Both Congress and the White House have taken initial steps toward creating greater transparency in reporting federal spending. While preliminary, these efforts could have a far-reaching impact on how governments collect and publish data from the entities they regulate.
Done right, new rules can create greater transparency and accountability while reducing the paperwork burden on regulated entities. At present, however, both sides' proposals fall short. They fail to recognize that spending is only one type of data collected from players from whom data is repeatedly and inefficiently gathered.
We offer some suggestions for improvement that could lead to reduced compliance and investment costs, improved corporate accountability, greater consumer protection, and will also create new research and reporting test beds to foster data-driven journalism and scholarship about the life of organizations.
The DATA Bill
In mid-June, Rep. Darrell Issa (R-CA) introduced the Digital Accountability and Transparency Act of 2011 (DATA), calling for quarterly reporting of all federal spending, including grants, contracts and subcontracts by both the recipients and the awarding agencies to an independent successor to the board previously established to oversee the implementation of the Recovery Act. DATA would effectively strip the Office of Management and Budget (OMB) of much of its oversight over federal spending reviews. However, DATA also calls for OMB to set standards about which data elements are to be used in reporting and to follow international, open and non-proprietary models such as XBRL. All reported data is to be published online and, to the greatest extent possible, the process automated to maximize transparency.
Executive Order on Accountability
On the same day, the President issued an executive order on Delivering an Efficient, Effective, Accountable Government, calling for agencies to reduce fraud, waste, and abuse and centralizing control over these accountability efforts with the Chief Performance Officer in OMB. The EO, too, calls for the creation of a new Transparency and Accountability Board, in this case, however, comprising agency personnel from the executive branch.
Without opining here on the jurisdictional debate between branches of government over the control, composition and authority of the new board, there are provisions that could be improved both in the draft legislation and in any subsequent guidance to serve the bi-partisan goals of greater transparency regarding how data is collected and published.
First, the DATA bill provides that items reported include name and address of recipient but no requirement that corporate persons identify the beneficial owner nor any parent-subsidiary corporate relationships. This week the Securities and Exchange Commission proposed draft "know your counter party" rules for complex financial transactions known as swaps as part of its new package of rules implementing the Dodd-Frank legislation. In the same way, it is entirely doable to add simple provisions to the DATA bill that would mandate disclosure of the ownership and structure of recipients at whatever level of specificity will best enable the public to know who is really receiving the money and how they relate to other recipients.
Second, entities could be mandated to use consistent legal entity identifiers by, for example, picking their corporate entity from a selection list. This will be useful for building a more consistent, open and standard library of legal entity identifiers within the federal government. By moving toward a standard list of names in the federal spending domain, we will help agencies to amass a library of common corporate names across different regulatory regimes. Currently, one federal agency might refer to a company as ABC Inc. while another uses ABC Corp. We can help solve this problem by mandating open, universal identifiers here rather than exacerbate it by creating yet another IT system with yet another set of disparate naming conventions.
Third, while mandating a single way of naming a legal entity is important, it's not sufficient to address the fact that every agency also collects different information, ie. names of facilities or securities controlled by that entity. We shouldn't be designing and building a system for reporting spending in a vacuum and focusing only on those limited data elements. Instead, DATA and bills like it should mandate a process that leads toward a single, universal, entity identifier for naming firms with the requirement that additional data fields be open and interoperable. We want the spending data to be able to "talk" to other data collected about corporate compliance and innovation so we can “mash up” data across agency responsibilities - for example, linking patent activity with the data about federal contracting. The DATA bill describes only a limited universe of approved standards and the EO is silent on the topic. Instead, any new requirements should mandate the use of non-proprietary, interoperable data elements not subject to any license fees or restrictions on reuse.
Fourth, data release through the federal data.gov, or via the many data sharing sites being developed by states, cities and tribal governments throughout the US, drives innovation and the development of innovative new startups. This side benefit to our economy should be augmented in data transparency legislation by allowing thatnew data standards promulgated for use in reporting federal spending should be subject to public consultation, letting developers and others help make sure the systems are open. The data should also be available in a machine-readable format, to encourage this sharing, with transparency legislation mandating the development of APIs for information sharing. The DATA bill does recognize the need to allow data to be linked, but it is an ambiguous, throwaway reference to Uniform Resource Identifiers (URIs) in 3612(d)(3)(H). Strengthening this requirement would significantly lower the effort to reporters, economic researchers, and systems developers to reuse this data in our increasingly information-driven economy.
Fifth, there is no authority in either the EO or the DATA bill to create pilot projects and iterate. We don’t understand the problem of inconsistent spending reporting well enough to design -- whether by the legislative or executive branch -- "the" system. Instead, we ought to be allowing small-scale pilots (potentially funded by prize-backed challenges) seeing what works, and trying again. Further, if the data is made available in machine-readable ways, new systems to make the data more transparent and useful can and will arise outside the government through crowsourced design and use. This will reduce the development costs while simultaneously allowing more designs to be explored. In the government, making large-scale “legacy” data systems interoperable is a hard problem that we are trying to retrofit without great expense. This requires more humility and the qualifications to try new policies, technologies, rules and standards. This isn't reflected in the legislation or in the composition and role of the Boards proposed. (We note that the UK’s Data Transparency Board includes a combination of government representatives and outside experts from corporations and academia, and would encourage the US government to consider a similar approach.)
Outside the government, we have been advocating the creation of an Open Organizational Data Project (http://dotank.nyls.edu/orgpedia), which is committed to assisting with the development of open, interoperable, non-proprietary standards for reporting data collected by government about firms and other corporate entities. With the support of the Alfred P. Sloan Foundation, we are at the beginning stages of thinking through the legal, policy and technology framework for a data exchange that can facilitate efficient comparison of organizational data across regulatory schemes as well as allowing public reuse and annotation of that data. Currently, we are convening workshops with relevant stakeholders and developing a functional prototype of such a system. As part of this project, we will also continue to curate feedback on legislative and regulatory approaches to achieving greater transparency, efficiency and accountability.