Existing law, the Financial Information System for California (FISCal) Act, establishes the FISCal system, a single integrated financial management system for the state, and requires the Department of FISCal to maintain and operate that system upon its full implementation and final acceptance. Existing law requires various state and local agencies to provide financial reports, as provided.

This bill would enact the Open Financial Statements Act. The bill would establish the Open Financial Statement Commission, consisting of 9 members, in the Treasurers office. The bill would authorize the commission to contract, through an open and competitive request for proposal process, with vendors possessing the necessary software and financial data standards development expertise to build one or more taxonomies suitable for public agency financial filings and create a software tool that enables a public agency to easily create machine readable documents consistent with these taxonomies, if necessary. The bill would require the commission, by January 1, 2021, to report to the Legislature and make recommendations regarding how and whether to transition financial reporting by state and local agencies to a machine readable format. The bill would repeal the Open Financial Statements Act as of January 1, 2025.

 VETO  

Bill No: SB 598

Author: Moorlach (R), et al.

Amended: 9/6/19

Vote: 27

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/10/19

AYES: McGuire, Moorlach, Beall, Hertzberg, Hurtado, Nielsen, Wiener

SENATE GOVERNMENTAL ORG. COMMITTEE: 16-0, 4/23/19

AYES: Dodd, Wilk, Allen, Archuleta, Borgeas, Bradford, Chang, Galgiani, Glazer, Hill, Hueso, Jones, Nielsen, Portantino, Rubio, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SENATE FLOOR: 38-0, 5/23/19

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

SENATE FLOOR: 40-0, 9/11/19

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASSEMBLY FLOOR: 78-0, 9/10/19 - See last page for vote

SUBJECT: Open Financial Statements Act

SOURCE: Author

DIGEST:

This bill establishes the Open Financial Statement Commission (Commission), within the State Treasurer’s Office (STO), and requires the Commission to report to the Legislature regarding how and whether to transition state and local agencies’ financial reporting to a machine readable format, as specified.

ANALYSIS:

Existing law:

1. Requires local agencies to file annual financial transaction reports with the State Controller’s Office (SCO). These reports document local agencies’ revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits.
2. Requires SCO to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest (SB 1138, Fletcher, 1945).
3. Requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles (GAAP).

This bill:

1. Establishes, in the STO, the Open Financial Statement Commission consisting of the following nine members:
   1. Representative from SCO.
   2. Representative from the California Debt and Investment Advisory Commission within STO, who chairs the Commission.
   3. Representative from the State Auditor’s Office appointed by the California State Auditor.
   4. Representative of a city or a county.
   5. Representative of a special district.
   6. Researcher with government accounting knowledge and experience affiliated with the University of California or the California State University.
   7. Municipal bond investor.
   8. Information technology professional employed in the private sector.
   9. Public member with knowledge and experience in data modeling for open data standards.
2. Authorizes STO to appoint members to the Commission, unless otherwise specified.
3. Authorizes the Commission to employ staff as may be necessary for the performance of its duties.
4. Authorizes the Commission to contract with vendors to build one or more taxonomies suitable for public agency filings, and create an open source software tool that enables a public agency to easily create machine readable documents consistent with the taxonomy or taxonomies developed, including but not limited to XBRL (eXtensible Business Reporting Language) or iXBRL (inline eXtensible Business Reporting Language).
5. Provides that the open source software tool created shall have no restriction on its use.
6. Requires the Commission to report to the Legislature and make recommendations by January 1, 2021, regarding how to transition financial reporting by state and local agencies to a machine readable format, including the following information:
   1. The cost of creating a taxonomy.
   2. The cost of creating an open source software tool, as specified.
   3. The amount of time necessary for public agencies to transition to a machine readable format.
   4. The cost of transitioning all public agencies and how the transition would be funded.
   5. Recommendations regarding whether such a transition is the most cost-effective method of preparing financial statements.
7. Allows the Commission to enter into an interagency agreement with the University of California or California State University for consultation on the required report.
8. Defines “public agency” to mean any state agency, department, board, or commission, county, city, special district, or other political subdivision.
9. Includes a sunset date of January 1, 2025.

Background

Accounting practices are not consistent across governmental entities in the State. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow. These are known as GAAP. SCO sets uniform accounting procedures that must conform to GAAP. The financial reports that local governments file with SCO must contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available. Local agencies generally prepare their financial statements in Portable Document Format (PDF). This format is human-readable, but is not machine-readable; thus, it cannot be searched electronically, which hinders comparing financial statements across public agencies.

XBRL is an open international standard for digital business reporting, managed by a global not for profit consortium. Often termed “bar codes for reporting,” XBRL was developed to improve the way in which financial data is communicated, making it easier to compile and share. iXBRL is a development of XBRL, in which the XBRL metadata are embedded in an HTML document, and allow a single document to provide both human-readable and structured, machine-readable data.

Comments

1. Purpose of the bill. According to the author, “SB 598 would provide more transparency for critical accounting documents. Currently, Comprehensive Annual Financial Reports (CAFRs) are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies. We are California. It is time to move into the 21st century. The concern? Inconvenience and maybe moving too fast. But, once again, the publicly traded industry is years ahead of government, and this bill would also make reporting easier for municipalities. It is time to have the governments’ taxpayers fund to provide a simple data dive opportunity. Stakeholders are investors and it goes back to the basic management principle: if you can’t measure it, you can’t manage it.”
2. Unknown unknowns. The Commission that SB 598 creates brings together expertise from state government, local government, the private sector, academia, and the public. Bringing these groups together to discuss how public agencies would implement machine readable taxonomies and documents, and how the state would support that implementation, could help address any potential obstacles before making any broader policy changes. That said, the timelines imposed under this bill may be unrealistic. This bill has an effective date of January 1, 2020, and requires the Commission to report to the Legislature by January 1, 2021. Given the need to appoint the Commission’s members and hire staff, giving the Commission one year to complete its work could be insufficient.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee, the STO indicates the costs of administering the Commission and producing the required feasibility report, including securing expert opinion, are absorbable within existing resources.

SUPPORT: (Verified 10/28/19)

California State Treasurer Fiona Ma

Bitvore

California Policy Center

California Society of Certified Public Accountants

Construction Progress Coalition

Data Coalition

Howard Jarvis Taxpayers Association

Mark V Systems

Object Management Group

Robots & Pencils

SunSpec Alliance

Surety Resource Connection

UN Global Sustainability Index Institute

Valley Industry and Commerce Association

Wells Fargo Renewable Energy & Environmental Finance

Workiva

XBRL US

5 individuals

OPPOSITION: (Verified 10/28/19)

None received

GOVERNOR'S VETO MESSAGE:

I am returning Senate Bill 598 without my signature.

This bill establishes the Open Financial Statement Commission within the State Treasurer's Office and requires the Commission to report to the Legislature regarding how and whether to transition to state and local agencies' financial reporting to a machine-readable format.

Although improving public agencies' financial reporting processes for transparency is vital, this bill imposes additional unbudgeted costs for the state and contains implementation provisions that are problematic.

ASSEMBLY FLOOR: 78-0, 9/10/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Brough

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

10/29/19 10:11:54

**** END ****

 UNFINISHED BUSINESS  

Bill No: SB 598

Author: Moorlach (R), et al.

Amended: 9/6/19

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/10/19

AYES: McGuire, Moorlach, Beall, Hertzberg, Hurtado, Nielsen, Wiener

SENATE GOVERNMENTAL ORG. COMMITTEE: 16-0, 4/23/19

AYES: Dodd, Wilk, Allen, Archuleta, Borgeas, Bradford, Chang, Galgiani, Glazer, Hill, Hueso, Jones, Nielsen, Portantino, Rubio, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SENATE FLOOR: 38-0, 5/23/19

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASSEMBLY FLOOR: 78-0, 9/10/19 - See last page for vote

SUBJECT: Open Financial Statements Act

SOURCE: Author

DIGEST:

This bill establishes the Open Financial Statement Commission (Commission), within the State Treasurer’s Office (STO), and requires the Commission to report to the Legislature regarding how and whether to transition state and local agencies’ financial reporting to a machine readable format, as specified.

Assembly Amendments add a coauthor.

ANALYSIS:

Existing law:

1. Requires local agencies to file annual financial transaction reports with the State Controller’s Office (SCO). These reports document local agencies’ revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits.
2. Requires SCO to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest (SB 1138, Fletcher, 1945).
3. Requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles (GAAP).

This bill:

1. Establishes, in the STO, the Open Financial Statement Commission consisting of the following nine members:
   1. Representative from SCO.
   2. Representative from the California Debt and Investment Advisory Commission within STO, who chairs the Commission.
   3. Representative from the State Auditor’s Office appointed by the California State Auditor.
   4. Representative of a city or a county.
   5. Representative of a special district.
   6. Researcher with government accounting knowledge and experience affiliated with the University of California or the California State University.
   7. Municipal bond investor.
   8. Information technology professional employed in the private sector.
   9. Public member with knowledge and experience in data modeling for open data standards.
2. Authorizes STO to appoint members to the Commission, unless otherwise specified.
3. Authorizes the Commission to employ staff as may be necessary for the performance of its duties.
4. Authorizes the Commission to contract with vendors to build one or more taxonomies suitable for public agency filings, and create an open source software tool that enables a public agency to easily create machine readable documents consistent with the taxonomy or taxonomies developed, including but not limited to XBRL (eXtensible Business Reporting Language) or iXBRL (inline eXtensible Business Reporting Language).
5. Provides that the open source software tool created shall have no restriction on its use.
6. Requires the Commission to report to the Legislature and make recommendations by January 1, 2021, regarding how to transition financial reporting by state and local agencies to a machine readable format, including the following information:
   1. The cost of creating a taxonomy.
   2. The cost of creating an open source software tool, as specified.
   3. The amount of time necessary for public agencies to transition to a machine readable format.
   4. The cost of transitioning all public agencies and how the transition would be funded.
   5. Recommendations regarding whether such a transition is the most cost-effective method of preparing financial statements.
7. Allows the Commission to enter into an interagency agreement with the University of California or California State University for consultation on the required report.
8. Defines “public agency” to mean any state agency, department, board, or commission, county, city, special district, or other political subdivision.
9. Includes a sunset date of January 1, 2025.

Background

Accounting practices are not consistent across governmental entities in the State. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow. These are known as GAAP. SCO sets uniform accounting procedures that must conform to GAAP. The financial reports that local governments file with SCO must contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available. Local agencies generally prepare their financial statements in Portable Document Format (PDF). This format is human-readable, but is not machine-readable; thus, it cannot be searched electronically, which hinders comparing financial statements across public agencies.

XBRL is an open international standard for digital business reporting, managed by a global not for profit consortium. Often termed “bar codes for reporting,” XBRL was developed to improve the way in which financial data is communicated, making it easier to compile and share. iXBRL is a development of XBRL, in which the XBRL metadata are embedded in an HTML document, and allow a single document to provide both human-readable and structured, machine-readable data.

Comments

1. Purpose of the bill. According to the author, “SB 598 would provide more transparency for critical accounting documents. Currently, Comprehensive Annual Financial Reports (CAFRs) are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies. We are California. It is time to move into the 21st century. The concern? Inconvenience and maybe moving too fast. But, once again, the publicly traded industry is years ahead of government, and this bill would also make reporting easier for municipalities. It is time to have the governments’ taxpayers fund to provide a simple data dive opportunity. Stakeholders are investors and it goes back to the basic management principle: if you can’t measure it, you can’t manage it.”
2. Unknown unknowns. The Commission that SB 598 creates brings together expertise from state government, local government, the private sector, academia, and the public. Bringing these groups together to discuss how public agencies would implement machine readable taxonomies and documents, and how the state would support that implementation, could help address any potential obstacles before making any broader policy changes. That said, the timelines imposed under this bill may be unrealistic. This bill has an effective date of January 1, 2020, and requires the Commission to report to the Legislature by January 1, 2021. Given the need to appoint the Commission’s members and hire staff, giving the Commission one year to complete its work could be insufficient.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee, the STO indicates the costs of administering the Commission and producing the required feasibility report, including securing expert opinion, are absorbable within existing resources.

SUPPORT: (Verified 9/10/19)

California State Treasurer Fiona Ma

Bitvore

California Policy Center

California Society of Certified Public Accountants

Construction Progress Coalition

Data Coalition

Howard Jarvis Taxpayers Association

Mark V Systems

Object Management Group

Robots & Pencils

SunSpec Alliance

Surety Resource Connection

UN Global Sustainability Index Institute

Valley Industry and Commerce Association

Wells Fargo Renewable Energy & Environmental Finance

Workiva

XBRL US

5 individuals

OPPOSITION: (Verified 9/10/19)

None received

ASSEMBLY FLOOR: 78-0, 9/10/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Brough

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

9/10/19 22:05:10

**** END ****

SENATE THIRD READING

STR Bill Id:SB 598

Author:(Moorlach)

As Amended Ver:September 6, 2019

Majority vote

SUMMARY:

Creates the Open Financial Statement Commission (Commission) and requires it to report to the Legislature regarding how to transition state and local agencies' financial reporting to a machine readable format.

Major Provisions

Establishes the Commission in the State Treasurer's Office (STO), specifies the Commission's members, and requires the Commission to report to the Legislature and make recommendations by January 1, 2021, regarding how to transition financial reporting by state and local agencies to a machine readable format.

Authorizes the Commission to contract with vendors to do both of the following: build one or more taxonomies suitable for public agency filings, including eXtensible Business Reporting Language (XBRL) taxonomies; and, create an open source software tool that enables a public agency required to file or submit a financial statement to easily create machine readable documents consistent with these developed taxonomies. This open source software tool shall have no restriction on its use. The bill sunsets on January 1, 2025.

COMMENTS:

State and local agencies prepare various financial reports. The state prepares an annual Comprehensive Annual Financial Report (CAFR), which contains the state's audited financial statements. Local agencies have been required to file annual financial transaction reports with the State Controller's Office (SCO) since the 1940s. The Controller must prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest. The state CAFR is displayed in Portable Document Format (PDF). Local agencies also generally provide their reports in PDF format. This format is human-readable, but is not machine-readable, making it difficult to compare financial statements across public agencies.

Over the last decade, the federal Securities Exchange Commission (SEC) has required private companies to submit financial reports in a machine-readable format known as XBRL. Starting in 2020, the SEC will begin moving to a human-readable and machine-readable format, known as the inline eXtensible business reporting language (iXBRL), to make these financial reports searchable and easier to compare. Public agencies in some other countries, such as Spain, already use this format to prepare financial statements. In this country, Florida House Bill 1073 (2018) started that state's rollout of iXBRL and appropriated $500,000 to develop an iXBRL taxonomy, which is the set of machine-readable tags that allows computers to read these documents.

In recent years, both the state and local agencies have generally moved towards providing more transparent financial information. For example, the SCO provides an open data site that includes data from local agencies' financial transaction reports that are submitted to the state. The site allows for comparisons between local entities for certain financial information and lets users download data.

Additionally, the state has its Open FI$Cal site that displays data from FI$Cal, California's statewide accounting, budget, cash management and procurement information technology system. This site currently includes expenditure data from 80 departments, and the information is searchable and can be downloaded.

According to the Author:

"SB 598 would provide more transparency for critical accounting documents. Currently, CAFRs are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies.

"We are California. It is time to move into the 21st century. The concern? Inconvenience and maybe moving too fast. But, once again, the publicly traded industry is years ahead of government, and this bill would also make reporting easier for municipalities. It is time to have the governments' taxpayers fund to provide a simple data dive opportunity. Stakeholders are investors and it goes back to the basic management principle: if you can't measure it, you can't manage it."

Arguments in Support:

The Data Coalition, in support, states, "Benefits accrue from the data standards proposed by SB 598. In particular, the transformation of municipal financial information into standardized, open data improves democratic accountability, enables better public-sector management and oversight, and allows compliance processes to be automated. For the private sector, the transformation is creating a new industry. Once government information is expressed as standardized, open data instead of disconnected documents, technology companies can build solutions that republish it to improve democratic accountability, analyze it to enable better management, and automate compliance processes for the benefit of citizens and those tasked with responsibilities for municipal financial oversight…Ultimately, this measure will help local governments, private analysts, and the public better track taxpayer dollars by switching to a proven approach that is more accessible, efficient, and user-friendly."

Arguments in Opposition:

None on file.

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, "The STO indicates the costs of administering the Commission and producing the required feasibility report, including securing expert opinion, are absorbable within existing resources."

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM LOCAL GOVERNMENT: 8-0-0

YES: Aguiar-Curry, Lackey, Bloom, Boerner Horvath, Ramos, Luz Rivas, Robert Rivas, Voepel

ASM ACCOUNTABILITY AND ADMINISTRATIVE REVIEW: 7-0-0

YES: Petrie-Norris, Patterson, Burke, Lackey, Medina, Quirk-Silva, Smith

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

UPDATED:

VERSION: September 6, 2019

CONSULTANT: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0002008

SENATE THIRD READING

STR Bill Id:SB 598

Author:(Moorlach)

As Amended Ver:May 17, 2019

Majority vote

SUMMARY:

Creates the Open Financial Statement Commission (Commission) and requires it to report to the Legislature regarding how to transition state and local agencies' financial reporting to a machine readable format.

Major Provisions

Establishes the Commission in the State Treasurer's Office (STO), specifies the Commission's members, and requires the Commission to report to the Legislature and make recommendations by January 1, 2021, regarding how to transition financial reporting by state and local agencies to a machine readable format.

Authorizes the Commission to contract with vendors to do both of the following: build one or more taxonomies suitable for public agency filings, including eXtensible Business Reporting Language (XBRL) taxonomies; and, create an open source software tool that enables a public agency required to file or submit a financial statement to easily create machine readable documents consistent with these developed taxonomies. This open source software tool shall have no restriction on its use. The bill sunsets on January 1, 2025.

COMMENTS:

State and local agencies prepare various financial reports. The state prepares an annual Comprehensive Annual Financial Report (CAFR), which contains the state's audited financial statements. Local agencies have been required to file annual financial transaction reports with the State Controller's Office (SCO) since the 1940s. The Controller must prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest. The state CAFR is displayed in Portable Document Format (PDF). Local agencies also generally provide their reports in PDF format. This format is human-readable, but is not machine-readable, making it difficult to compare financial statements across public agencies.

Over the last decade, the federal Securities Exchange Commission (SEC) has required private companies to submit financial reports in a machine-readable format known as XBRL. Starting in 2020, the SEC will begin moving to a human-readable and machine-readable format, known as the inline eXtensible business reporting language (iXBRL), to make these financial reports searchable and easier to compare. Public agencies in some other countries, such as Spain, already use this format to prepare financial statements. In this country, Florida House Bill 1073 (2018) started that state's rollout of iXBRL and appropriated $500,000 to develop an iXBRL taxonomy, which is the set of machine-readable tags that allows computers to read these documents.

In recent years, both the state and local agencies have generally moved towards providing more transparent financial information. For example, the SCO provides an open data site that includes data from local agencies' financial transaction reports that are submitted to the state. The site allows for comparisons between local entities for certain financial information and lets users download data.

Additionally, the state has its Open FI$Cal site that displays data from FI$Cal, California's statewide accounting, budget, cash management and procurement information technology system. This site currently includes expenditure data from 80 departments, and the information is searchable and can be downloaded.

According to the Author:

"SB 598 would provide more transparency for critical accounting documents. Currently, CAFRs are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies.

"We are California. It is time to move into the 21st century. The concern? Inconvenience and maybe moving too fast. But, once again, the publicly traded industry is years ahead of government, and this bill would also make reporting easier for municipalities. It is time to have the governments' taxpayers fund to provide a simple data dive opportunity. Stakeholders are investors and it goes back to the basic management principle: if you can't measure it, you can't manage it."

Arguments in Support:

The Data Coalition, in support, states, "Benefits accrue from the data standards proposed by SB 598. In particular, the transformation of municipal financial information into standardized, open data improves democratic accountability, enables better public-sector management and oversight, and allows compliance processes to be automated. For the private sector, the transformation is creating a new industry. Once government information is expressed as standardized, open data instead of disconnected documents, technology companies can build solutions that republish it to improve democratic accountability, analyze it to enable better management, and automate compliance processes for the benefit of citizens and those tasked with responsibilities for municipal financial oversight…Ultimately, this measure will help local governments, private analysts, and the public better track taxpayer dollars by switching to a proven approach that is more accessible, efficient, and user-friendly."

Arguments in Opposition:

None on file.

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, "The STO indicates the costs of administering the Commission and producing the required feasibility report, including securing expert opinion, are absorbable within existing resources."

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM LOCAL GOVERNMENT: 8-0-0

YES: Aguiar-Curry, Lackey, Bloom, Boerner Horvath, Ramos, Luz Rivas, Robert Rivas, Voepel

ASM ACCOUNTABILITY AND ADMINISTRATIVE REVIEW: 7-0-0

YES: Petrie-Norris, Patterson, Burke, Lackey, Medina, Quirk-Silva, Smith

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

UPDATED:

VERSION: May 17, 2019

CONSULTANT: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0001337

Date of Hearing: August 14, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 598

Author:(Moorlach) – As Amended Ver:May 17, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill establishes the Open Financial Statement Commission (Commission) within the State Treasurer’s Office (STO), and requires the Commission to report to the Legislature by January 1, 2021, with information and recommendations on how and whether to transition state and local agencies' financial reporting to a machine-readable format.

The bill also specifies the composition of the nine-member Commission to include a representative each from the State Controller's Office (SCO), the State Auditor's Office and the California Debt and Investment Advisory Commission, and six other members appointed by the Treasurer representing local agencies and subject experts. The bill further allows the Commission to hire staff, vendors and experts.

FISCAL EFFECT:

The STO indicates the costs of administering the Commission and producing the required feasibility report, including securing expert opinion, are absorbable within existing resources.

COMMENTS:

1. Purpose. This bill seeks to increase governmental financial transparency. According to the author:

[This bill] would provide more transparency for critical accounting documents. Currently, CAFRs are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies.

1. Background. State and local agencies currently prepare various financial reports. Every year, the state prepares its Comprehensive Annual Financial Report (CAFR), which contains the state’s audited financial statements. Local agencies file annual financial transaction reports with the SCO documenting their revenues, expenditures, long-term indebtedness, appropriation limits and total annual appropriations subject to those limits. The SCO then prepares and publishes annual reports on the financial transactions of cities, counties and special districts.

The state CAFR is displayed in, and local agencies generally prepare their financial statements in, Portable Document Format (PDF). This format is human-readable, but is not machine-readable. This means these reports are not easily searchable, making it difficult to compare financial statements across public agencies.

1. Machine-readable. Over the last decade, the federal Securities Exchange Commission (SEC) has required private companies to submit financial reports in a machine-readable format known as eXtensible Business Reporting Language (XBRL). Starting in 2020, the SEC will begin moving to a human-readable and machine-readable format, known as the inline eXtensible business reporting language (iXBRL), to make these financial reports searchable and easier to compare.

In recent years, both state and local agencies are providing more-transparent financial information. The SCO provides an open data site that includes data from local agencies’ financial transaction reports submitted to the state. The site allows for comparisons between local entities for certain financial information and lets users download data.

Additionally, the state has its Open FI$Cal site that displays data from FI$Cal, California’s statewide accounting, budget, cash management and procurement information technology system. This site includes expenditure data from 80 departments, and data from additional departments are expected later this year. The information is searchable and can be downloaded.

The STO indicates it will benefit greatly from the knowledge gained through the Commission’s work and writes in support, “[This bill] has the potential to install a fundamental best practice into California’s financial management systems that will improve the financial standing of California and her agencies with the municipal debt markets.”

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: July 3, 2019

ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW

Cottie Petrie-Norris, Chair

SBPCA Bill Id:SB 598

Author:(Moorlach) – As Amended Ver:May 17, 2019

SENATE VOTE: 38-0

SUBJECT: Open Financial Statements Act

SUMMARY: Establishes the Open Financial Statement Commission (Commission) within the State Treasurer’s Office (STO), with the task of reporting to the Legislature about transitioning state and local agencies’ financial reports to machine readable formats. Specifically, this bill:

1. Sets the Commission membership as follows:
   1. A representative from the State Controller’s Office (SCO), appointed by the Controller;
   2. A representative from the California State Auditor’s Office, appointed by the Auditor;
   3. A representative from the California Debt and Investment Advisory Commission within the STO, appointed by the Treasurer to serve as the Chair of the Commission; and
   4. Six other members who are appointed by the Treasurer, and represent a city or county; a special district; a researcher with government accounting knowledge and experience who is associated with either the University of California or the California State University; a municipal bond investor; an information technology professional employed in the private sector; and a person with knowledge and experience in data modeling for open data standards.
2. Subjects Commission meetings to open meeting requirements in existing law.
3. Allows the Commission to employ staff.
4. Allows the Commission to contract with vendors for tools related to public agency financial reporting.
5. Requires the Commission to report to the Legislature by January 1, 2021 about how to transition state and local financial reporting to a machine readable format.
   1. Requires the report to include costs of creating a taxonomy and an open source tool; time necessary for public agencies to transition to a machine readable format; cost of transitioning public agencies and how the transition would be funded; and recommendations if a transition is the most cost effective method to prepare financial statements.
   2. Allows the Commission to enter into an agreement with the University of California or the California State University for consultation on the report.
6. Sunsets the requirements of this bill on January 1, 2025.

EXISTING LAW:

1. Establishes the Financial Information System for California (FI$Cal), a single integrated financial management system for the state, and requires the Department of FI$Cal to maintain and operate that system.
2. Requires local agencies to file annual financial transaction reports with the SCO. These reports document local agencies’ revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits.
3. Requires SCO to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest.

FISCAL EFFECT: Unknown

COMMENTS: This bill establishes the Commission and charges it with reporting to the Legislature by January 1, 2021, on how to transition state and local financial reporting to a machine readable format. It specifies the composition of the commission and allows it to hire staff, vendors, and experts, as specified.

State and local agencies currently prepare various financial reports. Every year, the state prepares its Comprehensive Annual Financial Report (CAFR), which contains the state’s audited financial statements. Local agencies also prepare CAFRs with their financial statements.

The state CAFR is displayed in Portable Document Format (PDF). Additionally, local agencies also generally provide their CAFR in PDF format. This format is human-readable, but is not machine-readable. This means these reports are not easily searchable, making it difficult to compare financial statements across public agencies.

Additionally, the federal Securities and Exchange Commission (SEC) requires U.S. public companies preparing their financial statements in accordance with U.S. generally accepted accounting principles to provide this information in a machine-readable format.

According to the author, “SB 598 would provide more transparency for critical accounting documents. Currently, CAFRs are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies.”

This bill, through the work of the Commission, could help increase governmental financial transparency. In recent years, both the state and local agencies have generally moved towards providing more transparent financial information. For example, the SCO provides an open data site that includes data from local agencies’ financial transaction reports that are submitted to the state. The site allows for comparisons between local entities for certain financial information and lets users download data.

Additionally, the state has its Open FI$Cal site that displays data from FI$Cal, California’s statewide accounting, budget, cash management and procurement information technology system. This site currently includes expenditure data from 80 departments, and data from additional departments are expected later this year. The information is searchable and can be downloaded.

DOUBLE REFERRAL: This measure was previously heard in the Assembly Local Government Committee on June 19, 2019, with a vote of 8-0.

REGISTERED SUPPORT / OPPOSITION:

Support

Bitvore
California Policy Center
California Society of Certified Public Accountants
California State Treasurer Fiona Ma
Construction Progress Coalition
Data Coalition
Howard Jarvis Taxpayers Association
Mark V Systems
Object Management Group 
Surety Resource Connection
Valley Industry and Commerce Association
Workiva
XBRL Us

Opposition

None on file

Analysis Prepared by: Scott Herbstman / A. & A.R. / (916) 319-3600

Date of Hearing: June 19, 2019

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

SBPCA Bill Id:SB 598

Author:(Moorlach) – As Amended Ver:May 17, 2019

SENATE VOTE: 38-0

SUBJECT: Open Financial Statements Act.

SUMMARY: Creates the Open Financial Statement Commission (Commission) and requires it to report to the Legislature regarding how to transition state and local agencies’ financial reporting to a machine readable format. Specifically, this bill:

1. Creates the Open Financial Statements Act and establishes the Commission in the State Treasurer’s Office (STO).
2. Requires the Commission to consist of the following nine members:
   1. A representative from the State Controller’s Office (SCO), to be appointed by the Controller;
   2. A representative from the California Debt and Investment Advisory Commission (CDIAC) within the STO, who shall serve as the chair of the Commission;
   3. A representative from the State Auditor’s Office, to be appointed by the California State Auditor;
   4. A representative of a city or a county;
   5. A representative of a special district;
   6. A researcher who has knowledge and experience in government accounting, affiliated with either the University of California (UC) or the California State University (CSU);
   7. A municipal bond investor;
   8. An information technology professional employed in the private sector; and,
   9. A person with knowledge and experience in data modeling for open data standards.
3. Requires Commission members to be appointed by the Treasurer, except for the representatives from the SCO and the State Auditor’s Office.
4. Specifies that Commission meetings shall be open and public in accordance with the Bagley-Keene Open Meeting Act.
5. Allows the Commission to employ staff as may be necessary for the performance of its duties.
6. Allows the Commission to contract, through an open and competitive request for proposal (RFP) and consistent with existing law governing the acquisition of information technology (IT) goods and services by state agencies, with vendors possessing the necessary software and financial data standards development expertise to do both of the following:
   1. Build one or more taxonomies suitable for public agency filings, including, but not limited to, XBRL taxonomies; and,
   2. Create an open source software tool that enables a public agency required by other law
      to file or submit a financial statement to easily create machine readable documents consistent with the taxonomy or taxonomies developed pursuant to a), above, if necessary. This open source software tool shall have no restriction on its use.
7. Requires the Commission to report to the Legislature and make recommendations by
   January 1, 2021, regarding how to transition financial reporting by state and local agencies
   to a machine readable format. The report shall include, but not be limited to, the following information:
   1. The cost of creating a taxonomy, as described in the bill;
   2. The cost of creating an open source software tool, as described in the bill;
   3. The amount of time necessary for public agencies to transition to a machine readable format;
   4. The cost of transitioning all public agencies and how the transition would be funded; and,
   5. Recommendations regarding whether such a transition is the most cost-effective method of preparing financial statements.
8. Allows the Commission to enter into an interagency agreement with the UC or the CSU for consultation on the required report, and requires the report to be submitted in compliance with existing law governing the submission of reports to the Legislature.
9. Provides the following definitions:
   1. “Commission” means the Open Financial Statement Commission;
   2. “Financial statement” means any financial report or statement that a public agency is required by any state or local law to submit;
   3. “iXBRL” means Inline eXtensible Business Reporting Language;
   4. “Public agency” means any state agency, department, board, or commission, county, city, special district, or other political subdivision; and,
   5. “XBRL” means eXtensible Business Reporting Language.
10. Contains a number of findings and declarations, and states the intent of the Legislature to study whether to transition financial reporting by state and local agencies to a machine readable format, such as iXBRL.
11. Provides a sunset date of January 1, 2025.

FISCAL EFFECT: Unknown. This bill is keyed fiscal.

COMMENTS:

1. Background. Local agencies have been required to file annual financial transaction reports with the SCO since the 1940s. These reports document local agencies’ revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits. The Controller is required to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest.

Accounting practices vary across governmental entities in California. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow, known as generally accepted accounting principles (GAAP). The State Controller’s Office sets uniform accounting procedures that must conform to GAAP. The financial reports that local governments file with the Controller must contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available.

These reports include a comprehensive account of a state or local agency’s financial condition and includes information on all assets and liabilities of the agency. Local agencies generally prepare their financial statements in Portable Document Format (PDF). This format is human-readable, but is not machine-readable. This means these reports are not easily searchable, making it difficult to compare financial statements across public agencies.

1. XBRL and iXBRL. Over the last decade, the federal Securities Exchange Commission (SEC) has required private companies to submit financial reports in a machine-readable format known as eXtensible Business Reporting Language (XBRL). Starting in 2020, the SEC will begin moving to a human-readable and machine-readable format, known as the inline eXtensible business reporting language (iXBRL), to make these financial reports searchable and easier to compare. Public agencies in some other countries, such as Spain, already use this format to prepare financial statements. In this country, Florida House
   Bill 1073 (2018) started that state’s rollout of iXBRL and appropriated $500,000 to develop an iXBRL taxonomy, which is the set of machine-readable tags that allows computers to read these documents.
2. Author’s Statement. According to the author, “SB 598 would provide more transparency for critical accounting documents. Currently, Comprehensive Annual Financial Reports (CAFRs) are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies.

“We are California. It is time to move into the 21st century. The concern? Inconvenience and maybe moving too fast. But, once again, the publicly traded industry is years ahead of government, and this bill would also make reporting easier for municipalities. It is time to have the governments’ taxpayers fund to provide a simple data dive opportunity. Stakeholders are investors and it goes back to the basic management principle: if you can’t measure it, you can’t manage it.”

1. Bill Summary. This bill creates the Commission in the STO and requires it to report to the Legislature and make recommendations by January 1, 2021, regarding how to transition financial reporting by state and local agencies to a machine readable format. The report must include information regarding the cost of creating an XBRL taxonomy, the cost of creating an open source software tool, the amount of time necessary for public agencies to transition to a machine readable format, the cost of transitioning all public agencies and how the transition would be funded, and recommendations regarding whether such a transition is the most cost-effective method of preparing financial statements.

The bill specifies the composition of the Commission and allows it to contract with vendors to build one or more XBRL taxonomies suitable for public agency filings. It also allows the Commission to create an open source software tool that enables a public agency to easily create Inline iXBRL documents consistent with the taxonomy or taxonomies developed. The bill specifies that this open source software tool shall have no restriction on its use.

The bill defines “public agency” to include any state agency, department, board, or commission, county, city, special district, or other political subdivision, and includes a sunset date of January 1, 2025. This bill is sponsored by the author.

1. Policy Considerations. The Committee may wish to consider the following issues:
   1. Commission Membership. This bill includes one Commission membership seat for a city or a county. While counties and cities have similarities, they also have significant differences. In addition, the City and County of San Francisco would not qualify under either definition. The Committee may wish to consider encouraging the author to address representation for all of these categories.
   2. Whether or How? This bill states an intent to study whether to transition financial reporting to machine readable formats, but requires the Commission to report and make recommendations regarding how to transition financial reporting. The Committee may wish to ask the author for consistency in terms.
2. Arguments in Support. The Data Coalition, in support, states, “The Data Coalition is the foremost trade association dedicated to the transformation of government information into standardized, open data on behalf of the private sector and the public interest. SB 598 advances the mission of the Data Coalition to advance the adoption of better information practices for the benefit of both the public and federal, state, and local governments. First, we believe governments should adopt non-proprietary data standards to make the information they generate and collect fully interoperable and searchable. Second, wherever government information is legally public, it should be published as open data, freely available in bulk, without licensing or registration restrictions. SB 598 appears to implement both principles.

“Benefits accrue from the data standards proposed by SB 598. In particular, the transformation of municipal financial information into standardized, open data improves democratic accountability, enables better public-sector management and oversight, and allows compliance processes to be automated. For the private sector, the transformation is creating a new industry. Once government information is expressed as standardized, open data instead of disconnected documents, technology companies can build solutions that republish it to improve democratic accountability, analyze it to enable better management, and automate compliance processes for the benefit of citizens and those tasked with responsibilities for municipal financial oversight.

“Over 1,500 public entities prepare annual financial statements, independently audited, and submitted to the California State Controller. The reports are submitted as a PDF, either in a text-searchable format or as scanned physical documents producing data that are difficult to extract and analyze. Open data reporting, as proposed by SB 598, follow the adoption of open data practices by the Securities and Exchange Commission for operating company financial statements and fund risk/return summary information, as well as by the U.S. Treasury and the Office of Management and Budget (OMB) for spending activity reported centrally by federal agencies under the Digital Accountability and Transparency Act of 2014. Ultimately, this measure will help local governments, private analysts, and the public better track taxpayer dollars by switching to a proven approach that is more accessible, efficient, and user-friendly.”

1. Arguments in Opposition. None on file.
   
2. Double-Referral. This bill is double-referred to the Accountability and Administrative Review Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Bitvore

California Policy Center

California State Treasurer Fiona Ma

Data Coalition

Howard Jarvis Taxpayers Association

Mark V Systems

Object Management Group

Surety Resource Connection

Valley Industry and Commerce Association

Workiva

XBRL US

Six individuals

Opposition

None on file

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958

 THIRD READING  

Bill No: SB 598

Author: Moorlach (R)

Amended: 5/17/19

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/10/19

AYES: McGuire, Moorlach, Beall, Hertzberg, Hurtado, Nielsen, Wiener

SENATE GOVERNMENTAL ORG. COMMITTEE: 16-0, 4/23/19

AYES: Dodd, Wilk, Allen, Archuleta, Borgeas, Bradford, Chang, Galgiani, Glazer, Hill, Hueso, Jones, Nielsen, Portantino, Rubio, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SUBJECT: Open Financial Statements Act

SOURCE: Author

DIGEST:

This bill establishes the Open Financial Statement Commission (Commission), within the State Treasurer’s Office (STO), and requires the Commission to report to the Legislature regarding how and whether to transition state and local agencies’ financial reporting to a machine readable format, as specified.

ANALYSIS:

Existing law:

1. Requires local agencies to file annual financial transaction reports with the State Controller’s Office (SCO). These reports document local agencies’ revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits.
2. Requires SCO to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest (SB 1138, Fletcher, 1945).
3. Requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles (GAAP).

This bill:

1. Establishes, in the STO, the Open Financial Statement Commission consisting of the following nine members:
   1. Representative from SCO.
   2. Representative from the California Debt and Investment Advisory Commission within STO, who chairs the Commission.
   3. Representative from the State Auditor’s Office appointed by the California State Auditor.
   4. Representative of a city or a county.
   5. Representative of a special district.
   6. Researcher with government accounting knowledge and experience affiliated with the University of California or the California State University.
   7. Municipal bond investor.
   8. Information technology professional employed in the private sector.
   9. Public member with knowledge and experience in data modeling for open data standards.
2. Authorizes STO to appoint members to the Commission, unless otherwise specified.
3. Authorizes the Commission to employ staff as may be necessary for the performance of its duties.
4. Authorizes the Commission to contract with vendors to build one or more taxonomies suitable for public agency filings, and create an open source software tool that enables a public agency to easily create machine readable documents consistent with the taxonomy or taxonomies developed, including but not limited to XBRL (eXtensible Business Reporting Language) or iXBRL (inline eXtensible Business Reporting Language).
5. Provides that the open source software tool created shall have no restriction on its use.
6. Requires the Commission to report to the Legislature and make recommendations by January 1, 2021, regarding how to transition financial reporting by state and local agencies to a machine readable format, including the following information:
   1. The cost of creating a taxonomy.
   2. The cost of creating an open source software tool, as specified.
   3. The amount of time necessary for public agencies to transition to a machine readable format.
   4. The cost of transitioning all public agencies and how the transition would be funded.
   5. Recommendations regarding whether such a transition is the most cost-effective method of preparing financial statements.
7. Allows the Commission to enter into an interagency agreement with the University of California or California State University for consultation on the required report.
8. Defines “public agency” to mean any state agency, department, board, or commission, county, city, special district, or other political subdivision.
9. Includes a sunset date of January 1, 2025.

Background

Accounting practices are not consistent across governmental entities in the State. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow. These are known as GAAP. SCO sets uniform accounting procedures that must conform to GAAP. The financial reports that local governments file with SCO must contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available. Local agencies generally prepare their financial statements in Portable Document Format (PDF). This format is human-readable, but is not machine-readable; thus, it cannot be searched electronically, which hinders comparing financial statements across public agencies.

XBRL is an open international standard for digital business reporting, managed by a global not for profit consortium. Often termed “bar codes for reporting,” XBRL was developed to improve the way in which financial data is communicated, making it easier to compile and share. iXBRL is a development of XBRL, in which the XBRL metadata are embedded in an HTML document, and allow a single document to provide both human-readable and structured, machine-readable data.

Comments

1. Purpose of the bill. According to the author, “SB 598 would provide more transparency for critical accounting documents. Currently, Comprehensive Annual Financial Reports (CAFRs) are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies. We are California. It is time to move into the 21st century. The concern? Inconvenience and maybe moving too fast. But, once again, the publicly traded industry is years ahead of government, and this bill would also make reporting easier for municipalities. It is time to have the governments’ taxpayers fund to provide a simple data dive opportunity. Stakeholders are investors and it goes back to the basic management principle: if you can’t measure it, you can’t manage it.”
2. Unknown unknowns. The Commission that SB 598 creates brings together expertise from state government, local government, the private sector, academia, and the public. Bringing these groups together to discuss how public agencies would implement machine readable taxonomies and documents, and how the state would support that implementation, could help address any potential obstacles before any required changes go into effect. That said, the timelines imposed under this bill may be unrealistic. This bill has an effective date of January 1, 2020, and requires the Commission to report to the Legislature by January 1, 2021. Given the need to appoint the Commission’s members and hire staff, giving the Commission one year to complete its work could be insufficient.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, SCO indicates that it would incur a cost of $328,000, at a minimum, to implement the provisions of the bill (General Fund).

SUPPORT: (Verified 5/20/19)

California State Treasurer Fiona Ma

California Policy Center

Construction Progress Coalition

Data Coalition

Howard Jarvis Taxpayers Association

Object Management Group

Robots & Pencils

SunSpec Alliance

Surety Resource Connection

UN Global Sustainability Index Institute

Valley Industry and Commerce Association

Wells Fargo Renewable Energy & Environmental Finance

Workiva

XBRL US

OPPOSITION: (Verified 5/20/19)

None received

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

5/20/19 17:52:24

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 598 (Moorlach) - Open Financial Statements Act

Bill Summary:

>

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 16, 2019

Fiscal Impact:

SB 598 would (1) establish the Open Financial Statement Commission, within the State Controller’s Office (SCO), and (2) require the Commission to report to the Legislature regarding how and whether to transition state and local agencies’ financial reporting to a machine readable format, as specified.

Author Amendments:

House the Commission in the State Treasurer’s Office instead of SCO, and make clarifying changes

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 598 (Moorlach) - Open Financial Statements Act

Bill Summary:

SB 598 would (1) establish the Open Financial Statement Commission, within the State Controller’s Office (SCO), and (2) require the Commission to report to the Legislature regarding how and whether to transition state and local agencies’ financial reporting to a machine readable format, as specified.

Fiscal Impact:

SCO indicates that it would incur a cost of $328,000, at a minimum, to implement the provisions of the bill (General Fund, see Staff Comments).

Background:

Local agencies in California have been required to file annual financial transaction reports with SCO for eight decades. These reports document local agencies’ financial data, including revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits. SCO is required to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest.

Accounting practices are not consistent across governmental entities in the State. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow. These are known as generally accepted accounting principles (GAAP). SCO sets uniform accounting procedures that must conform to GAAP. The financial reports that local governments file with SCO must contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available. SB 742 (Moorlach, 2017) required the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to GAAP principles.

These reports include a comprehensive account of a state or local agency’s financial condition and includes information on all assets and liabilities of the agency. Local agencies generally prepare their financial statements in Portable Document Format (PDF). This format is human-readable, but is not machine-readable; thus, it cannot be searched electronically, which hinders comparing financial statements across public agencies.

eXtensible Business Reporting Language (XBRL) is an open international standard for digital business reporting, managed by a global not for profit consortium. Often termed “bar codes for reporting,” XBRL was developed to improve the way in which financial data is communicated, making it easier to compile and share. XBRL uses tags to identify each piece of financial data, which (1) allows it to be used programmatically by an XBRL-compatible program, and (2) is a standards-based way to communicate and exchange financial information between systems. These communications are defined by metadata set out in taxonomies, which capture the definition of individual reporting concepts as well as the relationships between concepts and other semantic meaning.

iXBRL is a development of XBRL, in which the XBRL metadata are embedded in an HTML document, and allow a single document to provide both human-readable and structured, machine-readable data. Typically, iXBRL is implemented within HTML documents, which are displayed or printed by web browsers without revealing the XBRL metadata inside the document.

For example, when viewing financial statements online, traditionally the statements would simply be in plain text. If analysts wanted to put these numbers into a spreadsheet file to run analysis on the statements, they would have to either manually type or copy and paste each account and corresponding number into the spreadsheet. However, if the data on the site was available in XBRL, they could simply convert this data from the website into a spreadsheet program that is XBRL compatible.

Over the last decade, the federal Securities Exchange Commission (SEC) has required private companies to submit financial reports in XBRL. Starting in 2020, SEC will begin moving to iXBRL. Public agencies in certain countries, such as Spain, already use this format to prepare financial statements. At the state level, Florida House Bill 1073 from 2018 (1) started that state’s rollout of iXBRL, and (2) appropriated $500,000 to develop an iXBRL taxonomy, which is the set of machine-readable tags that allow computers to read these documents.

Proposed Law:

This bill would do the following:

• Establish, in SCO, the Open Financial Statement Commission consisting of the following nine members, as specified. The Commission would be authorized to employ staff as may be necessary for the performance of its duties.
• Authorize the Commission to contract with vendors to build one or more XBRL taxonomies suitable for public agency filings, and create an open source software tool that enables a public agency to easily create Inline iXBRL documents consistent with the taxonomy or taxonomies developed, as specified.
• Provide that the open source software tool created shall have no restriction on its use.
• Require the Commission to report to the Legislature and make recommendations by January 1, 2021, regarding how to transition financial reporting by state and local agencies to a machine readable format. The report would include information regarding (1) the cost of creating an XBRL taxonomy, as specified, (2) the cost of creating an open source software tool, as specified, (3) the amount of time necessary for public agencies to transition to a machine readable format, (4) the cost of transitioning all public agencies and how the transition would be funded, and (5) recommendations regarding whether such a transition is the most cost-effective method of preparing financial statements.
• Define “public agency” to mean any state agency, department, board, or commission, county, city, special district, or other political subdivision.
• Include a sunset date of January 1, 2025.

Staff Comments:

SCO estimates a minimum of three positions would be necessary to carry out the provisions of the bill: one Office Technician, one Associate Governmental Program Analyst, and one Staff Service Manager 1. The cost estimate for these positions is $328,000. This amount does not reflect operational, contracting, meeting, and other costs that would be incurred by the SCO as a result of the bill, the magnitude of which are unknown. Contracting for a study that has similar parameters as those contained in the bill could potentially produce the same results as a lower cost.

Staff notes that the timelines imposed under the bill may be unrealistic. The bill would have an effective date of January 1, 2020, and would require the Commission to report to the Legislature by January 1, 2021. Given the need to appoint the Commission’s members and hire staff, giving the Commission one year to complete its work could be insufficient.

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SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2019 - 2020 Regular

Bill No: SB 598 Hearing Date: 4/23/2019

SUBJECT: Open Financial Statements Act

DIGEST: This bill establishes the Open Financial Statement Commission (Commission), and requires the Commission to report to the Legislature regarding how and whether to transition financial reporting by state and local agencies to a machine readable format, as specified.

ANALYSIS:

Existing law:

1. Establishes the Financial Information System for California (FI$Cal) as the single integrated financial management system for the state.
2. Requires the Department of FI$Cal to maintain and operate the system upon its full implementation and final acceptance.
3. Requires various state and local agencies to provide financial reports, as specified.
4. Establishes the California State Controller (Controller) as the chief fiscal officer of California with responsibility for accountability and disbursement of the state’s financial resources.
5. The Bagley-Keene Open Meetings Act (Bagley-Keene) requires that all meetings of a state body, as defined, be open and public and that all persons be permitted to attend and participate in a meeting of a state body, subject to certain conditions and exceptions.
6. Provides that any report required by law to be submitted by a state agency to the Members of either house of the Legislature generally, shall instead be submitted as a printed copy to the Secretary of the Senate, as an electronic copy to the Chief Clerk of the Assembly, and as an electronic or printed copy to the Legislative Counsel.
7. Requires, unless otherwise expressly provided, that all contracts for the acquisition of information technology goods or services be made by or under the supervision of the Department of General Services (DGS).

This bill:

1. Establishes, in the Controller’s office, the Commission consisting of the following nine members:
   1. A representative from the Controller’s office, who shall serve as the chair of the Commission.
   2. A representative from the California State Treasurer’s (Treasurer) office, to be appointed by the Treasurer.
   3. A representative from the California State Auditor’s (Auditor) office, to be appointed by the Auditor.
   4. A representative of a city or county.
   5. A representative of a special district.
   6. A researcher who has knowledge and experience in government accounting, affiliated with either the University of California or the California State University.
   7. A municipal bond investor.
   8. An information technology professional employed in the private sector.
   9. A person with knowledge and experience in data modeling for open data standards.
2. Except as otherwise provided, members of the Commission shall be appointed by and serve at the pleasure of the Controller.
3. Authorizes the Commission to employ staff as may be necessary for the performance of its duties.
4. Authorizes the Commission to contract with vendors to build one or more eXtensible Business Reporting Language (XBRL) taxonomies suitable for public agency filings, and create an open source software tool that enables a public agency to easily create Inline eXtensible Business Reporting Language (iXBRL) documents consistent with the taxonomy or taxonomies developed, as specified.
5. Provides that the open source software tool created shall have no restriction on its use.
6. Requires, no later than January 1, 2021, the Commission to report to the Legislature and make recommendations regarding how to transition financial reporting by state and local agencies to a machine readable format.
7. Requires the report to include, but not be limited to, the following information:
   1. The cost of creating an XBRL taxonomy, as specified.
   2. The cost of creating an open source software tool, as specified.
   3. The amount of time necessary for public agencies to transition to a machine readable format.
   4. The cost of transitioning all public agencies and how the transition would be funded.
   5. Recommendations regarding whether such a transition is the most cost-effective method of preparing financial statements.
8. Defines “public agency” to mean any state agency, department, board, or commission, county, city, special district, or other political subdivision.
9. Includes a sunset date of January 1, 2025.
10. Includes Legislative findings and declarations relating to the transitioning of documents to machine readable formats.

Background

Purpose of the bill. According to the author’s office, “currently, Comprehensive Annual Financial Reports (CAFRs) are provided in a PDF format. This is fine if you have the time to scour the entire document. Why not upload it in a language that allows for faster analysis and comparisons with other CAFRs? Let’s move into the 21st century. The publicly traded industry is years ahead of government. It is time to have the municipalities you fund with your tax dollars to provide a simple data dive opportunity. If you can’t measure it, you can’t manage it.”

Financial statements. Since the 1940s, local agencies have been required to file annual financial transaction reports with the Controller. These reports document local agencies’ revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits. The Controller is required to prepare and public annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest.

Accounting practices vary across governmental entities in California. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow, known as generally accepted accounting principles (GAAP). The Controller sets uniform accounting procedures that must conform to GAAP. The financial reports that local governments file with the Controller must contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available.

These reports include a comprehensive account of the State’s or a local agency’s financial condition, and includes information on all assets and liabilities of the agency. Local agencies generally prepare their financial statements in Portable Document Format (PDF). This format is human-readable, but is not machine-readable, meaning it is not searchable and can make it difficult to compare financial statements across public agencies.

eXtensible Business Reporting Language. XBRL is an open international standard for digital business reporting, managed by a global not for profit consortium. Often termed “bar codes for reporting,” XBRL was developed to improve the way in which financial data is communicated, making it easier to compile and share this data. XBRL uses tags to identify each piece of financial data, which then allows it to be used programmatically by an XBRL-compatible program; and, is a standards-based way to communicate and exchange financial information between systems. These communications are defined by metadata set out in taxonomies, which capture the definition of individual reporting concepts as well as the relationships between concepts and other semantic meaning.

iXBRL is a development of XBRL, in which the XBRL metadata are embedded in an HTML document, and allows a single document to provide both human-readable and structured, machine-readable data. Typically, iXBRL is implemented within HTML documents, which are displayed or printed by web browsers without revealing the XBRL metadata inside the document.

For example, when viewing financial statements online, traditionally the statements would simply be in plain text. If you wanted to put these numbers into a spreadsheet file to run analysis on the statements, you would have to either manually type or copy and paste each account and corresponding number into the spreadsheet. However, if the data on the site was available in XBRL, you could simply convert this data from the website into a spreadsheet program that is XBRL compatible.

Real world uses. Over the last decade, the federal Securities Exchange Commission (SEC) has required private companies to submit financial reports in the machine-readable XBRL. Starting in 2020, the SEC will begin moving to the human-readable and machine-readable format iXBRL to make these financial reports searchable and easier to compare. Public agencies in some other countries, such as Spain, already use this format to prepare financial statements. At the state level, Florida has begun a rollout of iXBRL, and appropriated $500,000 to develop an iXBRL taxonomy, which is the set of machine-readable tags that allow computers to read these documents.

Prior/Related Legislation

SB 558 (Hueso, 2019) would abolish the Office of California-Mexico Affairs and, instead, establish the Commission on California Mexico Affairs, as specified. (Pending in the Senate Appropriations Committee)

SB 730 (Stern, 2019) would establish the Commission on the Future of Work, as specified. (Pending in the Senate Governmental Organization Committee)AB 130 (Low, 2019) would establish the Higher Education Performance and Accountability Commission, as specified. (Pending in the Assembly Appropriations Committee)

SB 752 (Stern, 2019) would establish, until January 1, 2025, the Commission on Tech Equity, as specified.

AB 245 (Muratsuchi, 2019) would establish the California Aerospace and Aviation Commission, as specified. (Pending in the Assembly Appropriations Committee)

AB 931 (Boerner Horvath, 2019) would require the composition of each state and local board and commission with appointed members to have a minimum number of women board members or commissioners based on the total number of board members or commissioners on that board, as specified. (Pending in the Assembly Accountability and Administrative Review Committee)

AB 1678 (Carrillo, 2019) would establish the Indoor-Grown Cannabis Commission, as specified. (Pending in the Assembly Agriculture Committee)

SB 742 (Moorlach, Chapter 77, Statutes of 2017) required the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles.

SB 1138 (Fletcher, Chapter 111, Statutes of 1945) required the Controller to compile and publish annually reports of the financial transactions of each county and city within the State, together with such other matter as the Controller deems of public interest.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: Yes

SUPPORT:

Howard Jarvis Taxpayers Association

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: The Howard Jarvis Taxpayers Association writes in support that, “SB 598 recognizes that there are inconsistent reporting practices among municipalities regarding how financial documents are required to be sent to the State Controller. Some documents come as a text-searchable PDF, while others are submitted as a scanned physical documents. These various practices produce data that is difficult to analyze. The problem is compounded when most local agencies must also submit a similar unaudited financial transactions report.”

DUAL REFERRAL: Senate Governance & Finance Committee (7-0) & Senate Governmental Organization Committee

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2019 - 2020 Regular

Open Financial Statements Act

Creates the Open Financial Statements Commission and requires public agencies to prepare financial statements in a machine-readable format by 2021-22.

Background

Financial statements. Since the 1940s, local agencies have been required to file annual financial transaction reports with the State Controller’s Office. These reports document local agencies’ revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits. The Controller is required to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest (SB 1138 Fletcher, 1945).

Accounting practices vary across governmental entities in California. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow, known as generally accepted accounting principles (GAAP). The State Controller’s Office sets uniform accounting procedures that must conform to GAAP. The financial reports that local governments file with the Controller must contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available. SB 742 (Moorlach, 2017) required the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to GAAP principles.

These reports include a comprehensive account of a state or local agency’s financial condition and includes information on all assets and liabilities of the agency. Local agencies generally prepare their financial statements in Portable Document Format (PDF). This format is human-readable, but is not machine-readable, meaning it is not searchable and can make it difficult to compare financial statements across public agencies.

Interactive extensible business reporting format. Over the last decade, the federal Securities Exchange Commission has required private companies to submit financial reports in a machine-readable format known as eXtensible Business Reporting Language (XBRL). Starting in 2020, SEC will begin moving to a human-readable and machine-readable format to make these financial reports searchable and easier to compare, known as the inline eXtensible business reporting language (iXBRL). Public agencies in some other countries, such as Spain, already use this format to prepare financial statements. At the state level, Florida House Bill 1073 (2018) started the state’s rollout of iXBRL and appropriated $500,000 to develop an iXBRL taxonomy, which is the set of machine-readable tags that allow computers to read these documents.

To help improve consistency and accessibility of state and local agencies’ financial reports, the author wants to require the state departments and local agencies to file financial reports using iXBRL taxonomies.

Proposed Law

Senate Bill 598 enacts the Open Financial Statements Act. SB 598 (1) creates the Open Financial Statement Commission, (2) creates a timeline to approve taxonomy, (3) creates a timeline for an open source software tool that public agencies can use to file reports aligned with the new taxonomy, (4) requires public agencies to file financial statements under the new taxonomy starting in the 2021-22 fiscal year, and (5) makes a one-time appropriation of $1 million for the act.

Open Financial Statement Commission. SB 598 creates a nine-member commission comprised of one member representing each of the following:

• The State Controller’s office, who also serves as chair of the commission.
• The State Treasurers office.
• The State Auditor’s office.
• A city or a county.
• A special district.
• A researcher from the University of California or California State University systems with experience in government accounting.
• A municipal bond investor.
• An information technology professional employed in the private sector.
• A person with knowledge and experience in data modeling for open data standards.

The Controller appoints all members of the commission except for the representative from the State Auditor’s office. The commission must meet state requirements for public meetings and can employ staff to perform the duties of the commission.

SB 538 requires the commission to competitively contract with vendors to build (1) at least one XBRL taxonomy that would allow public agencies to file machine-readable financial reports, and (2) an open source software tool that enables public agencies to submit these statements consistent with that taxonomy.

Timeline for taxonomy. The bill allows vendors until March 31, 2020, to complete a prototype taxonomy. The commission must evaluate the taxonomies and submit a report to the Legislature describing one or more of the taxonomies and its decision whether to implement a taxonomy by June 30, 2020. If the commission does not approve a taxonomy, it can ask the existing vendor to make changes, and has until March 31, 2021, to determine whether to implement the revised taxonomy. If the commission requires changes to the revised prototype, the commission has until June 20, 2021, to submit a second report to the Legislature describing the revised prototype and its decision whether to implement the taxonomy. If the commission does not adopt a prototype taxonomy by December 30, 2021, the bill dissolves the commission.

Reporting requirements. Starting in 2021-22, SB 598 requires all public agencies to file financial reports in iXBRL using the taxonomy developed by the commission. The bill also requires public agencies to use this format instead of other electronic formats that public agencies may already be using. The bill also states that if the commission is dissolved because it does not approve a taxonomy, then these requirements would be inoperative. The financial reports subject to these requirements include:

• Audit reports prepared by a local agency required for submission to a state agency.
• The Controller’s annual report to the Governor regarding state funds.
• The Department of Finance’s financial and statistical reports for state agencies.
• The Treasurer’s account of the receipt and expenditure of all money received or paid out by the state.
• Local agency investment reports, including delegations of investment authority to its treasurer and county quarterly investment reports.
• Depository institution’s various reports.
• Local agency reports on all financial transactions during the preceding fiscal year.
• All financial reports that are publicly available.

Appropriates funds. SB 598 appropriates $1 million from the General Fund on a one-time basis, without regard to any particular fiscal year, to the commission to carry out these duties. Of this amount, the commission can use no more than $100,000 for meeting-related expenses. These funds divert back to the General Fund if the committee is dissolved.

The measure contains legislative findings and declarations supporting its purposes.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “SB 598 would provide more transparency for critical accounting documents. Currently, Comprehensive Annual Financial Reports (CAFRs) are provided in a PDF format. This is fine if one has the time to scour the entire document and try to accurately replicate data for reports and other analyses. Why not upload it in a standard that allows for faster analysis and comparisons with other CAFRs? It is required for publicly traded corporations and has improved reporting efficiencies. We are California. It is time to move into the 21st century. The concern? Inconvenience and maybe moving too fast. But, once again, the publicly traded industry is years ahead of government, and this bill would also make reporting easier for municipalities. It is time to have the governments’ taxpayers fund to provide a simple data dive opportunity. Stakeholders are investors and it goes back to the basic management principle: if you can’t measure it, you can’t manage it.”

2. Timing is everything. The bill requires businesses to submit prototype taxonomies within three months of the bill taking effect. It also requires state actors, local agency members, and others to come together and form a commission within three months to review those prototypes. By 2021-22, all state departments and local agencies are required to submit their financial statements using an iXBRL taxonomy. Agencies also have to implement a software to read the format. While the commission must develop an open-source option, it is unclear whether this solution can be developed in time to meet the potential requirement. While some larger public agencies may have sufficient expertise and resources to implement iXBRL taxonomies, it is unclear whether all public agencies, from state departments to small special districts, have the resources to satisfy these requirements in the time provided. In addition, the bill does not address what happens if public agencies are not able to meet this deadline. The Committee may wish to consider amending the bill to remove the requirement that public agencies start submitting financial reports in iXBRL format by the 2021-22 fiscal year.

3. Unknown unknowns. The commission that SB 598 creates brings together expertise from state government, local government, the private sector, academia, and the public. Bringing these groups together to discuss how public agencies would implement iXBRL, and how the state would support that implementation, could help address any potential obstacles before any such requirements go into effect. The commission could provide valuable insight into the cost of creating iXBRL taxonomies, the cost of developing an open source software tool for public agencies to prepare financial reports using the new format, how much time it would take public agencies to transition to the format, and whether there are costs associated with the transition. The Committee may wish to consider amending the bill to allow the Commission time to research if and how California should implement iXBRL taxonomies and associated software across the state, and make recommendations to the Legislature regarding what its next steps should be.

4. Membership? The Controller appoints all members to the Commission except the member appointed by the State Auditor. This includes the State Treasurer’s appointee, another constitutional office elected by the people. The Committee may wish to consider amending the bill to allow the State Treasurer to appoint their own representative.

5. Two-thirds vote. Since SB 598 includes an appropriation, it requires a two-thirds vote if it reaches the Senate floor. The Committee may wish to consider whether the appropriation is necessary depending on the responsibilities it gives the commission.

6. Mandate. The California Constitution requires the state to reimburse local agencies for the costs of new or expanded state mandated local programs. Because SB 598 requires local agencies to perform various activities related to implementing the bill’s requirements, Legislative Counsel says that it imposes a new state mandate. The measure states that if the Commission on State Mandates determines that the bill imposes a reimbursable mandate, then reimbursement must be made pursuant to existing statutory provisions.

7. Double-referred. The Senate Rules Committee has ordered a double-referral of SB 598—first to the Senate Governance & Finance Committee, which has jurisdiction over bills relating to local government finance issues, and then to the Senate Governmental Organization Committee, which has jurisdiction over bills relating to state government organization.

Support and Opposition

(4/5/19)

Support: California Policy Center; Data Coalition; Surety Resource Connection; Workiva; XBRL US.

Opposition: Unknown.

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