Accountability and Transparency Act passed.

Just before adjourning for the 2006 election, Congress enacted the Federal Funding Accountability and Transparency Act and sent it to the president for signature. When fully implemented, this measure will affect all federal contracts, prime contractors and subcontractors. Following is a brief summary of its requirements.

The purpose of the new law is to increase transparency and accountability of federal expenditures by providing access to information on contract awards through a single, searchable, publicly available Web site. The measure requires the Office of Management and Budget to ensure that the site is up-to-date, easily searchable and available to the public at no cost. It requires the site to be fully accessible by January 1, 2008, when data for fiscal year 2007 should be posted. By January 1, 2009, the site is required to provide information on sub-grants and subcontracts.

The law, however, does give the OMB director the authority to extend, up to 18 months, the deadline for implementing the sub-award reporting requirement for recipients of federal funds through state, local and tribal governments. Individual award transactions below $25,000 are not required to be included on the site.

Specific elements of information about federal awards are required to be available on the site. These include the name of the recipient, award amount, award type (such as grant, contract or sub-contract), industry classification or catalog of federal domestic assistance indicator, location of the recipient and the primary place of performance, agency and program source, and detailed title and description of each award. In addition, the site must provide a unique identifier for each entity receiving federal funds.

The law includes a temporary sub-award reporting exemption for small entities that can demonstrate that they earned less than $300,000 in gross income in the previous tax year. These entities would not be required to report on sub-awards until the OMB director determines that the imposition of the reporting requirements would not create an undue burden on them.

In order to best determine the most cost-effective and efficient way to provide information on sub-awards, the law establishes a pilot program to test methods of sub-award data collection and reporting and to receive public feedback.

The federal government currently makes some information on its expenditures available through various databases and reports. These include the Federal Procurement Data System-Next Generation (FPDS-NG), the Federal Assistance Awards Data System (FAADS), and the Consolidated Federal Funds Report (CFFR). However, each system is limited in its capabilities and usefulness, and the systems largely are not compatible with one another.

FPDS-NG is the primary source of information on federal contracting. It was created in 1978 to provide a central repository for all federal contracting information and to make that information publicly available. Congress believes that there are a number of weaknesses with FPDS-NG that make it ineffective for providing timely, accurate information on procurement actions. Among these concerns: First, not every agency is required to report to FPDS-NG, meaning that the only way to gain an accurate count of procurement spending is to ask each agency individually. Second, the database is undependable, often providing data that is unusable or unreliable.

The CFFR is a summary report of federal spending on a geographic basis by state, county and sub-county area. This report is published every year by the Census Bureau and is distributed publicly, as well as to Congress.

The CFFR utilizes data collected from FAADS, FPDS-NG and a collection of federal agencies to track funding within a number of high-level spending categories, including retirement and disability, other direct payments, grants, procurement contracts, salaries and wages, direct loans, guaranteed or insured loans, and insurance. One of the biggest problems with the CFFR is that the data is released on a two-year delay. Therefore, the most recent data currently available is from 2004.

Congress also is convinced that the inability of the current contract reporting systems to easily provide more than high-level dollar totals demonstrates government's general failure to establish transparency in its spending. The report accompanying the new law stated that, although strides have been made in recent years to make some information available online, more must be done. Real accountability for specific funding actions requires that better information be made available, the report said.

The National Defense Industrial Association supports a rigorous and transparent accountability system to provide visibility into who is receiving federal funds through contracts and grants, and for what purpose, as one of many methods to preclude the potential for fraud and abuse. A transparent accountability system also allows the public to better understand, assess and appreciate the scope and value of federal investments in their communities and to more fully participate in shaping priorities for federal spending. However, NDIA is concerned that yet another federal contract reporting system will add more administrative tasks to an already burdened defense industry.

Significantly missing in the Federal Funding Accountability and Transparency Act is any mention of funding to execute this new reporting requirement. At this time, it is not known who will pay to set up the new Web site, whether it will be OMB, each federal agency, or their contractors through a surcharge on each and every award. NDIA will be monitoring the implementation of this measure and will provide information to our membership as it becomes available.

Peter M. Steffes is vice president for government policy for the National Defense Industrial Association.