Managing Performance or Building Capacity? State Interventions in Local Financial Management (Job market paper) 

Abstract:  This paper asks whether organizations improve performance more effectively by incentivizing better performance or by building the underlying capacity that supports performance. Two types of state interventions in local financial management are examined: fiscal monitoring systems, which assess local governments' fiscal health and increase oversight, and training and certification mandates, which strengthen human capital and administrative procedures for financial management. Using a panel of general-purpose local governments subject to the federal Single Audit from 2009 to 2024 and a stacked difference-in-differences (DID) model, I estimate the effects of these interventions on local financial management capacity and performance. To measure both dimensions, disclosures in Single Audit reports are used to link internal control deficiencies with financial management capacity and noncompliance with financial management performance. Findings show that fiscal monitoring modestly reduces noncompliance, but does not lower, and may even raise, the probability of finding material weaknesses, the more severe category of internal control deficiencies. By contrast, training and certification mandates produce large and growing reductions in material weakness disclosures and a lagged reduction in noncompliance. Together, the findings indicate that incentive-based and capacity-building interventions operate on different organizational margins: the former primarily disciplines observable performance, whereas the latter appears better able to strengthen the systems that sustain performance. This suggests that while external pressure and oversight can reveal failures, they are insufficient to repair the systems that produce them, and genuine improvement in financial management may require some investment in the underlying capacity. 

Decoding Dysfunction: Machine-Aided Text Analysis of Federal Single Audits

Abstract: Local governments are routinely found to mismanage public funds, yet the field knows surprisingly little about why these failures occur in the first place. This paper looks inside thousands of federal audit reports to answer the question. Using machine-aided automation of downloading the documents and text analysis, I examine the reasons behind each disclosed failure in financial reporting and management among U.S. local governments. Drawing on a novel corpus of roughly 44,000 Single Audit documents from general-purpose and special-purpose entities cited for at least one such audit finding between 2016 and 2024, the top five recurring explanations are identified through LDA topic modeling: staffing shortages, accounting reconciliation problems, weak procurement documentation, payroll processing errors, and constraints in preparing financial statements. Staffing shortages emerge as the most prevalent, suggesting that local government financial mismanagement is rooted less in one-off mistakes than in chronic resource constraints. This paper offers the first large-scale, systematic account of why local governments struggle with financial management, and provides public administration scholars with new empirical insight into a long-understudied dimension of local government performance. 

Short-Term Rentals and Local Government Budgets: Evidence from Airbnb Expansion Following Solar Eclipse (with Lady Ikeya)

Revise & Resubmit 

Abstract: Digital platforms are reshaping regional housing markets, yet evidence on their implications for subnational public finance remains limited. This paper estimates the causal effect of the expansion of the short-term rental (STR) market on local government revenues and expenditures across all U.S. counties. To address endogeneity, we leverage quasi-experimental variation from the 2017 solar eclipse and estimate an instrumental-variables model with county- and year-fixed effects. We find that increased Airbnb penetration of the local housing market reduces property and sales tax revenues, as well as spending on public welfare and education. The findings of this paper imply that, as full-time residents are displaced by occasional visitors with increasing STR market penetration, local governments’ capacity to raise revenues may be sacrificed. With more Airbnb homeowners and fewer full-time residents – implying a shift in the voter composition – local governments may also reallocate resources, spending less on resident-focused public goods and services (e.g., public welfare and K-12 education) that may be less salient to home-sharing hosts.

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