Interesting that the Municipal Bond Rulemaking Board is seeking public comment about making the municipal bond market more transparent to the capital markets.
Management accountants working in government agencies play a major rule in preparing municipal annual financial statements and notices of the occurrence of certain material events (including notices of defaults, rating downgrades, events of taxability, etc.) to protect the public interest.
As of 2011, the municipal bond market was valued at $3.7 trillion.[2] Yet, the Electronic Municipal Market Access system (EMMA) at http://emma.msrb.org operated by the Municipal Securities Rulemaking Board (MSRB) where this financial data is made available to the public is NOT IN A MACHINE-READABLE data format available for the public to use. It is in a format (PDF) that does not allow effective data analytics.
The US SEC EDGAR SYSTEM is using open, freely available data standards supporting XBRL so the public can look deeply into financial statements and footnotes and do effective data analytics for better investment decisions. But currently the MSRB has no plans to move the EMMA System forward using technologies such as XBRL to make municipal bond data more accessible and usable to the public for better data analytics.
For most municipal bonds issued, the issuer is obligated to provide continuing disclosure to the marketplace, including annual financial information and notices of the occurrence of certain material events (including notices of defaults, rating downgrades, events of taxability, etc.) on the EMMA System. Yet this information is not in a machine-readable format for data analytics. Its in PDF format that is extremely difficult for users of the information to discover and analyze.
Why isn’t the MSRB's EMMA system supporting the $3.7 trillion municipal bond marketplace more transparent and accountable like the US Equities marketplace using the EDGAR System? Free and publicly-available, open data is critical in helping to bring capital from Main Street to Wall Street and support Democracy. Closed, for-a-fee systems available to the public -- like the current EMMA System under the MRSB - does not support the principles of state and local governments are obtaining funding to support the public interest.
Over the years – comment letters from the public have been sent to the MSRB, GASB and US SEC asking that the EMMA System be updated using standards like XBRL to protect the public – but nothing has happened by the MSRB or by GASB to support the utilization of technologies like XBRL to make data contained in the EMMA System more accessible to the public:
2008:
https://www.sec.gov/comments/s7-21-08/s72108-15.pdf
https://www.sec.gov/comments/s7-21-08/s72108-5.pdf
There is lots of data within the municipal bond marketplace that should be open. This ensures a level playing field for everyone who can benefit. Yet, the EMMA System – unlike the US EDGAR System is locked and not in a machine-readable format for the public to access and use to make better investment decisions.
XBRL is a global standard developed to enhance transparency and accountability and this same standard can be used by the US municipal bond marketplace. The XBRL standard is supported by more than 600 organizational members worldwide and is freely available and are an important part of the fabric of reporting used in more than 70 countries around the world, in use by well over 100 regulators, and used by in excess of -- 10 million private and public companies globally. Why can’t the municipal bond marketplace embrace this same global standard used in the capital markets to support better data transparency and accessibility?
Sixty percent of financial statement data is already being consumed electronically, and this figure will continue to grow, according to International Accounting Standards Board Chairman, Hans Hoogervorst. This same financial reporting standard used in the private sector can be leveraged over to the US municipal bond marketplace to create better transparency and accountability in this increasing complex marketplace to protect the public interest by making this data more accessible and in a machine-readable format for better data analytics.
But the MSRB and The Governmental Accounting Standards Board (GASB) currently have no plans to make data available in the EMMA System more transparent and usable to support the public interest. The GASB is subject to oversight by the Financial Accounting Foundation (FAF), which selects the members of the GASB and the Financial Accounting Standards Board, and it funds both organizations.[1] Its mission is also to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports and guide and educate the public, including issuers, auditors, and users of those financial reports.[2] The GASB has issued Statements, Interpretations, Technical Bulletins, and Concept Statements defining GAAP for state and local governments since 1984. GAAP for the Federal government is defined by the Federal Accounting Standards Advisory Board.
Should GASB's mission include making disclosed data from state and local governments using the GASB standards more accessible to the public in a machine-readable format?
As EDGAR ONLINE stated in its comment letter on September 9, 2008 so well:
"We believe that the lack of fundamental data and analysis in the municipal bond market represents one of the most significant risks to investors in the US market today. To solve this problem we believe that the MSRB and the SEC should require issuers to submit financial disclosures to the EMMA system in both electronic document format and in XBRL.
Access, consistency and quality of disclosures have been discussed by the SEC, the MSRB, and the participants in the municipal bond market many times over many years. However, there have always been questions of regulatory authority, technology accessibility, the challenges to developing reporting standards, and even questions of the cost/benefit for investors and the municipalities. What is different today is that we have a very clear and recent understanding of the impact of the lack of transparency in the bond markets. We have an investment climate that lacks confidence in its assets and the information the market is trading on. We have an internationally accepted open standard for financial reporting, and a thriving market providing low cost, high fidelity technology offerings for producing interactive data financial reports.
We believe that with the recent challenges in the bond and the bond insurance markets, the lack of consistent and detailed transparency puts investors and municipalities in a highly tenuous position and threatens the stability of this $2.5 trillion market.
These conditions combined with political will can solve the information issues we have all been discussing for years – with a 21st century solution for 21st century investors. We encourage the SEC and the MSRB to respond to this opportunity by moving forward with the implementation of the EMMA system as described in the proposed rule and with an interactive data pilot for the municipal bond market."
Let's hope MSRB, GASB, the US Congress and state and local governments have the political will to move forward in modernizing their disclosure process to include technologies - such as XBRL - to make this disclosed financial data more accessible and transparent to protect the public interest.