What Are the DATA Act’s Implications for Federal Agencies?
Previous IBM Center posts about the Digital Accountability and Transparency Act (DATA Act) of 2014 by Dan Chenok (The DATA Act and Transparency: 4 Ways that Industry Will Benefit and The DATA Act Moves Forward) and John Kamensky (Here’s Why DATA Act Implementation May Be Successful) discuss various aspects about the law. This post provides a very brief background to the law and focuses on its implementation implications for Federal agencies.
Background. Public Law 113-101 requires the full disclosure of Federal agency expenditure information for millions of transactions covering more than $1 Trillion and the development of government-wide financial data standards in reporting that information. It stipulates the Department of the Treasury and the White House Office of Management and Budget (OMB) lead the process of standardizing and publishing this financial information on a single governmentwide website on a regular basis by May 2017.
What are the Implications for Federal Agencies? David Mader -- Controller of the Office of Federal Financial Management at OMB -- and David Lebryk -- Fiscal Assistant Secretary of the U.S. Department of Treasury – are the faces for the implementation of the new law. In their 8 May 2015 White House blog post, they noted that today, spending data is not always readily available nor is it in a useable format. When I interviewed Herschel Chandler (DATA Act Project Lead, American Council for Technology-Industry Advisory Council (ACT-IAC)) regarding this topic he said, “As citizens we can hold our government accountable, but the biggest challenge is tying money to a program.” This legislation attempts to correct that deficiency, thus closing many gaps in understanding where money is being spent within agencies. Mr. Chandler went on to state that agencies would possibly be able to conduct outcomes analysis, making it easier to answer questions such as:
- What did I get out of the money I gave?;
- Did I give money to another entity for the same type of work?; and
- How much more/less did it cost me for paying multiple entities for the same type of work?
The legislation also mandates a set of data standards for all agencies to incorporate into their financial processes to make spending information comparable across agencies. Additionally, the spending information must be reported in the same XBRL (eXtensible Business Reporting Language) format to make data accessible and reusable.
What Are the Challenges Facing Agencies? While the DATA Act does not force agencies to change their financial systems to capture data, it’s inevitable that agencies will have to change their business processes, at a minimum, to meet the requirements. Christina Ho (Deputy Assistant Secretary for Accounting Policy and Financial Transparency at the Department of Treasury) and Karen Lee (Chief, Management Controls and Assistance Branch for the Office of Federal Financial Management at OMB) identified several challenges they expected to face during a Data Transparency Town Hall on 26 September 2014:
- Requires strong leadership from Treasury and OMB; My opinion is that it also requires strong leadership from personnel within each Federal agency to ensure the business process and system changes that occur within those agencies are not only compliant, but are flexible enough for future changes to meet the Treasury Department’s end goal of 360° financial transparency (more on this later in the post). The Office of the Inspector General for the Department of the Treasury published a report on 19 May 2015 stating that Treasury and OMB had made good progress in implementing the DATA Act, but had concerns with the Treasury’s project management practices.
- Short implementation timeline—requires early action from all agencies to ensure their business process or financial system changes are formulated early enough for employees to execute in time to meet the reporting requirements, which must be implemented across all agencies by May 2017;
- Limited resources; The Congressional Budget Office estimated it would cost agencies $300 million over the fiscal year 2014-18 period to comply with the DATA Act, but there was no additional funding authorized in the legislation for its implementation. This, often times, significantly limits Federal agencies’ ability to complete these types of actions on time, or even being able to complete them at all without major re-prioritization of existing, limited funding by their leadership. Mr. Mader and Mr. Lebryk stated in their blog post that the President’s FY 2016 budget requested $84 million to enable the implementation. Requires active collaboration and active participation across Federal communities; and Diverse and broad set of stakeholders.
Case Example: Implications for the Defense Department. Since the Department of Defense (DOD) owns the biggest category, by far, of discretionary spending (over 53% for the Fiscal Year 2015 budget), it has a sizeable task in making the requisite changes to meet the requirements. LeAntha Sumpter (Deputy Director, Program Development and Implementation, Defense Procurement and Acquisition Policy in the Office of the Under Secretary of Defense) discussed the challenges DOD faces during the Association of Government Accountants’ (AGA) webinar on 3 June 2015:
- Implementing data element and business process changes;
- Enabling end to end electronic interoperability across and between systems;
- Recognizing resource constraints;
- Timing of available data submissions;
- Managing data integrity; and
- Ensuring changes are relevant to mission execution.
An additional challenge is the sensitivity of the data provided by DOD and to whom it is provided. Does DOD provide exactly the same fidelity of data that all other Federal agencies will provide? When I interviewed Ms. Ho, she acknowledged those concerns and takes them very seriously, but she went on to state that DOD needs to determine the best way to address it.
The Need for a Culture Shift. One of the biggest hurdles the joint Treasury-OMB team has faced is changing Federal employees’ mindsets about making detailed financial data publicly available, absent the ability to provide explanatory contextual information. The prospect of an increasing amount of scrutiny their agencies may face from various stakeholders (Congress, citizens, state/local governments, etc.) over how money is spent is daunting, but agencies must remain open-minded about the end goal. They will find that it will help them better understand how much is being spent on programs and put them in a better position to provide strategic guidance to their leaders.
Agencies cannot be afraid of what the data might show initially. It could be negative for some agencies because it could show, as Ms. Ho stated to me, “one agency is spending a lot more than another for the same service.” Further, it might take a significant amount of time and resources for agencies to make the requisite changes; therefore, agencies must exercise patience in allowing the process to work. It’s one of the major growing pains of making data more transparent.
What is the way ahead for full financial transparency? The end goal for full financial transparency is enabling data consumers to follow the complete life cycle of Federal spending. Rep. Darrell Issa (R-CA) stated during the Data Transparency 2015 Conference that he is insisting the Federal Government should “make all data searchable” and that “the DATA Act is just the beginning,” while Ms. Ho and Ms. Lee described the legislation as a major step. The effects of this legislation are far-reaching, but this legislation is only the second step, with no subsequent actions currently identified, in a long process of enabling citizens and personnel within the Federal Government to follow that life cycle.
The first step was the Federal Funding Accountability and Transparency Act (FFATA) signed on 26 September 2006, which required information on Federal awards to be made available to the public via a single, searchable website (www.usaspending.gov). A related piece of legislation proposed in Congress in May 2015 by Rep. Issa was the Financial Transparency Act, which would require all eight U.S. financial regulatory agencies to adopt common data fields and formats for the information they collect (www.oceg.org).
The graph below shows the DATA Act and FFATA in context of the spending life cycle: Life cycle I am providing definitions to some of the terms used in the graph to ensure clarity, and they are as follows:
- Allotment: An authorization by the head of an agency to subordinates to incur obligations within a specified amount; may not exceed amount apportioned by OMB (www.gao.gov/new.items/d05734sp.pdf, p. 10).
- Apportionment: OMB-approved plan to use budgetary resources. It typically limits the obligations you may incur for specified time periods, programs, activities, projects, objects, or any combination thereof (OMB Circular A-11, Section 20, p. 3).
- Appropriation: A provision of law (not necessarily in an appropriations act) authorizing the expenditure of funds for a given purpose (OMB Circular A-11, Section 20, p. 3).
- Award: Provision of funds to an organizational entity or individual to carry out an approved program or project (grants.nih.gov). The term, when used as a noun, is sometimes used interchangeably with ‘grant’ (www.hrsa.gov).
- Commitment: An administrative reservation of allotted funds, or of other funds, in anticipation of their obligation (www.gao.gov/new.items/d05734sp.pdf, p. 32).
- Obligation: A definite commitment that creates a legal liability of the government for the payment of goods and services ordered or received. Payment may be made immediately or in the future. An agency incurs an obligation, for example, when it places an order, signs a contract, awards a grant, purchases a service (www.gao.gov/new.items/d05734sp.pdf, p. 70).
Conclusion. Centralizing and standardizing the publication of government expenditure information increases accountability for Federal agencies and allows taxpayers to have a comprehensible view of government spending, thus increasing transparency for both Federal agencies and private citizens.
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NOTE: Lieutenant Colonel (LTC) Jeff Adams is a data analyst in the Army serving as a Research Fellow in the Army's Training with Industry program, through which he works with IBM for one year before returning to the Army. His research fellowship is intended to help him learn how industry analyzes big data and communicates strategic insights to senior leaders to take this knowledge base back to the Army. LTC Adams worked with the IBM Center for several months. ***The ideas and opinions presented in this blog post are those of the author and do not represent an official statement by IBM, the U.S. Department of Defense, U.S. Army, or any other government entity.***