Reporting Model Phase I: Streamlining

FASAB Contact: Ross Simms, simms@fasab.gov, 202-512-2512

Project Objective:

The objective of the reporting model phase I: streamlining project is to determine near-term opportunities for streamlining required financial report content. On September 22, 2017, the Federal Accounting Standards Advisory Board (FASAB or “the Board”) issued Statement of Federal Financial Accounting Concepts (SFFAC) 8, Federal Financial Reporting. SFFAC 8 provided a more progressive platform for considering financial reporting issues and developing financial reporting standards. The Statement effectively concluded the concepts phase of the reporting model project; for a history of the concepts phase, please see http://www.fasab.gov/concepts-the-financial-report/. Next, the Board decided to develop financial reporting standards using a two-phased approach. During phase I, the Board will focus on near-term issues, particularly streamlining content. During phase II, the Board will focus on illustrations of an ideal reporting model, additional issues, and discrete projects over the long term.

HISTORY OF BOARD DELIBERATIONS

February 21-22, 2018

In considering a reporting model for the future, the Board observed a demonstration of interactive data visualizations, management’s discussion and analyses (MD&As), and financial statements. The interactive presentations considered the needs of users and were designed to help users understand financial information.

Mr. Justin Marsico, Senior Policy Analyst, Department of the Treasury (Treasury), presented a series of data visualizations. Treasury developed the visualizations to help users understand and explore data collected as part of the Digital Accountability and Transparency (DATA) Act of 2014. Mr. Marsico’s presentation included a sankey diagram and a dendrogram. The sankey diagram linked budget functions to object classes and illustrated the magnitude of the relationships. The dendrogram listed each federal agency and allowed users to drill down from the agency level to the sub-agency level and to the federal accounts that comprise sub-agency spending. Users could also view a federal account profile to gain a better understanding of how agencies receive and spend congressional funding to carry out their programs, projects, and activities.

The Board also observed an interactive MD&A and interactive financial statements developed by a team from Deloitte & Touche LLP. The interactive MD&A included tips to help users understand technical terms, a sankey diagram of budgetary resources, a radar chart comparing the net cost for five programs over multiple periods, and a geospatial heat map of net cost by state with drill-down capability enabling users to view amounts by congressional district. The interactive financial statements also provided drill-down capability. The drill-down feature enabled users to learn more about the details of financial statement line item balances.

The Board encouraged continued progress in electronic reporting. The Deloitte team included Mr. Justin Reed, Partner; Ms. Tasha Austin, Senior Manager; Mr. Daniel Shorstein, Manager; Ms. Tanya Bagheri, Business Technology Analyst; Ms. Reem El Seed, Consultant; and Mr. Dai Tran, Specialist Master.

The Board subsequently discussed whether to revisit certain topics within Statement of Federal Financial Accounting Concepts (SFFAC) 3, Management’s Discussion and Analysis. The possible topics included revisiting (1) SFFAC 3 for standards or implementation guidance; (2) the role of MD&A; (3) the scope of MD&A; (4) the schematic diagram of a sample general purpose federal financial report (GPFFR); (5) the intended audience for MD&A and GPFFRs; (6) the financial statements discussion; (7) the systems, control, and legal compliance discussion; and/or (8) the performance discussion. Board members discussed the topics for revisiting SFFAC 3 and noted that they were integrated rather than stand-alone topics. Consequently, the Board agreed that implementation guidance should be developed to help improve the content of MD&As. The Board noted that component reporting entities could be more creative and use interactive technology. Existing standards do not preclude reporting entities from using the technology.

Issue Paper for February 2018 – Tab G (PDF)

December 20, 2017

The Board discussed the next steps toward improving long-term investment reporting and management’s discussion and analysis. SFFAS 8, Supplementary Stewardship Reporting, requires reporting on the government’s long-term investments (or stewardship investments), and the Board discussed concerns regarding this guidance. For instance, the guidance defines and measures the government’s long-term investments differently from other sources of information, and readers of financial reports do not use the information presented. In addition, the Board considered whether reporting entities could reference other sources of information, such as the Budget of the U.S., but noted that the other sources could decide to change or remove the information at any time.

Considering that long-term investment information is important for achieving the Stewardship Reporting objective, the Board decided to reach out to interested groups and individuals. The feedback will be used to determine how best to improve long-term investment reporting.

Also, the Board discussed whether to update Statement of Federal Financial Accounting Concepts 3, Management’s Discussion and Analysis. The Board developed the concepts in the 1990s, and performance reporting and other areas have evolved since then. Rather than revisiting the entire concepts statement, the Board decided to identify and prioritize key areas for improving the guidance.

Issue Papers for December 20, 2017 – Tab B (PDF)

October 25-26, 2017

The Board discussed two proposals for improving the content of financial reports. The first proposal would provide flexibility in reporting the remaining item of required supplementary stewardship information (RSSI), stewardship investments, and eliminate the RSSI category. The second proposal would permit management to refer users to more detailed performance reports when preparing management’s discussion and analysis (MD&A). The flexibilities would be responsive to input from preparers and auditors regarding users’ access to and preference for other sources of information.

Given the flexibilities, Board members were concerned that financial reports would not present information needed to achieve the reporting objectives. Board members noted that financial report users need information on expenses that provide long-term benefits, such as investments in human capital, research and development, and non-federal physical property. In addition, users need information about the reporting entity’s performance.

Consequently, staff will conduct additional research to determine 1) how stewardship investment information might be improved, 2) what MD&A concepts could be considered for standards, and 3) what performance reporting concerns could be addressed through OMB form and content guidance.

Issue Paper for October 25-26, 2017 – Tab B (PDF)

August 30 – 31, 2017 Board Meeting

During its August 2017 meeting, FASAB staff presented a proposal to require reporting entities to inform readers on where to obtain the entity’s annual performance report (APR) rather than providing detailed performance information in MD&A. The Board supported providing flexibilities to reporting entities and noted that conditions have changed since FASAB developed the MD&A standards in the early 1990s. Component reporting entities currently issue separate financial and performance reports and issue the reports at different times. In addition, the Board’s concepts acknowledge that information that users need may not reside in a single report. Consequently, the Board plans to develop an exposure draft (ED) to amend the existing MD&A reporting standards, explain the rationale for the proposal, and obtain comments from users, preparers, and auditors.

The Board also discussed an initial draft ED proposing to rescind RSSI reporting requirements. The draft ED noted that users do not review the RSSI provided in financial reports. Users can access the information from other sources, such as the Budget of the United States and APRs. However, the Board discussed the history and complexities of the RSSI topic and noted that the draft ED needed to include a comprehensive discussion of the rationale for rescinding RSSI. Thus, FASAB staff will present a revised draft ED during the October 2017 meeting.

Issue Paper August 2017 – Tab I

June 21-22, 2017 Board Meeting

The Board plans to consider opportunities for streamlining management’s discussion and analysis (MD&A) and required supplementary stewardship information (RSSI). In May 2017, Board members reviewed financial reports and FASAB staff conducted roundtable discussions to determine potential areas for streamlining. As a result, staff noted several areas, including MD&A, RSSI, other information, the overall reporting model, and certain financial statements and note disclosures that might be suitable for the streamlining initiative.

The Board decided to use a two-phased approach for reviewing the streamlining options. During the first phase, the Board will focus on areas that can be addressed in the near term and, in the second phase, consider areas to address over the long term.

The Board’s near-term efforts involve MD&A and RSSI; as such, the Board will begin a note disclosure project. Staff will engage roundtable participants to help determine streamlining prospects for MD&A and RSSI. MD&A is intended to be concise. However, Board members and others noted MD&A is often broad and may overwhelm readers. In addition, with respect to RSSI, users can access the information from other sources, such as Analytical Perspectives, Budget of the United States Government, Fiscal Year 2017. Related performance information may also be presented in agency performance reports.

For the long term, staff will consider the other areas proposed by Board members and roundtable participants. Members discussed that the entire financial reporting community can become involved in the process of identifying opportunities for streamlining financial reports; users do not necessarily need to wait for standards to be developed.

Issue Paper for June 2017 –Tab C

2017 AFR MD&As