The Netherlands and Australia created common guidelines to report government financial regulation compliance to save on costs — and U.S. governments could benefit by doing the same.
Private companies in the U.S. pay as much as $2.028 trillion of combined annual costs related to reporting compliance with federal regulations, according to some estimates, but a new report has shown there may be a cheaper way.
The Data Foundation and PwC Public Sector have co-published Standard Business Reporting: Open Data to Cut Compliance Costs, which details how Australia and the Netherlands were able to cut a combined total of roughly $832 million in costs related to regulation compliance, a number projected to increase with time. The countries accomplished this feat by replacing staid document-based regulation reporting with standardized and open data formats, a concept known as Standard Business Reporting.
At the core of SBR is the idea that adopting a common data structure would make it so businesses need less time to meet the reporting requirements of regulatory government agencies, thus allowing said businesses to be more efficient, productive and, ultimately, profitable. For this to happen, all government agencies would have to implement the same common structure, rather than continuing to rely on the disparate systems that are in place now.
Hudson Hollister, interim director of the Data Foundation, said those involved with data standardization and transparency efforts have realized the benefits of SBR for some time, but the report serves as verification that the practice can work for government.
“This report shows that this basic idea — that agencies can reduce cost by coordinating the data structure they use — saves time and saves money,” Hollister said. “That’s the central insight. It’s proven, and we’ve seen it now in the Netherlands and Australia. It’s unknown here, but we hope this report starts to change that.”
In the U.S., some facets of the government have dabbled in SBR. The Digital Accountability and Transparency Act, which passed in 2014, required the standardization and publication of federal spending data with the US Department of the Treasury. As a result, 57 data standards were put in place to improve the consistency of info that was previously kept in disconnected systems under many different formats. A secondary benefit of SBR is that it enables financial data to become open and easier to find and decipher, ultimately increasing government transparency.
Hollister pointed to this progress with the Department of the Treasury as proof that SBR can be instituted within the federal government. For this to happen, the report suggests that action must be taken by both Congress and the executive branch.
Joe Kull, former deputy controller for federal financial management at the White House Office of Management and Budget, is currently a director in the Washington federal practice of the PwC, one of the organizations responsible for this report. Kull said the idea of SBR has been oft discussed over the past 20 years, and the benefits are clear, but some within government agencies have been slow to adapt or embrace it.
“It’s a tremendous opportunity, but with every opportunity comes a lot of risk,” Kull said. “It’s a risk for people who are currently doing things the old way, for sure, and there are lots of embedded cultures in these things.”
However, Kull said that in the wake of these findings it certainly seems like wide adaption of SBR is a certainty, although it’s less certain when such acceptance will happen, and chances are that within the next decade would be too rosy of a guess.
Australia and the Netherlands were able to implement the system to great effect because the governments in those countries have long been ahead on matters related to data. They are also considerably smaller than their counterpart in the U.S., which is home to the largest economy in the world. For SBR to be instituted, one entity would have to get a handle on every other regulatory reporting system, a challenge magnified by the size of the U.S. government.
“That doesn’t mean one shouldn’t try, one shouldn’t make some effort,” Kull said. “The real question to ask yourself is, 20 years from now can we continue doing business the way we’re doing it today?”
Some progress in the U.S., however, may be taking place soon. The Financial Transparency Act, which was first introduced in Congress in May 2015, may be reintroduced soon. If passed, this bill would require that all federal financial regulators make info collected under securities, commodities and banking laws into open data. This bill currently has 35 co-sponsors, including representatives from both parties.