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Understanding Public Accountability and Transparency

BWD Magazine, Fall 2010

When it comes to demonstrating their stewardship of public resources, state and local governments face an interesting challenge. Even the smallest governments are subject to numerous funding sources and spending constraints. Additionally, they are accountable to a wide array of stakeholders - from citizens, to legislators, to creditors, to federal and state grantor agencies. In order to meet these disparate obligations, governments use fund accounting and produce "general purpose financial reports" to present information to all of these various constituents at once.

Fund accounting is the practice of maintaining separate books and records for each major funding source or activity, such as streets, libraries, water and sewer operations, etc. As a result, governmental financial statements can at times be so voluminous as to be daunting. Case in point: the 2009 annual financial report for General Electric (a multinational conglomerate recently named by Forbes as the second largest company in the world with annual revenues of $157 billion) is available online in a 120 page PDF. Contrast that with the City of Holland (a West Michigan community with a population of 34,000 and a total annual budget of $128 million) whose 2009 comprehensive annual financial report weighed in at over 230 pages. The simple fact is governmental financial statements contain so much information that there is a very real danger of the message getting lost in the medium.

To combat this problem, the two leading professional organizations in the public sector - the Government Finance Officers Association (GFOA) and the Association of Government Accountants (AGA) - have each created programs to allow governments to supplement their full financial statements with simplified reports designed to be easier for citizens and other interested parties to understand while still detailing what and how their government is doing.

Popular Annual Financial Reports

Introduced by the GFOA in 1991, the Popular Annual Financial Report (PAFR) awards program was designed as a way to supplement the organization's Comprehensive Annual Financial Report (CAFR) program and to encourage state and local governments to produce clear, concise popular reports. Currently more than 140 governments (eight of them in Michigan) prepare PAFRs each year. While there are few hard and fast guidelines for the format of these reports, the GFOA emphasizes reader appeal, understandability, distribution methods and overall quality and usefulness. PAFRs typically range from eight to twenty pages in length.

Citizen Centric Reports

The AGA introduced the Citizen Centric Report in 2007. It is intended to foster innovative means of communication between governments and their citizenry. "Government fiscal assessments generally read like telephone books, with more pages of footnotes than the average citizen knows what to do with," according to Relmond Van Daniker, the AGA's Executive Director. "The Citizen Centric project is about getting back to what accountants are meant to do – crunch the numbers and make them understandable for the people we serve."

A Citizen Centric Report is limited to just four pages (it can be printed on the front and back of a single sheet of tabloid paper). It focuses on a government's strategic objectives, reporting performance for key missions and service, the cost of servicing citizens, the sources of funds and future challenges. To date, more than 30 state and local governments have participated in the program.

Regardless of which program a government chooses, the end result is clear: improved transparency and a better understanding of government by its citizens. For more information about popular reporting for governments, go to or

Any advice in this communication is not intended or written by Rehmann to be used, and cannot be used by a client or any other person or entity for the purpose of:(I) avoiding penalties that may be imposed on any taxpayer or;(II) promoting, marketing or recommending to another party any matters addressed herein. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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