practicum: a study of local governmental transparency, financial transactions and municipal budget

A STUDY OF LOCAL GOVERNMENTAL TRANSPARENCY

Financial Transactions & the Municipal Budget

PRACTICUM RESEARCH STUDY

PUBA 6320: Fiscal Administration

Summer 2015, Module I, June 16, 2015

Dr. George Atisa

Group 6 Authors

E. Rey Garcia – Project Leader

Melissa Ipina, Howard Clayton, Xavier Hinojosa

Tuesd

A Study of Local Government Transparency

Practicum Research Study – Group 6 P a g e | 1

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TABLE OF CONTENTS

Abstract …………………………………………………………………………………….. 4

Introduction …………………………………………………………………………………. 5

Background …………………………………………………………………………………. 7

Literature Review …………………………………………………………………………… 8

The Research Team …………………………………………………………………. 9

Criteria ………………………………………………………………………………. 9

Empirical Data Collection ………………………………………………………….. 10

Reporting …………………………………………………………………………… 10

Transparency Measures …………………………………………………………...…11

Methodology ……………………………………………………………………………….. 12

Communications Methods …………..………………………………………………16

The Case Studies …………………………………………………………………….16

Houston, TX …………………………………………………………………17

Fiscal Responsibility ………………………………………………...17

Performance Measurement ……………………………………….... 18

Statistical Analysis …………………………………………………..19

South Padre Island, TX ……………………………………………………...19

Statistical Analysis ………………………………………………..…20

Bandera, TX ………………………………………………………………....20

Statistical Analysis …………………………………………………..20

Findings and Recommendations ………………………………………………………….....21

Bibliography …………………………..…………………………………………………… 22



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ABSTRACT

This study researches, investigates and reports how local government agencies share their

financial transactions and municipal budget process with the community, media, and other arms

of the government. The research team has focused on three Texas cities: Houston, South Padre

Island, and Bandera. These local governments are categorized as a: (1) City, (2) Town, or (3)

Place or Village.



INTRODUCTION

There is an ever growing distrust and weakening of our democracy’s efficiency and

effectiveness. Transparency provides information and promotes accountability for citizens about

what their government is doing, and what they are funding. Transparency provides consistent

openness which allows others to access information that is key to an organization’s processes

and strategies. Some people may ask what “transparency” is and why is it important.

Government transparency allows the taxpayer to research and hold elected officials

accountable for how they spend money at all levels of government. In the last decade,

transparency has become increasingly important as citizens become ever more distrustful of the

federal government. The public has demanded greater visibility into all government decisions

especially those that involve tax dollars, while also calling for higher levels of accountability.

Mistrust in our governmental leaders has reached an all-time high, with only 34 percent

who say they trust the government. Much of this mistrust has come from governmental leaders

providing misleading information when it come to the budget. The public also lacks trust in

government leaders and their ability to be ethical and honest. This stems from the thought that

once elected, public officials act in self-interest. Transparency not only means demonstrating

that decisions are fact based, but that the information that is obtained is accurate and is

distributed with efficiency through the use of technology.



The purpose of our research is to investigate how local governments share their

municipal budgets with communities and the public sector. The study will focus on three local

governments and will examine the transparency efforts and methods used by each agency to

inform the community and public of budget meetings, budget workshops, city council meetings,

agendas, minutes, financial reports, web, social media, and other forms of communication to

keep the community and public informed of FY Budget.



BACKGROUND

Today’s Internet-savvy citizens are engaged with their government and this means clear,

credible information from the government and its business. The communication must be easily

accessible via information services, such as web and social media. Transparency originates from

Open Government, E-Government and Gov 2.0; connecting citizens with the government,

fostering openness, collaboration, and an efficient public sector through public data.

1) Open Government is defined by the Organization for Economic Cooperation and

Development (OEDC) as “the transparency of government actions, the accessibility

of government services and information, and the responsiveness of government to

new ideas, demands and needs.”

2) E-Government is defined by the World Bank as “the use by government agencies of

information technologies that have the ability to transform relations with citizens,

businesses, and other arms of government. These technologies can serve a variety of

different ends: better delivery of government services to citizens, improved

interactions with business and industry, citizen empowerment through access to

information, or more efficient government management. The resulting benefits can be

less corruption, increased transparency, greater convenience, revenue growth, and/or

cost reductions.”

3) Gov 2.0 is defined by Gartner Research as “the use of Web 2.0 technologies, both

internally and externally, to increase collaboration and transparency and potentially

transform the way government agencies relate to citizens and operate.”



Literature Review

This research study is composed of predominantly secondary sources regarding the field

of governmental transparency. Governmental financial accounting is complex and difficult to

understand by its citizens. Transparency has become an issue due to the growing lack of

confidence of the public in their governments. This is especially true since governments began

carrying huge deficit budgets. In addition, globalization has impacted accounting methods and

reporting due to the exchange of finances through loans between countries. Standards have been

established to assist governments with financial transparency efforts. These standards based

upon “best practices” to aid governments in creating benchmarks that guide improvements.

In the article, “FISCAL TRANSPARENCY, POLITICAL PARTIES, AND DEBT IN

OECD COUNTRIES, James E. Alt provided a definition of fiscal transparency as: openness

toward the general public about government structure and functions, fiscal policy intentions,

public sector accounts, and a form of commitment among coalition partners when problems

occur (Hallerberg et al. 2001).

The article acknowledges that both citizens and governments are in favor of increased

transparency and are making attempts to continue with the implementation of E-Government

through technology. The article also identifies the challenges to E-Government. While

technology makes E-government possible there are also limitations. A significant problem is the

lack of access by the public as well as technical literacy. Forty percent of the homes in the U.S.

lack internet capabilities which limits a large part of the population’s ability to participate in E-

Government. There are four issues identified that must improve in order for E-Government to

reach its potential. These include: the ability to understand and use technology; usability of



technology to enable citizens to access information; accessibility of all, including modifications

for those with disabilities and functionality where the design includes features users want to see.

This literature review explains and summarizes all sources as they pertain to local

government agencies and their transparency efforts when it comes to sharing financial

transactions and the municipal budget with the local community, media, and other arms of the

government. The study uses a mixed approach of both qualitative and quantitative research

methods and therefore allows for the reshuffling of information, alternative interpretations, and

the progression of the study.

The Research Team

This study consists of a research team of four professional MPA candidates who study,

review, analyze, and report on three Texas government agencies and the transparency efforts and

methods used to keep the public informed on the financial transactions and the municipal budget.

Criteria

The research team studied three types of local government agencies and based it on the

following criteria: (1) Bigger cities, which have a population of 6,000 or more; (2) Smaller

cities/towns/places/villages, which have a population between 1,000 and 6,000; and (3) Very

small towns and villages, which have a population of 1,000 or less. The three cities selected for

this study are:

• Houston, Texas – A bigger city with a population of 2,160,821.

• South Padre Island, Texas – A smaller city with a population of 2,896.

• Bandera, Texas – A very small town with a population of 856.



Empirical Data Collection

Empirical data findings are evident in this study. The data being collected and reviewed

from all three local government agencies follows state mandated actions and recommendations,

ordinances and compliances as posted by the State of Texas and other supporting organizations.

Reporting

After studying each local government agency, the research team presents a report of all

findings and recommendations. The research team uses a mixed approach of both qualitative and

quantitative processes to gather both statistical and informal data to report on the transparency

efforts and methods of the agencies being studied.



Transparency Measures

Most government agencies are taking measures to strategize processes such as

accountability of all financials, develop approaches and methods to report revenue, and

standardized or state mandate practices, and actions to ensure ethical budgetary practices and the

trust in the leaders.

1) Government Accountability – Agencies are gradually holding themselves accountable

to the community of all their financial transactions.

2) Actual Method – Agencies are moving towards implementing accounting methods to

report revenues on the income statement. Under the cash basis of accounting, revenues

are reported on the income statement when the cash is received. Under the accrual basis

of accounting, expenses are matched with the related revenues and/or are reported when

the expense occurs, not when the cash is paid. The result of accrual accounting is an

income statement that better measures all budgetary expenses.

3) Standardization – Agencies are gradually standardizing by following state mandated

recommendations, and developing and implementing standardize information systems to

communicate information by working together with Information Technology and

Communications departments.

4) Actions / Results – Agencies that are taking action and implementing transparency are

quickly noticing the results are a well-kept community, trust in the leadership, and builds

values, integrity and ethical practices of the public service officials.

5) Citizen Engagement – Agencies are using social media and the Internet to engage and

collaborate with their citizens.



Methodology

Agencies that adopt organizational methodology practices, recommendations and

standards can focus more on the tasks of leading, innovating and delivering products and

services, while improving efficiency and performance. Below are eight key organizations who

help agencies administer transparency by recommending, educating and awarding, rating, or

monitoring governmental financials and transparency efforts and methods.

Texas Comptroller of Public Accounts Office

www.Texastranparency.org

Agencies are adapting the transparency efforts as posted on the Texas Comptroller of

Public Accounts' Texas Transparency website www.texastransparency.org, which provides

detailed information about state spending, downloadable datasets and reports, links to local

government transparency efforts, and general information about the state budget process.

American Legislative Exchange Council (ALEC)

www.alec.org

Through the adaptation of the Local Government Transparency Act, ALEC requires that

a unit of local government or school district having an annual budget equal to, or more than,

$500,000 must maintain and post on its website for the current calendar or fiscal year, as the case

may be, and the 4 years immediately before that calendar or fiscal year.

http://www.texastranparency.org/

http://www.texastransparency.org/

http://www.alec.org/



Texas Municipal League (TML)

www.tml.org

TML provides a forum in which city officials can study municipal issues, network with

their counterparts from across the state, meet with vendors who provide services and products to

cities, hear from speakers who have timely and important information, and exchange ideas. It

offers participating agencies open government training, certification, transparency and leadership

recognition awards.

Texas City Managers’ Association (TCMA)

www.tcma.org

TCMA offers leadership

development, advocacy for a Council-

Mayor form of government, education

and training on uniformity and

consistency, and membership allows

access and collaboration with other

agency professionals and social media

which allows for better citizen

engagement and current information.

TCMA recognizes and awards agencies that become more transparent.

http://www.tml.org/



International City Managers’ Association (ICMA)

www.icma.org

ICMA advocates that a transparent governance means that government officials act

openly, with citizens’ knowledge of the decisions the officials are making. Availability of

information on government policies and actions, a clear sense of organizational responsibility,

and an assurance that governments are efficiently administered and free of systemic corruption

are important components of transparent governance.

ICMA educates and offers the tools like Performance Measurement to help local

government agencies become more transparency by helping build the flow of adequate

information, strong civil society, effective and transparent financial management systems, and

procurement regulations that keep the bidding process fair and open. (Reform, Ethics & Code

Enforcement, Open Budget and Procurement Process, Citizen Involvement or Services

Delivered. ICMA has developed an approach and methodology based on five elements that are

critical to success:

1) Political will at the highest levels of leadership

2) Integrity in local government systems

3) A culture of information sharing

4) Continuous monitoring and evaluation

5) The promotion of an ethic of public service

http://www.icma.org/



International Public Sector Accounting Standards (IPSAS)

www.ipsas.org

IPSAS offers agencies standardized accounting practices and accrual-based standards

used for the preparation of general purpose financial statements by governments and other public

sector entities around the world. These standards aim to enhance the quality, consistency, and

transparency of public sector financial reporting.

Bond Ratings (Moody’s, Fitch, Standard & Poor)

www.moody.com / www.fitch.com / www.standardandpoor.com

Local governments hire bond rating companies like Moody’s, Fitch and Standard & Poor

to review their municipal finances, governance and management. When a rating company awards

a high bond rating, this means that the budget is stable and predictable, thus making it safer for

conducting business with the local government.

National Association of Government Web Professionals (NAGW)

www.nagw.org

NAGW offers government agencies affordable membership, networking, and a national

conference that provides education and awards the best city websites with the prestigious

Pinnacle Award – This award is selected by the board members and judges teamwork, content,

organization, design, performance, accessibility, standards, and interactivity.

http://www.ipsas.org/

http://www.moody.com/

http://www.fitch.com/

http://www.standardandpoor.com/

http://www.nagw.org/



Communications Methods

Local government agencies are implementing information technology methods to

communicate information to the public, such as the Internet, cloud computing, mobile and smart

devices, social media apps, mobile web, local access channel, instant messaging systems, and

other forms of communications systems to keep the community informed of their financial

activity.

The Case Studies

The research team carefully studied, analyzed and reported the transparency efforts and

initiatives of three local government agencies of Texas (Houston, South Padre Island, and

Bandera). The team conducted a statistical analysis and reviewed each city’s communications

sources used to collaborate information with the public, budget documents and reports accessible

to the community, and organizational hierarchy and management style of each agency.



Houston, TX

www.houstontx.gov

Fiscal / Financial Responsibility

The City of Houston receives an A- or 88 points for

transparency. With a population of 2.1 million, it has established

an eGovernment Center dedicated to making more services

available online through the tools and information offered via the

web 24 hours. From a financial point of view, the city has

adopted five priorities to ensure “Fiscal Responsibility”. For

more information go to http://www.houstontx.gov/mayor/Fiscal-

Responsibility.

1) Jobs and Sustainable Development

2) Public Safety

3) Infrastructure

4) Quality of Life and

5) Fiscal Responsibility

http://www.houstontx.gov/

http://www.houstontx.gov/mayor/Fiscal-Responsibility

http://www.houstontx.gov/mayor/Fiscal-Responsibility



Performance Measurement

The City of Houston has implemented a Performance Improvement Portal, a division

which partners with City departments to identify opportunity, eliminate waste, and provide

internal consulting services. It offers the following methods to measure performance:

Performance Reporting via Publications

Open Data & Civic Innovation – Accessible information to the public.

One Houston - Adopt simple, cost-saving measures to employees’ life.

Improvement Projects – Offers training and improvements for employees.

Lean Six Sigma Program – Offers Six Sigma Methodologies training.

Strategy - Actions using performance measures to track progress.

http://data.ohouston.org/

http://performance.houstontx.gov/onehouston

http://performance.houstontx.gov/content/performance-improvement-projects

http://performance.houstontx.gov/content/lean-six-sigma-training

http://performance.houstontx.gov/strategy

http://performance.houstontx.gov/publications



Statistical Analysis

The research team conducted an analysis of the City of Houston’s, communication

sources, budget documents, and organizational structure. The initial hypothesis: larger cities with

higher budgets are capable of allocating more money, time and efforts into transparency in their

municipal budgets. True: Houston had the highest weighted score of 88/100.

South Padre Island, TX

www.myspi.gov

The City of South Padre Island, Texas receives a B or 66 points for transparency. SPI,

takes pride in their transparency and community involvement by allowing members of the local

community to get involved in the following boards and committees:

1) Board of Adjustments

2) Board of Ethics

3) Convention and Visitors Advisory Board

4) Convention and Visitors Transition Board

5) Development Standards Review Task Force

6) Economic Development Corporation

7) Historical Preservation Committee

8) Keep SPI Beautiful Committee

9) Parks, Recreation & Beautification Committee

10) Planning and Zoning Commission

11) Shoreline Task Force

http://www.myspi.gov/




The research team conducted an analysis of the City of South Padre Island’s communication

sources, budget documents, and organizational structure. The initial hypothesis: smaller cities

with a smaller budget are less capable of allocating funds, time and efforts into transparency in

their municipal budgets. South Padre, with a limited budget received a weighted score of 66/100.

Bandera, TX

www.cityofbandera.org

The City of Bandera, TX receives a C+ or 66 points for transparency. According to Texas

Transparency or www.texastransparency.org, the City of Bandera is taking measures to educate

the leaders, employees, and community on eGovernment and transparency. Such methods

currently in place are:

1) Recent Bond Election

2) Tax-Support Debt

3) Comprehensive Annual Budget Report


The research team conducted an analysis of the City of Bandera’s communication sources,

budget documents, and organizational structure. The initial hypothesis: a city with a very small

budget and staff is less capable of allocating funds, time and efforts into transparency in their

municipal budgets. Bandera received a weighted score of 66/100.

http://www.cityofbandera.org/

http://www.texastransparency.org/



Findings and Recommendations

The research team concludes this study by reporting findings and making

recommendations. The study shows

that in order to compete with other

municipalities, local governments,

regardless of size, have to educate the

leadership, staff, and community on

transparency. By being an open

government the city gains trust and

credibility of their leaders and elected officials. To achieve the transparency of communication,

agencies should make their information:

Portable and Expandable– Information should be portable and allow for

expansion and must be accessible via mobile web, smart devices and apps.

Reusable Technology – Using existing technologies to communicate your

information to the public.

Support and Collaboration – By collaborating and engaging with the community,

trust and ethics are built and credibility and support of the leadership.

Provide Training of EGovernment – Agencies have the option of using the many

trainings and certification programs offered by organizations like TML, ICAM

and NAGW.



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