XBRL: Transparency by the numbers

One of the newest buzzwords in official Washington these days is "transparency," but at its core, transparency equals numbers, and the ability to use those numbers to account for how the government spends taxpayer dollars.

A recent panel discussion at the Association of Government Accountants meeting here in D.C. asked state and federal accountants in attendance to think about the near-term future for their profession, and transparency.

The theme of this AGA panel was "Getting Ready for 21st Century Financial Transparency". Tom Sadowski is a college professor but his resume includes a stint as the Director of Accounting for the State of Missouri, and past National President and past National Treasurer of AGA.

He says that in order for transparency to work, the government financial accounting community has to embrace others who he says are part of the process.

I really view it as a partnership with a third party in the partnership. The thing the auditors need to get over is this whole thing with independence, that "we can't get too engaged because we'll lose our independence." And the third group that needs to be in the group are the program people. The process really didn't engage the program people.

And as part of his presentation, Tom Sadowski demonstrated a government website, which is now online on Missouri's state government servers , that he says is one version of a very transparent future for government.

What people want to know as citizens and taxpayers is "where's all our money go, what are you spending it on?" So, this is our website, we're able to do on the expenditure side on our site. Everything we spend, every expenditure, our system is updated every night, and we're able to put it out there online. Once a contract is awarded, that information is put online. The one that was the most interesting was the employee information. Every time we run a pay cycle, that information is updated online.

Sadowski also says that at the University of Missouri, where he works today, the biggest challenge with placing employee information and salaries online is getting people to understand that the people who are paying -- the taxpayers -- "have a right to know how much you're paid, what you're doing, what your job title is, those kinds of things."

One of the relatively new tools available to the accounting and auditing community that is expected to pave the way for new levels of transparency and accountability is XBRL, or "eXtensible Business Reporting Language". This is a "markup language" that puts financial information in a common format so that it can be more readily manipulated not only for financial reporting, but for display using common spreadsheets, on intranets and the internet. XBRL can make financial reporting data more interactive, giving both regulators and investors quicker access to information they need to make decisions.

Bill Lutz, director of the 21st Century Disclosure Initiative at the Securities and Exchange Commission, says XBRL is already making possible a new generation of business information reporting, based on work the private sector has been refining for the last several years.

You might have a landing page where you have all the principle information on the left side, and on the right hand side, all the programs that you may have wanted, to make things interesting, to past filings, a look at executive compensation, whatever you want. On the bottom, we have classes of securities, non-financial disclosures, it could even allow you to go outside the SEC website, and mix external information with the information we have on file here.

Lutz even sees a day not too far in the future when XBRL will make it possible for a young programmer to develop tools that will make it possible for everyone with a computer and internet access to be a competent financial analyst.

Lutz concludes that the SEC is already requiring all financial disclosure filings from corporations and big businesses be submitted electronically, and in a standard format under XBRL. And he says, imagine what could happen if that same format were applied to government financials.

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On the Web:
State of Missouri - Missouri Accountability Panel
SEC - 21st Century Disclosure Initiative
SEC - Spotlight on Tagged Data and XBRL Initiatives for EDGAR Filings

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