What is the Federal Data Transparency Act?
The Federal Data Transparency Act (FDTA or the Act) was passed by Congress on December 23, 2022, as part of the National Defense Authorization Act. It is another step in digitizing data coming on top of the Federal Funding Accountability and Transparency Act (FFATA) of 2006, the Data Accountability and Transparency Act (DATA) of 2014, and the Great Reporting Efficiency and Agreements Transparency Act (GREAT) of 2019. The purpose of the FDTA is to improve the value, quality, and availability of financial data. It will make the information collected and made publicly available by regulatory agencies easier to access, analyze and compare by requiring data to be posted in a machine-readable format. The FDTA only changes how information is submitted; it does not contain any new disclosure requirements.
How does it impact my local government agency?
As a local government agency and a municipal bond issuer required to post information to EMMA (Electronic Municipal Market Access), it will alter the format of the information posted. Specifically, the translation of financial information into a format consistent with the classifications developed by financial regulatory member-agencies of the U.S. Financial Stability Oversight Council charged in adopting and applying uniform data standards for information collected from regulated entities including state and local government agencies. The format may be different from the format currently required by the Government Accounting Standards Board (GASB) and Generally Accounting Standards Board (GAAP).
What does FDTA require?
The Federal Data Transparency Act requires the financial regulators to adopt and implement uniform non-proprietary data standards to collect and disseminate information so that information submitted is fully searchable and machine-readable, and consistently identified. Specifically, financial regulators will issue data standards for information that municipal securities issuers provide to the Municipal Securities Rulemaking Board to be machine readable. Your ACFR will need to be converted to the new data standards to file continuing disclosure on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access.
When do I have to comply?
First, the Act applies only to issuers and obligors that are required to file continuing disclosure reports on EMMA.
Second, financial regulators have to adopt uniform non-proprietary data standards. These are open-source data standards and common identifiers. They have until December 2024 to establish data standards and another two years to implement those standards. You are looking at posting information on EMMA under the new data standard in early 2027 at the earliest.
Next, the Act requires financial regulators to consult with market participants to address concerns from municipal market participants. The National League of Cities and the Government Finance Officers Association (GFOA) have raised concerns about the new reporting requirements, including cost concerns and concerns that information unique to a specific type of issuer such as a state, city, public utility provider will be lost in the standardization of information.
Last, the implementation will be a lengthy process. As rules take shape and taxonomy develops, you should stay up to date in the process. GFOA is at the forefront, leading the way for municipal participants issuers to best protect governments and ensure the easiest and least costly ways to implement the Act. Keep an eye out for resources, including alerts and agency rulemaking notices, to help you engage in this important process. Until there is clarity on the data standards and implementation, do not commit to contract with a third-party vendor or software to perform data tagging services or for the preparation and review of the data.
Contact LSL to learn more or talk about how this impacts your agency.
