Will Financial Transparency Save Me Money?

October 8, 2014 6:09 pm PST | Data as a Service

Let’s face it, the prospect of financial transparency is nerve racking for government. 

Sure, financial transparency makes sense for citizens, helping them gain greater understanding and confidence in their government and how it spends tax dollars, but for government, it means budgets that are scrutinized with an ever finer toothed comb, even as everyone sees those budgets increasing slimmed down. So, here’’s the real boon for government, financial transparency offers benefits beyond “just being transparent.” Financial transparency offers governments the opportunity  to save money.

According to a May 2013 report from US PIRG’s Education Fund (which looked only at financial transparency on the state level) governments can “realize significant financial returns on their investment [in financial transparency sites.] The savings come from sources big and small – more efficient government administration, more competitive bidding for public projects and less staff time spent on information requests, to name just a few – and can add up to millions of dollars.“

There is a kind of Heisenberg Uncertainty Principle of financial transparency. In physics, objects behave differently under observation. This is true for government spending, too. When spending is easily monitored, governments are able to identify corruption, reduce waste, and more smartly achieve policy goals. 

Former New York City Deputy Comptroller Ari Hoffnang explains that, “When the public has access to data, the government makes more critical decisions, because it knows it’s being watched.” In just the first two years after launching it’s transparency site, Texas’ Comptroller reported a $4.8 million savings stemming from more efficient administration and elimination of redundancies, according to USA Today. Numerous other states who’ve launched financial transparency sites have saved millions in paper, printing, postage, and staff time reductions just because they receive fewer requests for information once financial data is readily available.

Hoffnang posits that even if jurisdictions, like Boston, which has a $3 billion annual budget factored in all its fixed costs and labor contracts, and came to the conclusion that it could only save 0.1% by visualizing its spending, renegotiating contracts, decreasing information requests, and the like, that would still yield $3 million in savings from just a few hundred dollars a month’s worth of investment in financial transparency.”

The PIRG report agrees that while the potential financial upside of transparency is large, the cost to open this data is relatively little and getting less expensive everyday.  When Hoffnang worked for New York City’s Comptroller he built CheckbookNYC completely in-house at a cost of over $3 million. Last year, PIRG reported most states spending from just under $75,000 to over $2 million for financial transparency programs. Socrata’s suite of financial transparency apps has brought these costs even lower and made deployment far easier than in-house developed solutions.

However low the costs, Hoffnang warns not to start with the technology. “This is not just about buying another app for government. You need to start with the concept that financial transparency is good for decision making, citizen engagement, and spending. When you understand the real benefits of financial transparency, you are going to end up with a real success.”

Up Next: Is financial transparency just for the big guys?

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