October 24, 2022 | Cole Arreola-Karr
The National Special Districts Coalition (NSDC) opposes federal legislation that would standardize local agencies’ federal financial reporting requirements, potentially posing an unnecessary, costly mandate on local agencies issuing bonds and holding investments.
NSDC is especially concerned about efforts to include S. 4295 (Warner), the Financial Data Transparency Act, in the must-pass Fiscal Year 2023 National Defense Authorization Act (NDAA). Of specific concern is Section 203 of the bill.
If successfully attached as part of the NDAA or passed on a stand-alone basis, Section 203 would require the Municipal Securities Rulemaking Board (MSRB) to unify reporting across major financial institutions such as the Securities and Exchange Commission based on common reporting metrics of all state and local agencies. Compliance with these standards could demand certain types of technologies, which impacted agencies may need to build or acquire costing upwards of tens of thousands of dollars.
The Coalition and its Members value and promote the necessity of public agencies’ transparency and accountability. NSDC Members demonstrate this commitment by prioritizing the delivery of professional development resources and compliance trainings covering regulatory compliance as well as courses on financial best practices. However, NSDC does not believe the public benefit of this proposal will outweigh the public costs associated with compliance – especially for the thousands of potentially impacted small and mid-sized special districts.
Special districts – like all local governments – abide by various public records and financial requirements based on federal laws and a myriad of state laws. Special districts and other local agencies subject to the financial data reporting guidelines would be required to comply and implement a new standardized system within four years of bill’s enactment into law.
Furthermore, NSDC is concerned that an additional requirement rooted in broadly standardizing disclosures across all types of governments could ultimately lead to the loss of important public information due to the diverse specific services more than 30,000 special districts provide across the country. New, broad standards could also lead to confusion among local agencies that follow the commonly-used Government Accounting Standards Board (GASB) standards and guidance.
NSDC joined the Government Finance Officers Association and 16 other government service associations on a September 29 letter to U.S. Senate leadership stating opposition to the Financial Data Standards Act’s Section 203 in the NDAA.
The Senate will reconvene from its recess after the November 8 mid-term elections, after which the Upper Chamber will continue consideration of the NDAA – with the Financial Data Transparency Act potentially being among more than 900 amendments offered to the bill.
NSDC will continue to closely follow and work with coalition partners on this matter and provide more information to members as it develops. Contact Cole Karr, NSDC Federal Advocacy Director, for more information.