Why Xbrl Is Necessary for Grant Accountability

University Grants and the eXtensible Business Reporting Language (XBRL)

Why XBRL is Necessary for Grant Accountability

Abstract

This paper explores the world of grant accounting and why eXtensible Business Reporting Language (XBRL) would revolutionize the accounting of grant funds. Federal grant funds in 2010 exceeded $900 billion dollars (AICPA, 2009). XBRL is a programming language, often referred to as a "bar-coding" system. XBRL would provide thorough accountability of grant funds through detailed taxonomies. This paper examines five areas of grant-funding and XBRL: the definition of grants; grant accounting methods and how XBRL can streamline the process; what is XBRL; what are some little-known uses of grant funds; and what are the reporting requirements of various funding agencies. XBRL must be used in grant funding to provide the same level of accountability for governmental money as is already required by publically traded firms.

Key words: XBRL, university, grants, indirect funds, accountability, efficiency, transparency

Statement of the Problem

The purpose of this paper is to examine why XBRL is necessary for grant accountability and efficiency. Competitive grants and federal appropriations provide a significant contribution in funding the operations of universities and not-for-profit agencies. Examples provided by the University Of Washington Office Of Research in a 2010 report (citing 2008 funds) include:

* University of Washington $1.03B

* University of California, Davis $522M

* University of Alabama (Birmingham) $433M

* University of Minnesota $548M

* Ohio State $652M

* Penn State $564M

Not only do these funds attract top-quality professors and exceptional students to conduct research, they also subsidize other employment opportunities for support staff. Grant funded research is financially lucrative. The amount of federal funds for grants grew from 7% of the federal budget in 1960 to over 17% in 2004 (AGA, 2009). The government agrees that tracking the backend of grants is difficult at best. The major concerns are, according to the AGA study (2009):

* Timely collection of the data and compliance with laws and regulations.

* Reconciling data with data already in the system, such as quarterly reports and final reports.

* Reducing improper payments.

A study conducted by Martha Lair Sale of the Florida Institute of Technology and R. Samuel Sale of Lamar University estimate the U.S. government allocates almost $15 billion dollars in university primary research funds each year (Sale, 2010). Through creative grant fund management, especially with the indirect funds generated through grants, a university can grow significantly in enrollment and in dollars used for various campus needs. However, grant funds can also create opportunities for questionable ethical decisions including the opportunity to misappropriate tax dollars due to non-standardized reporting regulations.

Purpose of the Study

There are many problems in grant accounting and reporting. As stated by Randall Finden (Finden,1994), "Governments have done a masterful job of scrambling their transactions, and GASB is trying to sort out who's doing what and why," (All Business, July 2010, pg1). Finden's time spent as assistant deputy auditor of the State of Washington led him to these conclusions. With differing grant award formats and differing management requirements, reporting requirements can vary extensively for extremely similar types of work (Kuglin, 2010). Questions arise as the frequency of grant reporting and the detail needed in these reports. The answer is, "It depends on the agency!" There is no standard answer. Currently, not enough regulations and procedures are consistent in the grant world. This point is proven by the wide-spread media concerns over how the recent-allocated Stimulus Funds have been spent (AICPA, 2009). Creating attributes within XBRL elements and standardized taxonomies and applying these "bar codes" to the funds at the initial funding level would resolve this issue. Continuing through the funding cycle with XBRL General Ledger coding to track all expenditures and encumbrances, XBRL would provide a standardization and accountability through the bar coding of every dollar spent of public and private funds. This report will examine grant funds, XBRL and finally the integration of the two into a robust reporting mechanism to substantially increase accountability in how taxpayer dollars are spent.

Rationale

XBRL is a software program which will provide a systematic approach to blend accurate accounting data and technology processes that will provide information to management, funding agencies, and other interested parties in an efficient and accurate manner. The necessity in for the use of the XBRL software program can be found in the author's personal experience as a former university grant accountant who discovered a Principle Investigator, who is also known as a manager of grant proposals, using funds in an illegal manner. The grant in question had to undergo extensive audits and a personal phone deposition was made with the author by the Office of the Inspector General the United States. If XBRL had been in place, the funds would have been virtually impossible to misappropriate and the audit process would be ongoing.

XBRL provides a straightforward method to have full accountability of governmental funds. The Securities and Exchange Commission (SEC), the Federal Deposit insurance Corporation (FDIC), and several international countries are mandating XBRL to enhance accountability and transparency. Understanding this newly mandated tool is an opportunity to see where the direction of data sorting, fund management and report production is heading. XBRL transforms grant accounting from passive information to an active creation of fund transparency. XBRL will clarify the user's input and exponentially increase the consumer's ability to discern relevant information through the detailed taxonomies provided by XBRL.

Research Questions