By Christine Kuglin JD, LLM, CPA, Director – Truth in Accounting – Daniels College of Business, University of Denver
For those of you who have ever used the online app, “NextDoor”, you probably know the benefits of keeping in touch with neighbors. The app, which is a subscriber-only network, offers up handy tips, lets residents post items to sell, and is a useful neighborhood channel to learn about road closings, weather warnings, and town activities. The NextDoor conversation does sometimes stray into gripes about parking problems, annoyances with dogs, etc., but generally the discussion stays pretty civil.
The ability to connect with neighbors, and gain a shared view about what’s happening in town can be very useful. We think residents should be able to get the same insights into how their local government officials are spending tax dollars, and how their spending stacks up against neighboring towns. Financial reporting on local government activity can usually be found by searching through a town website, or contacting Town Hall. But once the information is identified, it can be challenging to figure out how much your local school district is spending on teacher salaries versus administrative staff, or determine the per student allocation of funds compared to schools in adjacent counties. The ability to easily locate, unambiguously understand, and consistently compare one government to another, are hurdles that any government finance officer or resident will face when looking for answers.
Recently passed legislation called the Financial Data Transparency Act (FDTA) will require governments that issue municipal bonds, including school districts, to report disclosures in machine-readable format. This probably won’t happen until 2027 but when it does, it will unlock a treasure trove of information about local governments, including school districts, hospital districts, fire districts and any other kind of government entity that obtains funding in the municipal marketplace. While the aim of the bill is to help municipal bond analysts and portfolio managers to make better investment decisions, the gains will reach a much bigger audience.
Imagine city government managers being able to better negotiate with contractors because they can more readily see how funds were spent in nearby municipalities on similar projects? Or evaluate the per patient expenses in a local hospital district compared to those in another city of a similar size? This level of transparency will benefit residents and local governments.
We believe that better communication will make us all better neighbors.
Read our paper: ACFR Special District Taxonomies Report
