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Indiana University project outlines challenges of tracking Indiana's local government financing

  • Oct. 1, 2015

FOR IMMEDIATE RELEASE

INDIANAPOLIS – The authors of a continuing fiscal benchmarking project say they've run into challenges as they try to monitor Indiana local government financial data. Their concerns have implications for legislators and taxpayers.

"Our findings show opportunities for reform and updating in the financial reporting of local governments," said report co-author Craig Johnson of the Indiana University Bloomington School of Public and Environmental Affairs. "There's much that local governments can and should do to provide greater financial transparency."

Johnson and researchers at the Indiana University Public Policy Institute described the problems and recommended fixes in an issue brief designed to assist the Indiana General Assembly and the staff of the Department of Local Government Finance.

The researchers identified six challenges that involve many Indiana communities:

  • Using cash accounting for financial reporting instead of the preferred system known as accrual accounting.
  • An inconsistent and incomplete system of fund codes and transaction codes.
  • A lack of complete budget reporting.
  • A varied treatment of enterprise operations, particularly by the state's largest cities.
  • Debt reporting issues.
  • The unique structure and treatment of Indianapolis.

Johnson is part of an advisory committee leading the project "Fiscal Benchmarking for Indiana's Local Governments"; the committee also includes IU Public Policy Institute Senior Analyst Jamie Palmer. The Indiana Fiscal Benchmarking Project was launched in 2012 by SPEA and the IU Public Policy Institute and is an extension of Policy Choices for Indiana's Future, an initiative to provide decision-makers with unbiased information about issues facing state and local government.

The project team's initial benchmarking report was released in September 2014 and provides 36 fiscal benchmarks for each of Indiana's 92 counties, 1,006 townships and 568 cities and towns. The benchmarks address spending, revenue, property tax base and levies, local option income tax rates and debt.

After analyzing the data contained in that initial report, the project team is recommending a series of steps to improve Indiana financial reporting:

  • Adopt generally accepted accounting principles (GAAP). Palmer said that the state should mandate localities to produce financial statements under GAAP rules: "This would make it hard for local governments to hide or ignore long-term liabilities that are often the cause of fiscal distress." The downside to this step is that it requires costly training for financial officers.
  • Adopt a complete set of fund, receipt and disbursement coding.
  • Require reporting of full local government budgets.
  • Improve the quality of debt reporting.

"Successful implementation of these reforms will provide greater local government financial transparency," the issue brief concludes.

Read the issue brief: The Opportunities and Challenges of Benchmarking Indiana’s Local Governments.

Read the report: Fiscal Benchmarking for Indiana's Local Governments Comprehensive Report for 2011-2012: Counties, Townships, and Cities and Towns.

About the IU Public Policy Institute

The IU Public Policy Institute, located in Indianapolis and established in 1993 within the School of Public and Environmental Affairs, delivers unbiased research and data-driven, objective, expert analysis to help public, private and nonprofit sectors make important decisions that directly impact quality of life in Indiana and throughout the nation. Using the knowledge and expertise of a multidisciplinary staff and faculty, the institute provides data and analysis that addresses a wide range of issues. It helps leaders, citizens, businesses and organizations solve problems, seize opportunities and create positive change. The institute also supports the Indiana Advisory Commission on Intergovernmental Relations.

About the IU Bloomington School of Public and Environmental Affairs

SPEA was founded in 1972 and is a world leader in public and environmental affairs and is the largest school of public administration and public policy in the United States. In the 2012 "Best Graduate Schools" by U.S. News & World Report, SPEA ranks second and is the nation's highest-ranked professional graduate program in public affairs at a public institution. Four of its specialty programs are ranked in the top-five listings. SPEA's doctoral programs in public affairs and public policy are also ranked by the National Research Council as among the top 10 in the nation.

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