The Push for Greater Transparency in Municipal Reporting

As an investor or analyst, the last thing you want to have is a pile of different financial reports in front of you with little to no way of comparing each entity’s performance, barring going through each report manually to pull out the key facts and figures.

Unfortunately, while a variety of steps have been taken in the U.S. to try to make financial reports more transparent, from the initial mandate in 2008 for 10-Q and 10-K reports of public companies to be filed in XBRL to the SEC’s announcement earlier this year that operating companies and funds will have to use iXBRL to file financial statement information and risk/return summaries, the fact remains that within the realm of municipal reporting, difficulties still abound.

For instance, many thousands of local governments across the U.S. continue to file their comprehensive annual financial reports (CAFRs) in PDF format. This can make it incredibly difficult, not to mention tedious and time-consuming, for any analyst who wants to compare the CAFRs of several local governments. Equally, these limitations in data accessibility make life more challenging for anyone owning or looking to invest in municipal bonds.

Luckily, it’s not all doom and gloom. As we previously noted, back in March HB 1073 was passed in Florida, which outlined that from 2022 CAFRs should be prepared in XBRL format. While Florida is just one state, any move away from PDFs towards XBRL is a bonus when it comes to improving data standardization, comparability, and transparency. Hopefully, other states will follow Florida’s example over the coming years.

In order to help make the 2022 goal a success, there are a number of organizations working together that hope to see real change in data standardization. Among them is XBRL US, a non-profit organization of which DataTracks is a member. However, XBRL US isn’t the only organization committed to seeing real change within the municipal reporting arena.

The Reason Foundation, for example, has been a prominent organization when it comes to the formulation and ongoing commitment to HB 1073. More recently, it submitted comments to the SEC regarding “The Road Ahead: Municipal Securities Disclosure in an Evolving Market” – a day-long conference that will be held by the SEC in December 2018.

Part of the Reason Foundation’s comments included the recommendation to develop XBRL taxonomies and also “Allow and encourage disclosure filers to switch from uploading PDF formatted documents to machine-readable documents using Inline XBRL.”

Indeed, as the Reason Foundation later reported, it seems as though the SEC is not averse to the idea of using XBRL within the realm of municipal disclosures, with the Reason Foundation stating that SEC Commissioner Robert Jackson “expressed enthusiasm for the idea”.

Hearing such comments from within the SEC is highly reassuring. Not only does it highlight the SEC’s awareness that there is an issue when it comes to the municipal reporting framework as it currently stands, but it also hints that further progress in making municipal reports more accessible and transparent to investors may not be far off the horizon.

Ultimately, the sooner any meaningful, and country-wide, changes are able to take place, the better off both investors and analysts will be.

DataTracks has extensive experience providing compliance reports in XBRL and iXBRL format for filing with regulators such as the SEC. DataTracks is also a member of XBRL US. For further information about our regulatory and compliance reporting services, please contact a member of the team.