This article reviews the implementation of real-time reporting by state and municipal governmental units as a model for analyzing these emerging technologies. While the implementation of real-time reporting presents several challenges, it offers many opportunities that may make it feasible for many municipal governments. The challenges include the complex and cumbersome process of integrating an entity’s different data warehouses and the significant costs of implementation. Notwithstanding this, real-time reporting provides benefits, such as flexibility in the customization of data to facilitate business decision making on a real-time basis, fraud prevention, and audit efficiency.
In recent years, there has been an ongoing effort to introduce new financial reporting technologies to modernize financial reporting by state and local governments. Two such states at the forefront of this effort are California and Florida. For instance, California’s proposed SB 598 would transition municipalities within the state to the XBRL system, which allows for state and local financial reports to be both computer-readable and human-readable. Similarly, Florida enacted HB 1073, which seeks to introduce the XBRL system in state and local financial filings. In Canada, Montreal appears to have gained traction in this area by adopting emerging technologies, and it has even instituted real-time reporting. This article reviews the opportunities and challenges of adopting emerging technologies for real-time reporting by the approximately 38,917 counties, municipalities, and townships across the United States (https://www.census.gov/newsroom/releases/archives/governments/cb12-161.html).
Real-time financial reporting presents opportunities for organizations to enhance their decision-making process and provide timely information to constituents. There are, however, challenges related to the costliness and time-consuming nature of implementing an accounting information system to accommodate nonperiodic real-time reporting. This article uses the implementation of real-time reporting by administrators in New Hampshire, Montreal, and Los Angeles County to highlight the challenges and opportunities of implementing real-time reporting.
Case Study: Montreal’s Implementation of Nonperiodic Real-Time Financial Reporting
Montreal represents a case study of implementing a real-time financial reporting system on a large scale because it established an online real-time system for tracking municipal finances and managing receipts in 2003 (P. Ashcroft, “Real-Time Accounting,” The CPA Journal, April 2005). The implementation of a large-scale real-time financial reporting system subject to numerous transactions for around 400,000 taxpayer accounts with Can$2.5 billion in annual receipts annually is a nontrivial task.
Usefulness of real-time reporting.
One of the motivations for Montreal to implement its system was to accommodate new employees in need of self-service access to Montreal’s data warehouse (German eGovernment & Smart City Architects, “Canada: City of Montreal Implements Real-Time Financial Reporting,” July 30, 2019, https://bit.ly/3gNuVw1). Overall, the system serves a financial reporting function and allows employees to access tax records. Authorized users have access to more than 500 reports, including predefined and customized reports that may be constructed by users to serve their specific needs. Users can also tailor consumption of these reports to their preferences; reports can be scheduled for automatic distribution via printers, faxes, e-mail, and wireless devices, or users can specify events that automatically trigger report distribution when certain conditions occur—for example, financial planners can arrange to distribute a report when a given budget is exceeded. This ability to efficiently tailor information to users’ specific needs highlights an important benefit of real-time financial information systems.
The New Hampshire Department of Revenue Administration (DRA) also implemented a real-time financial reporting system by building a series of comprehensive and visual dashboards with the business intelligence (BI) and analytics, integration, and data integrity solutions from the New York software company Information Builders (Exhibit 1). Thanks to software such as WebFOCUS and iWay, DRA’s employees can easily retrieve all taxpayers’ information, such as outstanding notices, types of taxes owed, and relationships with other taxpayers, in a single PDF file. Approximately 80% of DRA’s workforce is using this version of the single view portal because it reduces the time workers take to research information regarding taxpayers’ inquiries by as much as 50% (New Hampshire Department of Revenue Administration, “New Hampshire Boots Productivity and Revenue Generation,” https://bit.ly/3dwYK23).
Single View of the Taxpayer Portal Dashboard, Designed by the New Hampshire Department of Revenue Administration
Los Angeles County also successfully built a self-service analytics environment, which helps to manage salaries and benefits for 100,000 employees. (Exhibit 2). The county used real-time financial reporting tool WebFOCUS, which includes interactive dashboards and parameterized display forms for intuitively analyzing data. Employees can access and visualize data directly without manual coding; as a result, analysts can provide the requested information more quickly than before. Real-time reports also help the county to reduce costs. Instead of taking all night to produce a single data dump and two to three weeks to create a single report for its compensation team, WebFOCUS can perform all the same procedures within 15 minutes. Moreover, 37 other departments, such as Internal Services, also use these real-time reports to save costs (County of Los Angeles, “Los Angeles County Uses WebFOCUS to Manage Compensation for 100,000 Employees,” https://bit.ly/371F9Vk).
Among other software suites, Information Builders’ WebFOCUS software can be used to create a financial reporting portal. Information Builders’ iWay Enterprise Information Suite was used to extract data from Montreal’s mainframe-based tax system (eGovernment 2019). One of the most significant challenges faced by Montreal in implementing this system arose from the nature of government institutions’ data, as those institutions often rely on a diverse set of information systems for planning, service delivery, and internal evaluation and administration functions. Systems used to fulfill these functions often adapt and change independently; therefore, the integration of the various data sources that constitute Montreal’s diverse data warehouse presented a unique challenge for the implementation of its real-time reporting system. (See Exhibit 3 for a list of software suites.)
Real-time Implementation Software
Before the implementation of real-time financial reporting, Montreal used a mainframe-based central tax system called OASIS (eGovernment 2019). The flowchart in Exhibit 4 illustrates the connections to available data. The WebFOCUS software was installed on a Microsoft Windows NT Server, and an Oracle data warehouse was built on a UNIX server. The iWay Enterprise Integration Suite ultimately tied the system together and served as the middleware layer that transferred financial data from OASIS to the Oracle data warehouse, and then from the Oracle data warehouse to end-users in PDF or Excel format files. The suite’s general functions for any organization include using a single integrated set of graphical design tools to assemble pre-built components for enterprise-class business-to-business integration, business process automation, or enterprise information management integration without the use of custom codes (Information Builders, Inc., https://www.informationbuilders.com/).
Connections between the Prior Mainframe-Based Tax System and the Current Real-Time Reporting System Adopted by Montreal
The flowchart in Exhibit 4 shows the contrasts and connections between the prior mainframe-based tax system and the current real-time reporting system adopted by Montreal. In the mainframe-based system, the financial data was created by OASIS and then transferred to the Oracle data warehouse; in contrast, the financial data in a real-time reporting system is created by WebFOCUS and transferred to real-time data warehouses. For both systems, the iWay Enterprise Integration Suite is used to tie the systems together by moving financial data from the data portal to the data warehouse, and then from the data warehouse to end-users.
WebFOCUS was used to create the self-service application as well as a web portal page to grant access to reports by way of HTML menus. The simplicity and ease of access to this system are significant benefits; users only need a standard web browser to obtain the needed information. The WebFOCUS portal enables users to create dashboards from numerous data sources and formats. This portal also allows users to customize and write reports. The WebFOCUS discovery “insight mode” has visualization and charting functions that enable users to conduct effective and efficient data discovery to make informed decisions (https://www.informationbuilders.com/).
Timely investment and management decision making.
Research conducted by the Association of Chartered Certified Accountants (ACCA) surveyed 300 prominent investors from many industries, including pension funds, insurance companies, private banks, and asset management firms, found that real-time financial information would increase investor returns, improve perceived corporate governance, and enhance the attractiveness of investment opportunities. Respondents’ positive perception of real-time reporting is congruent with additional opportunities presented by nonperiodic reporting (ACCA “Understanding Investors: The Road to Real-Time Reporting,” 2013). Real-time financial reporting facilitates several opportunities associated with: 1) accessibility, as management and other decision makers can view key performance indicators at any time; 2) flexibility, as many real-time reporting solutions allow decision makers to design reports and customize data displayed to meet their specific needs; 3) collaboration in real time; and 4) accuracy, as the probability of errors is reduced provided the audit trail is created and visible with every accounting transaction (Prosper, “The Benefits of Real-Time Accounting,” December 7, 2016, https://letsprosper.co.uk/the-benefits-of-real-time-accounting-information).
Opportunities associated with accessibility, flexibility, and collaboration collectively present the primary benefit of real-time financial reporting—the availability of up-to-date and decision-useful information. Cash flow is of the utmost importance to most organizations in order to resolve maturing financing obligations and pursue profitable business and organizational strategies. Real-time data enables enhanced decision making related to cash flow because knowing cash availability at any point in time allows organizations to anticipate and adequately address any cash shortfalls promptly. In addition, for-profit organizations’ income-producing ability and going concern status are at the forefront of any financial decision-making process. Tracking profit and loss accounting in real time allows organizations to efficiently gain insight into financial fluctuations associated with strategic decisions (Prosper, 2016). This efficiency enables prompt corrective action if needed.
Fraud prevention and audit efficiency.
The accuracy of financial information is vital to its decision-usefulness. Financial fraud often takes time to happen, and audits conducted by external auditors are frequently only required annually (Auditchain, “Real-Time Financial Reporting Solution DCARPE,” November 16, 2017, https://bit.ly/3gQD56X). Any time lag creates an opportunity to falsify financial data. Technology that allows real-time recording and presentation of financial data presents an opportunity for technology that continually generates helpful input for auditors’ opinions and other reports for stakeholders that enhance the accuracy of financial information in real time.
Challenges with Real-Time Reporting
Integrating diverse data warehouses.
Although real-time financial reporting presents several opportunities for organizations, it also creates some challenges related to the complex and costly nature of its implementation. As noted in the Montreal case, these difficulties often arise from the cumbersome process of integrating an organization’s existing data warehouse and enterprise resource planning (ERP) system into a real-time reporting system. Current technological solutions for real-time reporting pull from several sources, including business process management (BPM), mobile devices, cloud computing, business intelligence, and enterprise application integration (F. Belfo, A. Trigo, and R. Perez Estebanez, “Impact of ICT Innovative Momentum on Real-Time Accounting,” Business Systems Research, vol. 6, no. 2, pp. 1–127, 2015). Business Process Management Suites (BPMS) have enabled real-time data with a Business Activity Monitoring (BAM) module that presents real-time dashboards to monitor a variety of business processes for enhanced decision making. This trend related to BPM readily presents the opportunity to implement a BAM for real-time accounting information and continuous auditing. While the opportunity exists, creating a BPM and BAM to generate accounting data is a challenging process that requires organizations to invest considerable time, energy, and financial resources to implement in a manner that complements their unique business processes and needs. Such integration is not necessarily straightforward; while both BPM and financial reporting for a given organization may arise from the same activities and events, they may come from different perspectives due to the purely economic nature of financial reporting.
Cloud computing solutions offer many advantages for implementing real-time financial reporting compared with BPM software, which does not make use of this technology. Cloud-based solutions that are available on the market, including Oracle Fusion Financials and NetSuite Financials, address several challenges tied to feasibility, scalability, and costs. Cloud computing provides access to real-time financial data and reports from smartphones and laptops, eliminating the need for excessive hardware and software requirements. Moreover, cloud-based tools make real-time reporting solutions more feasible for small and medium-sized organizations that would otherwise only be available to large enterprises with abundant resources (Belfo, Trigo, and Perez Estebanez, 2015).
The above examples of state and local government units’ implementation of real-time reporting illustrate the opportunities within the grasp of enterprising municipalities. While real-time reporting presents challenges—such as the cumbersome, challenging, and costly task of its implementation—real-time reporting also presents advantages, such as timely and flexible information to aid timely decision making of local government constituents. With the increasing availability of emerging technology solutions, real-time reporting may prove to be a worthwhile investment for some local government units to provide timely information for their constituents.
The authors wish to thank Marwa Sayed, graduate student in the Mike Ilitch School of Business, for research support in preparing the article.