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A tale of an evolving standard: XBRLreporting for U.S. and Brazilian localgovernmentsBy Deniz Appelbaum, Hussein Issa, and StephenKozlowski, forThe 36th World Continuous Auditing & ReportingSymposium, held at theUniversity of Sao Paulo, Sau Paulo, Brazilon June 2, 2016Rutgers, The State University of New Jersey

A tale of an evolving standardIntroduction: Governmental reportingIncreased transparency demand:U.S.: DATA Act S.994 was passed into LAW May 2014Brazil: Supplementary Law 131 passed in 2009Questions:1) What are the incremental innovations with governmentaldigital reporting that may be gleaned from other countries suchas Brazil?2) How may the DATA Act elements be successfully extended toSingle Audit Filings, since grant recipients will be filing in the newdigital format under the Pilot Program (mandated in Sect. 5)?36th WCARS at University of Sau Paulo, June 2, 20162

A tale of an evolving standardWhy is governmental financial reportingtransparency so important?36th WCARS at University of Sau Paulo, June 2, 20163

A tale of an evolving standardWhy is governmental financial reportingtransparency so important?May 13th36th WCARS at University of Sau Paulo, June 2, 20164

A tale of an evolving standardU.S. Local Municipality Reporting and theSingle Audit Act Local governments differ from businesses in purpose,organization, processes of generating revenues, stakeholders,budgetary obligations and longevity (GASB, 2013). Taxation: legally mandated involuntary exchange, directbenefit/service? How to measure service efficiency? Federal Government: 400 Billion in grants annually Single Audit Act of 1984: requires that each grant recipient ofmore than 750,000 from ANY agency or agencies will need tofile a Single Audit Report Each agency has 14 specific grant requirements that must befollowed For many grantees, this is a repetitious process!36th WCARS at University of Sau Paulo, June 2, 20165

A tale of an evolving standardU.S. Local Municipality Reporting and theSingle Audit ActSingle Audit Reporting Package: Auditor’s ReportsManagement Discussion and Analysis (MD&A)Recipient’s financial statementsRecipient’s notes to the financial statementsSupplemental InformationSchedule of Expenditures of Federal Awards (SEFA)Schedule of Findings and Questioned CostsSchedule of Prior Audit FindingsRutgers University 2013 Single Audit Reporting Package:124 pages, SEFA 71 pagesRutgers University 2013 Single Audit Report is used to build thereporting example36th WCARS at University of Sau Paulo, June 2, 20166

A tale of an evolving standardPerformance Auditing of Government EntitiesGovernments and non-profits: service, not profits Questions: how to measure this service, how to track andtrace the purpose? (GASB 2008) voluntary guidance “Service Efforts andAccomplishments (SEA) Report”Key measures of SEA: Purpose and scopeMajor goals/objectives/purposeKey measures of SEA performanceDiscussion and Analysis of results and challengesGASB Concepts 1 & 2:Attributes of SEA Report: Relevance, Understandability, Comparability, Timeliness,Consistency, and ReliabilityShould the Single Audit and SEA reports remain in PDF format?36th WCARS at University of Sau Paulo, June 2, 20167

A tale of an evolving standardConfluence of Government Innovations AcrossNationsMultinational businesses share innovations across countriesPerformance Auditing for Governments Canada : Auditor General Act of 1977 Followed by Australia, New Zealand, Sweden, the U.K. andfinally the U.S. (Glynn, 1985) and then by many othersSimilarly, many governments have started reporting in digitalmachine-readable format The Netherlands, 2004 Australia, China, Holland, Brazil in 2013, and the U.S. in2014 36th WCARS at University of Sau Paulo, June 2, 20169

A tale of an evolving standardThe DATA ActConsistent &implementapplicableaccountingprinciplesEstablish astandardmethod ofconveying thereportingGovernmentwide financialdata standardsfor federal fundsand entitiesreceiving suchfunds.Produceconsistent andcomparable dataGovernmentwide universalidentifiers forfederal awardsand entitiesIncorporatewidely acceptedcommon dataelementsCapable ofbeingcontinuallyupdated36th WCARS at University of Sau Paulo, June 2, 20169

A tale of an evolving standardThe DATA Act36th WCARS at University of Sau Paulo, June 2, 201611

A tale of an evolving standardThe DATA ActPilot Program: Affects state and local governments, transportation authorities, hospitals,universities, charities and not-for-profitsLittle standardization in accounting practices across jurisdictions andrecipients (Bloch et al,2015)Standardization of data terms/definitionsReports must be published in machine readable transparent formatFederal Level: Separated reports and agencies will now be standardizedNewly formed central reporting website www.usaspending.gov where all willfile statements and reports will be publishedCurrently all financial statements are in PDF: DATA Act requires that reportsbe in machine-readable and open data format, such as that of XBRL36th WCARS at University of Sau Paulo, June 2, 201612

A tale of an evolving standardThis PDF document mustbe manually extracted ifthe reader wants toanalyze this information!!36th WCARS at University of Sau Paulo, June 2, 201612

A tale of an evolving standardThe Brazilian InitiativeMost similar to the U.S.: One central government, 26 states, one Federal District, and 5561municipalities Federal Government and States have 3 powers: executive, legislative, andjudicialFiscal Responsibility Law (LRF) enacted in 2000, requires entities to achievebalanced budgets and transparent financial data LRF mandates that all state and local reports also be consolidated at onelocation - responsibility of the National Treasury Secretariat (STN)STN relies on the Accounting Data Collection System (SISTN): SISTN provides a standardized web form Consolidated Accounting DataSchedule (QDCC) Duplication of effort with different reporting formats and requirements! Dec 2014: All state and local accounts must be in standardized codes andattributes (started with Ordinance No. 184 in 2008)36th WCARS at University of Sau Paulo, June 2, 201614

A tale of an evolving standardBrazil:United States:Degree of similarity:Number of States26 states50 statesSomewhat similarFormatFormat controlled by STNSingle Audit format controlledNot similarby Federal agencies withdifferent requirementsReporting structureReports structured by law LRFData formatPDF ReportsPDF ReportsSimilarQDCC doesn’t match requiredSingle Audit filings often do notSimilarannual formsmatch other reportsQDCC data is detailed andDetailed checkbook data is justpublicly availablenow being made available byMatching reportsData availabilityReports loosely structured byNot similarGASB becoming more similarseveral local governmentsChallenges:Challenges:ChallengesNeed to standardize chart ofAccounting conventions willSomewhat Similaraccounts in order to consolidate need to be uniform for grantinformationreportingObsolete method of collectionObsolete method of collectionObjectives:Objectives:Replace obsolete data collection Replace obsolete dataSimilarObjectives:Similarsystemcollection systemImprove data qualityImprove data qualitySimilarSimplify reporting process forSimplify reporting process forSimilarentities36th WCARS at University of Sau Paulo,June 2, 2016entities14

A tale of an evolving standardThe Brazilian InitiativeThe United StatesBrazilOne mandated standardized digitalformat for all Federal agenciesOne mandated standardized digitalformat for all Federal agenciesCan only mandate the data format forgrant recipient reportsCan mandate that all states andmunicipalities and fund recipients useone standardized data format for allfinancial reportsCannot mandate State and Local levelaccounting practicesHas mandated that all State and Localgovernments use the same accountingstandards and conventions36th WCARS at University of Sau Paulo, June 2, 201616

A tale of an evolving standardXBRL – Extensible Business Reporting Language Special language derived from XML “extensible”: if the rules are followed, XML can beextended/embellished. “markup”: labeling data with tags that add meaning anddimension DATA is TRANSFORMED into USEFUL INFORMATION!! XBRL documents “instance documents” which define thatreport type and description XBRL GL versus XBRL FR XBRL GL: vouch and trace XBRL GL: used in Brazil and will be used in the U.S., as itprovides complete DATA TRANSPARENCY36th WCARS at University of Sau Paulo, June 2, 201617

A tale of an evolving standardXBRL benefits: ccurateSimplerFlexible* From Ernst & Young: Introduction and Explanation of XBRL36th WCARS at University of Sau Paulo, June 2, 201618

A tale of an evolving standardXBRL for State and Local U.S. GovernmentFinancial Reports DATA Act and FFATA (Federal Funding Accountability andTransparency Act) Collaboration space:Broad Category of “Data Awardee and Recipient Entity InformationThis list includes information about recipients and awardees of federalfunds.2Award Amount InformationThis list includes elements used to describe the amount (value) of acertain award.3Award Characteristic InformationThese elements describe the different characteristics each awardpossesses.4Funding Entity InformationThese data elements describe characteristics of the entity thatprovided funding for an award.5Awarding Entity InformationElements on this list describe awarding entities – those that presentedthe awardee with the funding.6Account Level InformationThis list features elements that describe the accounts from which theawards are funded.36th WCARS at University of Sau Paulo, June 2, 201619

A tale of an evolving standardXBRL for State and Local U.S. GovernmentFinancial ReportsRutgers University Single Audit Report 2013, SEFA sectionProposed Data Elements for “Schedule of Federal Award Expenditure” (Single Audit Report):S.N1Recommended Data ElementXBRL Item TypeData DefinitionFederal ExpendituresMonetary ItemAmount of federal expenditure.Catalog of federal domestic assistancenumbers (CFDA)String ItemThe title of the program under which the Federal award wasfunded in the CFDA.Pass Through Grantors NumberString ItemPass through grantors number.American Recovery and ReinvestmentAct ApplicableYes No ItemTypeDenotes the American Recovery and Reinvestment Actapplicability.Program Title [Axis]Dimension ItemAxis to represent program titleAgency [Axis]Dimension ItemAxis to represent agency nameGrant Nature [Axis]Dimension ItemAxis to represent grant natureGrantor [Axis]Dimension ItemAxis to represent grantor titleBasis of Presentation [Text Block]Text Block ItemThe entire disclosure for basis of presentation.Sub recipients [Text Block]Text Block ItemThe entire disclosure for sub recipients.Federal Direct Student Loan Program[Text Block]Text Block ItemThe entire disclosure for Federal Direct Student Loan Program.Text Block ItemThe entire disclosure for Federal Perkins Loan Program,Nursing Student Loan Program, and Income Contingent Loan.23456789101112Loan Program [Text Block]36th WCARS at University of Sau Paulo, June 2, 201620

A tale of an evolving standardXBRL for State and Local U.S. GovernmentFinancial Reports36th WCARS at University of Sau Paulo, June 2, 201621

A tale of an evolving standardXBRL for State and Local U.S. GovernmentFinancial Reports36th WCARS at University of Sau Paulo, June 2, 201622

A tale of an evolving standardXBRL for State and Local U.S. Government FinancialReports36th WCARS at University of Sau Paulo, June 2, 201623