On December 6, U.S. House and Senate Armed Services Committee leadership unveiled a bicameral, bipartisan Fiscal Year (FY) 2023 National Defense Authorization Act (NDAA) that includes the Financial Data Transparency Act (FDTA), which was led by Reps. Carolyn Maloney (D-N.Y.) and Patrick McHenry (R-N.C.) in the U.S. House and Sens. Mark Warner (D-Va.) and Mike Crapo (R-Idaho) in the U.S. Senate. On December 8, the U.S. House voted 350-8 on a resolution to deem the NDAA compromise bill as passed and on December 15 the U.S. Senate voted 83-11 to pass the bill. The bill now heads to the White House to be signed into law by the President.

Similar financial data transparency legislation was included as an amendment to the House Armed Services Committee’s version of the NDAA that passed the U.S. House in July 2022, however several changes were made to the bill to the benefit of counties and other public municipal market participants before its inclusion in the final NDAA. 

FDTA as initially written would have required the Municipal Securities Rulemaking Board (MSRB) to establish new, machine-readable financial data reporting standards for municipal securities market participants separate from the standards established by the Government Accounting Standards Board (GASB). NACo opposes federally imposed standards for county financial accounting and reporting and supports those principles put forth by the GASB.

As such, counties had several concerns with the bill as it was initially written and worked with our state and local government organizations to voice our concerns with the legislation. NACo provided counties with a template letter to send to their members of Congress.

The new FDTA language included in the final  NDAA directs the Securities and Exchange Commission (SEC) to set and implement these new data standards instead of the MSRB. This language is more favorable to since SEC is subject to congressional oversight. Further, this move doesn’t expand MSRB’s authority to include prescribing standards for state and local governments as bond issuers.

The final text maintains the 2-year time-frame for the SEC to come out with these rules, however, it includes new language specifically directing SEC to consult with market participants (such as counties) when drafting these standards and also requires the SEC to scale these reporting standards for smaller regulated entities and work to ensure these rules cause minimum disruption.  

While the bill still represents a potential unfunded mandate and a federally imposed reporting standard, the changes made to the text will allow counties to work with SEC to address these concerns during the rulemaking process.