State Sen. John Moorlach (R-Orange County) has introduced the Open Financial Statement Act, SB-598, in the California State Senate. The bill aims to make audited state and local government financial data more accessible and easier to prepare.
California’s counties, cities, school districts, special districts, and pension funds prepare at least two sets of annual financial reports. They send unaudited data to the state controller, who publishes it (at “By the Numbers”) after a significant time lag. These entities also prepare audited financial statements in the form of PDF documents to comply with state and federal single audit requirements and for use by municipal bond investors. Because the audited reports are in PDF format, they can be difficult for users to automatically process.
The two sets of reports heavily overlap and the need to prepare both creates extra work for local government financial teams. Under SB-598, reporting would be simplified by replacing both types of financial statements with tagged web pages using a technical standard called Inline eXtensible Business Reporting Language (Inline XBRL).
If SB-598 is fully implemented California governments would submit these tagged web pages to the state controller, who would then automatically extract data from the pages for publications on the “By the Numbers” website.
California SB-598 is similar to legislation enacted in Florida last year. Like Florida HB-1073, the California bill provides for a multi-year, multi-stakeholder process for making the conversion to unified, machine-readable reporting. Unlike the Florida law, the California measure would also include the state’s Comprehensive Annual Financial Report (CAFR), as well as the CAFRs prepared by public pension funds.
Although Inline XBRL technology is relatively new, extensive prototyping work has already been completed. Reason Foundation participates in a ‘State and Local Disclosure Modernization Working Group’ under the auspices of XBRL US, a national standards-setting body. The working group recently published a sample taxonomy (a list of acceptable government accounting terms) and 15 sample government financial statements using Inline XBRL format. States can use these samples to create their own technical implementations.
For Reason’s previous analysis of the Florida bill please see:
Florida Passes First in the Nation Data Reporting Standards to Improve Local Government Financial Transparency
And for responses to some of the primary concerns about this emerging reporting standard please see:
Addressing Misperceptions About XBRL for Municipal Disclosure