Frequently Asked Questions
General XBRL Questions
A data standard is a documented set of rules and definitions for technical information that guide its management, definition, and relevant systems. An “open” data standard is created through a collaborative, publicly available process.
Weights and measures, such as the length of an inch or the weight of a kilogram, and the design of USB computer cords, are examples of open standards. The advantage of standards is that they facilitate widespread use, innovation, and collaboration, since everyone is able to agree on and understand the same set of measures and definitions. Open data standards for governments allow anyone to freely access or create applications to use the data.
eXtensible Business Reporting Language (XBRL) is an open data standard that is commonly used for digital business financial reporting, and is managed by a non-profit organization, XBRL International. XBRL provides a common language and format that can be adapted to many different financial reporting contexts, and it is both human and machine readable. This means that XBRL-formatted files look just like regular Word or PDF documents, but they have embedded “tags” to identify data.
XBRL standards are used in 60 countries by over 100 regulators, mainly for private-sector regulatory and supervisory data collection concerning financial regulation, capital markets, and businesses registrars. In the US, the federal government has adopted XBRL standards in several areas of public reporting including the Federal Financial Institutions Examination Council, the Federal Energy Regulatory Commission, and the Securities and Exchange Commission (SEC), which implemented XBRL standards in 2009.
At the local government level, Spain, Italy, and Brazil began using XBRL to collect municipal financial data in the late 2000’s. In the US, XBRL projects have been piloted in Oregon, Illinois, California, and Florida, which has recently required XBRL reporting for all local governments.
A taxonomy is a set of categories and definitions created using a specific data standard (e.g. XBRL) for a specific type of data. In this case, this taxonomy corresponds to data included on local governments’ audited financial statements.
Tagging means that you digitally link defining concepts to a specific data point. This means that when you click on a data point, you will then be able to see the defining properties of that data. For example, if you are viewing a particular set of financial statements and click on the number for fund balance, the tag defines fund balance and digitally identifies it so that it can be easily added to a database.
The XBRL format is essentially a digital version of regular PDF-formatted financial statements. Because XBRL documents use tags, however, data can be more easily retrieved from a single set of statements and it can be more easily incorporated into a database containing multiple statements from multiple years.
No. The XBRL taxonomy is built using the same accounting concepts, definitions, and rules that are used to generate financial statements. Because XBRL presents the same data in a more useful format, the reporting process will be more efficient and streamlined. The current version of the ACFR Taxonomy includes government-wide, governmental funds, and proprietary fund statements, as well as footnotes for pension, OPEB, capital assets, and long term debt. The taxonomy covers all concepts needed for the Michigan Chart of Accounts, in addition to separate entry points (sections of the taxonomy) for the Michigan Form F-65, Local Unit Fiscal Report, and Michigan Form 5572, Retirement System Annual Report.
Once data is in XBRL format, it can be used by government, auditing, and public stakeholders to review and compare data across different municipalities or throughout different years. Because XBRL is open source, any software developer can create applications using XBRL-formatted data. Some web viewers, for example, provide visual data tools, showing the comparison of the data points with graphs. The data can be used to fulfill state and federal reporting requirements by generating the data once instead of copying it into multiple reporting formats.
To learn more about XBRL, their work, and updates on the ACFR Taxonomy 2022 click here .
CLOSUP and XBRL are opening the taxonomy for public review and comments until August 14, 2022. To learn more about how to view the taxonomy and provide feedback, please click here. There will be two options on how to provide feedback. One will be through Logging into an application called Yeti and adding comments to the taxonomy. The other will be to view the taxonomy in a spreadsheet format and provide feedback via a form. Additional instructions can be found here.
Local Michigan Government Adoption
CLOSUP, in partnership with XBRL, launched a pilot program in 2021 to design and implement XBRL standards to modernize and digitize Michigan local government financial reporting with Flint as the first pilot site. To learn more about this project you can read about it here.
This summer, CLOSUP is working with 2-3 small/rural municipalities to pilot this implementation and assess any unique challenges smaller government entities face.
There will be a transition period in moving from the old system to the new, but in the long run, a streamlined reporting process should save local governments time and effort. CLOSUP is committed to working with local governments to make this initial setup simple and easy. Moving to the XBRL format will require initially tagging the current year’s financial report. But in doing so, you will create a template for your future financial reports. In addition, because the taxonomy is designed to identify the data points in financial statements that need to be reported in the F-65 or other reports, these reports can be generated automatically rather than separately filled out.
In the long run, XBRL standards will create less work for local governments by eliminating duplicate processes often needed when reviewing PDF documents. It will streamline reporting processes by digitizing data, meaning that data can be quickly retrieved and validated.
XBRL works with several applications to convert data, including Excel-based tools. Because
XBRL is already widely-used in the private sector, there are many existing applications and vendors. CLOSUP is currently working with XBRL and vendors to expand existing applications
The taxonomy is specifically designed to incorporate the F-65 and pension/OPEB (Form 5572) reporting requirements. Therefore, if a local government generates XBRL-formatted statements, it will also automatically generate these reports. Although there is no current plan to require XBRL, CLOSUP is working with the Department of Treasury to explore the feasibility of accepting XBRL statements in lieu of these additional reporting requirements.
At this point, adoption of XBRL is voluntary. CLOSUP is committed to working with local governments to make this process simple and easy.
As seen in our Twenty-year Review of Flint’s Financial Condition, having easily accessible financial information can assist policy makers and decision makers in financial planning and identifying signs of fiscal stress early. XBRL allows governments to streamline their reporting, which will reduce human error and increase data transparency, completeness, and accuracy.
CLOSUP is dedicated to supporting local, state, and urban policy issues, and understands that fiscal health is at the core of many policy concerns. We fully believe that the implementation of XBRL will reduce reporting burdens on local governments and help all stakeholders gain a better understanding of local fiscal health.
“The fiscal health of local governments is critically important to the functioning of our democracy, economy, and quality of life. In turn, high-quality easily-accessible financial data are essential to promote fiscal health, as well as transparency and data-driven policymaking. This project ultimately is about improving a community’s quality of life, because as local fiscal information becomes more available, a greater number of stakeholders will have eyes on the data and be able to act on potential problems long before they turn into crises”
-Thomas Ivacko, CLOSUP Executive Director
See more information about CLOSUP's work on modernizing and digitizing local government financial reporting.
Local governments should adopt XBRL to have accessible quality data that will save them time and money in the long run. XBRL will streamline their financial reporting process and eliminate duplicate processes. It will also provide local governments with access to usable high-quality data for internal management and external transparency. Similarly, it may lower borrowing costs, as it will make it easier for investors to assess credit risk, and may also lower the cost of third-party transparency applications
CLOSUP and XBRL are collecting public feedback on a draft of the taxonomy until August 15, 2022. Please read instructions above to learn more about reviewing the taxonomy. To learn more about the project or participating as a pilot site, contact CLOSUP’s fiscal health team at email@example.com .