing so, the GFOA will modify and enhance both the hard-copy reports and the database diskettes based on user response and suggestions.

One important result of continuing to extract such data will be the collection of data for multiple years. This development should be invaluable in the future in allowing comparisons, not only between governments, but also over time. Such multi-year comparisons should be of great value fo identifying trends and helping to provide a context for the analysis of annual data.

Inherent Limitations

Sound analysis requires that bata be used properly. It is very important that users of the GFOA's CAFR database be aware of some of the inherent limitations in such a product. These limitations include the following.

Self-selection Bias. The reports in the database are not randomly seleged, but instead are drawn from reports voluntarily submitted to the GFOA. Accordingly, such data are not designed to support statistically valid inferences.

Also, the 1,400 reports included in the database represent only 2.5 percent of all governments in the United States. On the other hand, the database represents a significant portion of larger U.S. governments. For example, more than 25 percent of all U.S. municipalities with populations greater than 10,000 are represented in the database. Similarly, 42 percent of municipalities with populations greater than 25,000, 55 percent of municipalities with population greater than 50,000 and 66 percent of municipalities with populations greater than 100,000 are represented. Similar figures hold true for counties (i.e., 11 percent, 18 percent, 30 percent and 46 percent).

Classification Disparities. Necessarily, data included in the database are classified in the same way as in the CAFR/CUFR. While the classification of some data elements is relatively uniform among governments (e.g., total property tax levy), others are subject to interpretation. Consider, for example, expenditures for employee fringe benefits--a significant cost for many governments. Ideally, the cost of such benefits would be assigned to the various types of expenditure (e.g. general government, public safety). Some governments, however, report the total amount of the cost of employee benefits in the "general government" category. Accordingly, comparisons must be approached with caution.

At the same time, the overall quality and integrity of the GFOA's CAFR database are superior to those of various alternative data sources from several points of view. First, all the data have been presented in conformity with generally accepted accounting principles (GAAP). Second, the data have been subjected (except for information taken from the statistical section of the CAFR/CUFR) to independent audit.


The establishment of the new GFOA CAFR database marks a major step forward for government officials who wish to answer the inevitable question "how to we compare?" It provides governments with an important tool for analysis and communication. Moreover, thanks to the increasing presence of personal computers in the public sector, governments need not


be satified with the selected comparisons provided in the hard-copy reports prepared by the GFOA. Rather, governments can profit from direct access to all of the data elements contained in the database. Furthermore, the possibilities for comparison are likely to be further enhanced in the future as multi-year data become available as the basis for trend analysis.

Additional information on the database diskettes and hard-copyp reports can be obtained by contacting the GFOA's Technical Services Center in Chicago (312/977-9700).

Ronald D. Picur, Ph.D., C.P.a., director of the Office for Government Accounting Research and Education at the University of Illinois at Chicago, was comptroller and chief financial officer of Chicago from 1985 to 1989. He served as the technical advisor to the GFOA on the CAFR database project and also serves as the director of public sector services for Pandolfi, Topolski, Weiss & Co., Ltd., an Illinois-based CPA firm.
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Title Annotation:comprehensive annual financial reports/component unit financial reports database of the Government Finance Officers Association
Author:Picur, Ronald D.
Publication:Government Finance Review
Date:Feb 1, 1992
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