Special District Governments: The Accountability Frontier

1. AAA Government and Non-Profit Section Larita J. Killian, Ed.D., CPA Indiana University at Columbus Special District Governments:The Accountability Frontier

2. Overview • Growth of special districts • Major advances in performance reporting and accountability • Why special districts are a concern • Disconnect: Indiana example • Suggested research agenda

3. Special Districts Defined • US Census Bureau criteria • Exist as organized entity • Governmental character • Substantial autonomy • Plus 7 “disqualifiers”

4. Business of Special Districts • Small – cemeteries and diking districts • Large - ports, regional utilities and transportation systems • Over 90% serve a single function • Multiple functions often relate to water • Most common = Natural resources • Flood control, irrigation, conservation • Second most common – Fire districts Source: US Census Bureau Census of Governments, 2002, Volume 1, “Government Organization”

5. Explosive Growth • 284% increase in special districts • 12,340 (1952) to 35,052 (2002) • Opposite trend for other government forms • Lessons learned • NOT homogenous subject • Diverse in scope and financing Source: US Census Bureau Census of Governments, 2002, Volume 1, “Government Organization”

6. Growth in Special Districts: 1952-2002 Source of data: US Census Bureau Census of Governments, 2002, Volume 1, “Government Organization”

7. Advances in Accountability: GASB • 1987 • “The taxpayer has a right to know” • 1994 • “SEA reporting …to provide more complete information about an entity’s performance” • 2003 • Suggested Criteria for performance reporting

8. Advances in Accountability: AGA • SEA awards • Certificate of Excellence in Service Efforts and Accomplishments Reporting • No special districts among 15 winners, some repeats (caveat) • Citizen-Centric reporting program • Encourages and publishes 4-page reports that answer, “Are we better off today than we were last year?” • A debatable advance

9. Sidebar: Example US Government Citizen-Centric Report FY2007 Outlays by National Objective (in billions) To establish justice 39.8 1% To ensure domestic tranquility 30.4 1% To provide for the common defense 674.5 23% To promote the general welfare 1,795.7 62% To secure the blessings of liberty 369.6 13% Total Outlays – Accrual Basis $2,910.0 100% Unofficial report prepared by Financial Management Services, Inc

10. Other Performance Reporting Promoters • American Accounting Association • Slaon Foundation • International City/County Management Association • IBM Endowment for the Business of Government

11. Why Special District Accountability is a Concern • Less visible and less responsive to general public • Some consider this a positive value • Ability to incur debt and other long-term liabilities away from public view

12. Why Special District Accountability is a Concern “Too many entities issuing too much debt.” Grady Patterson, former So. Caroline Treasurer “When government becomes more cumbersome, redundant and complex, both accountability and efficiency suffer.” ICLGR, 2007

13. Disconnect: Indiana Example • Indiana Commission on Local Government Reform • Gov. Mitch Daniels • Focus on Townships • Final report 12/2007 “Recommend changes to structure, organization, and number of local government units to achieve efficiencies and reduce financial burden.”

14. Excerpts: ICLGR Final Report • Redundancy, overlapping jurisdictions, and confused lines of government authority impede efficiency and the basic ability of citizens to hold government accountable. • We have spent the last six months asking whether Indiana’s patchwork of local government delivers the most effective service at the lowest possible expense. The answer is NO.

15. Excerpts: ICLGR Final Report • Moreover, it is all so complicated that voters and taxpayers have an extremely difficult time maneuvering their way through the maze and making their will felt. • Only elected officials should have the power to levy taxes.

16. Excerpts: ICLGR Final Report • When it comes to local government in Indiana, few of us know where the buck stops. Our many complex layers of government are often difficult to understand, monitor and hold accountable.

17. As Reported: ICLGR Type Number Townships 1,008 Special Districts 886 Towns 451 Schools 293 Libraries 239 Cities 117 Counties 92

18. As Classified - US Census Bureau ICLGR Report Townships 1,008 Special Districts 886 Towns 451 Schools 293 Libraries 239 Cities 117 Counties 92 With Census Classification Townships 1,008 Special Districts 1,125 Towns 451 Schools 293 Cities 117 Counties 92

19. Suggested Research Areas What local factors mitigate for - against creation of special districts? “Almost all local government services in New York City are classified as part of the city government (the school system, several libraries, transit, and so forth). There are more than 100 dependent agencies in New York City alone. By contrast, many of these services in Chicago are classified as functions of independent school district or special district governments.” Source of data: US Census Bureau Census of Governments, 2002, Volume 1, “Government Organization”

20. Suggested Research Areas • Do performance reporting practices of special districts differ by subtype? • Recommend improvements

21. Suggested Research Areas • What is the public’s level of awareness of special districts as compared to general purpose districts? • Are special districts truly less visible and less subject to competitive political processes?

22. Suggested Research Areas • Are services more or less costly when performed by special district governments as compared to general purpose governments ?

23. Suggested Research Areas • How does the growth of special district governments impact overall governmental accountability?

24. Thank you Larita J. Killian. Ed.D., CPA Indiana University at Columbus 812.348-7219 ljkillia@iupuc.edu