Learn Current Trends and Important Developments in Public Finance at GFOA’s Annual Conference
If you’re not yet registered, take advantage of the following opportunities:
- A special discounted registration fee of $380 is available for GFOA’s state and provincial representatives and presidents. To receive the discount, submit the conference registration form and write “State/Provincial GFOA President or Representative” on the form.
- Encourage your national GFOA government members who have never attended GFOA’s annual conference to apply for a first-time annual conference attendee scholarship. Fifty scholarships are available per state or province — view a list of how many scholarships have been awarded (current as of 3/29/2017). Please note that all 50 scholarships are committed for the States of California and Colorado.
If you have any questions about the Annual Conference, contact GFOA.
Will Your Organization Be Holding a Meeting or Social Event at the Annual Conference?
If so, please forward your invitation or e-mail the date, time, and location of your event as well as the name, phone number, and e-mail address of your main contact to Kate Southard. We will have a listing of events available at the Message Center onsite in Denver.
NOTE: We ask that your social events not conflict with any GFOA sessions or social events. Open nights to host a hospitality event are: Saturday, May 20, after 5:00 pm; Sunday, May 21, after 8:00 pm; and Monday, May 22, after 6:30 pm.
RSVP for GFOA’s State/Provincial Representatives and Presidents Meeting
This year’s meeting will take place on Saturday, May 20, 3:00–4:00 pm, in the Colorado Convention Center (Room # TBA). Please attend this meeting to learn more about GFOA’s activities and to share information with your fellow state/provincial GFOA colleagues.
E-mail your RSVP for the meeting and send any suggested topics for roundtable discussions to add to the meeting’s agenda to Natalie Laudadio. Last year’s discussions covered the following topics: describe your working relationships with neighboring finance officers associations; discuss the most commonly expressed need you hear from your members; and implementing GFOA’s awards programs. A finalized agenda will be distributed before the meeting.
See you in Denver!
What are the Latest Practices in Accounting, Budget, and Treasury?
Sign up to participate in one or more of the following courses, June 26-29, at the Renaissance Columbus Downtown Hotel in Columbus, Ohio:
- Accounting for Capital Assets – June 26
- Treasury Management Best Practices – June 26
- Managing the Budget Process – June 26
- Preparing a CAFR – June 27
- Data Analysis – June 27-28
- Advanced Financial Reporting – June 28-29
- Capital Budgeting and Infrastructure Finance – June 28-29
Save 10 percent on the registration fee when you sign up and pay in full by May 26. If you register with three or more colleagues for the same seminar, you will receive 10 percent off of each registration fee. (To receive the group discount, registrations must be received and paid together. This discount cannot be applied to online training registrations.) Register today! (Registration form / Online)
A block of rooms has been reserved for GFOA attendees at the Renaissance Columbus Downtown Hotel. Based on availability, GFOA’s group rate is valid until June 4. Click here for more information about available rates.
We look forward to seeing you in Columbus! For information on what to do while in Columbus, visit Experience Columbus. If you have any questions about GFOA’s training seminars, contact GFOA.
Maximizing the Influence of Your Financial Forecast
Part 1: Forecaster Credibility
Forecasting revenues is a fundamental part of budgeting and financial planning. Revenue forecasts allow public officials to anticipate resource availability and plan accordingly for things like enhancing services to the community, changing the salaries and benefits of public employees, and adjusting tax rates. Governments use 12- to 18-month forecasts to develop budgets that are balanced and affordable. They use longer-term forecasts to analyze the financial sustainability of existing policies and programs, and to provide warning about potential imbalances in the government’s financial future. A forecast provides a shared basis for discussion about what the fiscal future might look like and what actions can be taken. In the absence of a formal forecast, a common assumption is that the future will not be much different than the past – an assumption that could be seriously flawed.
That said, to paraphrase Nobel Prize-winning physicist Niels Bohr (who said “Forecasting is very difficult, especially if it is about the future”), forecasting is not without its challenges. One of the biggest challenges is that forecasts are often not effective in influencing financial decisions. Frequently, decision makers are much more strongly influenced by other factors. A forecast is not effective at influencing decisions just by virtue of its accuracy and reliability. These elements are necessary and important, but alone they are not sufficiently effective. This article examines several strategies you can use to boost the utility of your forecast.
Establishing the forecaster’s credibility is essential because decision makers are more likely to use a forecast from a trustworthy source (and less likely to use a forecast from a disreputable source). Therefore, a good place to boost the utility of your forecast is to build credibility. Even if you don’t have a credibility problem, more credibility is never a bad thing. In any case, research suggests that people generally overestimate how trustworthy and credible they seem to other people.
Understand Your Audience. A forecaster who demonstrates an understanding of the audience’s concerns and needs will seem more credible. Common questions about a revenue forecast might include: What are the implications for constituents’ tax bills? Can we lower taxes? What is the impact on high-priority (often capital) projects? Can we afford improvements or augmentations to a high-priority service? Are our current services and obligations affordable into the future?
One way to cement an understanding of the audience’s concerns is to discuss them directly. For example, in the City of Sunnyvale, California, staff met with elected officials to review the city’s long-term forecasts in study sessions, rather than the regular council meetings. This allowed the elected officials to ask questions and exchange ideas with staff about key forecast assumptions before it was presented at the city’s council meetings. Staff was then able to fine-tune the forecast presentation, which a) better aligned the forecast presentation to the informational needs of elected officials, and b) demonstrated to elected officials that staff took their questions and concerns seriously. For example, elected officials were often curious about how new growth and development projects would affect the city’s tax revenues. The informal meetings gave the council and staff the opportunity to discuss the point at which new development would be included in the forecasts versus when it was too speculative to be included. Because there were differences of opinion on this question, the less formal meetings allowed for a more relaxed discussion than might have been possible in regular council meetings.
Know the Facts. Having a substantive command of the facts underlying revenue performance builds the forecaster’s credibility. The details a forecaster should know will depend on the community. For example, the City of Palo Alto, California, has a population of about 66,000 and is located at the epicenter of Silicon Valley. Palo Alto’s staff remains abreast of the health in the Silicon Valley economy in general, and growth in venture capital activity in particular because those measures have been reliable indicators of the economic activities that will affect Palo Alto’s revenue sources. Palo Alto also pays close attention to microeconomic statistics. For instance, one of the city’s revenue sources is a tax on hotel occupancy, so it monitors room rates, occupancy rates, and the construction of new rooms.
The City of Houston, Texas, is the fourth-largest city in the United States, so it wouldn’t be practical for Houston’s forecasters to achieve the level of granularity that a smaller government like Palo Alto might need. However, Houston does conduct detailed examinations of key industries in the local economy like oil and gas, as well as other indicators of economic performance that foreshadow revenue yields. As a result, though Houston’s staff may not have the same level of detail as a smaller city, they can still credibly demonstrate their knowledge of the environment.
The forecaster should translate a strong knowledge of the environment into a set of assumptions about the financial and economic environment that underlay the forecast. The assumptions should rely on objective information that is relevant to the factors that drive revenue yield. To the extent possible, the assumptions should also be compared to forecasts or analysis performed by credible third-party experts such as consultants or universities. Differences may increase credibility if there are clear local circumstances that merit a difference from regional trends – this shows the forecaster’s knowledge of the environment. If a third party’s analysis is directly relevant to the circumstances of the forecaster’s organization, then similarities between assumptions can also increase credibility, as the forecaster is thus shown to not have biases that cause him or her to deviate from what other analysts examining a similar question have found.
Acknowledge Uncertainty. A forecaster can maintain credibility while acknowledging uncertainty around the assumptions. In fact, acknowledging uncertainty can strengthen the forecast. The forecaster for the City of Manhattan, Kansas, labels particularly uncertain assumptions “wild cards” and demonstrates for the audience how different outcomes in the wild-card assumptions could raise or reduce city revenue. This helps decision makers prepare for outcomes that differ from the baseline forecast.
Decide If You Want to Adopt a Conservative Approach. One of the toughest issues in maintaining credibility as a forecaster is making “conservative” versus “objective” forecasts. A conservative forecast systematically underestimates revenues in order to reduce the danger of budgeting more spending than actual revenues prove able to support. An objective forecast seeks to estimate revenues as accurately as possible, with the goal of making optimal use of all available resources—but it also carries a higher risk of being too optimistic (which could lead to budgetary shortfalls during the fiscal year). Governments with highly effective forecasts are almost evenly split in describing their forecasting approaches as objective or conservative, with a slight tilt toward “objective,” on the whole. While these governments had two different philosophies among these governments, there was one important commonality: The decision to be objective or conservative was explicit and consistent with the goals and expectations of the governing board.
For example, in the case of the conservative forecasters, the governing boards have a clear preference for end-of-year surpluses that could be put toward building reserves or paying for capital projects. There is an expectation, then, that actual revenues will exceed what was budgeted, so when they do, no one is shocked or disappointed and the forecaster maintains credibility. However, for governments where the board does not have this same preference, a conservative forecast could lead to credibility problems. If actual revenues consistently exceed forecasts, decision makers may come to feel that the forecaster is unreliable or, at worst, manipulative. In recent years, one government that experienced this challenge has moved toward more objective forecasts to be in line with the preferences of the governing board. Before that, when the finance staff produced conservative forecasts, some board members felt that that the finance office was “playing games” with the budget.
Of course, an objective forecast could also harm a forecaster’s credibility, especially if the forecast is too high and the government is forced make painful budget cuts. Governments with effective forecasts and an objective forecast philosophy adopt a number of strategies to mitigate the risk posed by shortfalls (e.g., contingency accounts, short-term revenue monitoring, etc.) and maintain credibility.
This article is adapted from Informed Decision-Making through Forecasting: A Practitioner’s Guide to Government Revenue Analysis, by Shayne Kavanagh and Daniel Williams (GFOA: December 2016). For more information, contact Shayne Kavanagh.
Improve Financial Decision-Making
The purpose of a forecast is to inform financial decision-making. Public finance managers often find that decision-makers don’t give forecasts the weight in decision-making that they should. GFOA’s new publication, Informed Decision-Making through Forecasting: A Practitioner’s Guide to Government Revenue Analysis, describes how public finance managers can make a forecast resonate with its audience.
Certified Public Finance Officers (CPFOs) Testing at GFOA’s Annual Conference
The CPFO Program of GFOA is a broad educational self-study program designed to verify knowledge in the disciplines of government finance. Attaining certification is a mark of excellence in government finance. To earn the CPFO designation, candidates must pass a series of five examinations covering the major disciplines of public finance.
The CPFO exams will be available at GFOA’s Annual Conference in Denver, Colorado, on Saturday, May 20 in the afternoon, and Sunday, May 21 in the morning. They are also currently available this spring.
GFOA Awards Program Update
GFOA encourages and recognizes excellence in financial reporting, budgeting, and financial management by granting awards to those governments that meet program standards. Below is the latest Program update:
- Complete list of award winners for the Certificate of Achievement for Excellence in Financial Reporting Program (CAFR Program)
Congratulations to the 4,231 entities that have received the Certificate of Achievement for Excellence in Financial Reporting in 2016 for the fiscal year ended 2015 comprehensive annual financial reports (CAFRs). The complete list of the winners has been posted to GFOA’s website and can be viewed here. We would also like to thank the reviewers in the CAFR Program for volunteering their time to review reports in 2015. The list of the reviewers have also been posted to GFOA’s website and can be viewed here.
GFOA established the CAFR Program in 1945 to encourage and assist state and local governments to go beyond the minimum requirements of generally accepted accounting principles to prepare comprehensive annual financial reports that evidence the spirit of transparency and full disclosure and then to recognize individual governments that succeed in achieving that goal. More than 4,200 governments, participate in the program each year, including all types (general purpose and special purpose) and sizes.
Click here if you are interested in participating in the CAFR Program or serving as a reviewer.
- GFOA’s Budget Awards Programs
GFOA’s Distinguished Budget Presentation Award Program Surpasses 1,600 Submissions
GFOA’s Budget Awards Program has just surpassed 1,600 submissions. Your participation in the program has not only contributed to its growth, but to advancing the public finance profession.
A list of award winners for 2015 and 2016 are available on GFOA’s website. (Click here to view a list of governments in your state that earned GFOA’s Budget Award in February 2017.) The listing of winners is accompanied by a PDF of their award-winning budget document. In addition, the list of winners identifies budget documents that received special recognition from GFOA for their effective use of performance measures or for their success at integrating information on the capital component of the budget. Thank you to the program’s more than 550 reviewers.
For information about the Distinguished Budget Presentation Award Program, contact John Fishbein.
Award for Best Practices in School Budgeting
GFOA is offering a new budget award specifically for school districts centered on the complete budget process – the Award for Best Practices in School Budgeting. The new award includes the entire budget process – including the budget document. Included within the recommended framework are steps to improve alignment with district strategic priorities, better integration with long-term planning, and enhanced stakeholder engagement. GFOA has numerous resources and guidelines available to support improving your budget process and also working towards the award. For more information on the award, click here. Additional information to support implementation, including numerous free resources, can be found at the PK-12 Budget Resource Center and at Smarter School Spending.
- Popular Annual Financial Reporting (PAFR) Award Program
GFOA would like to congratulate the 362 entities for successfully achieving the Popular Annual Financial Reporting Award in 2016 for annual financial reports with fiscal years ended in 2015. We would also like to thank the reviewers for their invaluable contributions in reviewing reports in 2016. Click here for the complete list of the winners. Click here for the list of reviewers.
Do you have an Upcoming Annual Conference?
If so, please fill out the “GFOA Promotional Items” form, checking off any materials you are interested in receiving for your upcoming annual conference. The form is interactive, so you can type and save your changes directly to the document. Submit the completed form at least two months before your event to Kate Southard. Please note: raffle items are limited to annual conferences.
If your state or provincial association has any new educational or mentor programs to promote or events at your annual conference to connect fellow finance officers and advance the profession, we will share the information in this monthly memorandum. Please send a brief description of your program to Natalie Laudadio.