New Tools for a Government Financial Manager

By: Anthony Rainey

Anthony Rainey is a member of AGA’s Washington D.C. Chapter, the Emerging Issues Committee and the Steering Committee Partnership for Intergovernmental Management and Accountability. He is the agency fiscal officer for the Office of the Chief Technology Officer, District of Columbia. He has also held financial management positions at District of Columbia Courts (federal), and the cities of Norfolk, VA, Gresham, OR, and Seattle, WA.

The presidential campaigns used new tools in their strategies to engage people. The financial manager and their staffs need to become familiar with these new tools and incorporate them into their strategies. The major change required for these new tools is that finance must be more proactive rather than reactive, with results examined in real time.

·      Internet —We need to monitor the changes in the Internet (the enormous network of networks connecting disparate computers using languages called protocols). Internet Protocol Version 6 (aka IPV6) has now expanded the addresses and tags that can be used. Have our governments transitioned to IPV6?

·      Web—We need to accommodate the different vehicles that customers use to travel on the “http” protocol to visit our sites. Can the different vehicles (MS Internet Explorer or Firefox or Safari or on a Web-enabled phone or PDA) that visitors use to access out sites allow them to seamlessly navigate through our Web pages?

·      XML—Do our Web pages use of “eXtensible Markup Language” utilize well-formed and valid smart tags with corresponding end tags to get the user where she or he needs to go?

·      XBRL—Are we presenting our financial documents—PAR, budget, CAFR or PAFR—into “eXtensible Business Reporting Language” to our customers so that they are not seeing a large financial document as a mere block of text but rather as a set of smart tags for the different parts (assets, liabilities, net assets, revenues, expenditures) that can be drilled down to the lowest level?

·      Wikis—Are we using “What I Know Is” tools, internally and externally, to aggregate and share financial information on an ongoing basis in a collaborative manner?

·      Blogs—Are we utilizing blogs to discuss financial topics and issues, internally and externally, to enhance and refine ideas, opinions and approaches in a collaborative manner?

·      Social Bookmarking—Are we engaging the customers of our financial information by inquiring what they want to know (categorize whether it is a salary or revenue query) and where they go (assigning a tag—bookmark) to find it? Do we examine these social bookmarks to modify or adapt our financial information based on user trends?

·      Social Media —Are we creating financial information forums utilizing blogs, Wikis, podcasts, MySpace, Facebook, Youmeo, Twitter or Plaxo to keep in touch with our users of financial information?

·      Collaboration—If we do not manage collaboratively now, then what do we need to learn about it to enable us to take advantage of collaborative tools like Google Docs or MS SharePoint? Do our Intranet websites allow for collaboration? What is our government’s or agency’s strategy on collaboration?

If you expect that citizens and customers will wait for you to implement the above, or come to you asking you to implement the above, then nothing will change. I believe that we must engage our customers about government finance with these existing tools. I believe that the government budget, accounting and auditing professions must incorporate these tools into their existing strategies. The easiest way to implement them is to incorporate them, where appropriate, into your defined business processes. If presidential campaigns can use these tools with people all across the country, many of whom never met face-to-face, then why can’t government finance do the same?

Comments

[ahrainey]

A. SECURITIES EXCHANGE COMMISSION VOTE ON PHASING IN XBRL - On December 16, 2008 the Security Exchange Commission (SEC) voted to require all publicly traded companies to use XBRL within 3 years.

B. PHASED IN APPROACH - LARGE COMPANIES - The new rules phase in companies of all sizes over three years to turn their traditional, static financial statements into an interactive format. The transition to moving all companies to the XBRL technology will rest on CFOs' shoulders - not necessarily IT's shoulders. The private sector CFOs influenced the SEC to push back its proposal's timeline by six months after saying the deadlines were too tight. The first round of "accelerated" companies required to use XBRL — considered the largest with over $5 billion in market capitalization — must file XBRL-prepared filings on their first quarterly or annual report for fiscal periods ending on or after June 15, 2009. The SEC estimates about 500 companies are eligible for this requirement.

C. SECOND PHASE - SMALLER COMPANIES - One year later, 2009, accelerated companies will be expected to comply, followed by smaller companies and foreign companies that use international financial reporting standards.

D. WEB-SITE REQUIREMENTS - In addition to submitting their XBRL-prepared statements with the SEC, companies will have to provide the same filings on their website at the same time. The SEC is giving companies until their second year of using XBRL before they have to tag their footnotes and schedules, a task predicted to be more difficult than tagging line items.

E. WHEN WILL THE PERFORMANCE ACCOUNTABILITY REPORTs (PARs)AND COMPREHENSIVE ANNUAL FINANCIAL RERPORTs (CAFRs)BEGIN UTILIZING XBRL AND POST THEM ON THEIR WEBSITES? Well federal, state and local finance officers, when will we begin seeing XBRL? Is there any discussion occurring with the SEC and public sector finance representatives on implementation issues and lessons learned?

F. LIABILITY CONCERNS - The SEC is giving companies some room to make mistakes in their XBRL filings for their first two years of getting used to the technology, an allowance they also gave to the nearly 100 companies that tested XBRL. some feel, however, that the SEC limitation of liability shifts the risks to investors regarding the possibility for misleading disclosures and for suffering losses. In light of the current financial condition of companies (the lack of credit and declining demand for supplies and services), this is an important issue for the public sector to consider. The "tagged" financial data will not be subject to antifraud claims by investors even if the information is inaccurate ... will the Inspector Generals (IGs) or external auditing firms or the finance staff federal agencies, state governments, county government and city governments be prepared to address this? Is this a new "internal control" issue?

G. TRADITIONAL FINANCIAL STATEMENTS - The traditional financial statements will still be filed with the SEC and are expected to continue to be subject to current securities regulations. However, the limited liability provisions for XBRL will expire for all companies in 2014.

H. WHAT DO YOU THINK? When will the federal and state and county and city financial XBRL "standards" be developed? Is FSIO preparing to address this emerging issue on the federal side?

[A Rainey]

Q1. HOW DO YOU THINK IT SHOULD BE DONE FOR THE FEDERAL GOVERNMENT?

A1. I think that all federal agencies need to be involved with XBRL development; just as the State of Oregon has approached the presentation of its Comprehensive Annual Financial Report (CAFR) federal agencies should take a similar approach with their Performance Accountability Reports (PARs). The "lessons learned" would go far in forming a "state"/"federal"/"municipal" partnership on XBRL development. I think that the AGA would be a great convener of such an approach. Specifically, there are three things that the federal side could undertake to expedite this process.

A1.1 The U.S. Securities Exchange Commission (SEC) is already using XBRL http://www.sec.gov/spotlight/xbrl.shtml The SEC's XBRL Voluntary Filing Program was created to encourage public companies and mutual funds to use interactive data to make it easier for investors to get and use information from SEC filings. These web-based applications demonstrate how investors can find, view, download and even analyze financial and other information more quickly when the information is submitted as interactive data rather than as just text. By using computer codes to "tag" different kinds of data in financial reports, the information companies file with the Commission can be made much easier to find and analyze. For example, specific items in a financial statement, such as net income or gross sales, are given computer-readable labels. At the same time, the task of preparing the reports can be automated for the companies who file them.

A1.2 Interactive data relies on standard definitions to "tag" various kinds of information, turning SEC financial reports that have previously been text-only into documents that can be retrieved through computer searches, and analyzed in a variety of spreadsheet programs and analytical software. The data can also be more readily used to compare companies' financial performance, and better identify "outliers" that could represent attractive investment opportunities – or increased risk of misstatements or fraud. The use of interactive data, if widely adopted, could dramatically enhance the usefulness of reported financial information. Consumers of the data would be able to use it more easily and effectively. Potentially, computer-tagged data could provide real-time operational information for business managers. And its instant availability could dramatically streamline and accelerate the collection and reporting of that same financial information to the SEC and the public.

A1.3 I think that the Data Reference Model (DRM) http://www.whitehouse.gov/omb/egov/a-5-drm.html within the Federal Enterprise Architecture (FEA) should move quickly to accommodate some standards for Performance Accountability Reports (PARs).

A1.4 I believe that the Federal Systems Information Office (FSIO) should work within the FEA's DRM to develop XBRL tags for the United States Standard General Ledger (USSGL) http://www.defenselink.mil/dbt/products/2008_BEA_ETP/lrp/products/USSGL_Library_BR.htm transaction reference library to synchronize FSIO's proposed Common Government-wide Accounting Classification (CGAC) Structure Agency Identifier https://www.sam.gov/sampublic/agencycodes.htm .

A1.5 These three entities (SEC, OMB's FEA DRM section, Office of Federal Financial Management, FSIO) could meet with the State of Oregon officials to approach federal agency PAR XBRL approaches much the same way as the State of Oregon did with their CAFR.

Q2. DO YOU THINK EACH AGENCY SHOULD DO ITS OWN DEVELOPMENT, OF COURSE USING A COMMON TAXONOMY? OR SHOULD IT BE SOMETHING THAT OMB OR OFFM DECREE FROM ABOVE?

A2. No, I do not think that each federal agency should "go it alone". I think that before developing an OMB Circular on a common taxonomy, my suggestions in A1. above should be utilized. I also think that the municipalities should also be a part of this so that all government is utilizing a similar approach. I believe that the AGA is in the best position to lead all parties in creating a dialogue with the new USSGL.

I believe that the federal, state and local financial systems vendors ought to incorporate a XBRL financial reporting tool within their systems. In other words, I would expect that an XBRL created PAR on the federal side and a CAFR on the state and local side should be able to be produced – in the future with some kind of tool to be developed.

Finally, I believe that internal and independent auditors of federal state and local governments should develop some type of testing and evaluation method (like SAS 70) for XBRL systems.

Q3. WHAT ARE OTHER FEDERAL, STATE, COUNTY, CITY, OTHER AGENCIES PLANS ARE FOR UTILIZING THESE NEW TOOLS?

[anna]

Personally I would like to see XBRL used more in the government. I am more familiar with the federal government. How do you think it should be done for the federal government? Do you think each agency should do its own development, of course using a common taxonomy? Or should it be something that OMB or OFFM decree from above?