Modernizing State and Local Government Fiscal Transparency
November 2021
- Current
Summary
CLOSUP, along with its nonprofit partner XBRL US, has launched a project to modernize and digitize Michigan local government financial reporting, with the City of Flint as the first local government partner and pilot site. The partnership will design and implement a new open data standard, based on eXtensible Business Language Reporting (XBRL), that the City of Flint can use to share its financial information with the public, the State, and other stakeholders. XBRL is an international open standard for financial data already widely used in the public and private sectors in the U.S. and other countries. XBRL formatted financial statements are both human-readable and machine-readable, so that the underlying digital data can be easily searched, sorted, merged, compared, analyzed and put to use. The first local partners and pilot locations include the City of Flint, Ogemaw County, and Pine River Township, with the ultimate goal to implement the open data standard for all local governments in Michigan.
UPDATE: In June 2022, XBRL US and CLOSUP released a public version of the new XBRL data standard to be used in this project. A 60-day public review period gave those interested in local government financial reporting a chance to provide their feedback on this data standard. Although the public review period has ended CLOSUP is continuing to collect feedback on general thoughts about implementing XBRL financial reporting for local governments, as well as on the data standard.
The fiscal health of local governments is critically important to the functioning of our democracy, economy, and quality of life. In turn, high-quality easily-accessible financial data are essential to promote fiscal health, as well as transparency and data-driven policymaking.
Currently, the most important local government financial data, found in Annual Comprehensive Financial Reports (ACFRs), are provided to the public and to the State in an outdated PDF format that severely limits their accessibility, comparability, and usefulness. Accessing these data requires transcribing hardcopy financial statements into other forms and databases by hand. This practice is labor-intensive and leads to delays, duplication of efforts, inaccuracies, and a lack of data consistency. These features stymy the sharing of understandings of what is happening on the ground in local units of government – leading to delays in responding to fiscal threats like those that put Flint, Detroit and Benton Harbor into emergency management. These outdated systems threaten fiscal management at both the state and local levels. Many local governments do not have the resources to “translate” these data into information that can be easily evaluated by local policymakers, managers, citizens or other stakeholders. Local governments must repeatedly re-enter the data by hand out of ACFRs and into numerous duplicative reporting systems, often leading to human error during data entry. In turn, outdated, unreliable and incomplete data limit the ability of external stakeholders, including the public/press, philanthropic and other nonprofits, economic developers, the federal and state governments, businesses, bondholders, and researchers, to understand local financial conditions and challenges.
This project ultimately is about improving a community’s quality of life, because as local fiscal information becomes more available, a greater number of stakeholders will have eyes on the data and be able to act on potential problems long before they turn into crises
In December 2022, Congress adopted the Financial Data and Transparency Act (FDTA), which will require local governments including municipalities, schools, and special-purpose districts that issue debt to make their regular financial disclosures in a machine-readable open data format. While regulators at the Securities and Exchange Commission will ultimately make the decision, XBRL is already widely used at the SEC and is a top candidate for FDTA implementation.
Financial transparency is absolutely essential to maintaining trust between governments and the public. Equally important is giving governments the resources to get the most value out of the data they produce.
This case study examines the fiscal health of Pine River Township, Michigan, a mostly rural community in central Michigan, using data from the Township’s audited financial reports. We find that Pine River Township has a sizable and growing General...
This case study examines the fiscal health of Ogemaw County, Michigan, a mostly rural county in the northeast lower peninsula of Michigan, using data from the County’s annual audited financial reports. We find that while Ogemaw County has struggled...
Over the past twenty years, few cities have experienced as much fiscal stress as Flint, Michigan. After decades of economic decline, two periods of state receivership, the water crisis, and the COVID-19 pandemic, the City of Flint is trying to shore...
XBRL, an open data standard, can improve access and analysis of public financial data for local governments in Michigan. Key benefits of creating an XBRL program for local governments include enhanced public transparency, easier data access for...
