A New Data Source for Comparative Analysis

Article excerpt

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. …