The Recipients of Municipal Annual Financial Reports: A Nationwide Survey

By Atamian, Rubik; Ganguli, Gouranga | The Government Accountants Journal, Fall 1991 | Go to article overview

The Recipients of Municipal Annual Financial Reports: A Nationwide Survey


Atamian, Rubik, Ganguli, Gouranga, The Government Accountants Journal


INTRODUCTION

The information contained in municipal accounting and financial reporting documents affects the lives of many citizens in various ways. In fact, more people are affected by the qualitative and quantitative information contained in the financial reports published by thousands of municipalities across the country than are affected by corporate accounting and reporting activities. Yet, it is generally recognized that research focused on municipal accounting issues has traditionally lagged far behind the attention showered on financial accounting issues reported by corporate entities. This recognition of the lack of exploration and investigation of governmental accounting issues was responsible for a two-day (November 11 and 12, 1976) conference jointly sponsored by the Department of Accounting of the University of Texas at Austin and the Municipal Finance Officers Association and financed by the accounting firm of Grant Thornton (fka Alexander Grant & Company). Appropriately titled, the focus of the conference was "Municipal Accounting and Reporting: Issues for the Future."

The first section of the findings of the conference bears the title "Information Requirements of Investors and Other Uses of Financial Reports" and it lists the first research issue:

"Users of external municipal reports and the audiences to which these reports are directed should be identified."

The report goes on to say that "Before the information needs of users of external reports can be set forth, it is necessary to determine who these uses are."

Today, more than a decade after the identification of this research issue, there is no evidence in the published research that this specific issue has received any systematic attention and evaluation.(1) Accordingly, we undertook a project with the express purpose of identifying the primary recipients of municipal financial reports via a direct nationwide survey of municipalities.

REVIEW OF LITERATURE

The National Committee on Governmental Accounting published "Governmental Accounting, Auditing and Financial Reporting (GAAFR) in 1968 wherein it identified six categories of financial report users:

* Internal management * Legislative and governing bodies * General public * Investors and creditors * Other governments, and * Public interest groups

Patton (1975) identified four groups of users of governmental financial reports using the membership roster of the Municipal Finance Officers Association (MFOA):

* Internal management * Bankers and investment counselors * Certified public accountants, and * Actuaries and consultants

Davidson, et. al. (1977) suggest that the broad audience of potential users of the financial statements of state and local government units can be classified into four groups:

* The general public, made up largely of the taxpayers of the governmental unit preparing the report; * Investors and creditors (and their advisers), both present and potential, of the governmental unit;

* Employees and potential employees of the governmental unit; and * Officials, both elected and appointed, of the governmental unit.

A 1978 study conducted by the accounting firm of Coopers and Lybrand with the objective of identifying the primary users of governmental financial reports reached the conclusion that such users can be placed under the following six groups:

* Municipal management * Senior levels of government * Oversight agencies * Labor groups * Taxpayers. and * Investors

In a roundtable of professors, John C. Burton (1979) suggested the following four groups as the "interested parties" in the financial accounting and reporting of municipalities:

* Managers in the public sector who are trying to manage governmental organizations in the most efficient and effective way; * Informed citizens and voters; * Investors in the securities of municipalities; and * Businessmen and labor leaders and other economic decision makers in the private sector. …

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