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Modernizing Government Financial Reporting

By T. David Colgren
February 1, 2019
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On December 22, 2018, the Open, Permanent, Electronic, and Necessary (OPEN) Government Data Act was approved by the U.S. Congress in a very rare, bipartisan manner. The OPEN Government Data Act was supported by then-Speaker Paul Ryan (R.-Wis.); Sens. Patty Murray (D.-Wash.), Brian Schatz (D.-Hawaii), and Ben Sasse (R.-Neb.); and Rep. Derek Kilmer (D.-Wash.) to promote better, open, transparent, and accountable government using smart data. President Trump signed the legislation into law on January 14, 2019.

 

The new law requires federal agencies to disclose their information (including financial information) online using machine-readable data formats. Specifically, it requires the federal government to codify data-driven governance and also requires federal agencies to use evidence-driven decision making in their public policies to support cost savings and to better service ­performance.

 

PROCESS IMPROVEMENT BENEFITS

 

Modernizing government financial reporting information by updating the process to an open data standard through a machine-readable format will give the public and investors better access to information and will boost the ability to find and prevent instances of financial fraud in the federal government. Management accountants inside and outside the U.S. government can become major players for implementation of this new law, including helping government agencies set up internal controls and helping reduce machine bias when conducting machine-­readable data analytics.

 

Machine-readable data analytics is needed for government financial reporting because, according to a recent Government Accountability Office (GAO) report, “Reducing Government-wide Improper Payments,” we don’t know where more than $144 billion was spent by the federal government in 2016.

 

The use of a machine-readable format like eXtensible Business Reporting Language (XBRL) could be deployed across federal financial reporting to help both the U.S. government and the public better understand how taxpayer funds are being spent. Also, it could potentially improve the performance of government services in a transparent and accountable manner. This same XBRL data reporting standard—created by the accounting profession and supported by IMA® (Institute of Management Accountants) as a founding member of the XBRL Consortium—is used in more than 70 countries around the world by more than 100 regulators to support better capital markets transparency and accountability for better investment decisions.

 

Why not use the same machine-readable data standard in the private sector for the U.S. government for better financial reporting by federal, state, and local governments? This is especially key to supporting a $3.9 trillion municipal bond capital market where improved financial reporting can be deployed to provide better transparency for the more than one million outstanding municipal securities held by investors.

 

THE NEW APPROACH

 

The new law also requires the White House Office of Management and Budget (OMB) to oversee the completeness and availability of an enterprise data inventory for every agency. This approach to transparency and accountability not only will inform and enhance public knowledge and apply data to improve society, but it will improve the ability of agencies to understand and use the information assets they hold. The data hacks and compromises of the past few years show how important it is for agencies to understand what data they hold and its sensitivity.

 

 

The OPEN Government Data Act will require the Chief Information Officers (CIO) Council to work with the newly strengthened Office of Government Information Services and the White House Office of Science and Technology Policy to “promote data operability and comparability of data assets across the government.”

 

The federal CFO Council could be another agency directed by the White House OMB to be a major player in the implementation of this new law from a federal financial transparency perspective. The CFO Council was established pursuant to the Chief Financial Officers (CFO) Act of 1990. It’s an organization of the CFOs and deputy CFOs of the largest federal agencies and senior officials of OMB and the Department of the Treasury who work collaboratively to improve financial management in the U.S. government.

 

The Council was established to advise and coordinate the activities of the member agencies on such matters as consolidation and modernization of financial systems, improved quality of financial information, financial data and information standards, internal controls, legislation affecting financial operations and organizations, and any other financial management matter.

The use of common data standards for financial reporting should become one of the major priorities of the CFO Council in concert with the CIO Council and the Council of the Inspectors General on Integrity and Efficiency (CIGIE), which represents the CFO, inspectors general, and data officers of each of the major federal agencies of the U.S. government. All three functions of the federal government need to work together to promote better federal financial management using smart data.

 

KEY PROVISIONS

 

The new law is essentially the result of a three-year struggle by both political parties in Congress to get the legislation passed. Presuming that the federal government often serves as a model for state work, it could encourage identical legislation in statehouses nationwide to provide better government using smart data.

 

Key provisions of the new OPEN Government Data Act include mandates to:

  • Create a comprehensive, machine-readable inventory of agency data within one year;
  • Submit the data inventory and real-time updates to the OMB for a federal data catalog;
  • Cement the position of Chief Data Officer into law at each agency;
  • Include data and methods that the agency intends to use or collect in the agency’s strategic plan;
  • Create a list of policy-relevant questions that the agency plans to answer with data;
  • Create a Federal Chief Data Officer Council; and
  • Follow upcoming Office of Personnel Management (OPM) guidance on establishing a new occupational series and career path for program evaluation.

 

The U.S. government has always supported the concept of open data. The computer and internet revolutions originated in the United States. The OPEN Data Act will allow the U.S. to remain a world leader on open data. This critical concept has proven to be enormously efficient as an engine for innovation in both the public and private sectors; supporting significant economic value; creating millions of new jobs; and promoting transparency, efficiency, and accountability in both government and private sector operations. Each revolution has powered the development of new tools and services that address some of the country’s most pressing economic and social challenges.

 

The accounting profession has played—and will continue to play—a major role in creating a transparent and financially accountable government using technologies such as XBRL to help government officials, academics, nonprofits, and the private sector make better decisions using machine-readable data. Executive orders and memoranda can be undone with the stroke of a pen. Open data in the public domain can’t be so easily untangled nor dismissed, and the end result is better government and services for the citizens of America.

 

T. David Colgren is CEO of the Colcomgroup, Inc., and a member of IMA’s Technology Solutions and Practices Committee. He can be reached at dcolgren@colcomgroup.com.
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