SYNOPSIS The Governmental Accounting Standards Board issued Statement No. 34, creating a new accrual-based financial reporting model. This study examines whether information from this model is associated with the default risk (a proxy for fiscal distress) of municipal governments and whether this information is incremental to that provided by the fund-based, modified-accrual reporting model. Ordered logistic regressions are used to analyze financial data from 2005 for a sample of 409 municipalities that participated in the Government Finance Officers Association award program. This study extends the work of Plummer et al. (2007) to municipal governments. In addition to the financial position indicator variable (total net assets/total revenues) examined by Plummer et al. (2007), this study provides evidence of the relevance of three other financial indicators (change in net assets/total net assets; total liabilities/total assets; and current assets/current liabilities). We also find that these accrual-based indicators provide information incremental to the fund-based model and that one fund-based measure (total fund balances/total fund revenues) also provides information incremental to the accrual indicator. These results are consistent with perceptions of regulators and others who expect accrual accounting to be a better measure of the economic costs of running a government than the traditional fund-based model. Data Availability: Contact the authors.

This study examines the impact of audit committees on the internal control quality of nonprofit organizations. Based on resource dependency theory that stresses an entity's economic needs for internal control over administering federal funding, we select a sample of nonprofit hospitals subject to the Single Audit Act in the United States, from 2001 to 2008. Our results show that hospitals that had audit committees and also employed Big 4 auditors were associated with better internal control quality. In addition, we find that Big 4 auditors were negatively associated with reported deficiencies of internal control over administering major federal programs in the early years (2001–2004), but positively associated with reported deficiencies of the same kind in the later years (2005–2008), suggesting a possible effect of the Sarbanes‐Oxley Act.

While comprehensive auditing of federal government agencies in the United States had its inception in 1945, citizen-led efforts to evaluate and improve state and local government operations began much earlier. One such early pioneer organization was the Tennessee Taxpayers Association (TTA). Using group theory constructs from the political science field, this study documents how the TTA was able to use its power and influence to shape the development of accounting systems and accountability in the local governments of Tennessee as early as 1932. This study extends the body of historical research on public sector accounting by analyzing original publications issued by the TTA and documenting how the entity interacted with state and local governments and other power centers.

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