25 February 2010

Spain, the quiet achiever

Imagine a world in which 17,000 annual budget settlements were being handled manually each year. The time and cost involved, not to mention the error rates, would be enough to challenge any organization. In fact, you'd expect something like this to have been automated years ago. Now add a small problem; all the reporting entities run different systems, have individual workflows, set their own priorities, only one of which was providing reporting to an external party. Lets add to the complexity by making each budget settlement require up to 400 rows of information.

Here we have an almost perfect scenario for XBRL - multiple reporting entities, using any range of different systems and processes, providing information that must be manually processed, all being provided to a common consumer of the information.

Okay, so the the title gives it away. But across Spain a quiet revolution has been underway in local government reporting. Specifically municipalities, regional government, regions and metropolitan areas. Specifically in the area of budget settlement, of which there are something like 17,000 from the various levels of government. Spain has a decentralised administrative system vesting local authorities and municipalities with significant freedom to make business decisions - what processes, system and standards they will use. Lets add to the complexity by understanding than t80% of the reporting entities represented communities of 5000 or less people.

I think many of us who attended the XBRL conference in Madrid would agree that a "standardized" Spain would lose too much of its charm.

Alejandro Amelivia Garcia, the project manager, has given me some fascinating insights on the project. Alejandro is the head of e-government area in Directorate General of Financial Coordination with regional governments and local Agencies. Ministry of Economy an Finance.

So if you want to reform at lease one element of public sector reporting, what would your project plan look like? Lets go to Alejandro's own words about the successes of the project.
  • First, developing the taxonomy with XBRL Spain.
  • Then we published a legal text recommending XBRL to transmit the data.
  • Then we made it well known by attending to meetings with local entities and showing the advantages of the standard.
  • They were convinced and began asking for the feature to their accounting systems vendors.
  • Vendors developed plug ins to dump the data into XBRL Files. They had to do it for free because they had to update their systems according to the legal text.
The Public Sector is, I've written before, one of the great opportunities for XBRL. Massive amounts of information flowing back and for, up and down, and much of it either manual or conforming to multiple local and national standards.

The LENLOC project (Liquidación ENtidades LOCales = LOCal Entities budget settlement) in Spain was designed to deal with this situation. It is important to note that that central government did not mandate the use of XBRL - in this case the advantages of using XBRL were simply too great to be ignored. That did not mean that there was a single "big bang" implementation. But progress has been impressive.

So what kinds of benefits can be achieved from such a project? Again we'll go to Alejandro's own words:
History of Budget Settlement transmissions:
  • Until 2004: Only paper + army of typers. Let’s forget this has ever happened.
  • Until 2006: Web forms for entities to type their data + hand-signed paper.
  • 2006: electronic signature (no more paper needed) + development of LENLOC, our XBRL taxonomy which describes the transmission of a settlement.
  •             20% of the settlements sent by a local entity were received via XBRL.
  • 2007:    60%
  • 2008:    (current reception): About 80%
  • 2009:    We deployed the application just a few weeks ago, so data is not significant.

My own guess is that 2009 will go down in history as the last year in which any local authority in Spain provided non-XBRL tagged budget submission information.And the benefits - again to Alejandro:
Improvements achieved:
  • No more paper and no more typing for anybody. This two would pay the bill.
  • Better data. No typos, information is extracted directly from the different databases. One instance is accepted only if it is correct.
  • Less expenses on mail, typers…
  • Better world: No paper, no physical space to storage paper for years, no bored people doing monotonous jobs.
There can be little doubt that Spain, the quiet achiever, is using XBRL to deliver real efficiency and effectiveness benefits to a key component of public administration. Equally there can be little doubt that with this success and the efficiencies demonstrated, we should expect more examples of Spain using XBRL to reduce administrative burden, reduce costs, while improving effectiveness of local government.

If you want to, you can learn more and contact Alejandro directly on his e-mail: Alejandro Amelivia Garcia .
 

3 comments:

  1. Hi Daniel,
    I'm Spanish and I'm not involved in any public administration.
    From the point of view of a simple citizen, this changes are, for now, too far.

    Do you know what is the most advanced administration in the implementation of the xbrl standard?
    It will be interesting to track them...

    Thanks and congrats for your site.

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  2. Congratulations for this great report Dan and Alejandro

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  3. Good work, i feel this report shows hard work behind it Dan.
    Managerial Accounting

    ReplyDelete