The Federal Funding Accountability and Transparency Act (S. 2590): Overview and Comparison with H.R. 5060

The Federal Funding Accountability and Transparency Act (S. 2590): Overview and Comparison with H.R. 5060

Order Code RL33638
CRS Report for Congress
Received through the CRS Web
The Federal Funding Accountability and
Transparency Act (S. 2590): Overview and
Comparison with H.R. 5060
September 11, 2006
Garrett Leigh Hatch
Analyst in Government Organization and Management
Government and Finance Division
Congressional Research Service { The Library of Congress

The Federal Funding Accountability and Transparency
Act (S. 2590): Overview and Comparison with
H.R. 5060
Summary
In an attempt to expand oversight of federal spending, including earmarks, S.
2590 would provide the public with access to an online database containing
information about entities that are awarded federal grants, loans, and contracts.
According to the bill’s sponsors, the database would deter “wasteful and
unnecessary” spending, since government officials would be less likely to earmark
funds for special projects if they knew the public could identify how much money
was awarded to which organizations, and for what purposes. S. 2590 is a companion
bill to H.R. 5060, which also calls for the creation of a federal awards database. The
bills differ in several respects, however, most notably in that S. 2590 would require
information on federal contracts to be made available to the public, but H.R. 5060
would not. Because contracts represent over $340 billion in federal awards, the
scope of the Senate version is significantly broader.
While the intent of S. 2590 is widely lauded — it has been endorsed by leaders
of both parties and an array of business, union, and watchdog organizations — there
is growing concern among government officials and members of the public that
issues surrounding implementation of the proposed database have not been
adequately addressed. In particular, many observers question the reliability of
information taken from the Federal Assistance Award Data System (FAADS), and
the Federal Procurement Data System (FPDS), which are to be the primary sources
of information for the public database. They note that information in FAADS and
FPDS is often incomplete and inaccurate, and therefore may be of limited utility in
identifying earmarks.
This report summarizes S. 2590, compares it to H.R. 5060, and outlines the
arguments in favor of the bill and those critical of it. The final section discusses the
implications of using FAADS and FPDS to populate the bill’s proposed database.
This report will be updated as events warrant.

Contents
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Comparison of S. 2590 with H.R. 5060 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Support and Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Concluding Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
List of Tables
Table 1. Comparison of Selected Features in S. 2590 and H.R. 5060 . . . . . . . . . . 4

The Federal Funding Accountability and
Transparency Act (S. 2590): Overview and
Comparison with H.R. 50601
Overview
On April 6, 2006, Senator Tom Coburn along with three cosponsors introduced
S. 2590, the Federal Funding Accountability and Transparency Act.2 On August 2,
2006, the Senate Committee on Homeland Security and Governmental Affairs
unanimously reported S. 2590, with an amendment in the nature of a substitute.3
According to one of the bill’s original sponsors, Senator John McCain, S. 2590 is an
attempt to reduce “wasteful and unnecessary spending” by the federal government,
including spending on funds earmarked for special projects.4
The fundamental premise of S. 2590 is that by making the details of federal
spending available to the public, government officials will be less likely to earmark
funds for projects that might be perceived as wasteful. To that end, the bill calls for
the creation of a new database, under the direction of the Office of Management and
Budget (OMB), that would provide the public with a comprehensive source of
information on all federal awards. As envisioned by the bill’s sponsors, a citizen or
watchdog group could access the database on the Web, free of charge, and easily
determine how much money was given to which organizations, and for what
purposes.5
Under provisions in the bill, the database would be implemented in two phases.
In the first phase, which would have to be operating by January 1, 2008, the database
1 CRS Information Specialist Merete Gerli provided research assistance in the preparation
of this report.
2 Original cosponsors included Senators Tom Carper, John McCain, and Barack Obama.
By September 7, 2006, there were 40 cosponsors.
3 There was no written report on August 2, but the Senate Committee on Homeland Security
and Governmental Affairs published S.Rept. 109-329, to accompany S. 2590, on Sept. 8,
2006.
4 For information on other recent earmark reform proposals, see CRS Report RL33397,
Earmark Reform Proposals: Analysis of Latest Versions of S. 2349 and H.R. 4975, by Sandy
Streeter. Testimony of Sen. John McCain, in U.S. Congress, Senate Subcommittee on
Federal Financial Management, Government Information, and International Security,
Federal Funding Accountability and Transparency Act, hearing on S. 2590, 109th Cong., 2nd
sess., July 18, 2006, at [http://hsgac.senate.gov/_files/071806McCain.pdf].
5 Testimony of Sen. Tom Coburn, ibid.

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would provide information on entities that are awarded funds directly from the
federal government. Entities covered in the first phase of the database would include
corporations, associations, partnerships, sole proprietorships, states, and localities.
By January 1, 2009, the database would also include information on subgrantees and
subcontractors that receive federal funds through a primary award recipient. The bill
excludes individual recipients of federal assistance.
Consistent with the objective of providing comprehensive information on
federal financial assistance to the public, virtually all categories of awards would
ultimately be covered by the database, including grants, contracts, subgrants,
subcontracts, loans, cooperative agreements, and purchase orders. Two special
provisions address particular types of transactions: individual transactions of less
than $25,000 would be exempt, and credit card transactions would not be included
until October 1, 2008.
To achieve greater transparency, the bill would require the database to provide
the following information about each federal award:
! Name of entity receiving award
! Amount of award
! Type of award (e.g., grant, loan, contract)
! Agency funding award
! A North American Industry Classification System (NAICS) code of
the recipient or a Catalog of Federal Domestic Assistance (CFDA)
number (where applicable)6
! Program source
! Award title that describes the purpose of the funding
! Location of recipient
! City, state, congressional district, and country in which award
performance primarily takes place
! Unique identifier for entity receiving award and of the parent entity
of recipient, if one exists
! Any other information specified by OMB
The bill’s sponsors, mindful of the criticism that government databases are often
difficult for non-experts to use, included language that would require OMB to ensure
the database is accessible through a “single, searchable website.” This means the
website would permit a search of federal funding by any of the data elements listed
above. It also means that a user, searching from just one site, would be able to
determine the total amount of federal funding awarded to an entity by fiscal year. In
addition, the data would have to be in a downloadable format, and new information
6 The Census Bureau assigns an NAICS code to each business establishment for the
purposes of collecting and analyzing statistical data on the U.S. economy. NAICS codes are
two to six digits long, with each digit representing information about the economic sector
in which the establishment conducts the largest portion of its business. CFDA numbers are
assigned by the General Services Administration (GSA) to all federal domestic assistance
programs. A CFDA number usually has five digits, where the first two digits represent the
federal agency and the last three digits indicate the specific program for which the agency
is providing funding.

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would be posted to the website within 30 days of an award being made. The site
would be required to allow the public the opportunity to provide input on the site and
recommend improvements.
Three major financial assistance databases are identified in the bill as likely
sources of information for the new website — the Federal Procurement Data System
(FPDS), the Federal Assistance Award Data System (FAADS), and Grants.gov.7
According to the provisions in S. 2590, however, a user must be able to access
information from all three databases in a single search. The bill is explicit on this
point; it would not be acceptable merely to provide links to these or other databases,
because that would force users to search each database separately.
As previously noted, information on subcontractors and subgrantees would not
be included in the database until January 1, 2009. The delay reflects the fact that data
on subrecipients are not currently collected consistently across federal agencies and
programs. To address existing gaps in the data on subawards, the bill would charge
OMB with the responsibility for implementing a pilot program to test the feasibility
of having primary recipients provide information on their subgrantees and
subcontractors. Sensitive to arguments about unfunded mandates, the bill provides
a mechanism for reimbursing federal award recipients and subrecipients for the costs
associated with collecting and reporting the required data. It also specifies that any
requirements for collecting data on subawards made by state and local governments
under block and formula grants be cost-effective. The Congressional Budget Office
(CBO) has estimated that S. 2590 would cost $15 million to implement between
2007 and 2011.8 CBO has also determined that no unfunded mandate would be
placed on recipients or subrecipients for complying with the bill’s provisions.9
S. 2590 would require OMB, in addition to implementing the pilot program, to
submit an annual report to the Senate Committee on Homeland Security and
Governmental Affairs and the House Committee on Government Reform. The report
would have to include data on public usage of the website, an assessment of the
reporting burden on federal award and subaward recipients, and an explanation of
any extension of the subaward reporting deadline. A copy of the report would also
be posted on the Web.
7 The Federal Procurement Data System is a database of federal contracts maintained by
GSA, and the Federal Assistance Award Data System is a database of federal grants
maintained by the Census Bureau. Grants.gov is part of the E-Government initiative, and
it permits grant seekers to find, apply for, and manage federal grants through a single Web
portal. All entities that apply for federal assistance through Grants.gov are assigned a
unique identifier known as a Data Universal Numbering System (DUNS) number. Complex
entities, such as state or local governments, may have multiple DUNS numbers, making it
difficult, at times, to link subunits to the parent entity.
8 U.S. Congressional Budget Office, S. 2590: Federal Funding Accountability and
Transparency Act of 2006, Aug. 9, 2006, at
[http://www.cbo.gov/showdoc.cfm?index=7483&sequence=0].
9 Ibid.

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Comparison of S. 2590 with H.R. 5060
On March 30, 2006, Representative Roy Blunt introduced H.R. 5060, to amend
the Federal Financial Assistance Management Improvement Act of 1999. On June
21, 2006, the House passed H.R. 5060, as amended, by voice vote.10 According to
Representative Blunt, the bill is intended to “increase accountability and transparency
in the federal awards process” by establishing a public database with information on
award recipients.11 While both S. 2590 and H.R. 5060 have similar objectives, the
bills differ in important ways. Table 1 highlights three of the most important
differences.
Table 1. Comparison of Selected Features in S. 2590
and H.R. 5060
Feature
S. 2590
H.R. 5060
Contents of public
Includes grants, loans and
Includes grants and loans,
database
contracts
but excludes contracts
Reimbursement for costs
Recipients and
No reimbursement
of new reporting
subrecipients of federal
provided to recipients and
requirements
assistance can recover
subrecipients to cover
costs associated with
costs associated with
collecting and reporting
collecting and reporting
data on subrecipients
data on subrecipients
Subaward pilot program
Authorizes 18-month pilot
No pilot program
program to evaluate
authorized to evaluate
options for government-
options for subaward
wide subaward reporting
reporting policy
policy
Most notably, contracts are exempt from the public database under the House
bill, but are covered in the Senate bill. Since contracts are the second-largest
category of federal domestic assistance — $340 billion in FY2004 compared to $460
billion for grants and $260 billion for loans — their exclusion would significantly
reduce the comprehensiveness of the database.12 Critics of the House bill argue that
a database without information on federal contracts would fail to provide sufficient
10 Rep. Tom Davis, et al., “Amending Federal Financial Assistance Management
Improvement Act of 1999,” remarks in the House, Congressional Record, daily edition, vol.
151 (June 21, 2006), pp. H4335-H4338.
11 Rep. Roy Blunt, “Blunt-Davis Bill to Reform Federal Grants Process Passes House,” press
release, June 21, 2006, at [http://www.blunt.house.gov/Read.aspx/ID=653].
12 David Nather, “Members Back Government Spending ‘Google’,” CQ Today, July 26,
2006, at [http://www.cq.com/display.do?dockey=/cqonline/prod/data/docs/html/news/109/
news109-000002348447.html@allnews&metapub=CQ-NEWS&searchIndex=0&seqNu
m=4].

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transparency and accountability.13 Supporters of H.R. 5060 maintain that a database
primarily covering grants would still be a valuable tool, and that a grants database
could be made available to the public more quickly than one with information on
both grants and contracts.14
Both S. 2590 and H.R. 5060 would require the public database to include
information on subrecipients, but only the Senate bill would provide funding to cover
the costs associated with collecting and reporting that information. Currently, data
on subgrantees and subcontractors is not gathered uniformly across the government.
Some experts believe that recipients of federal financial assistance — particularly
states and local governments — would incur substantial costs as they began to collect
and report information on their subrecipients.15 Under S. 2590, recipients and
subrecipients of federal assistance could receive reimbursement for the costs
associated with new reporting requirements by incorporating those costs into their
indirect cost rates; H.R. 5060 has no similar feature.16
Because no uniform method of collecting information on subcontractors and
subgrantees presently exists, S. 2590 would direct OMB to conduct a pilot program
to test alternatives for implementing a government-wide subaward reporting process.
The pilot program is intended to help the government find ways to minimize the cost
and administrative burden of any new reporting requirements. H.R. 5060 does not
contain provisions for a pilot program.
Support and Criticism
S. 2590 has extensive bipartisan support in the Senate. The bill was
unanimously voted out of the Senate Committee on Homeland Security and
Governmental Affairs, and the number of cosponsors has grown from three to 40,
including Senate Majority Leader Bill Frist and Minority Leader Harry Reid. The
bill’s broad appeal is explained in part by its non-controversial objective: to increase
accountability and reduce wasteful spending by making government operations more
13 Testimony of Gary Bass, President of OMB Watch, Federal Funding Accountability and
Transparency Act, hearing on S. 2590, July 18, 2006.
14 Aimee Curl, “Transparency bill subjected to secrecy,” Federal Times, Aug. 14, 2006, p.
4.
15 Telephone conversation between the author and Jerry Keffer, Chief of the Federal
Programs Branch at the U.S. Census Bureau, Aug. 17, 2006. Letter from R. Thomas
Wagner, Jr., President of National Association of State Auditors, Comptrollers, and
Treasurers (NASACT), to Sen. Tom Coburn, July 5, 2006, at
[http://www.nasact.org/techupdates/downloads/CRC/LOC/07_06-NASACT_coburn.pdf].
16 An indirect cost rate is a percentage, negotiated between a recipient of federal funds (a
grantee or a contractor) and a federal agency, which is used to calculate the amount the
recipient may be reimbursed for the indirect costs associated with administering the federal
award. For example, if a grantee expended $100,000 in direct costs administering a federal
grant program, and it had an indirect cost rate of 10%, then the grantee could request
reimbursement from the federal awarding agency for $110,000 (the total direct costs plus
an additional 10%).

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transparent. Support for S. 2590 was believed to be so widespread that on August
2, 2006, the committee’s chair, Senator Susan Collins, and its ranking member,
Senator Joseph Lieberman, requested the bill be brought to the floor for a unanimous
consent vote before the August recess commenced. This motion was blocked by an
unnamed Senator, which delayed action on the bill until after the recess.17 On
September 7, all holds were lifted and the Senate passed the bill by unanimous
consent.18 House action is anticipated the week of September 11.19
According to the original sponsor of S. 2590, Senator Tom Coburn, over 150
organizations with a wide range of political leanings have endorsed the bill.20 The
Senator’s list of supporters includes representatives of private enterprise, such as the
U.S. Chamber of Commerce; unions, like the American Federation of State, County,
and Municipal Employees; media groups, such as the American Society of
Newspaper Editors; and government watchdog organizations, like OMB Watch. As
evidence of the unusual alliance in support of S. 2590, the list indicated that both
People for the Ethical Treatment of Animals (PETA) and Gun Owners of America
support the bill, as do both the National Gay and Lesbian Task Force and the
Traditional Values Coalition.
The White House has not issued a Statement of Administrative Policy on S.
2590, but Rob Portman, OMB Director, issued a statement supporting the bill, as
passed by the Senate.21
While support for the intent of S. 2590 is widespread, concerns about its
implementation have been raised in several quarters. In a letter to Senator Coburn,
the National Association of State Auditors, Comptrollers, and Treasurers (NASACT)
initially expressed strong reservations about the potential financial and administrative
burden that the bill’s reporting requirements would impose on state and local
17 According to Congressional Quarterly, Senators Byrd and Stevens had both placed holds
on the bill at different times. See Martin Kady II, “Frist Mobilizes Blogs to Muscle Two of
Senate’s Old Bulls on Database Bill,” CQ Today, Sept. 6, 2006, at
[http://www.cq.com/display.do?fL=3&docid=2365650&productId=4].
18 Sen. Bill Frist, et al., “Federal Funding Accountability and Transparency Act of 2006,”
remarks in the Senate, Congressional Record, daily edition, vol. 151 (Sept. 8, 2006), pp.
S9209-S9211.
19 Martin Kady II, “House Considers ‘Follow the Money’ Federal Spending Database
Legislation,” CQ Today, Sept. 8, 2006, at
[http://www.cq.com/displayalertresult.do?matchId=28532010].
20 Senator Coburn’s office provided CRS with the list of supporters. Over 80 leaders of
supporting groups signed “An Open Letter to Majority Leader Frist: Bring S. 2590 to the
Floor for a Vote!”, dated Sept. 6, 2006. See [http://www.cq.com/flatfiles/editorialFiles/
budgetTracker/reference/docs/20060706database-ltr.pdf].
21 U.S. Office of Management and Budget, “OMB Director Portman Praises Senate for
Supporting Increased Transparency In Federal Spending,” Sept.8, 2006, at
[http://www.whitehouse.gov/omb/pubpress/2006/2006-44.pdf].

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governments.22 In particular, NASACT noted that collecting data on subgrantees
would be “very, very costly” for state and local governments, since federal grant
funds are often passed down multiple levels (e.g., a state receiving federal assistance
gives a subgrant to organization A, which in turn gives a subgrant to organization B).
Additional costs could be incurred under the bill, NASACT said, if state and local
grant recipients were required to modify their financial systems to collect and report
any other new information. After S. 2590 was amended to include the pilot program
for collecting information on subgrantees, NASACT sent a letter to Senator Coburn’s
office indicating that they felt their concerns had been addressed and that they
supported the amended bill.23
The reliability of data provided at present by FPDS and FAADS has also been
questioned. In a 2005 report, GAO noted that users lacked confidence in the data
provided by FPDS, largely because there was no rigorous system in place to ensure
the data were accurate and complete.24 This problem has not been resolved.25 A
panel of procurement experts recently attempted to use FPDS in their evaluation of
federal contracting operations, but reportedly found so many errors in the data that
the chairman declared that, “FPDS is not a reliable database.”26 One reason the data
are inaccurate is human error; contract information may be incorrectly entered into
FPDS by inexperienced users who have received minimal training.27 FPDS data are
also notoriously incomplete. For example, the Department of Defense — which
accounts for 60% of all federal contract actions — is only beginning to feed
information on its contracts into FPDS.28 Moreover, agencies vary in the degree to
which they fill out the fields in the database, resulting in data of uneven quality.29 In
a recent example, FPDS users reported that the database failed to consistently
identify contracts related to Hurricane Katrina recovery efforts that were awarded
without competition.30 Finally, information on subcontracts is not currently captured
at all by FPDS, but instead is contained in an entirely separate database, the
Electronic Subcontracting Reporting System.
22 Letter from R. Thomas Wagner, Jr., President of NASACT, to Sen. Tom Coburn, July 5,
2 0 0 6 , a t [ h t t p : / / w w w . n a s a c t . o r g / t e c h u p d a t e s / d o w n l o a d s / C R C / L O C /
07_06-NASACT_coburn.pdf].
23 Letter from Jan I. Sylvis, President of NASACT, to Sen Tom Coburn, Sept. 5, 2006.
24 U.S. Government Accountability Office, Improvements Needed to the Federal
Procurement Data System-Next Generation, GAO-05-960R, Sept. 27, 2005, pp. 1-2.
25 In an e-mail between the author and Rod Lantier, Director of FDPS at GSA, August 22,
2006, Mr. Lantier wrote that there is no ongoing data verification, only an annual
“confirmation” from the 24 Chief Financial Officers Act agencies that they entered the data
as accurately as possible.
26 Chris Gosier, “Contracts database short on info, long on problems,” Federal Times, July
31, 2006, p. 5.
27 Ibid.
28 Ibid.
29 Testimony of Gary Bass, President of OMB Watch, Federal Funding Accountability and
Transparency Act, hearing on S. 2590, 109th Cong., 2nd sess., July 18, 2006.
30 Chris Gosier, “Contracts database short on info, long on problems,” p. 5.

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Similar problems affect FAADS, the government’s primary source of grant
award information. In a recent review of 86 federally funded grant programs, GAO
determined that in the majority of cases, the administering agencies provided no data,
incomplete data, or inaccurate data to FAADS over a three-year period.31 The report
concluded that these problems occurred because (1) the Census Bureau lacked the
resources to ensure agencies were submitting accurate and timely data; (2) agency
program officials lacked knowledge of FAADS reporting requirements; and (3)
agencies had not implemented sufficient oversight to ensure they were submitting
accurate data. A Census Bureau official concurred with these findings, adding that
a number of data elements S. 2590 would require are not uniformly captured by
federal agencies or grant award recipients, such as information on subrecipients and
the congressional district in which federal funds are spent.32 The official also noted
that agencies are currently required to update their information in FAADS on a
quarterly basis, so it may take time for agencies to develop the capability to update
FAADS within 30 days of making an award, as S. 2590 would mandate. Given the
amount of work necessary to enhance the scope, quality, and timeliness of
information reported to FAADS, the official was skeptical that the database would
meet the bill’s requirements by the January 1, 2008, deadline.
Finally, some observers note that it is unclear how users of the public database
would actually identify earmarked funds, since neither FAADS nor FPDS collects
that information. Instead, the ability of users to identify earmarks appears to rest on
the manner in which a funding action is described under the “award title” field. To
use an egregious example, a $100 million grant may be alternatively described as,
“funding for planning and development of an interconnected transportation system
important to commerce and travel,” or, “a highway to a virtually uninhabited village.”
By the same token, an earmarked project that some believe has merit may be
described in a manner that puts it in an unfavorable light. One ramification, given
the absence of an agreed-upon, government-wide method for identifying earmarks,
is that different award descriptions may lead the public to draw different conclusions
about the value of a given federally funded project.
Concluding Observations
The underlying logic of S. 2590 is that by providing citizens with information
on federal assistance awards through an online database, government officials will
be less likely to fund earmarks and other “wasteful” projects. To put this argument
succinctly: greater transparency will yield greater accountability. Most observers
agree that in order for a public database of federal awards to provide maximum
transparency, it must encompass as broad a range of financial assistance categories
as possible. The database proposed by S. 2590 is generally considered to provide
substantial transparency, since it covers all forms of federal financial assistance —
31 U.S. Government Accountability Office, Rural Economic Development: More Assurance
Is Needed that Grant Funding Is Accurately Reported, GAO-06-294, Feb. 24, 2006, pp. 23-
34.
32 Telephone conversation between the author and Jerry Keffer, Chief of the Federal
Programs Branch U.S. Census Bureau, Aug. 17, 2006.

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including contracts, which are excluded under H.R. 5060. The database proposed by
S. 2590 also provides transparency by including information on subcontractors and
subgrantees, thus allowing the public to track the flow of federal funds down to the
level of the ultimate recipient.
However, even a database of such breadth and depth is only as useful as the
quality of the information that populates it. A number of observers have cautioned
that a database of federal assistance relying primarily on information from FAADS
and FPDS would be of limited value. Both government officials and knowledgeable
members of the public describe significant weaknesses in FAADS and FPDS — such
as incomplete and inaccurate information — that cannot be quickly corrected.
Moreover, some observers point out that it is unclear how earmarks would be
consistently identified in the new public database, because such information is not
captured as a separate, searchable category by either FAADS or FPDS. These
observers suggest that substantial changes in the collection, reporting, and
verification of information relating to federal assistance awards would likely be
necessary before FAADS and FPDS could be considered reliable sources of
information. As one commentator put it, it would be “an embarrassment” to the
government to launch a public website that drew on information from these databases
before improvements were made.33
Another point of view suggests that FAADS and FPDS do not need to be error-
free in order to help accomplish the bill’s objectives. Even with gaps in the data, a
publicly accessible database on federal financial assistance may constrain funding for
earmarks and other “wasteful” projects if government officials are concerned those
awards might be in the database. From this perspective, it could be useful to weigh
the value of launching the public website by the bill’s deadline — even with
imperfect data — so as to exert pressure on government officials sooner, against
delaying implementation of the new public website until the quality of the data it
provides is enhanced.
33 Ibid.