Category: Administration

Crowdsourcing for Local Governments: Research Review

Research Review is a place for me to bring you academic research that I think might be of interest or relevant to you all.  It is not necessarily the Cliff notes of the paper, but it will present some key findings or insights from the paper.

In this installment of Research Review I am going to talk to you about crowdsourcing government services via the paper “A Framework for Using Crowdsourcing in Government” (Clark, Zingale, Logan, and Brudney 2016).

So first things first, what is crowdsourcing?  The authors define it as: “Crowdsourcing is a general term used to describe a variety of ways that organizations, particularly in the for-profit sector, take advantage of the thoughts, inputs and ideas of the public” (pg 57). These days that usually means through the internet and/or phone.

The authors characterize crowdsourcing as being less organized and focused than typical workgroups and that they tend to be used for gathering lower level ideas and suggestions—not to say that they are not important, just not necessarily “big picture.”  Of course the crowd matters too. There are times it makes sense to involve everyone, there are times that it does not.  One advantage is that there can be some internal policing and vetting of ideas amongst the participants which can help eliminate biases.  Biases that professional and technical training may inadvertently create or those that may be driven by experiences or status.   While this policing may happen naturally, effective crowdsourcing will also require an administrator (or moderator) of the platform and information.  This administrator will need to understand the issue at hand, have some technical expertise, and what sort of information and input is desired from the crowdsourcing endeavor.

One of the success stories of crowdsourcing is through 311.  There have been some great examples of where online platforms or even webapps have allowed citizens to report problems like potholes or dead trees in the street.  For example, “New York City residents can now take advantage of an innovative Internet platform that combines the instant effects of crowdsourcing with a hobby that many residents like to do – complaining” (full article).

Am I the only who is thinking of Pokémon Go for local governments?  Find three potholes and earn the road warrior badge!  Ride the public bus five times and earn a pine tree hugger badge, ride it 25 times and you can evolve it into a redwood hugger badge!  This is what people like my husband (i.e., nerds) would call gamification and it is pretty popular right now too!

 

But I digress.  These 311 apps have been a great way for helping local governments monitor outages, the need for repairs, and  other problems.  While someone on the government side still needs to sift through all the reports and data and then have a crew go address the problem, it has been successful at identifying needs.

Crowdsourcing is beginning to be implemented by local governments, but there is still room to do more.  The question is how and when and WHAT.  That is where this paper is helpful.  It presents a basic framework to begin to think about these issues.

They develop a framework based on the type of problem, then translating it into what sort of process and feedback you might want to solicit, and then some of the issues with that process.  Once that is laid out, they go into brief case studies to illustrate the points.

This first figure is how they present their initial framework.  It allows for you to identify whether you have a complex or simple problem and the level of expertise you need and the diversity of thought you want.

They further flesh it out through this typology.  You can see under the column labeled “Our Analytical Framework” how this second figure corresponds to the first.  What is SO helpful about this second figure is that it gives a quick and dirty guide to ways in which an organization can crowdsource and some of the issues you should consider.

This all sounds great right?  Well it can be, but the paper highlights numerous issues.  I will highlight one here, transaction costs.  “Transactions costs, in the economic tradition, are the costs of finding partners, negotiating with them, and enforcing the contract you have agreed to. Each interaction between citizen and government incurs a cost on either or both parties. The higher the transaction cost is, the more difficult it will be for citizens and government to collaborate. In government crowdsourcing all three types of transaction costs are present: search and information costs (finding partners/collaborators/information), bargaining costs (negotiating the relationship), and policing and enforcement costs (assuring the contract is carried according to the negotiations)” (page 59).  These costs may not always be obvious and the first that are considered when government begins the process of exploring crowdsourcing—but they are critical.

What are the primary takeaways? They conclude with three themes they believe will help government understand and implement effective crowdsourcing.

  1. Lower the transaction costs. Yup, back to this one. They specifically identify lowering the costs to participants (though government matters too).  One way to do this is to take more complex problems and make them into smaller more discrete pieces.  Let citizens easily navigate themselves to the problems where they want to help and feel like they can help.
  2. Make sure you say thank you to participants. You need to acknowledge their contributions with a thank you and some visible evidence that their feedback is being used. So if you are playing Pokémon Go and they find potholes, then let them know when they have been filled and thank them for their assistance! 
  3. Recognize and emphasize that crowdsourcing does not replace what government has been doing, it adds to it.  You still need your experts and there are places where that expertise trumps all outside input.  That does not mean encouraging skepticism, the authors point to evidence that the wisdom of the crowds can be high quality and useful to government.

Thoughts?  Have you all tried any crowdsourcing?  How did it go?  What problems did you encounter?  What successes did you have?  Please comment and share.  Let’s crowdsource this conversation!

 

 

 

Benjamin Y. Clark, Nicholas Zingale, Joseph Logan, & Jeffrey Brudney. (2016) “A Framework for Using Crowdsourcing in Government.” International Journal of Public Administration in the Digital Age, 3(4): 57-75.

Abstract:

Crowdsourcing is a concept in which the crowd is used as a source of labor, idea generation, or problem identification. Crowdsourcing originated in the private sector; though with any good private sector practice it is increasingly being utilized in government. This paper provides an overview of the concept of crowdsourcing, gives examples of its use in the private and public sectors, and develops a framework for how governments can begin to strategize and think about crowdsourcing to solve problems when engaging with citizens. The authors’ framework is illustrated with a number of cases from current or past uses of crowdsourcing in government. They conclude with important considerations about how governments should strategize their crowdsourcing efforts.

 

There are two sides to every coin: Or is there Common Sense about Cost Accounting in Government?

In the 1990s there was a wave of euphoria about cost accounting and particularly Activity Based Costing (ABC).  One book in particular stands out in my mind as particularly euphoric: Common Cents: The ABC Performance Breakthrough by Stephen Turney.  While it had a clever title, few people remember this book now, but many people remember ABC.  Many finance and budget managers do not recall ABC with fondness.  In fact, when government budget and finance managers are asked about the use of ABC in their organizations now, most will say that they are not using it.  However, when asked if they are doing some form of cost accounting, the measure is much higher.  In this post, I explore why budget and finance managers are willing to say that they are doing cost accounting and not ABC.  I further explore (and mix) the metaphor of common sense/cents about cost accounting by thinking of its uses as two sides of the same coin.

Some background on cost accounting…

Cost accounting is the measurement and use of both direct and indirect cost information for an organizational purpose like rate setting, grant overhead recovery, performance measurement or cost management. For private businesses, cost accounting is essential for pricing goods and services.  In government, cost accounting has many uses as well.  It can be used to price goods as businesses do, to collect overhead for grants, and to improve performance measurement systems.  These are all beneficial uses that are broadly supported by most organizations. The other side of the coin is that cost accounting can be used for intensive cost management purposes, but these uses may generate resistance in organizations. Intensive cost management such as contracting out services and service cutbacks or eliminations can generate resistance from employees.  It is important for managers and budget officers that are looking to use cost accounting for the first time, or more intensively, to consider both sides of the coin and plan accordingly.


The easy side of the cost accounting coin

– Collecting grant overhead

– Accurately price goods or services

– Improve performance management systems

In my research and as described in my forthcoming edited book, cost accounting has many acknowledged uses in government.  The oldest use of cost accounting was to collect grant overhead costs from the federal government as described in the A-87 circular.  The benefit of A-87 cost accounting is that when local governments provide federal services that they should be able to charge indirect costs like HR, IT, and Accounting costs to the grant so that the local government does not have to subsidize services that are most appropriately paid for by the federal government.

Cost accounting also has an important place in accurately pricing goods and services that government “sells” to consumers.  Like federal grants, services that are sold to private consumers need to have indirect costs added into them so that the general tax is not unintentionally subsidizing the service.  Finally, cost accounting is important for performance management systems.  The work of the North Carolina Benchmarking Program most directly speaks to this issue.  Without cost accounting, we cannot be sure if performance differences come from differences in processes that we can learn from or whether they come from simple differences in resources.  Generally, few people inside an organization object to these purposes and may readily assist if they believe that it can be used to generate new revenues for their programs.

The difficult side of the cost accounting coin

– Contracting out services

– Service cutbacks and eliminations

– Overhead cost management

 

Cost accounting also has some more difficult uses.  I suggest that these are difficult only because they are difficult for people in the organization.  Analysts and managers have told me that people believe that when the government starts collecting data on the “full” cost of services they think that sweet Ms. Betty in Animal Licenses is going to lose her job.  They believe this because cost accounting allows governments to more accurately estimate the benefit associated with contracting or eliminating services.  If we only look at the budgeted costs of a services like animal licensing, we leave out important indirect costs or the budgeted cost is aggregated at such a level that it obscures the individual cost of services.  So, cost accounting can be used to both combine direct and indirect costs and track expenses at a more granular level, which becomes very beneficial for contracting and service analysis.

Cost accounting also often shows that building space, which is an often untracked overhead expense in the budget, is an important cost of services.  If the cost of building space is added into the cost estimate, the service managers often have to justify the high cost of the space for things like storage.  This is something that managers do not want to have to justify and defend.

The improved ability to evaluate contracting, service elimination, and overhead cost management are all important and appropriate uses of cost accounting from the budget officer’s perspective. However, this side of the coin may appear negative from the employee and service manager’s perspective, and organizational resistance may ensue.  Often this resistance is seen in the form of service managers focusing on the excessive time and data requirements of cost accounting.

 

My common sense suggestions about both sides of the cost accounting coin

The previous discussion of the “other” side of the coin that generates resistance in the organization has suggested why cost accounting (and ABC in particular) has been limited in government.  If the resistance hypothesis is correct, then the next question is what can be done about it? In my forthcoming edited book and in my dissertation (found here: see chapter 3 in particular), I note that the cost accounting used in practice by local governments is not completely an ABC cost accounting system, which may help this problem of resistance and minimize the time and data requirements.  I call this development “hybrid” cost accounting.  These hybrid cost accounting systems are neither very basic or exactly like ABC.  They have a mix of basic and specific cost drivers, the level of cost is passed down to some broad programs and some very specific activities, and that the “fullness” of the system is mixed.  In other words, the systems that are developed and used by cities over time are not purebred ABC systems.  The system is more basic in areas where it is not as important to have a specific activity cost and in areas that generate the most resistance.

Additionally, many cities have found that they have multiple cost accounting systems for different purposes like A-87 cost accounting plans for federal grants and then “full” cost accounting for purposes of setting rates and evaluating the cost of services.  All of this points to the new understanding that there needs to be multiple estimates of cost for the multiple purposes of government.

In conclusion, cost accounting has many significant benefits for government, but we have to use some common sense about our expectations for cost accounting and how it will be received by the organization.  In other words, we need to consider both sides of the coin and especially from the perspective of the service managers and employees. By using hybrid cost accounting systems and multiple cost systems, we may be able to minimize the resistance from the organization and maximize benefits.

Zach Mohr is an Assistant Professor at UNC Charlotte.  He has a forthcoming, edited book on cost accounting titled Cost Accounting in Government: Theory and Applications.  It will be published by Routledge in May 2017.  Links to actual local government cost accounting documents and other useful cost accounting resources can be found on his faculty website.

Mirror, Mirror on the wall, How much revenue will we generate this fall?

Yup, you guessed it, today’s blog post is on revenue forecasting!  My current blog series is about some of the non-legal finance issues that are out there and revenue forecasting, while required by law, is a really important one!  There are many people that are involved with revenue forecasting in local governments. While many outside of government may just assume that there is some accountant or budget wonk sitting in a back room who is somehow magically able (or has some very scientific formula) to predict how much money is going to be coming in next year, we know better.

There are many reasons to forecast revenues including planning for the future (are we going to have enough money coming to support our expenditures in five years) and to balance this year’s budget, but in North Carolina local governments are also required by law to forecast revenues.  Our forecasted revenues set the parameters on the budget, they define how much we can spend this year and may cause policy choices on both the expenditure and finance side (like setting the property tax rate).

This is why it is explicitly required in the Local Government Budget and Fiscal Control Act or simply the Fiscal Control Act.  The Fiscal Control Act requires that the budget is balanced and that the estimated revenue for the following year, used to create the balanced budget, be reasonable, reliable, and justifiable.  The question is, how do we do that?

In this blog post I am going to discuss forecasting methods broadly, if this is something you are more interested in and you want more details (and math!) please see my chapter in the Introduction to Local Government Finance textbook.

First, of all what do we need to successfully forecast our revenues? We need: data, institutional insight, and judgement.  We need data on the revenues we have collected in the past, policy changes, changes to our tax base, and whatever else we think may be important to know about past revenues and future revenues.  For example, beyond just property tax collections it is important to have data on property tax rate changes, reassessment cycles, etc.

Data is foundational, but without institutional insight it would be easy to misinterpret that data.  Institutional insight and knowledge helps a forecaster know what data needs to be collected, what effect changes have had on your community, what population or demographic changes may be occurring, whether firms are entering or exiting, etc.  Institutional insight provides the context for the data.  In a course I was teaching, I had the opportunity to talk with a budget officer from Fayetteville and we were talking about unexpected shocks to budgets.  She mentioned how the federal government shut down that occurred in 2013 really hit them hard because of the importance of Fort Bragg to their community.  They were affected by the shutdown in ways that most jurisdictions outside of metro D.C. were not.  If you had no context and were looking at their revenue receipts for that period and comparing them to other jurisdictions you would not only be confused but you would also let that shock affect your forecast in inappropriate ways.

Lastly, you have to always use your judgement.  You need to make sense of the numbers, look at the trends, and not rely exclusively on the numbers spit out of models.  I sometimes refer to this as the “gut check.”  You can use real numbers and reasonable forecasting methods and get unrealistic forecasts.  There are a lot of reasons this may happen and we are going to discuss some of them below!

There are two main categories of forecasting methods: qualitative and quantitative.

Qualitative forecasting relies on expert judgement.  The experts can be internal (like budget directors) or external (like local economists).  This is extremely common and can be very reliable when the expert understands the revenue source, the economy, and the community.  Can’t decide on just one expert? You can also use a panel of experts who bring different knowledge and perspectives to the process.  This often means internal experts as well as economists, business owners, bankers, etc.  There are many strengths to qualitative forecasting such as it is typically low cost, straightforward, and not too data intensive.  ***Note: This does not mean that our experts do not use data though!***  However, it has its share of weaknesses too.  You need to identify the correct experts, it is not as transparent a process, and it is hard to avoid forecaster bias.  Forecaster bias comes in many shapes and sizes but an example of it is that your expert remembers last time there was a downturn and it took your community 5 years to get back to previous sales tax collections, never mind that the previous economic downturn was the Great Recession and the next downturn will likely (hopefully!) be much less dramatic.  Or they know that this new box store coming in is going to generate tons of revenue, they just know it!

Quantitative judgement relies on data very heavily and there are numerous ways it can be accomplished.  For some tax sources, like property taxes, they can be forecasted through formulas because you have all the data you need (like tax base, rate, and collection rate) to calculate it.  Unfortunately this information is not available for the majority of taxes and fees.  A common method of quantitative forecasting is trend analysis, where the forecaster uses previous collections (and the changes from year to year) to estimate future collections.  There are many ways to forecast using trends including applying the average growth over the period to the previous year’s revenue.  The issue you here is that trend analysis is always backward looking and will lag behind changes to the economy.

A final way that is more common in larger jurisdictions is causal modeling where not just previous revenue is used, but also other economic drivers.  The advantage is that it can be forward looking and it incorporates the “why” of changing revenue collections.  It requires a lot of data though and for most local governments that data is not available, at least not for the most recent time periods.  And when it comes to data you should always remember GIGO: Garbage in, Garbage out.

So how do we choose? Well resources are the first hurdle.  What capacity do you have on staff (not just skill set but time)? Do you have the money to hire consultants?  Do you have the data?  The second consideration is to think about the revenue being forecasted, you should not be using the same (quantitative) forecasting technique for all your revenue sources.  ***See the book chapter for more on this.*** The third consideration is what works on previous data?  I suggest you forecast for previous years using a few different methods.  You know what the actual revenue collections are, so you will be able to identify which quantitative methods work best for different revenue sources.

Final thoughts on revenue forecasting.

  • All forecasts are wrong. The goal is to minimize how wrong they are.
  • Be cautious, but not too cautious. It is prudent to air on the conservative side of forecasting but too conservative and you are either taxing people too much or you are missing opportunities by not budgeting your revenues.
  • Expert judgement should always be incorporated, even when doing quantitative forecasting. The gut check of “does this make sense” is valuable.  I suggest you graph your estimate against the previous years to eyeball your forecast to help inform that gut check.

 

 

Are all North Carolina County Property Tax Appraisers Subject to USPAP?

This is the exact question that I was asked recently.

“Are all North Carolina, county, ad valorem, real estate appraisers subject to the Uniform Standards of Professional Appraisal Practice (USPAP)?”

This could be a very short blog post. The answer to the question is, “no”. But a different question, “Should all North Carolina county ad valorem appraisers comply with USPAP?” leads to a more in depth discussion.  The answer to that question is, “yes”.  I believe if you act as an appraiser, you should comply with USPAP.

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Welcome!

Benjamin Frankin, (1706-1790) , North American printer, publisher, writer, scientist, inventor and statesman. Source: Wkipedia

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.

Benjamin Franklin, in a letter to Jean-Baptiste Leroy, 1789

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