The DATA Act: What CPAs Need to Know
Are you aware that the new Digital Accountability and Transparency Act, signed into law earlier this year, will have a significant impact on CPAs who work in government and or interact with the federal government?
Known as the DATA Act, the new law calls for the adoption of a data standard that is “a widely accepted, nonproprietary, searchable, platform-independent computer-readable format” to report federal contract, loan and grant spending information by federal programs. CPAs need to be aware of the changes so they can better serve their clients and be prepared to help agencies meet the new requirements.
Currently, all federal agencies have different reporting requirements for spending information that have been established over time. As a result, one can analyze the spending of federal agencies individually, but it is impossible to compare the spending of all government programs across these entities. Additionally, since not all of the information reported is publicly available or easily accessible, citizens have been challenged to understand how their tax dollars are being spent. Consistent data standardization will transform today’s fragmented spending information into open, publicly accessible data. The data standard that will be used under the DATA Act has not yet been determined; however, eXtensible Business Reporting Language is the leading candidate, as it is the only non-proprietary standard for reporting financial information available. The DATA Act requires guidance on government-wide data standards for federal spending to be issued by May 2015.
What will be the impact for federal auditors? Under the DATA Act, additional types of spending information will be disclosed and all of the data will be standardized so that it is machine readable and publicly available. The additional data will include:
- a breakdown of each appropriation
- a breakdown of each account, including amounts received, obligated and spent
- further account breakdowns by program activity and by object class
Under the Federal Funding Accountability and Transparency Act that is in place today, only summaries of federal awards for grants and contracts are published on USAspending.gov, and the format is not machine readable.
This diagram illustrates the current life-cycle of federal spending (blue arrows), how information is currently reported under FFATA (green arrow) and how the requirements will be expanded under the DATA Act (orange arrows).
Although we still have some time before the DATA Act takes effect, CPAs who work in government and those who interact with federal government entities should begin considering its impact. Federal agencies are starting to establish teams of people who will be responsible for implementing and mapping to the standards.
The DATA Act’s implementation will differ from the Securities and Exchange Commission’s Interactive Data Program for public companies where financial statements for quarterly and annual filings are submitted in XBRL format. Under the SEC’s Interactive Data Program, most companies have employed a “bolt on” approach, meaning that there has been no change to the process to compile the information and that the tagging is done after the fact, predominantly as a manual process. Auditors are not required to be involved with these filings. Alternatively, when the transactional level data is structured under the DATA Act, the reporting process will change and many of the manual controls and processes will be eliminated. How will these changes impact the audit process? Will the current audit approaches suffice? What is needed to get ready?
If you’d like to get involved in the AICPA’s activities related to the DATA Act, please contact me.
Ami Beers, CPA, Manager - Business Reporting, Assurance and Advisory Services, American Institute of CPAs. Ami is responsible for providing information, tools and resources that enable members to provide valuable business reporting, assurance and advisory services. This includes building awareness and understanding of XBRL and supporting the AICPA XBRL Assurance Task Force.