As the lameduck Congress comes to end in the next few weeks – will the US Senate pass the Grant Reporting Efficiency and Agreements Transparency Act of 2018 or the GREAT Act?
The bipartisan bill passed the US House on September 26, 2018 via voice vote -- has moved to the US Senate where it is awaiting passage in the final days of the 115th Congress. The Trump Administration has indicated it will sign the GREAT ACT of 2018 if the US Senate passes the legislation to provide financial transparency and accountability to 1/2 trillion dollar marketplace using new technologies like XBRL and Blockchain.
Management accountants and accountants “in-general” are looking very closely at this important piece of national legislation because as our society has moved to the “Internet Age” the need to consume and analyze structured data in a structured, machine-readable format continues to grow in importance in helping organizations make better business decisions around the world.
As a global society -- we are moving away from paper reporting, and PDF document reporting to structured, "machine-readable" reporting that includes tagged-data as use of data analytics continues to accelerate in the marketplace – especially with the potential of using blockchain technologies such as smart contracts and distributed ledgers where structured data inside these technologies will become the business standard.
Accountants want to be able to get inside these large, complex documents and extract specific data elements – especially financial data elements - using a structured, machine-readable format - for better data analytics. Once accountants have this data in a format that can be analyzed they can help organizations make smarter decisions as key business advisors to senior management and data stewards. The accounting profession continues to help business and government create data tags that can be used in business documents - such as disclosed financial statements - that allow stakeholders to extract data elements in a machine-readable format so these data elements can be compared and analyzed using software programs.
What we know today is that CFOs - like or not - are becoming the key data analysts/ data steward of the organizations they serve based on a white paper from Deloitte.
One of those global data formats financial teams are using is XBRL. Today, XBRL is being used in more than 70 countries by more than 140 regulators to help protect the capital markets and investors around the world to grow economies and create new jobs. The IMA is a founding member of the XBRL Consortium supported by the Accounting profession around the world.
For example, European Securities Market Authority (ESMA) is in the process of creating "The European Single Electronic Format" in which 6,000+ public companies and issuers on EU regulated markets shall prepare their annual financial reports with XBRL data ‘tags’ which make the labelled disclosures -- structured and machine-readable "to facilitate accessibility, analysis and comparability of annual financial reports. This allows for instance the analysis of large amounts of financial information without extensive and burdensome manual re-keying processing." The EU Directive will move financial reporting into a cloud environment using XBRL and Blockchain technology by 2020. The European Financial Transparency Gateway will rival the US EDGAR SYSTEM for US Public Company Disclosures by adding labels to both financial and non-financial data like human capital and climate change data being required for disclosure by public companies.
THE GREAT ACT of 2018
With the GREAT ACT of 2018 – The US Government has an opportunity to establish government-wide standards for information reported by grant recipients so that the data can be centralized on a public website. The US Government would create standard data elements within a standard contract so they would be “machine-readable” for superior data analytic purposes to protect the public interest. Instead of looking at a PDF document and finding specific elements within thousands of scanned pages and then re-keying specific info into a different excel document – stakeholders will be able through technology to extract specific agreed-upon data elements that can be used for analysis in a machine-readable format – like what a clerk does at a grocery store when scanning a bar code on a grocery item. A “bar-code” data item would be in the PDF document that could be extracted and compared.
WHY ARE SPECIFIC MACHINE-READABLE DATA ELEMENTS IMPORTANT IN CONTRACTS?
According to the Hill: “In 2017, the federal government awarded $662.7 billion in grants funding to state agencies, local and tribal governments, agencies, non-profits, universities, and other organizations. Roughly translated, this equates to the Gross Domestic Product of Switzerland – or more than the GDP of every country outside the G20.”
The Trump administration has set a goal of compiling and standardizing data elements to help establish an overarching taxonomy for core grant information across the US Government.
WHY IS THIS IMPORTANT?
In addition to the public interest of providing transparency and accountability to the more than $662.7 billion US Grant Reporting Marketplace – We can also provide financial transparency across the 24 federal agencies of the US Government.
Today the US Government doesn’t know where approximately $140 billion annually has been spent across 24 federal agencies. Standardizing data elements in financial reporting and management could help reduce improper payments of BILLIONS OF TAXPAYER DOLLARS.
STATUS OF THE DATA ACT 2014 and USING MACHINE-READABLE DATA STANDARDS LIKE XBRL
After passage of the 2014 Digital Accountability and Transparency Act, OMB worked on a pilot project for standardizing grants data with the Health and Human Services Department. The House-passed bill would require the data collected to be made publicly available within four years, with the exception of personally identifying information, sensitive data, and data otherwise exempt from public disclosure under the Freedom of Information Act.
Adopting a government-wide open data structure for all the information grantees reports will alleviate compliance burdens, provide instant insights for grantor agencies and Congress, and enable easy access to data for oversight, analytics and program evaluation.
According to a recent GAO Report - the Treasury Department and the White House Office of Management and Budget (OMB) have done a pretty good job setting up the standardized data fields that will govern all federal spending information -- but more work needs to be done and transitioning this effort into other areas where the need for transparency and accountability requires additional standardization.
Moving into overall contact management and financial statements of government agencies would be good strategies to protect taxpayer dollars and monitor government services more effectively to meet the needs of citizens.
SO WHAT’S NEXT
Good government and good capital markets requires transparency and accountability of more, open public access of data in a machine-readable format to make better decisions. Reliable information is fundamental to commerce and to our democracy. Management accountants continue to protect the public interest by analyzing this data and continue to be big supporters of using open public data in ways that are usable to the public as we continue to move forward with the Age of the Internet, Big Data, Data Analytics and Predictive Analytics.
Let’s hope the US Senate passes THE GREAT ACT of 2018 in the final days of the 115th Congress. Management accountants continue to play a role in both government and the capital markets as IMPLEMENTERS of new technologies like XBRL, Blockchain, smart contracts and distributed ledgers. Consequently, by doing so they – management accountants will continue to be one of the most trusted stewards in protecting the public and business interest by using data in a way that is constructive and useful to benefit of society.