Declaring Assets, Liabilities and Babysitting

Asset and business interest disclosure for policymakers is an area of ongoing research of the Doing Business team. In the course of obtaining information on national legislation, I came across an interesting article on Colorado’s disclosure law for public officials. It is a good illustration of some of the challenges of disclosure legislation and entails useful lessons for both regional and national legislations across the world.

At first glance, the law looks like a textbook example. It requires officeholders to disclose their sources of income, financial assets, real estate, directorships and business interests. The disclosures must be submitted on an annual basis and are made available to the public. Transparency at its best, or so you might think!

A closer look at the law, however, reveals some ambiguities. It requires the disclosure of insurance policies or trusts, but does not include direct investments such as stocks or other investment vehicles. Stock holdings might fall under the required declaration of sources of income, which include capital gains, but this affects only realized gains. The law is also silent on the disclosure of the actual value of their investments and of their sources of income.

The ambiguous wording of the law might explain in part why a vast majority of the actual disclosures filed are quite meager. The case of Colorado may entail important lessons for other US states and countries worldwide. It shows that disclosure laws must be drafted very carefully and should be as clear and comprehensive as possible to avoid loopholes.

In some cases, the ambiguity of the law is, however, eclipsed by the high conscientiousness and the accuracy of the public officers concerned. An exemplary model is Governor Bill Ritter’s income disclosure, which includes, amongst others, the babysitting, lawn-mowing and caddying activities of his kids.