Wednesday, February 12, 2014

DATA Act, Part 2: Will it help? XBRL?

CompSci Resources, LLC

Lately, there has been quite a bit of news about the Digital Accountability and Transparency Act (DATA Act). I have recapped the highlights from the last several months; we also provided a summary of the White House Office of Management and Budget (OMB) comments on and suggested amendments to the DATA Act (including responses from public and private leaders that have been promoting the legislation).

However, we have two compelling questions to answer here:
  • Will the DATA Act improve reporting?
  • What will the DATA Act mean for the XBRL community?

How will the DATA Act improve government reporting?

The DATA Act will make four significant changes to improve the transparency and accessibility of government reporting. 

First, will be expanded to include not only online grants, contracts, and other federal awards, but also to spending data for all federal funds. This will put all of the financial data in one location where it can be searched and viewed easily.

Second, there will be a consistent, government-wide data standard. This will help with comparability across agencies since all agencies will report in the same format in the same location.

Third, in the current system, those receiving federal funds have to file their financials annually, quarterly, and monthly to each agency for each grant to fully comply with reporting requirements. This is in addition to filing their standard financials with the U.S. Securities and Exchange Commission (SEC) at the same intervals. The DATA Act would reduce reporting costs of those who are awarded federal funds by eliminating the need to report information twice (or more, if they receive funds from several agencies). 

And, lastly, the DATA Act will use a common data format to enhance transparency for taxpayers, giving them more information about where their tax dollars are going. By using a common data format for reporting, comparability among agencies will be possible. This will give taxpayers the opportunity to review and scrutinize government spending across agencies and track the movement and allocation of funds.

What are the implications for the XBRL community?

While the bill does not specify which common data format will be used, many groups have speculated that eXtensible Business Reporting Language (XBRL), the machine-readable format currently used by public filers to report quarterly and yearly financials to the SEC, is a contender.

The American Institute of CPAs (AICPA) has promoted the use of XBRL by saying it would “facilitate clearer, more accurate data reporting among federal agencies, recipients of federal grants, contracts and loans.” Similarly, other groups such as the Institute of Management Accountants (IMA), have endorsed the use of XBRL for federal reporting, stating, “XBRL goes beyond reporting and provides the mechanism to sort through mountains of information and to help governments to make informed decisions.” As stated by these two groups, using XBRL to report federal spending would organize the data in such a way so both taxpayers and government officials could understand and more easily analyze the data to make better decisions.

From the perspective of those in the XBRL community, the expanded use of XBRL beyond the financial reporting world should be seen as a positive. It will help other people in new industries become exposed and acclimated to the standard and begin to better understand its utility.
If more people in a greater number of industries use XBRL, it can lead to new ways of looking at XBRL and then to further developments for its use and analysis. With new software tools integrating the different uses, the potential for XBRL to become a universal data standard for financial information could become a reality.

What unanswered questions do you have about the DATA Act? Do you think it will be signed into law? Should XBRL be the chosen data format?

More in this series:
  • Part 1What is the DATA Act? Is there a need for change? How much would it cost?
  • Part 1b: White House OMB comments and suggested edits; DATA Act leadership response.
  • Part 3: The U.S. Senate unanimously passes the DATA Act.
  • Part 4: The U.S. House re-passes the DATA Act, this time unanimously.