Standardized, Open, Machine-readable Format for Financial Statement Data

At the Open Data Summit in Vancouver yesterday, I gave a 5 minute ‘lightening talk’ about the future of open data and how open data standards will increase the number of people who can use a data set and the impact of code that is written against that data.

Photo credit: Bowen Osoko (@bxmx – Instagram)

At the end of my talk I issued a call to action to consider ways to standardize on financial reporting for public sector organizations, primarily financial statements and budgets. Financial reporting is (hopefully) low hanging fruit. Public sector organizations are already required to publish financial data by adopting the accounting and reporting standards established by the Public Sector Accounting Board (PSAB). Unfortunately, for open data enthusiasts like me, this data is almost exclusively in PDF format.

The immediate value proposition of an open, standardized format for publishing financial statements would be for citizens and public administrators to:

  1. Easily compare financial statements between jurisdictions for comparative analysis of revenues and expenditures
  2. Enable civic hacking, essentially free development for the public sector organization, creating value for citizens
  3. Open up the data for other tools and analysis
  4. Facilitate interoperability and data exchange between data sets
  5. Lower the barrier of entry to this information (value realized within and outside of the public sector organization)
  6. Reach a wider audience with open APIs built for these standards. These APIs would be used by any organization using the standard specifications.

Recently, while consulting for a large municipality in British Columbia, the City Manager asked for a comparison of his IT budget to similar sized municipalities providing a similar set of services. He wanted to get an idea of whether his IT spend was below or above average. This comparative analysis was relatively difficult to do because IT spending is reported differently in each municipality and sometimes IT services are centralized and sometimes they are decentralized throughout the service areas such as Engineering, Planning and Development, and Parks and Recreation. Open, standardized, machine-readable municipal financial data would make this cross-jurisdictional analysis much easier.

Citizens would also become more informed. Today, we pay our taxes, but have little understanding on how they are spent. Taxes should be considered an investment. We are investing in public infrastructure, health, education, and other citizens’ services. Citizens should have granular visibility into how our taxes are used. Today, it is a black box (okay, really its a PDF but not easily consumed). With open, standardized data, we could build easily understood dashboards or data visualizations of how our investment (taxes) is being spent.

During breakout sessions we brainstormed possible solutions to my call to action. Philip Ashlock, the co-founder of the Open311 standard had some great suggestions to implementing a standard for financial reporting. Many of these steps are generic to any kind of standards setting.

  1. Research – don’t re-invent the wheel. Check out the Civic Commons Wiki to see what has been done before in other cities across the globe. 
    1. Check out Checkbook New York City
    2. Check out XBRL (Extensible Business Reporting Language) an XML-based computer language for the electronic transmission of business and financial data
  2. Narrow scope – at first we were thinking all financial reporting for public sector. We have narrowed that down to Financial Statements for municipalities in British Columbia.
    1. Ideally, we want to start with one municipality. Demonstrate success and then sign on other interested municipalities.
  3. Develop iteratively – find partners such as civic hackers, vendors, municipalities. Start small, demonstrate value, and continue.
  4. Be flexible – you don’t have to standardize everything.

Philip described a tale of two cities with the standardization of Open311. It started with a more simple standard in Washington D.C. and a more complex standard in San Francisco. Both cities worked cooperatively to create interoperability between the cities (see more here). Philip told us that they did not have to standardize on all data elements, and that flexibility helped with the standard’s adoption.

One of the challenges brought up by the group was that allowing financial statements to stand alone, without the accompanying documentation (i.e., text) in the PDF, would be a violation of generally accepted accounting principles (GAAP). The solution to this objection is that the documentation could be included in the metadata or in corresponding data fields in the data standard.

Do you work in a municipality would be willing to take on the challenge of open, standardized financial reporting? Have any ideas for action? It would be great to hear from you.