With residents routinely demanding information about how their tax dollars are used, local governments are searching for ways to effectively account for and report finances. Used wisely, business intelligence (BI) software can help cities and counties more accurately show financial plans.
BI software uses complex algorithms to detect unusual patterns and highlight ongoing trends. For example, tax records could be combined with other government data to ferret out behavior indicative of tax evasion and identify individuals who merit examination. While IRS files may only show income and expenditures, other data sources may reveal unusual business patterns, changes in financial circumstances among family members, and associates with criminal records.
Because virtually all governments have to account for expenditures — often demonstrating they have a balanced operating budget and relying on information from various sources — many agencies use reports to show how finances are allocated. But, developing and implementing the reports can be challenging for local governments.
For example, compiling a Comprehensive Annual Financial Report (CAFR) requires data from various departments, often compiled in spreadsheets in which the data is not auditable and can be difficult to reproduce consistently. With BI software, governments can access data from multiple sources to accurately account for expenditures. Further, governments can determine spending trends by isolating local tax revenues and highlighting how they are being spent for services by cross referencing the information in several databases.
Cincinnati uses BI software to generate statements of balance, revenue and expense reports. Agencies — including the waterworks, sewer district and recreation departments, and the computer center — can generate reports that allow them to track expenditures on individual projects and the city’s fixed assets.
With BI, residents can access accurate financial information online, which may help justify plans to raise additional revenue or reallocate revenue because of ineffective performance. Using the information, local government officials can identify key financial indicators that are under-performing and alert the appropriate manager to correct them before an emergency occurs. For example, it can identify when pension funding is not adequate to meet future retirement payment requirements of union workers. BI software can be used with integrated mapping to identify businesses that will be affected by proposed tax assessment changes.
To address the demand for open government while maintaining public trust, local governments can no longer afford to maintain static and archaic financial reporting systems. BI software allows cities and counties to achieve those goals while leveraging and extending their existing investments in technology assets.
The author is the Public Sector Solutions Manager for New York-based Information Builders.