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Moving Beyond the PDF Era: 3 Reasons to Embrace Financial Transparency

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By Ari Hoffnung February 20, 2015

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Ari Hoffnung is former NYC deputy comptroller and senior adviser to Socrata.

President Obama’s recently released fiscal year 2016 budget made history, not because of its size – $4 trillion – and not because of the spending priorities or tax proposals it outlined, but because it strongly reflected the values of data-driven government as our nation’s first easily accessible federal budget with “machine-readable” information.

This approach helps bridge the gap between documents, which are typically static and frozen in their format, and data, which may be dynamic and can be open to further processing.

Indeed, the White House’s commitment to open data and financial transparency allows taxpayers to see exactly how their money is being spent, where it’s going, why it’s being allocated and the extent to which the president’s fiscal policies, plans and initiatives will impact Americans.

This form of digital democracy is now spreading across the nation, thanks to governments at all levels and sizes – small and large cities, dense and sparse counties, and the most and least populous states. Democratic and Republican, there is strong bipartisan support for financial transparency, whether it’s in Stutsman County, North Dakota, which has a $23 million budget, or the City of New York, where I helped place our $70 billion budget online, for the first time ever.

Governments are moving toward greater financial transparency because, as a rule of thumb, the more comprehensive and useful the information provided by a public sector organization is, the more likely their constituents will trust their decisions and become more civically engaged.

Unfortunately, as I survey the landscape, many governments are still struggling
 to provide open and public access to the type of useful data and information constituents really need, in a manner that nontechnical folks can easily consume.

And nowhere is this more evident than in the realm of financial transparency, where many governments continue to only provide access to their financials in the form of hard-to-decipher, lengthy and highly technical reports posted online in PDF format.

There are, however, a growing number of governments that are embracing the concept of open data and are not only publishing detailed financial information in machine-readable formats but also leveraging user-friendly apps to help make complex budgetary information more accessible to taxpayers through visualizations.

Still, I strongly urge governments that want to move beyond the PDF era to consider three key questions before launching financial transparency initiatives.

The first question: “Why should our government care about providing financial transparency?”

In addition to engaging citizens, increasing accountability and boosting trust in government, making public sector financial data easily accessible is cost effective.

Taxpayers have a right to know how their money is being spent, and often the only way for them to get the information they need in a form useful to them is by directly requesting it. But in my experience, this process can be painful and costly for any public sector organization that doesn’t provide easy access to this information. And most analysts agree the time and money spent responding to these Freedom of Information Act requests could be put to better use.

The good news is, governments can significantly reduce the impact of expensive and time-consuming information requests through financial transparency initiatives. The State of Mississippi, for example, estimates it saves between $750 and $1,000 in staff time per request, while two state agencies in Utah save about $15,000 per year from reduced information requests.

Interestingly, the cost-savings category likely the most material is also the one most difficult to quantify, namely the savings that stem from human psychology.

Simply put, when people – like government officials and contractors – know their financial decisions will be placed in the public domain for review, they make better decisions. Time and again, psychology experiments have demonstrated that being watched impacts behavior.

The second question: “Who benefits from financial transparency?”

Of course, the public gets better access to the financial information it needs. But public sector employees benefit from financial transparency, too.

Why?

Because sharing this crucial financial data across a public sector organization helps foster critical internal communication within a government.

In New York City, for instance, we observed a significant amount of our CheckbookNYC financial transparency website traffic came from within government. It seemed some government employees found the city’s internal financial management systems hard to understand and welcomed a more user-friendly source of financial information.

The third question: “How should a public sector organization launch a financial transparency initiative?”

Change is difficult for any organization, especially governments, so it’s important to have a financial transparency champion as well as the appropriate backing from governmental leaders – whether it’s a budget director, CIO or chief accountant.

It’s also vital to understand and identify the types of financial data and information that needs to be shared within a public sector organization and with the public, where it is, how best to make it available, and how to maintain and update it over time.

And lastly, the right technology must be selected. Thanks to the cloud and innovative apps built exclusively for the public sector, it’s now possible to start small and get a public sector organization’s financial data online quickly, easily and cost effectively.

As a former deputy comptroller in New York City, I believe financial transparency is an absolute imperative for data-driven governments of all sizes in the 21st century.

And providing citizens with open budget and spending data is now a fast-growing and mainstream global movement that will continue to expand on just about every continent because it benefits taxpayers and public sector employees alike.

The key is getting financial transparency initiatives right – and, in my view, addressing the three questions I’ve discussed above will go a long way toward ensuring long-term success.

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