June 14, 2012

OMB should reconsider its opposition to the DATA Act. Here's why.

Last Tuesday, June 12, the Washington-based Partnership for Public Service hosted a panel discussion to examine lessons learned from the American Recovery and Reinvestment Act of 2009 (better known as the Recovery Act). The Recovery Act revolutionized federal spending oversight by requiring the recipients of some $234 billion in stimulus grants, contracts, and loans to report regularly to a single public data platform, managed by the Recovery Accountability and Transparency Board (better known as the Recovery Board).

The Recovery Board's recipient reporting system imposed government-wide electronic standards on spending data for the first time. Every recipient and every award got a unique electronic identifier code and the Recovery Board established a consistent electronic structure for the reports. Thanks to standardization, stimulus spending data can be electronically searched for indicators of fraud and waste. As of the Recovery Board's March 31, 2012, performance report, federal inspectors general using stimulus spending data had opened more than 1,800 investigations of questionable recipients, recovered $20 million from them, prevented $29 million from being paid out at all, and recommended better uses for nearly $8 billion in stimulus funds.

The Recovery Board proved that standardization means better transparency and better accountability - and Congress and the administration took notice. In December, President Obama's Government Accountability and Transparency Board told him that the federal government must rationalize all spending data. In April, the House of Representatives unanimously passed the DATA Act, which does just that.

But at Tuesday's panel, Danny Werfel, controller of the Office of Management and Budget, told us that the White House isn't yet ready to embrace the DATA Act. Government Executive reported Werfel's objections. First, by creating a permanent version of the Recovery Board, empowered to standardize all federal spending, the DATA Act "creates a new layer of regulation, two sets of rules and additional regulatory complexity." Second, the administration is already "leading in the open government area." Werfel said his office is considering a standard, government-wide award identifier code without the need for legislation.

These objections are not good reasons for Congress to kill the DATA Act, nor do they justify OMB's opposition. Unless Congress passes the DATA Act and the administration implements it, the federal government will never reach full transparency for its spending.

Here's why.

Objection One: The DATA Act would add "a new layer of regulation."

Werfel is wrong to suggest that the DATA Act replaces one set of rules with two. To the contrary, it replaces eight sets of rules with one.

The DATA Act establishes a new entity, the Federal Accountability and Transparency Commission (FAST Commission), with the authority to set data standards for all federal spending, including both external grants and contracts and internal expenditures. Under current laws, this is nobody's job.

Under the current system, grantees and contractors report separately to two different data systems: they must report subgrants and subcontracts to the GSA and stimulus grants and contracts to the Recovery Board. Meanwhile, agencies report their internal financial information to at least six separate data systems within four separate agencies (Treasury, OMB, GSA, Census Bureau). Each of these systems is specialized and none is comprehensive. They cannot be searched together.

The DATA Act consolidates these stovepiped reporting streams by establishing a single spending transparency platform, managed by the FAST Commission. The DATA Act redirects all spending reporting to that platform: (1) recipient reports by federal grantees and contractors, of the same sort that the Recovery Board found to be so useful; (2) agencies' own data on every obligation and disbursement; and (3) the Treasury Department's government-wide expenditure data.

The DATA Act amends the laws that govern these separate existing compilations - including the Recovery Act, the Federal Funding Accountability and Transparency Act of 2006, the Federal Program Information Act of 1977, and the Consolidated Federal Funds Report Amendments of 1985 - to put one entity, rather than five, in charge.

At Tuesday's panel, Werfel also suggested that the new FAST Commission's standardization rules will not be subject to the Administrative Procedures Act (APA), which requires public notice and comment for regulatory proposals. That isn't actually true. The APA applies to every federal agency, defined quite broadly. The FAST Commission will be an independent federal agency. Therefore, the APA will apply, and the FAST Commission's rules will get full public scrutiny before they're adopted.

Werfel pointed, as well, to the DATA Act's exemption for the FAST Commission from the Paperwork Reduction Act (PRA), which requires agencies to get approval from OMB for proposed data collections. This exemption is typical for independent federal agencies, as the FAST Commission will be. It also is consistent with the spirit of the PRA, which was intended to protect the public from excessive and burdensome federally-sponsored data collections. The FAST Commission will collect data from the federal government itself and from grantees and contractors receiving public funds - not from the general public or private industry.

Objection Two: Full transparency is possible without legislation.

OMB's own record demonstrates that without the DATA Act or similar legislation, we cannot expect electronic standards covering all federal spending information anytime soon.

Until the Recovery Act, USASpending.gov was the only government-wide source for information about federal grants and contracts. Under the Federal Funding Accountability and Transparency Act of 2006 (FFATA), OMB is responsible to publish USASpending.gov by combining the contents of government-wide grants and contracts databases, which are fed with content reported by the agencies. Since the agencies frequently report this data manually, USASpending.gov's accuracy is poor, and in recent years has not improved.

Standardization could improve USASpending.gov's accuracy and allow its data to automatically be searched alongside the contents of other compilations. But in the six years since FFATA's enactment, OMB has not tried to standardize federal spending data. USASpending.gov has no consistent, government-wide identifier codes for recipients or awards, making it very difficult to check USASpending.gov data for accuracy.

OMB's failure to adopt standard identifiers also impedes USASpending.gov's searchability. For instance, a search for the top 100 recipients of transportation grants in 2011 displays New Jersey's department of transportation twice - once for $656 million in grants and once for $145 million in grants. Even worse, a search for the top 100 recipients of Housing and Urban Development grants in 2010 turns up the New York City housing authority in the top eight - three separate times.

OMB's job is to manage the executive branch and pursue the Administration's policy goals. It is not suited to the additional, conflicting responsibility of running an impartial transparency platform.

Sharing Tuesday's panel with Werfel, former Recovery Board Chairman Earl Devaney - who sits on the Data Transparency Coalition's Board of Advisors - disagreed with him. "The government moves fastest when Congress acts and there are concrete data sets. If we leave it up to the agencies, it will never get done."
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