The Financial Data Transparency Act of 2022 (S. 4295), sponsored by Senator Warner (D-VA) and Senator Crapo (R-ID), would require governments and nonprofits to report financial information using uniform reporting categories, or “data standards,” which likely to require costly updates or extensive workarounds to circuit financial systems.
The accompanying legislation (HR 2989), introduced by Rep. Carolyn Maloney (DN.Y.) and Patrick McHenry (RN.C.), was passed by the U.S. House of Representatives on July 14, 2022 as an amendment to the House version of the Fiscal Bill 2023 National Defense Authorization Act ( NDAA), which is annual must-pass legislation. Like the House of Representatives, the Senate is actively considering appending S. 4295 to its version of the NDAA for fiscal year 2023.
Section 203 of that law would require the Municipal Securities Rulemaking Board (MSRB) to develop data standards for financial reporting related to the municipal bond market.
These data standards encompass universal reporting standards, and to the extent practicable, reporting entities would need to provide fully searchable and machine-readable data with accompanying metadata that clearly defines the semantic meaning of the data. In addition, the legislation would require the MSRB to “scale” reporting requirements for “smaller regulated entities”.
When enacted, the legislation will require common rulemaking for regulated entities, which will take place two years after enactment, and then provide two years for implementation. Full implementation and compliance would begin in 2027.
The transition to a new unified reporting system will require significant resources—consultants, software, and the reconfiguration of district financial systems to accommodate the new reporting standards. Furthermore, this costly, unfunded mandate would fall on the backs of local governments without federal government financial support.
According to the National Association of Counties (NACo):
Districts recognize the need for full disclosure of all relevant information about a district’s financial condition to potential investors, citizens and other interested parties in municipal bonds. The counties also reject federally imposed standards for county financial accounting and reporting and support principles established by the Governmental Accounting Standards Board (GASB). As such, NACo is concerned about the unfunded and federally mandated accounting standards included in this bill.
NACo is following this closely and will update members with updates.
The Local Government Article, Section 16-306 of the Annotated Code of Maryland requires that each county, incorporated city or township, and tax district in Maryland file audit reports annually or every four years, subject to certain conditions.
The Office of Legislative Audits, part of the Maryland Department of Legislative Services, audits the financial statements. The annual financial statements must be prepared in accordance with generally accepted accounting principles and audited in accordance with generally accepted auditing standards.
OLA’s fiscal year 2021 review included 186 local government audit reports (23 counties and Baltimore City, 150 other incorporated cities and towns, and 12 tax jurisdictions). You can find the latest report here.
Visit the NACo website for more information.