Thursday, January 23, 2014

Digital Accountability and Transparency Act, Part 1

CompSci Resources, LLC

With new information coming out every day about the Digital Accountability and Transparency Act (DATA Act) it can be difficult to keep up with its details and current status. Here’s a recap.

What is the DATA Act?

The Digital Accountability and Transparency Act (DATA Act), a bill introduced to the House and Senate in 2013, calls for the U.S. government to use a common data format to report and publish their financial activities. One potential data format is eXtensible Business Reporting Language (XBRL), which is being used by public companies to file their yearly and quarterly financials with the U.S. Securities and Exchange Commission (SEC). Standardizing the government’s financials would lead to better transparency, more effective federal management, and cheaper compliance, according to the Data Transparency Coalition (DTC).

In 2006, Congress passed the Federal Funding Accountability and Transparency Act (FFATA), which required all organizations who were awarded federal funds to report those funds publicly. It also established the website as a platform for those organizations to report, which would be maintained by the Office of Management and Budget (OMB). The DATA Act modifies and improves on several parts of FFATA to make the reporting more expansive and explanatory for taxpayers who want to know what their taxes are funding.

There were 4 key changes from FFATA to the DATA Act:
  1., which is currently maintained by the OMB, would be run by the Treasury. The Treasury would be in charge of establishing data standards and how the information will be published online.
  2. All the reporting data will be in a machine-readable, searchable format that can be downloaded by the public.
  3. The amount of data reported will be expanded. Currently only federal awards are reported, but under the DATA Act, the allocation of all federal funds would be reported. This will incorporate data from other databases into one, easy-to-view location.
  4. The “Accountability Platform”—The Recovery Accountability and Transparency Board, in coordination with Inspectors General, would serve as a quality control system by reviewing the data submitted in search of fraud, waste, abuse, and improper payments.
On November 18, 2013, the House passed a version of the DATA Act by a vote of 388-1. The approved version did not change any of the key features. 

The Homeland Security and Governmental Affairs Committee of the Senate passed an amended version of the DATA Act on November 6, 2013. The modified version does not include the accountability platform, which would have added significant costs. Without this section, it may be more difficult to identify fraud and force reporters to correct it.

Is there a need for change from the current reporting system?

Currently, the reporting system is disjointed because each agency can report their financials in different databases and formats. For example, government “awards data is reported in PDF and summarized in XML. Budget actions are reported in PDF and Excel.” And then, “each agency uses its own format for reports by recipients.” More on this can be found here on the DTC website.

Additionally, the current system limits the information available to taxpayers. In the current system, it is impossible to search the databases or compare the spending of different agencies. There is also no one place where a taxpayer could find the spending information of all of the governmental agencies, so they have no aggregate view for how taxes are being spent. By plugging these holes in the system, the average citizen would be able to readily see and understand how their taxes were being used, and thereby hold government officials more accountable for their spending decisions.

How much would the DATA Act cost?

The Congressional Budget Office (CBO) estimated that the DATA Act would cost $395 million over five years. The most expensive costs would be realized during the implementation stage for staff training, computer system modifications, and communicating the changes to recipients of federal awards. The CBO estimated the implementation would cost $285 million of the $395 million total over five years. The cost estimate did not include any information about the potential cost savings associated with the legislation, and this estimated cost savings would be required to get a true sense of the total cost of the Act.

The portion that was removed by the Senate Committee, the accountability platform, has been estimated to cost $102 million over five years. The CBO, however, did not estimate the potential savings, which are typically substantial. According to the DTC, the current accountability platform has helped to find and correct $100 million in stimulus spending fraud while costing the taxpayers about $20 million per year. Absent some actions by Congress, the accountability platform is scheduled to stop operating in 2015.

Please check back soon for part 2 of our DATA Act discussion. In part, we will be discussing how the DATA Act could impact the XBRL community.

More in this series:
  • Part 1b: White House OMB comments and suggested edits; DATA Act leadership response.
  • Part 2Will it improve government reporting? How might XBRL be involved?
  • Part 3: The U.S. Senate unanimously passes the DATA Act.
  • Part 4: The U.S. House re-passes the DATA Act, this time unanimously.