Bob Schneider is a Partner in 
Wilson So is the Director of Hitachi America, Ltd. XBRL in Federal Financial Management — Part II
Written by Bob Schneider Posted on April 26, 2007
“Transforming Financial Information: Use of XBRL in Federal Financial Management” is a white paper recently released by the Industry Advisory Council and freely available online. In my post of April 20, I wrote about the paper’s discussion of the information supply chain and the tradeoff between information reach and richness. In this second and final post, I’ll discuss why the authors believe XBRL can substantially improve financial management at Federal agencies.
On page 32 of the report, the authors begin a detailed overview of the Federal budget process, whose participants are the individual agencies, the executive office, and the legislative branch. Not surprisingly, the process includes a stunning number of reports whose information greatly overlaps.
Throughout the fiscal year, agencies are required to submit a series of reports to various entities like OMB that wind up being consolidated into the Financial Report of the United States Government. On page 36, ten of the primary reports in the process are described; but the authors warn that they represent “only a sampling” of financial information exchanges and the reporting responsibilities of agencies. Indeed, one Federal employee says “There are so many reports involved, pulling data through such a wide set of systems, that no one person really understands it in totality.”
There is a mind-boggling chart on page 38, reproduced below, that demonstrates the enormous amount of overlap in Federal financial reports. (You can click the image for a better view.) The reports are often in formats like PDF which, while easy to read, are not easily reusable, or flexible for computer-based analysis.
The authors comment:
In the end, the magnitude of cost created through redundant reporting provides limited value, since the information is reported in a wide variety of formats using a copious number of reports, technologies, and systems, making it costly to obtain a complete picture of a single agency and difficult to appreciate the Federal government as a whole.
On pages 39 to 45 of the report, the authors outline areas of opportunity where XBRL adoption would achieve vast improvement. As I read through the details, I noted the many benefits mentioned were those consistently championed by XBRL supporters:
- Consolidate many similar information requests into one, thus greatly cutting overall costs;
- Automate manual processes;
- Eliminate reconciliation points;
- Standardize terminology while keeping it flexible;
- Deal successfully with non-quantitative information;
- Share data among reporting entities;
- Monitor capabilities more effectively;
- Reduce the number of data calls.
The authors end with a series of recommendations for implementing XBRL and getting started. I suppose it was beyond their mandate and scope, but I would have appreciated some discussion of the winners and losers in XBRL adoption at the Federal level and what the political ramifications might be. In other words, does the political class want this? Does the bureaucracy? I also wished more attention had been paid to costs of implementation and the roadblocks, and the likelihood that actual improvements would be achieved.
Nevertheless, this is an extremely useful study. The paper is another reminder that, while interest in interactive data remains substantially focused on financial reporting, the potential of XBRL for transforming how public and private organizations work both internally and in combination with external audiences is enormous.