Machine-readable disclosure has ‘revolutionized’ Flint’s financial reports, CFO says

For Flint, Michigan, new machine-readable disclosure standards which have sparked controversy across the muni market represent a “quantum leap” for the city’s finances, its CFO said.

“If you’re asking me, it’s about time that we modernize and digitize municipal financial reporting, especially if it brings about transparency and better governance in the end,” Flint CFO Robert Widigan said Tuesday during a webinar hosted by the University of Michigan’s Center for Local State and Urban Policy and XBRL US, which supports the implementation of digital business reporting standards.

For Flint, which is participating in a pilot program to develop XBRL taxonomy for local Michigan governments, the technology “truly is, in my opinion, a quantum leap in financial reporting,” Widigan said.

Widigan’s comments come as the municipal market continues to digest a new law, the Financial Data Transparency Act, that requires issuers to standardize disclosure data in a machine-readable format like XBRL and shift away from the traditional PDF format.

Issuer groups like the Government Finance Officers Association oppose the law, saying it will cost up to $1.5 billion to implement and ignores the vast differences among muni bond issuers. Other market participants have said they support the new standards in hopes that it will improve the subpar disclosure that has long plagued the muni market.

The FDTA has a four-year ramp-up period, with the Securities and Exchange Commission responsible for crafting the final rule with input from muni market stakeholders.

Tuesday’s webinar featured FDTA supporters, including Stephanie Leiser, who leads the Michigan Local Government Fiscal Health Project at the Center for Local, State, and Urban Policy, or CLOSUP, at the University of Michigan’s Ford School of Public Policy, as well as Marc Joffe, policy analyst at the Cato Institute and chair of the XBRL US Standard Government Working Group, and XBRL’s CEO and president Campbell Pryde.

Leister said CLOSUP has been working on the open data standards for a few years.

“We have a much bigger perspective on the value of open data standards and the costs and benefits of using them for governments,” she said. “And ultimately our goal is around transparency and good government and getting the data that we need to really improve our understanding of government fiscal health.”

Flint is one of a handful of Michigan local governments participating in a pilot project hosted by the state Department of Treasury to develop the XBRL taxonomy.

Widigan said machine-readable disclosure will help the long-suffering city tells its story, strengthen its relationships with philanthropies, and move toward an “ultimate goal” of “transparency and better governance.”

“The more transparent we are with our financial data, the more we build trust and the stronger these partnerships are,” said Widigan, who formerly worked at the Treasury Department.

“And having the data for other local governments in an open standard format would also help us benchmark against our peers.”

The biggest challenge is the time it takes “to ensure the initial data upload is important and put in accurately and verified,” he said.

He recommended that local officials plan now for the new standards and ask their auditors to begin to enter their financial data into an XBRL program.

“This change would really be revolutionary — bringing high quality, highly detailed data out into the open, and making it available for anyone,” Widigan said.

Proponents hope to develop an XBRL US taxonomy that the SEC can use as a model when it crafts final rules, Joffe said.

“This is our opinion about the best practice for implementation of this standard,” Joffe said after presenting a video that showed how the taxonomy works for Ogemaw County, another Michigan government that has incorporated the data standards.

“The ultimate decision will be with the SEC,” Joffe said. “All we can do is show the SEC a very strong pilot that can help inform their regulatory decisions.”

Pryde said corporations that file four times a year to the SEC with XBRL technology paid an average of $5,500, and added that the cost could be as low as $500 for small local governments.