Good government is open, clear government. Citizens who are not accountants also should be able to easily read government financial documents. Senate Bill 598 encourages the adoption of a readily accessible digital reporting standard. Legislators should approve it.
By John M. W. Moorlach
John M. W. Moorlach is a Republican from Costa Mesa who represents Senate District 37, firstname.lastname@example.org. He wrote this commentary for CALmatters. Read his previous commentary here.
Good government is open, clear government. There was a day when taxpayers had to purchase a paper copy of their city’s audited financial statements, known as the Comprehensive Annual Financial Report.
Now, these these annual reports are free on most cities’ websites. But this still does not provide search capabilities or comparative analyses with the Comprehensive Annual Financial Reports of neighboring cities.
That’s why I introduced Senate Bill 598, the Open Financial Statements Act.
For all state and local governments in California, SB 598 encourages the adoption of a digital reporting standard. It goes by the initials, iXBRL. Please excuse the computer speak, but that stands for Inline eXtensible Business Reporting Language.
Its terrible name notwithstanding, Inline eXtensible Business Reporting Language means the financial information can be read by machines and–thank goodness–humans.
I’m a certified public accountant and love to dig into a Comprehensive Annual Financial Report. But citizens who are not accountants also should be able to easily read government financial documents.
That’s my goal with SB 598. By tagging categories in the financial reports, they would become searchable just like websites.
And the bill would require that the data be easily uploaded so people could produce comparison charts and graphs, and readily see how your city or school district budgets compare to those nearby.
A decade ago, the U.S. Securities and Exchange Commission required publicly traded companies it regulates to adopt an earlier version of the standard, called just XBRL. And last year the commission moved to the improved iXBRL.
It’s like migrating from film to digital cameras.
The Securities and Exchange Commission explained the new “format will bring disclosure data to life: computers will have the ability to parse the data in a timely manner, while humans can continue to view … that data within the same document.”
Why do I believe it is this necessary to adopt this private industry standard for governments?
Over the past year, I have issued reports on the financial soundness of California’s 944 public school districts, 482 cities, 58 counties and three higher-learning systems, as well as all 50 states.
It took weeks for my staff and me to comb through documents on the internet.
We only looked for one key balance sheet data point, the unrestricted net position, which should be positive (good) and not negative (bad).
This helped me write commentaries on the school districts in several counties. One in the Orange County Register was on the 27 districts in Orange County, finding all but one district bleeding red ink.
And just before teachers went out on strike in January in the Los Angeles Unified School District, I wrote an commentary in the Los Angeles Daily News. It detailed the terrible fiscal condition of the LAUSD, whose most current unrestricted net deficit was a staggering $19.6 billion, or $4,180 per person living within the district’s borders.
Obtaining this number for all of California’s school districts would take seconds if the Comprehensive Annual Financial Reports were iXBRL compatible, not weeks.
The unrestricted net position was just one data point. But if we had SB 598 in place, you easily could access dozens of other data points of these nearly 1,500 government bodies; and not just for one year, but many years.
The iXBRL standard has been adopted internationally, providing significant cost savings for accounting data publication. It’s free. And conversions are simple and result in significant cost savings.
SB 598 also would advance California’s reputation as a high-tech citadel. Florida passed a similar bill last year. So our computer state should seize the initiative and sprint in front of the crowd.
Such new fiscal transparency could also help cities, counties and school districts get their fiscal houses in order. Those in great shape, such as Irvine and its positive unrestricted net position of $442 million, could be held up as doing what’s right.
The Senate Appropriations Committee will consider SB 598 on Thursday.
It would open the books to easy analysis by everyone. An immense power to improve government would be given to legislators, local officials, credit rating agencies, bond investors, journalists, researchers and citizens.