Closing the Special District Financial Transparency Gap

May 4, 2017 – OpenGov

At OpenGov, we work to power greater effectiveness and accountability within the public sector. When we consider the challenges unique to local leaders, we include those managing special districts. Too often overlooked, independent special districts comprise a critical component of many local landscapes. As they operate, they serve specific functions, often including delivering key community services, such as wastewater treatment, mass transit, parking facilities, stadiums, airports, or water supply.

U.S. PIRG Highlights Special District Financial Transparency Gaps

U.S. PIRG recently published a first-of-its-kind report that examined and rated the transparency practices of special districts nationwide. Alarmingly, nearly all of the 79 special districts examined (representing a diversity of functions and geography) in the study failed to meet basic online financial transparency standards. Over half received failing scores.

Focusing on the availability of data online, the report noted that only 30 percent of the districts posted their Comprehensive Annual Financial Reports (CAFRs) online, and just 38 percent provided their current budgets. 11 of the 79 districts posted no financial information whatsoever online.



In a recent article featuring the PIRG report, Governing offered additional support for the findings. “Other reviews conducted by individual states have identified similar holes in transparency. A 2012 report by the Kentucky Auditor’s Office, for instance, found that 40 percent of the state’s special districts failed to submit budgets as required, while nearly half of larger districts had not performed audits on an annual basis.”

Opportunities Exist

While independent special districts exist outside traditional local government structures, they nonetheless utilize significant public resources. We think most would agree that the public benefits when public entities establish and adhere to financial transparency best practices for their organizations, including creating a one-stop shop for financial data online. Adopting transparency best practices is especially important because special districts play such an important role in delivering services to many local communities nationwide. According to the 2012 Census of Governments, nearly 39,000 special districts exist nationwide, providing key government services and spending over $2 billion annually.

As PIRG’s report notes, there is certainly a case for strengthening financial transparency among special districts. “Since special district expenditures typically are not subject to the checks and balances of the regular budget process and fall outside of the ‘official’ budgets of general purpose governments, special districts can lack public accountability, making online transparency particularly important.”

The report includes specific recommendations for improvement, including creating a central registry of special districts, establishing uniform reporting and transparency requirements, and identifying a government agency to track special district financial reporting.

Governing notes the apparent correlation between districts earning higher transparency scores and their location in states that specifically require more robust reporting. “If there’s one common trait shared by the higher performing districts, it’s that they’re in states that have taken steps to bolster reporting practices. Illinois, for example, passed a law in 2015 that led to the creation of the Greater Chicago Mass Transit Transparency and Accountability Portal, which posts regular spending, contacts and employee data. U.S. PIRG’s Surka also cites Kentucky, which launched a central reporting agency for its districts, and Texas, where the state comptroller runs a Transparency Stars program that encourages disclosure.”

Financial Transparency Best Practices

At OpenGov, we emphasize the benefit of ensuring data is both useful and usable. For instance, our Administrator’s Guide to Financial Transparency highlights some best practices of online transparency, providing practical approaches public sector entities, including special districts, can take immediately to improve their transparency. The guide notes, for example, “The purpose of a transparency site is to transform raw data into meaningful information for constituents, elected officials, and internal staff. A picture paints a thousand words and an intuitive user-interface brings meaning to millions of data points.” That makes the data more useful.

Furthermore, web interfaces should be intuitive and user-friendly to make the information usable. Can citizens search, sort, and analyze the data? Is the data comprehensive, including multiple years? Can it be annotated? Does it drive stakeholder engagement?

As special district and other local public sector leaders work to make their data more useful and usable for all stakeholders – citizens, staff, management, and elected officials – it is becoming more critical to get their transparency initiatives right every time.


To learn more about best practices for local government financial transparency initiatives, download a free copy of the Administrator’s Guide to Financial Transparency.