Project Pages

Electronic Financial Reporting

Project Description: The objective of this research project is to monitor the effect of the electronic media on information delivery and user needs. Extensive research into the evolving state of the art in electronic financial reporting by state and local governments will provide the Board with a basis for evaluating the need to develop standards for financial reports intended for this medium.

Status: Added to Research Agenda: April 2008

Electronic Financial Reporting—Project Plan

Background: During the development of the Board’s initial strategic plan in 1997, and the succeeding plans in 2004 and 2007, the Board recognized the importance of staying abreast of the rapidly increasing use of electronic media in financial reporting applications. In the strategic plan, the Board acknowledges that it has the responsibility to ensure that its standards provide current and potential users with relevant information. It is that responsibility that led the Board to initiate a long-range project to monitor practice and determine how new media will be used by governments to provide electronic alternatives to traditional reports.

In accordance with the strategic plan initiative, the staff has been monitoring developments in the reporting of governmental financial statement information via electronic media. The staff has concentrated on two specific issues:

  • The development of Extensible Business Reporting Language (XBRL), a standardized digital language for business financial reporting.
  • The growth in governments’ use of electronic media to report their financial results in the absence of a standard format like XBRL.

The application of XBRL to governmental financial reporting is still is the early development phase; however, some individuals and national organizations have expressed an interest in an effort to develop a taxonomy framework for state and local governments. (A pilot project with the state of Oregon was undertaken in 2007, as discussed below.) The electronic financial reporting taking place in the interim raises a number of concerns that the Board may wish to explore in the short run.

Project History: The staff has an ongoing project (as time allows) to analyze state and local government websites. The first step in that research was to compile a comprehensive list of key information items to provide consistency and focus in the website searches. That database design has been completed and will be modified and updated, as time permits, as research progresses. The database includes information on the extent to which governments are reproducing their external financial reports on their websites, whether they present other financial information including financial condition measures and service efforts and accomplishments or performance items, and a variety of other information and statistics. The staff completed the website visits for all 50 states and made an initial analysis of the results of the research. Since that research was completed, staff commitments to other current agenda projects have severely limited the time available to conduct the website research.

In addition to understanding what is currently being done in electronic reporting, an important part of the research effort has been focused on gaining a better understanding of the implications of what can (and very likely will) be done in the near future. In that regard, the project staff developed a demonstration model that incorporates a level of sophistication and interactivity that goes beyond the status quo of presenting “pictures” of the published comprehensive annual financial report (CAFR) in Adobe (.PDF) formats, and perhaps even beyond what might be envisioned after widespread implementation of XBRL, should that occur. The working prototype model features a multi-level linked design to allow site visitors (users) to access information in varying degrees of detail and from a variety of sources. Many government websites have this multi-level design now; however, financial information, if presented, is generally not incorporated into the linking system. There are several potential benefits to maintaining an in-house electronic reporting model prototype.

  • It would help the GASB to be proactive, rather than reactive, in establishing financial reporting standards. The ability for hands-on application would allow the Board to evaluate alternatives in both a traditional and electronic reporting environment.
  • It would enhance the Board’s responsiveness to real-world situations.
  • Developing a model that governments may see as a “prototype” (and could use or emulate) would enhance experimentation. The Board would benefit by an increased awareness of what governments are actually doing.

In October 2004, a consulting firm indicated an interest in working with the GASB on the electronic reporting project. In November 2004, the GASB Chairman and staff met with representatives from that firm and discussed the possibility of working together on the project. In March 2005, the consultants arranged for a meeting between the GASB representatives and representatives of a business intelligence software development firm to discuss the possibility of leveraging their expertise and resources to help move the GASB’s effort forward. A proposed work plan and timetable was drafted. The software firm used the GASB’s working model and in early 2006, developed a limited-scope demo using their proprietary programs and processes to demonstrate how an electronic reporting model, such as the prototype developed by the staff, could become part of a comprehensive interactive web reporting package.

The staff also monitors academic research pertaining to electronic reporting issues and use the results of those external studies, as appropriate. In addition, some state and local governments have begun to issue their annual reports in compact disc format. The staff is collecting those reports and examining their contents and structures.

An XBRL pilot project was initiated in June 2007 by the state of Oregon. That project, with outside funding assistance, involves creating XBRL financial statements for a statement of net assets and statement of activities using the state of Oregon’s CAFR. A multi-disciplinary team, including GASB staff members, was assembled to build a limited taxonomy for these two statements as a demonstration project. The GASB staff played an advisory role in the pilot project providing comments and suggestions to the other project team members as the experiment progressed. It is hoped that the products of the pilot will serve as a starting point for other governments to continue the development of an XBRL taxonomy and architecture for state and local governments. The staff will continue to monitor and participate in, as appropriate, the development of a governmental taxonomy framework with any groups, task forces, or committees that initiate such an effort.

A 2010 publication by the National Association of State Chief Information Officers (NASCIO) “A Call to Action for State Government: Guidance to opening the doors to state data,” discusses the data transparency trend at the state government level. The report highlights some of the initiatives already undertaken by some states in which open access to public information is made available through a website data portal system. The report stresses the importance of transparency and accountability, and while it focuses on the availability of unabridged data that has not been aggregated, summarized, or interpreted, many of the concepts are consistent with the GASB’s interest in the provision of timely user interactive financial statements.

The NASCIO initiative is based on three basic principles (Transparency, Participation, Collaboration) that are consistent with the objectives of our electronic financial reporting project. Most notably is the Transparency principle, which is “To enable greater accountability, efficiency, and economic opportunity by making government data and operations more open.”

One of the anticipated outcomes of the NASCIO initiative is greater government accountability, credibility, and integrity, because the public will have easier access to government reports and the underlying data. The GASB’s prototype electronic reporting model was developed on that principle.

A series of conference calls were initiated with NASCIO, NASACT, and AGA to determine if there were common interests at the state level that would enhance further research efforts associated with electronic financial reporting. The GASB and the other groups drafted papers that outlined their respective interests, objectives, or philosophies. The NASCIO initiative is focused on unabridged data that is not aggregated, summarized, or interpreted. They view the process as evolutionary—to begin with data that is already created for public consumption and would be interesting and useful. The AGA agreed to assume the lead position for this effort and conducted a series of user roundtables to investigate the types of information that would be most useful to all types of potential users and the best ways to provide access to that information.

The AGA issued a white paper summarizing the results of their user needs focus group sessions. As a next step, the group may enlist volunteer governments to experiment, even in a limited way, with some aspect of on-line interactive financial reporting. From a timing perspective, however, the condition of the state and local government economies and resulting budgetary pressures leaves few, if any, financial and human resources that could be devoted to an electronic financial reporting effort. Thus, expectations for near-term progress are modest.

Current Developments: The project staff continues to monitor the progress of XBRL reporting in the private sector alert for interest or activity in connection with financial reporting applications by state or local governments. There has been recent publicity about state and local governmental interest in XBRL development to make the process of federal grant reporting more efficient and timely.

The project staff routinely updates the GASAC on the project and the Council members generally assign a relatively high priority to it. At the November 2011 GASAC meeting, the Council members discussed with the Board what the GASB’s role should be in advancing the progress of electronic financial reporting.

In July, 2012, the Association of Government Accountants (AGA) published a report focusing on electronic reporting (Report No. 32 in the AGA research series). References to the GASB and the Federal Accounting Standards Advisory Board (FASAB), their financial reporting objectives, and the roles that standards setters have played and can play in the advancement of electronic financial reporting are including in the report.

The research gauged respondents interest in a host of different capabilities that government websites could have. Among the most popular features identified by respondents were search capabilities by agency, department or program, providing prospective and fiscal sustainability data, providing performance data, and hypertexted data with drill-down capabilities. Checkbook level detail generated the least interest. The respondents preferred level of detail is “somewhat detailed and somewhat aggregated.”

The report suggests that standards-setters should be interested in establishing standards or publishing best practices even if they do not ultimately have the force of GAAP.
Among the report’s recommendations are that “Standard setters, preparers and citizen-users all have a stake in the success, and all should have a stake in the process,” and that “Standardization of data definitions, report content and report format is paramount.”

At its February 2013 meeting, the GASAC ranked the project first in priority among research and potential projects.

Research Work Plan:


May–August 2013:

Staff will continue to monitor the development of XBRL reporting and the discussions with AGA, NASACT, and NASCIO. Staff will provide assistance to governments as requested.