This blog originally appeared on Workiva.com on March 14, 2019.

Written by Cathlyn Coons.

Comprehensive annual financial reports (CAFRs) are the lengthy presentations published by state and local governments, usually online in PDF format, to detail their financial health. Constituents consume the reports for insight into the operations of a specific state or municipality. However, comparing one entity to another is often challenging because of the wide variation in the reporting data within CAFRs.

It appears to be only a matter of time before regulators adopt open data mandates for state and local financial reporting. Their counterparts in corporate and federal financial reporting have already moved toward searchable, machine-readable financial data, tagged according to a standard taxonomy. In fact, Inline XBRLTM is emerging as the data encoding language of choice for reporting.

To demonstrate the potential for data modernization in state and local government financial reporting, Workiva helped launch The Modern CAFR pilot project. The Modern CAFR project showcases what the future of government financial reporting might look like and the potential benefits it may bring.

A look inside the modern CAFR

With the release of the CAFR Demonstration Taxonomy (v0.5) by XBRL US in January, the Workiva team created sample filings from publicly available data inside the CAFRs filed by the states of Utah and Georgia for 2017.

The Modern CAFR website was developed to host the sample filings. As users navigate to financial statements, they are able to click on a line item and see the details pop up with the information behind that number. The result is easier CAFR analysis, universally understood and available in seconds.

A modern CAFR indeed.

The potential for data modernization in state and local financial reporting

Imagine investment boutiques, especially those focused on fixed income, efficiently pulling data from CAFRs to evaluate which bonds to add to their portfolios, instead of scraping together that information manually.

Communities could more easily review data from cities of a similar size to see how they compare. Rating agencies and data aggregators like S&P Global could do the same.

The open data movement keeps gathering momentum

The Modern CAFR pilot program is underway just as the open data movement is beginning to ramp. For public companies, the Securities and Exchange Commission (SEC) is phasing in the mandate with requirements for filers to use the iXBRL format.

In January, the president signed into law provisions in the OPEN Government Data Act requiring nonsensitive government data to be reported in machine-readable format for federal agencies. Meanwhile, the GREAT Act, which would require the government to adopt a single data format for grant reporting, is making its way through Congress.

What does all this activity mean for state and local chief financial officers and finance directors? Here are the top takeaways for leaders to plan ahead:

1. Explore iXBRL software
   Begin researching technologies, and know your options—in case a mandate for iXBRL tagging takes effect.

1. Join the discussion on taxonomy
   XBRL US is encouraging government agencies and users of state and local government data to weigh in on its demonstration CAFR taxonomy.

1. Connect your data
   Begin to explore the correlation of open data to connected reporting. How can you connect your data so that a number that appears in the mayor’s budget presentation, for example, is consistent with the same number when it appears in a CAFR or a municipal securities document on EMMA? Some teams use shared drives to work from the same data. Cloud solutions are available to connect data, people, and processes for more dynamic reporting with real-time updates.

For more on how to evaluate technology for government reporting, download this checklist.