Financial reporting is one of the most important functions of government finance departments. It plays a key role in establishing transparency, fostering public trust, and providing critical information to a wide range of decision-makers. However, despite its significance, financial reporting in local government organizations often fails to serve its users effectively.

Join us as we examine the challenges inherent in the financial reporting process and explore the solutions that modern technology tools can offer.

Why Government Reporting Matters

Unlike their private sector counterparts, government entities are subject to increased oversight. They are responsible for appraising a wide range of stakeholders of the organization’s financial health, from taxpaying citizens to legislative bodies, investors, and creditors. For example, elected and appointed officials need complex financial data to make sound decisions on the current results and future direction of vital programs and policies. Citizens want to know how their tax dollars are spent and expect clear and transparent reporting from local government organizations. Government financial reports are also crucial for participants in the municipal debt market, commonly known as bond buyers, who need robust financial data to assess the creditworthiness of a government agency and make informed decisions.

One of the most significant tasks of any government finance department is preparing reliable, useful, and timely reports for all these stakeholders, including an annual financial report, which presents the organization’s financial position, operating results, and cash flows. Financial reports not only help fulfill local government’s responsibility for public accountability but are also used to compare actual financial results with the legally adopted budget; assess the financial condition and operational results of the organization; determine compliance with finance-related laws, rules, and regulations; and evaluate overall efficiency and effectiveness.

Challenges in Government Reporting

Despite its importance to a wide range of stakeholders, government financial reporting doesn’t always serve its users as well as it could. It often produces information that is not necessarily understandable to government officials or citizens. Financial reporting processes are also time-consuming, labor-intensive, and often inefficient, diverting resources from other critical tasks.

A late 2023 survey by the Government Finance Officers Association (GFOA) revealed that nearly half of its members who prepare financial reports are unsure if the annual financial report provides good value for the resources invested. Considering that creating this report is the primary responsibility of many GFOA members, it is striking that such a large portion of professionals are not convinced that their time is well spent.

The survey also explored whether the size of the organization, the frequency with which it issues debt, or the time required to complete the financial report impact its perceived value to GFOA members. According to the results, the only variable that seems to matter is how much time it takes to prepare financial reports. The longer it takes, the less likely respondents were to consider financial reporting “a good value.”

Reports are too complex.

According to GFOA members, financial reports receive surprisingly low interest from officials serving on the governing board. Out of 11 elements included in a yearly financial report, only 1% of boards showed interest in 10 elements or more, 2% showed interest in 9 elements or more, and 4% seemed interested in 8 elements or more.

While some reports may not align with the needs of elected officials, Mark Scott, a city manager known for turning around financially distressed cities, suggests another reason for this lack of interest. Scott believes that financial records are very difficult to understand, making it challenging for elected officials without a finance background to decipher them. Since financial reports provide critical information on an organization’s well-being and serve as the basis for making sound decisions for citizens, creating reports that are easy to access and understand is critical.

If most elected officials don’t read or can’t understand financial reports, it is safe to assume that they are not widely understood by the public either. Additionally, financial reports may not always provide the information that citizens want, such as the value they get for their tax dollars or the potential for fraud, waste, and abuse within an organization. This may, in part, explain the public’s lack of interest. According to the GFOA’s survey, most of its members (60%) report no interest in their financial reports. Only 35% of government finance officers receive interest from media and watchdog groups, and a mere 5% report broader interest from multiple parts of the community.

Reports don’t serve their users well.

Another potential explanation for the lack of interest is that financial reports don’t always serve their users as well as they could. For example, many residents consume government financial reports indirectly through the media. However, in tandem with the decline of the local press, interest is expected to wane even further. Local government organizations must rethink how reporting can reach the average citizen more directly when local media is no longer available as an intermediary.

Bond buyers, another audience of local government financial reports, are not always well served by current reporting practices either. For them, the phrase “time is money” is not just a cliché; access to timely data is vital, as the value of financial information decreases over time. Unfortunately, the time required to produce financial reports has increased. Since 2010, the mean audit time alone has grown from 146 days to 169 days in school districts, 171 to 180 days in cities, and 181 to 198 days in counties.

Reporting requires significant resources.

Several factors contribute to lengthy reporting timelines, including expanding requirements for local government financial reporting. For instance, the Government Accounting Standards Board (GASB) issued Statements 68 and 75 in 2012 and 2015, respectively, focusing on employer accounting for pension benefits and other post-employment benefits, such as retiree health care. Not only does the initial implementation of these standards demand considerable time and resources, but their ongoing requirements for periodic actuarial valuations also have a lasting impact on reporting timelines, especially given the limited number of actuaries and actuarial firms with the necessary expertise to do government plan valuations.

While financial reporting requirements are on the rise, staffing in public finance is trending in the opposite direction. For example, between 2020 and 2022, job postings for state and local public finance positions surged by about 75%. This isn’t just a short-term issue. According to the American Institute of Certified Public Accountants (AICPA), the number of accounting degrees has been stagnating or declining since 2014/2015, including at the bachelor’s and master’s levels. These staffing challenges impact not only local governments but also the audit firms essential for financial reporting.

Given these conditions, the authors of GFOA’s study consider reevaluating standards and assessing whether the time, money, and energy spent on financial reporting might sometimes be better spent elsewhere. However, while local governments remain subject to a wide range of accounting and reporting standards, finance teams need urgent help.

How Technology Can Transform Financial Reporting

Technology empowers local government organizations by streamlining the reporting process, transforming complex financial information into valuable insights, and extending access to critical financial information to all internal and external stakeholders.

Data-Driven Decisions

Advanced financial reporting software, such as Springbrook’s Advanced Budgeting, provides a comprehensive overview of an organization’s economic health, supports informed decision-making, and empowers finance departments to drive performance and meet strategic goals proactively. With advanced analytics, government organizations can track key KPIs in real time with advanced dashboards, multi-dimensional slicing-and-dicing, and powerful drill-down functionality right down to the transaction level.

Modern finance software also improves collaboration, buy-in, and accountability across the organization, enabling finance departments to engage with different stakeholders and operational staff more meaningfully. A collaborative, flexible budgeting and reporting process allows managers to participate actively and understand how programs and policies influence the organization’s financial success. With leading solutions like Advanced Budgeting, teams can generate what-if scenarios and funding streams in minutes, gaining access to real-time insights into the impact of key decisions on income statements, balance sheets, and management reporting.

Many technology solutions also deliver a single reporting and analytics platform across the organization, allowing finance departments to eliminate complex spreadsheet processes, the chaos of multiple reporting sources, and the risks associated with version control. By holding all data within a single secure location, government finance officers can protect the validity and accuracy of the data they rely on for strategic decisions and enjoy the confidence that comes from a single source of truth.

Lowered Costs

Reducing the cost of producing and disseminating information is another significant advantage of modern technology solutions. Once data is entered into a system, it can be reused and displayed in countless ways at minimal cost, including custom reports, dashboards, and flexible reporting outputs in formats such as PDF, MS Excel, or MS Word. Advanced automation built into leading reporting platforms eliminates the need for manual data entry. Information is automatically updated in multiple reports and dashboards, not only simplifying reporting processes but improving overall data accuracy as well. These automations also support the creation of highly personalized portals for different audiences, with information tailored to the specific needs and expertise levels of various users.

In addition, moving away from physical mediums like papers and letters, which are costly to produce and distribute, allows government organizations to reduce their expenses. Sharing financial and operational data digitally gives government finance officers central control of their reporting and makes information easily accessible to key stakeholders, often in real time.

Streamlined Reporting Process

Leveraging pre-built, standardized ‘best practice’ reporting tools also allows organizations to reduce reporting timelines and meet compliance requirements more quickly and efficiently. Modern financial reporting software such as GovView not only saves finance officers time but also helps them respond more swiftly to changing reporting requirements. With the option to choose from a range of pre-configured dashboards or build custom ones using a variety of pre-configured widgets, reports can be built and published with a few clicks.

The automation functionalities offered by leading providers also reduce the amount of manual effort required from government finance teams. By automating budgeting, reporting, and other routine tasks, government finance leaders can spend more time advising managers and less time compiling numbers.

Customized Views

Leading technology tools also help key stakeholders better understand and evaluate government performance by consolidating financial data into visually engaging, easy-to-consume analytics. Delivering information in the form of attractive, contextual dashboards and charts and the ability to customize dashboard layouts using familiar ‘point and click’ and ‘drag and drop’ functionality ensures that information is presented in the most accessible format for each user.

Solutions such as Advanced Budgeting also help organizations meet the varying needs of their diverse stakeholders, whether they benefit from summary graphics and plain language explanations or require detailed technical information. By creating different dashboards for each of a local government’s key audiences, organizations can ensure that stakeholders receive insights that are easy to consume and support effective decision-making.

With visually engaging, professional-quality reports, government organizations can tell their story, create robust self-service reporting environments, and publish financial data in various formats, from simple KPI alerts to complex financial dashboards and professionally published business reports.

Citizen Transparency

Solutions, such as Springbrook’s Advanced Budgeting, also empower organizations to better serve citizens, who are demanding more access to financial data from their local government organizations.

Springbrook’s GovView module (available within Advanced Budgeting) is the ideal tool that enables easy access and consumption of an organization’s financial data, providing easy navigation to explore budget expenditure and income in the current year as well as preceding years.

With a growing list of standards and regulations, government financial reporting is more complex than ever. It often generates information that is not easily accessible or understandable to government officials or citizens and involves lengthy, costly processes that delay information delivery to key stakeholders.

However, technology can significantly improve the financial reporting process for local government organizations. Modern software solutions, such as Advanced Budgeting, streamline reporting with pre-configured templates and advanced automation, reducing the overall costs of producing and disseminating information to key decision-makers.  These tools offer real-time data, easy-to-understand analytics, and customized dashboards to help finance departments engage meaningfully with all their stakeholders.

Contact us today and learn how Advanced Budgeting can streamline your financial reporting!