In a move that was a decade in the making, the National Association of State Auditors, Comptrollers and Treasurers have approved a new best practices document aimed at enhancing financial disclosure on the state government level.
The NASACT executive committee voted during its annual conference in Boston to approve the new guide called “Voluntary Interim Financial Reporting: Best Practices for State Governments.”
“We recognized that we need cost-efficient access to capital to maintain and improve our infrastructure and that we have an obligation as part of that deal to provide quality, transparent information to the investment community,” Martin Benison, president of NASACT and Massachusetts comptroller, told MFT. “Improving continuing disclosure is a progressive process. We recognize that each state is different and will have varying levels of capacity to fully implement the best practices we approved today.”
The NASACT along with other municipal finance organizations first convened in 2003 with the goal of creating a “template” for a minimum level of voluntary interim disclosure for financial and related information by state and local governments. While recommendations issued in the mid-2000s following two NASACT meetings never came to fruition due to technology constraints some states faced, the Lexington, Ky.-based organization has continued to engage in investor disclosure issues, which culminated in its action taken in Boston. The NASACT established a Continuing Disclosures Task Force this past January, which created 10 best practices to be implemented by states on a “voluntary” basis to accompany existing programs.
NASACT officials said after careful study, its task force did not recommend states produce interim financial statements and determined that providing “currently available unaudited financial data” would be more efficient. The 10 best practices are not standards or requirements and can be adapted to meet each state’s particular circumstances. The National Federation of Municipal Analysts' Disclosure Committee received investor input before the document was approved.
The 10 recommended items the NASACT highlights in its best practices guide for state governments to have reports on include:
- Tax revenues (update regularly)
- Budget updates (update regularly)
- Cash flow (update regularly)
- Debt outstanding (update regularly)
- Economic forecasts (update as information changes)
- Pensions and other post-employment benefits (update as information changes)
- Interest rate swaps and bank liquidity (update as information changes)
- Investments (update as information changes)
- Debt management policies (update as information changes)
- Filings with the Electronic Municipal Market Access (EMMA) system (update as information changes)
The best practices were developed by NASACT’s Continuing Disclosures Task Force, co-chaired by Kim Wallin, state controller of Nevada, and Colin MacNaught, assistant treasurer for debt management in Massachusetts. The task force, which was created to examine continuing disclosure and to explore how unaudited financial and related information can be made more readily available to municipal bond investors on an interim basis, met with bond attorneys and the Government Finance Officers Association during its multiple meetings held early this year.
MacNaught said recommendations from the task force were based on feedback the NASACT has been receiving from investors “over a long period of time.”
“Investors want to see more financial data,” MacNaught told MFT. “The goal is to make the surveillance by investors as efficient as possible.”
Wallin, who is planning to run for Nevada treasurer next year, highlighted the importance of including reports on their 10 recommended items in an easily accessible website for investors to access. She said states should consult with their bond counsel to determine which disclosures to make and draft appropriate disclaimer language.
“These voluntary enhancements to state disclosure efforts will maximize the potential for information that is already gathered by states for other purposes in many instances,” Wallin said in a statement. “Putting the information online in a central, easily-accessible location will benefit the entire investor community and enhance the market overall.”
