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Posted on: September 27, 2022

Financial Data Transparency Act of 2022: A Costly Unfunded Mandate for Municipalities

As Congress prepares to pass the annual National Defense Authorization Act (NDAA), municipalities should be aware of a provision that may have a negative impact on their operations through the imposition of a new unfunded mandate. Senators Mark Warner (D-VA) and Mike Crapo (R-ID) are looking to attach a new piece of legislation, the Financial Data Transparency Act of 2022, to the mandatory end-of-year defense bill. This provision would establish new financial data standards that would apply to local governments.
   
 The Financial Data Transparency Act of 2022, seeks to establish a uniform standard of financial reporting that encompasses many different types of issuers, including states, cities, counties, water systems, public power providers, public gas providers, hospitals, and more. 
  
 As written, the legislation would require local governments to come into compliance with the new financial reporting standard by 2027. Changing the current financial reports issued by local governments would mean the potential loss of valuable information contained within current financial reports that not only benefit the local government as an organization.  
 
 Additionally, the transition to a new system of reporting financial standards will require resources–consultants, software, and reconfiguring municipal financial systems–to account for the new reporting standards. This costly adjustment would fall on the backs of local governments as they work to comply with the new standards by 2027, with no financial support from the federal government.  
  
 The House of Representatives passed a version of the Data Transparency Act by attaching to the house draft of the NDAA. Now, the Senate is eyeing a similar tactic. The Senate is unlikely to take up the NDAA before December.
  
Please reach out to Senators Menendez and Booker and let them know that this imposition of a new financial standard will be costly and time-consuming and force an unfunded mandate on your municipality and urge them to keep this provision out of the NDAA.
  
Contact: Paul Penna, Senior Legislative Analyst, ppenna@njlm.org, 609-695-3481, x110.

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