The End Is Near for Outdated Government Financial Reporting

Link: https://www.route-fifty.com/finance/2023/02/end-near-outdated-government-financial-reporting/382747/

Excerpt:

By way of a few paragraphs inserted into the recently enacted 4,000-page 2023 National Defense Authorization Act, Congress mandated that state and local governments prepare their annual financial statements in a standardized format that is electronically searchable. The provision effectively drags state and local governments kicking and screaming into the 20th century, if not the 21st.

As worthy an accomplishment as this appears to be, it was resisted mightily by the state and local government financial community. Most prominently, they argue, the measure can potentially result in a major transfer of accounting and reporting regulatory authority from states to the federal government, thereby undercutting what many consider a fundamental principle of federalism. Moreover, state and local officials see it as one more costly unfunded mandate imposed upon their governments.   

The opposition by state and local governments is understandable. But they have no one to blame but themselves. To this day they are wedded to a technological past. In a perverted way, they may be getting their just desserts. The act requires them to do little more than what they should have done years ago on their own for the benefit of their investors and other stakeholders.  

Implicit in the act is that governments will have to prepare their financial statements using XBRL (eXtensible Business Reporting Language) or some comparable reporting framework. This is the format that the Securities and Exchange Commission, which would be charged with implementing the new provision, currently demands corporations use in their financial filings. XBRL requires all entities to classify each of the elements of their financial statements (e.g., assets, liability, revenues and expenses) by identical rules and in machine readable form.    

Author(s): Michael Granof and Martin J. Luby

Publication Date: 8 Feb 2023

Publication Site: Route Fifty

Government Financial Reporting – Data Standards and the Financial Data Transparency Act

Link: https://xbrl.us/events/230124/

Date and Time of upcoming event: 3:00 PM ET Tuesday, January 24, 2023 (60 Minutes)

Description:

The U.S. Congress passed legislation on December 15, 2022 that includes requirements for the Securities and Exchange Commission to adopt data standards related to municipal securities. The Financial Data Transparency Act (FDTA) aims to improve transparency in government reporting, while minimizing disruptive changes and requiring no new disclosures. The University of Michigan’s Center for Local State and Urban Policy (CLOSUP) has partnered with XBRL US to develop open, nonproprietary financial data standards that represent government financial reporting which could be freely leveraged to support the FDTA. The Annual Comprehensive Financial Reporting (ACFR) Taxonomy today represents general purpose governments, as well as some special districts, and can be expanded upon to address all types of governments that issue debt securities. CLOSUP has also conducted pilots with local entities including the City of Flint.

Attend this 60-minute session to explore government data standards, find out how governments can create their own machine-readable financial statements, and discover what impact this legislation could have on government entities. Most importantly, discover how machine-readable data standards can benefit state and local government entities by reducing costs and increasing access to time-sensitive information for policy making.

Presenters:

  • Marc Joffe, Public Policy Analyst, Public Sector Credit
  • Stephanie Leiser, Fiscal Health Project Lead, Center for Local, State and Urban Policy (CLOSUP), University of Michigan’s Ford School of Public Policy
  • Campbell Pryde, President and CEO, XBRL US
  • Robert Widigan, Chief Financial Officer, City of Flint

Publication Site: XBRL.us