The federal Financial Data Transparency Act is poised to reshape how local governments handle financial data by prioritizing machine-readable, searchable, standardized formats. However, as implementation rules for the FDTA continue to take shape, uncertainty remains — especially for resource-limited organizations and those behind in modernizing their financial systems.

To help local governments navigate these changes, last week DebtBook and Funkhouser & Associates hosted an information-packed webinar featuring Tyler Traudt, CEO of DebtBook; Liz Sweeney, president of Nutshell Associates; and David Stringfellow, Utah’s deputy state auditor. The discussion offered insights from our latest issue brief as well as practical steps and strategies for practitioners to stay ahead of the curve. Here are the key takeaways:

Many local governments are grappling with the FDTA’s new requirements, but our panel agreed that delaying the process is likely to worsen disruption down the line. Traudt highlighted the importance of taking a gradual approach: “Getting ahead of this in a functional sense will be more cost-effective than ignoring it and scrambling at the last minute.”

They took a phased approach to collecting local government financial data. “We started with the big guys first and phased it in over five or six years,” he explained. Utah’s approach provided a clear path for smaller governmental entities to comply, reducing the burden by offering web-based forms for them with simpler financial structures. Utah’s approach could serve as a template for states and their municipalities working toward FDTA compliance.

While larger municipalities may have the resources to invest in complex software solutions, smaller governments can still find low-cost or even free options to help with FDTA compliance. “There are plenty of inexpensive or even free tools out there, especially for smaller municipalities that don’t need to buy expensive systems to comply,” said Sweeney.

Sweeney pointed to Florida, where local governments are using a standardized chart of accounts and the state CFO’s office converts their financial reports into XBRL format without additional burden on the local governments. Utah deployed similar tools to automate data extraction from local governments’ general ledgers, helping them comply without needing to overhaul their entire financial reporting systems.

I highlighted an initiative from the University of Michigan, which is working directly with localities to offer technical assistance and training for FDTA compliance. Additionally, collaborations with vendors specializing in financial reporting tools, along with guidance from organizations like the Government Finance Officers Association, can provide critical resources. The key is to not go it alone: leverage partnerships, educational programs, and expert guidance to ensure a smooth transition.

By democratizing data, the FDTA will make it easier to compare financial performance across municipalities, which could boost accountability and lower borrowing costs. Traudt emphasized the benefits of having machine-readable, standardized data: “If you’re a smaller organization with solid financials, being able to compare yourself side by side with larger municipalities can give you a leg up in the market.”

Sweeney noted that Florida “has digitized 12 years of annual financial reports, which has dramatically increased transparency.” These open, machine-readable reports allow investors, citizens, and government leaders to access data quickly and make informed decisions. Similarly, Utah’s data transparency system allows users to easily search for information on public spending.

Balancing the cost of compliance with the FDTA against its long-term benefits is a top concern for local governments. Traudt acknowledged these worries but encouraged municipalities to focus on the bigger picture. “There’s a lot of work, but there could be some really interesting benefits if it’s successfully implemented,” he noted, pointing to how machine-readable data could improve financial transparency, reduce borrowing costs, and make municipalities more attractive to investors.

Stringfellow agreed. “If you think you’re an all-star financially, this kind of transparency effort can help you show that to the world.” The ability to showcase strong financial management has already helped some Utah municipalities secure better interest rates, underscoring how compliance can provide tangible financial benefits — and, ultimately, better value for taxpayers.

Although the comment period for the Joint Rules has passed, individual agencies like the SEC — the subject matter agency for municipal securities — will set their own comment period after the Final Joint Rules are adopted, estimated sometime between 2025 and 2026. To stay involved in the FDTA’s rollout, local governments and their financial officers can continue to engage through their professional associations, such as GFOA, which will remain involved in shaping the final rules, a process that is expected to be completed by the end of this year. Stay informed by monitoring updates from regulatory agencies and participating in industry webinars and workshops. Additionally, governments can collaborate with peers and vendors to share lessons and develop strategies for compliance. Engaging in dialogue with stakeholders and policymakers at the state and federal levels can help ensure that the practical needs of local governments are considered as the FDTA rules evolve.

For a deeper dive into the FDTA, check out our latest issue brief to help prepare your government for this new era of financial transparency.