Model Legislation: The Fiscal Transparency and Accountability Act

General Bill for Statewide Application

The Fiscal Transparency and Accountability Act

An Act to ensure transparency, accountability, and accurate financial reporting by requiring [state name] local governmental entities to adopt full accrual accounting in their financial statements and budgets while eliminating the use of cash-basis accounting in all financial reporting. Provides that the Act aims to improve transparency and accountability during municipal government budget processes. Requires municipal governments to publish an annual comprehensive financial report and to fund their retirement plans fully. Requires the budgets of municipal governments to include actual revenues earned and costs incurred.

Be It Enacted by the Legislature of the State of [Name]: 

Section 1: Definitions 

1.1. "Government" refers to any level of government, including state/provincial and local/municipal governments. 
1.2. "Full Accrual Accounting" refers to an accounting method that recognizes and records financial transactions when they occur, regardless of the timing of cash inflows or outflows.
1.3. "Financial Statements" include balance sheets, income statements, cash flow statements, budgets, annual comprehensive financial reports, and other statements necessary for accurate financial reporting.
1.4. “ Financial reports” should be helpful in assessing 

(1) the government’s accountability, efficiency, and effectiveness and 

(2) the economic, political, and social consequences of the allocation and various uses of resources, whether positive or negative.

1.5 “Machine Readable Format” refers to eXtensible Business Reporting Language or another structured text format designated by the Division of Accounting and Auditing.

Section 2: Legislative Intent

It is the intent of this Act to improve transparency and accountability during local government budget processes such that it does the following:

2.1 Confirms and strengthens each municipal government’s special responsibility to disclose its actions and the results of those actions in a timely and useful way.
2.2 Establishes the concept that government budgeting disclosures and financial reporting are created primarily for the purpose of informing the public of government activity and promoting widespread understanding of these actions.
2.3 Reflects the principle that the purpose of proper government budgeting is to preserve intergenerational equity, in conformity with the understanding of intergenerational equity promulgated by the Governmental Accounting Standards Board (GASB), and to prevent the imposition of undue burdens upon unborn residents and residents who, at the time a budget is enacted into law, are too young to vote.
2.4 Preserves intergenerational equity in the municipal budgeting process. Prohibiting one generation from obligating future generations comports with the Government Accounting Standards Board's interpretation of the purpose of "balanced public budgets."
2.5 Establishes definitions of existing statutory language to strengthen the Governor’s, the General Assembly’s, each Mayor’s, and municipal government legislative body’s ability to determine compliance with the intent of balanced budget requirements, which is to preserve intergenerational equity.
2.6 Lessens the necessity of the State government to bail out municipal governments due to prior fiscal mismanagement.
2.7 Reflects the principle that incurring municipal debt for operating expenses is improper.
2.8 Resolves the ambiguity that municipalities use to calculate their budgets by clarifying that budget calculations should only include earned revenue, not funds obtained from loan proceeds or funds transfers, and that all incurred expenses and retirement plans/systems actuarially determined contributions should be included.
2.9 Acknowledges costs when incurred during the budget year regardless of when they are paid.
2.10 Requires a comprehensive indication of the total activity of the government and the long-term effects of current policy.
2.11 Calls for calculating the long-term financial implications of budgetary decisions to the state and others of the budgetary decisions.
2.12 Provides the complete costing information necessary to accurately calculate performance measurements accurately.
2.13 Recognizes the distinction between operating budgets and capital budgets and that it is proper to incur long-term obligations to acquire long-lived assets.
2.14 Enables inclusion in municipal budgets of accurate municipal obligations, including but not limited to current and future personnel benefit costs and other incurred costs.
2.15 Adopts the use of a consolidating budget document to facilitate the public’s ability to understand each municipality’s annual and accumulated shortfalls despite the relative scale of each municipality’s financial operations and the volume and complexity of budget and financial data.
2.16 Establishes the local government’s duty to report the best calculations of its own financial condition.
2.17 Requires explicit disclosure and accurate reporting by the Governor, the General Assembly, each Mayor, and the municipal government legislative body of the following

a. Debt incurred to fund current operating expenses;
b. Current and past costs shifted to future budgets and imposed upon future taxpayers;
c. Government obligations, including but not limited to current and future personnel benefit costs and
d. A fiscal deficit in terms of the excess of full accrual expenses over full accrual revenues and a budget surplus in terms of the excess of full accrual revenues over full accrual expenses at the time the final budget is sent to the Governor.

2.18 Calls for each government's mayor and legislative body to determine if future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due.
2.19 Injects the expertise and knowledge of each government’s chief financial officers into the preparation of budget calculations.
2.20 Requires production and publication of the Annual Comprehensive Financial Report within three months after the end of each local government’s fiscal year.
2.21 Requires the Annual Budget and each local government's Annual Comprehensive Financial Report to be prepared to facilitate a simple comparison of budgeted amounts to the actual amounts spent and received.

Section 3: Adoption of Full Accrual Accounting 

3.1. All government entities shall adopt and implement full accrual accounting practices for their financial reporting regardless of size or level. 
3.2. The implementation of full accrual accounting shall be carried out within a reasonable timeframe to be determined by the relevant government authorities. The transition period should allow for necessary adjustments and training to ensure a smooth transition.

Section 4: Reporting Requirements 

4.1. Governments shall prepare and publish annual comprehensive financial reports and budgets using full accrual accounting. 
4.2. The Chief Financial Officer’s Division of Accounting and Auditing will enumerate full accrual accounting requirements in an update to its Uniform Accounting System manual to be published no later than December 31, 2025.
4.3. The financial statements shall provide a fair representation of the government's financial position, operating results, and cash flows. 
4.4. Governments shall ensure that independent auditors audit the financial statements to enhance the credibility and reliability of the financial information.

Section 5: Disclosure and Transparency 

5.1. Governments shall provide access to their financial statements and related information to the public in a timely and accessible manner. This may include publishing financial statements on government websites or other suitable platforms. 
5.2. The financial statements shall be presented in a clear, understandable, and machine-readable format to facilitate public comprehension. 
5.3. Governments shall disclose any significant accounting policies, judgments, estimates, and assumptions made in preparing their financial statements to enhance transparency.

Section 6: Training and Capacity Building 

6.1. Governments shall provide adequate training and resources to their financial staff to ensure a smooth transition to full accrual accounting practices. 
6.2. Training programs shall be developed to enhance the understanding and application of full accrual accounting principles, methodologies, and reporting standards.

Section 7: Compliance and Enforcement 

7.1. Government entities failing to comply with the provisions of this Act shall be subject to loss of state revenue sharing and grants. 
7.2. Independent oversight bodies shall be established or empowered to monitor compliance and enforce the provisions of this Act. 
7.3. Citizens and stakeholders shall have the right to report non-compliance and seek redress through the use of public records requests.

Section 8: Review and Evaluation 

8.1. A periodic review shall be conducted to evaluate the effectiveness and impact of implementing full accrual accounting across government entities. 
8.2. The review shall assess the benefits, challenges, and progress in enhancing transparency, accountability, and financial reporting. 
8.3. Based on the review's findings, necessary adjustments or improvements to the legislation shall be proposed to ensure its continued effectiveness.

Section 9: Commencement 

9.1. This Act shall come into effect on [date] and shall apply to all financial periods commencing on or after that date.

Section 10: Transitional Provisions 

10.1. Governments shall establish transition plans and timelines for adopting full accrual accounting within five years after the effective date of this Act. 
10.2. During the transition period, governments shall continue to maintain and provide reports under the existing accounting practices until the full implementation of full accrual accounting.

Section 11: Appropriations

11.1 The sum of $20,000,000 is appropriated from the General Funds to the Chief Financial Officer’s Division of Accounting and Auditing to implement this Act.
11.2 The Division shall use these funds to provide grants to each Florida local government to offset its costs of implementing this Act.
11.3 The minimum local government implementation grant shall be $10,000 or 0.01% of the entity’s Fiscal Year 2023, whichever is greater. Additional funds may be granted at the Division’s discretion.

Section 12: Severability 

12.1. If any provision or part of this Act is found to be invalid or unenforceable, it shall not affect the validity or enforceability of the remaining provisions.


Conclusion: This legislation fosters transparency, accountability, and precise financial reporting within government entities by enforcing elevated accounting practices. By implementing these measures, local governments can effectively portray their accurate financial positions, operating results, and cash flows. Consequently, this will bolster public trust and enable well-informed decision-making. Additionally, it serves as a safeguard, preventing the state from having to intervene and financially rescue heavily indebted cities in the future.