Are Your Financials Transparent? (How to Meet Arizona’s New Financial Transparency Requirement)

by Karin M. Smith, MBA, SFO, Consulting Manager

Posted on May 7, 2013

Do you report out your revenues and expenditures each year to your governing body? Do you post your budgets to your website annually? Do you provide community presentations about the financial health of your organization? All of these are great strategies for increasing awareness on financial health, however local governments are now
required to do more to ensure transparency.

Merriam-Webster’s Dictionary defines transparent as “free from pretense or deceit, easily detected or seen through, readily understood, characterized by visibility or accessibility of information especially concerning business practices.”

Many local governments are just learning of a new law that went into effect on January 1, 2013 that requires financial records to be transparent. Arizona Revised Statutes (A.R.S.) §41-725 requires in part for each local government to establish and maintain an official internet website that is accessible to the public at no cost and that contains a comprehensive reporting of all revenues and expenditures over $5,000 of local monies. Local government is further defined to include counties, cities or towns with a population of more than 2,500 people, any community college having more than six hundred students, and all state universities.

Currently, local governments have the option to post an electronic copy of their CAFR with the Award of Excellence Certificate as an alternative to the searchable database. While there has been talk of eliminating this option from the statute, no real progress on this point has been seen yet. As a precaution, governments should be prepared for the possibility of a requirement to post the full searchable database in future years.

The Arizona Department of Administration (ADA) has created Arizona OpenBooks (www.openbooks.az.gov) in response to A.R.S. §41-725, and all Arizona state agencies post their financial information to this website. The State is also offering this website as an option for other governmental entities. Since Arizona OpenBooks has already passed reviews by the Auditor General’s Office and the Goldwater Institute, many governments are pursuing this option to avoid potential criticism of their own websites.

In a recent presentation, ADA shared some of the challenges they faced in developing the website. One of the major challenges involved their chart of accounts. For most entities, the chart of accounts has historically been restricted to internal use. As a result, entities may have acronyms and abbreviations in their account names. ADA had to clean up these issues so the general community could understand their account code structure.

Another area to carefully consider is confidential information. This may require entities to redact certain vendor information. Some examples of confidential information include tax payments and refunds, persons receiving state or other assistance, information protected under attorney-client provisions, and other data that may not be provided under a public records request.

Financial information must be posted at least quarterly. It is important to remember that both revenues and expenditures in excess of $5,000 are required to be posted; however, some entities are choosing to post all revenues and expenditures. Some entities have not yet determined how they will meet the transparency requirements. To meet the deadline for this first quarter, entities should immediately begin working with their software providers and local IT departments to determine the most effective way to ensure compliance with this new law.

For more information on this new law, visit www.openbooks.az.gov and A.R.S.
§41-725.