Why Financial Transparency Matters

September 23, 2014 12:20 pm PST | Data as a Service

51 cents on the dollar — that’s the amount Americans estimate the federal government wastes of each tax dollar it collects, according to a Gallup poll released earlier this month. State and local governments fair a bit better (but not much) with the public believing those governments waste 42 and 37 cent, respectively. It’s a hard pill for governments to swallow, but also incredibly far from the truth, according to former New York City Deputy Comptroller, Ari Hoffnung.

“It’s important to consider why people have this image of the government as wasteful and irresponsible,” Hoffnung said by phone interview last week. “Part of the issue is that most people have no idea how the government spends their taxes.”

Compounding the issue of general misunderstanding of government spending is government mistrust. Last year, the Pew Research Center found only 19% of Americans trusted the national government, pretty much an all-time low. Again, state and local governments fair better. A Gallup poll from earlier this year reported a four-point drop in state government trust to 58%.

If governments are serious about regaining the public trust, if governments are serious about dispelling the notion that their greatest efficiency is inefficiency, governments must get serious about financial transparency. 

An informed constituency is an engaged partner with government, so providing open access to financial information is critical to rebuilding the public trust and improving understand on how tax money is spent. As Hoffnung says, “It’s in government’s interest to have the trust of the people, because it is bad for democracy when they feel that the government is run by crooks in some way, shape, or form. Implementing a financial transparency plan will help change those opinions and give the public a deeper appreciation of the work of government.”

However, many governments that are “financially transparent” aren’t really reaching their constituents. In an age where consumers use apps and websites to manage their own finances, static data in print or PDF formats are insufficient. Putting government financial spreadsheets online with APIs is also not enough according to Hoffnung.

“It is a narrow universe of people who understand APIs.” he says, “It’s even narrower when you consider who knows how to use an API and read millions of transactions worth of annual financial data.” Government has an “ethical responsibility” to provide its financial data with a user-friendly interface and in an intuitive format, Hoffnung adds.

The pressing need for government to put comprehensible financial data in the hands of its citizenry led Hoffnung, who previously developed of CheckbookNYC, to help Socrata build a financial transparency suite of software. The end result is a turnkey solution allowing governments of any size to effectively and reasonably join the financial transparency movement in a way that is meaningful to their constituents. However simple the solution to the government’s financial transparency quagmire is, Hoffnung says, “It takes a bold public official to decide to make this information public.”

If corruption is an opportunity to restore faith in democracy, it’s time government embraced true financial transparency.

Up Next: Will financial transparency save me money?

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