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The methods used by the Bureau of the Census to calculate the per capita income estimates for small communities were examined. These estimates are a major factor in determining the amount of Federal general revenue sharing funds a community receives. The reliability of the per capita income estimates for small communities is questionable, and such communities may not be receiving their proper share of revenue sharing funds. The data used to develop the estimates for small communities are inadequate which could result in misallocations of revenue sharing funds. Misallocations are generally confined to small communities within a county because total funding for counties and States is controlled by other data which economists and statisticians consider more reliable. Although Congress has provided alternatives for distributing the funds, the alternatives have not been used. In addition, there are no adequate checks or controls on the Bureau's methods for developing the estimates; some quality controls should be built into the process to provide greater assurance of the validity of the estimates. An explanation of the Bureau's calculations of estimates for Aredale, Iowa, and Minden, Nebraska, is included.

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