What scares you most?
That was the question posed to a record crowd at the MACPA's Business and Industry Conference on April 20.
Nearly 200 CPAs working as CFOs and controllers were in attendance representing mostly middle-market businesses -- you know, the numbers guys and gals.
Federal and state deficits and spending! Examples included the GSA's Vegas debacle, or Solyndra, or all of the things that can happen when millions and millions of dollars are spent without many controls, oversight, or transparency.
Where would they start if they were the CFO of the government?
The numbers -- timely, relevant, accurate numbers that they could verify and check and analyze.
They would start with data standardization, making sure the data is categorized into useful definitions and financial reporting standards are applied. (This is where the analysis and accountability comes from.) In this case, an open data standard like XBRL would be ideal. Once the data was accounted for and put into a computer, the analysis would begin.
They would look for patterns that may lead to errors. They would look for duplicate payments, the same names showing up under multiple agency expenditures, waste, fraud, etc. They would run tests, charts, graphs, and other analytic procedures to check the data and analyze what was happening.
It is ultimately about transparency, accountability, and efficiency.
The DATA Act (H.R. 2146, "The Digital Accountability and Transparency Act of 2011") is a big start.
The DATA Act would require recipients of federal money to account for their expenditure by filing reports electronically using a "machine-readable" set of data standards so the information would be available for disclosure to the public and use by the government to account for and analyze the numbers (similar to the Recovery.gov website). The difference is that the data is electronically generated and automatically reported. There would be no additional human compilation, which means increased accuracy and efficiency and lower costs to taxpayers.
So why isn't this bill a slam dunk?
Some opponents argue that requiring the filing of data to the government may be too complex or costly for non-profits and smaller companies who do business with the government. Many point to the challenges that faced public companies when they were required to file their financial statements to the SEC in XBRL.
Last summer, the MACPA completed the tagging of our data with XBRL to find out first-hand what is involved in using this to enhance our financial reporting efficiencies and improve transparency (as a non-profit organization), and to serve as an example to help our CPAs understand more about this important data standard and the tools that use it. We were able to combine data from two completely different systems and bring it into Excel to create “PowerPivot” tables that every employee can access to analyze our data almost in real time.
We accomplished this project with a summer accounting student from Salisbury University’s accounting program and some inexpensive software tools from Altova (one of many XBRL tool providers in the market). We were then featured in a case study about our project. Details are available at www.altova.com/cust_macpa.html and cpa.tc/tn.
We discovered several important points when talking about our case study:
- XBRL is an open, global data standard, not a proprietary software or technology.
- There are plenty of inexpensive and free software tools available to tag, map, and use XBRL to access data across almost any platform.
- It is not as costly or complex as many have said. An accounting student intern working with our CFO proved that it can be done on a cost-effective basis.
- There are many benefits of faster access to our data for decision-making and increased efficiency in our finance.
- Compliance costs are reduced.
Now that our data is tagged and standardized, reporting to the government (federal or state) could now easily be accomplished. If this would happen as imagined per the DATA Act or at a state or local level, the benefits and costs savings are actually magnified as they accrue to both the filer and the government entity receiving the data.
There is even a free, open source XBRL tool called Arelle that can map DATA Act requirements to Quickbooks, which would make this requirement easily accomplished by the smallest non-profits.
So it can be done by even the smallest of non-profits, and it is not the same size or scope of the public company mandate by the SEC. The DATA Act will help us get control of spending and actually save money in the process.
Others agree with us. W.David Stephenson, author of Data Dynamite: How Liberating Information Will Transform Our World, sums it up well in a post titled, Recovery.gov: The First Step Toward Smart Regulation:
"If eventually adopted not just by Recovery.gov but agencies in general, such an approach could dramatically reduce companies' and local governments' reporting burdens; improve regulatory oversight by giving agencies simultaneous, real-time access to the same data; and, as a bonus, help improve organizations' efficiency."
Hudson Hollister of the newly formed Data Transparency Coalition says:
"Without data standardization, citizens, members of the media, watchdog groups, and even the federal agencies themselves have no means of searching the information to identify spending patterns or waste, fraud, and abuse. Americans need their government to be open and accessible, and we need an industry initiative to make it happen."
Read the MACPA's letter to House Oversight and Reform Committee Chairman Darrell Issa and ranking member Elijah Cummings (our Maryland representative) and let us know what you think.
If what scares you is the latest headlines about the deficit, unchecked spending, and growing deficits, it may be time to ask Congress to pass this bill and start being more transparent, accountable, and efficient.
Join us on June 27 in Baltimore as we continue this conversation about open government, data standards, and all of the possibilities around XBRL at the MACPA's 2012 Innovation Summit.
David Stephenson, Hudson Hollister, the Arelle/Quickbooks guy, and lots of others will be there.
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