Signaling Government Financial Reporting Quality to Credit Analysts

The quality of governmental financial reporting and auditing is of continuing concern to oversight bodies and to those interested in the financial accountability of governments. While governments may have operational incentives to improve financial reporting, external incentives depend on external users' ability to distinguish cities with better reporting practices from those with inferior systems. Two methods that cities with better systems may use to distinguish themselves are the GFOA's Certificate of Excellence for Financial Reporting and through the reputation of the audit firm. This article examines whether the degree of reliance that bond raters place on accounting data is influenced by the Certificate and by the type of auditor. In addition, since inadequate fees have been cited as a possible cause of substandard audits, we examine the trend in audit fees for cities for the period 1985–1989. The findings suggest that the use of a Big Eight audit firm does increase the reliance placed on cities' financial statement numbers but there is only weak evidence that the Certificate has a similar effect. In addition we find evidence of a significant decline in audit fees for the period 1985–1989.     

Coming to grips with corporate governance in local government

Local government, the tier of government closest to the people, provides services and infrastructure which impact daily on the well‐being of local communities. Despite the Australian state‐based regulatory framework, governance dysfunction regularly results in dismissal of councils. This paper seeks to gain an insight into what is understood by corporate governance at the local government level, an area not addressed in previous research. The methodology was a case study of one local municipality in Tasmania using explanatory sequential mixed methods. Findings revealed a narrow compliance‐based understanding, with effective accountability strategies not included in that understanding. Diverse information sources, such as previous employment experience and industry‐based training, led to embedded beliefs about the meaning of corporate governance which were not necessarily shared by all. This study has implications for state governments seeking to find long‐term solutions for dysfunctional councils, and to bring about positive change.     

The likelihood of social choice violations in rank sum scoring: algorithms and evidence from NCAA cross country running

Recent contributions have used combinatorial algorithms to determine the likelihood of particular social choice violations in rank sum scoring. Given the broad importance of rank sum scoring (e.g., in non-parametric statistical testing, sporting competition, and mathematical competition), it is important to establish the level of ambiguity generated by this aggregation rule. Combinatorial likelihoods are naïve, however, in that they assume each possible outcome sequence for an event to be equally likely. We develop a computational algorithm to extend upon previous combinatorial results as to the likelihood of a violation of transitivity or independence in rank sum scoring. We use a similar computational scoring approach to analyze the empirically-observed likelihood of each such violation across fourteen NCAA Cross Country Championships. Within the data, rank sum scoring fails to specify a robust winning team (i.e., one that also rank sum wins against each possible subset of opponents) in 4 of 14 cases. Overall, we find that empirical likelihoods of social choice violations are consistently (significantly) overestimated by combinatorial expectations. In the NCAA data, we find correlated ability (quality) levels within team (group) and discuss this as a cause of lower empirical likelihoods. Combinatorial analysis proves reliable in predicting the order of empirical likelihoods across violation type and event setting.