Federal CFO: Navigating the DATA Act’s Implementation Challenges

The Data Accountability and Transparency Act of 2014 (DATA Act) aims to dramatically improve internal management transparency by creating an open data set for federal spending. Enhancing transparency can make a big difference in enabling agencies to use data analytics to their advantage — and the public’s,” says Dave Mader, chief strategy officer for the civilian sector within Deloitte Consulting LLP’s Government and Public Services practice.

However, “DATA Act 2022: Changing technology, changing culture,” a study by Deloitte and the Data Foundation, revealed some potential challenges to the Act’s implementation that could diminish its benefits. The study, which drew on interviews with more than 20 DATA Act, also found that, “to successfully navigate the Act’s implementation, organizations should consider how to address a number of challenges, including cultural and technological hurdles,” says Christina Canavan, a Deloitte Risk and Financial Advisory managing director in Deloitte & Touche LLP’s Government and Public Services practice.

Federal CFOs and chief data officers (CDOs) have important roles to play in this effort. “As ‘owner’ of their organization’s financial data, CFOs will require the support and close collaboration with the CDO to integrate their organization’s performance data and financial data,” Mader says.

Data-driven Insights on Federal Spending

If successfully implemented by 2022, when the statutory deadlines are complete, the DATA Act will enable federal spending data to flow automatically from agency originators to government officials and private citizens through publicly available websites. “Thoughtful use of the resulting data-driven insights can help agency leaders monitor performance, evaluate results, and make evidence-based decisions,” says Mader.

With the totality of federal government spending and expenses — including contracts, grants, and salaries — available on a website, CFOs would have access to programmatic information that gives them a view of financial performance across their agency, Mader observes. “By marrying their financial data with information on programmatic expenditures and outcomes, CFOs can conduct the kind of analysis that is highly valuable for prioritizing and managing program investments to achieve mission objectives,” he adds. For example, a CFO could tie the expected outcomes of each program’s projects to their actual expenditure to determine to what degree an investment of $1,000 actually provided $1,000 of value.

The DATA Act could increase efficiency across the federal government in several ways, for example:

  • Spending reports would populate automatically. Agency leaders wouldn’t need to request discrete spending reports from their different units because the information would be compiled automatically.

  • Congress could make appropriations more transparent. When crafting legislation, Congress could evaluate the impact of spending bills with greater ease. Having the ability to adjust the key assumptions and parameters on a dashboard could show the impact of proposed changes to each agency’s budget.

  • Internal auditors would have direct access to spending data. With direct access to data describing spending at a granular level and by using data analytics, internal auditors could gauge the cost-effectiveness of spending decisions or compare similar endeavors in different agencies.

  • Citizens might have more information to understand spending decisions.With greater spending transparency, citizens could have real-time clarity into how government decisions might influence local grant recipients, nonprofits, and infrastructure.

Technology to Support the DATA Act

While much work remains, “the technology to support the DATA Act has already been developed, giving the act a strong foundation,” observes says Tasha Austin, a Deloitte Risk and Financial Advisory senior manager at Deloitte & Touche LLP’s Government and Public Services practice

The DATA Act mandates that the White House Office of Management and Budget (OMB) maintain a unified data format, or “schema,” to organize all federal spending reports. This schema, known as DATA Act Information Model Schema (DAIMS), represents an agreementon how OMB and the Department of the Treasury want to categorize federal spending. To allow other agencies to connect to DAIMS, OMB has built open-source software to help agencies report their data.

Implementation Challenges — and How to Address Them

The study identified the following cultural and technical challenges to implementing the DATA Act:

  • Treating the Act as a reporting requirement. If users consider the Act as a reporting requirement rather than a tool, they are unlikely to unlock its full potential. “Bare minimum data sets, lacking in detail, might satisfy reporting requirements, but they could fail to support effective data analytics,” says Canavan.

  • Incompatible legacy reporting systems. The federal government currently identifies grant recipients and contractors using the Data Universal Numbering System (DUNS), a proprietary system of identification numbers with numerous licensing restrictions. A transparent federal data set would be unable to incorporate new data sets from state and local partners unless those partners also spend scarce resources on the DUNS system to achieve compatibility.

  • DAIMS does not account for the full federal budgeting life cycle. This gap could hamper the ability to use the data to organize operations.

The following steps can help CFOs, CDOs, and other agency leaders overcome cultural and technical hurdles to implementation:

1. Encourage managers to view the DATA Act as a tool, not a chore. To fulfill the DATA Act’s promise, workplaces should approach it as a managerial tool, not merely a reporting requirement. For example, if managers use the DAIMS system to run their own organizations, the data they provide would be granular and more accurate. “One of the best ways to convince managers to adopt DAIMS for daily use will likely be through active congressional buy-in,” Mader adds.

2. Educate users and managers on DATA Act benefits. Education can encourage agencies to incorporate DAIMS data into their own operations, potentially helping to find mislabeled data, and make data quality improvements, and, in one case, to discover discretionary funds thought to be already committed. Further, more can be done to invest in the upskilling of managers. This could help managers to develop a vision for how data can be used, and begin to provide the resources needed to get there.

3. Improve execution. Without strong execution, the DATA Act may fail to deliver its full potential. Considerations for improving execution include:

  • Establish a permanent governance structure. Currently, OMB and Treasury are responsible for managing data standards for spending data. While this fulfills the basic mandates of the DATA Act, observers acknowledge that, with their current resources, these two agencies cannot do the work indefinitely. To ensure DAIMS’s stability, a permanent management structure should oversee it for the long term.

  • Extract information directly from source systems. Currently, when a government agency awards a contract, it reports the contract data using several legacy systems. Currently, DAIMS extracts financial information from these inconsistent sources. The first major revision to DAIMS should require agencies to extract contract information directly from their source award systems. Going straight to the source for data should lead to more efficient processing and boost data.

  • Adopt a numbering system that anyone can use. Everyone, from local governments to U.S. businesses, should be encouraged to integrate their own budgeting data with that of the federal government’s. Instead of using a proprietary numbering system that excludes participants, the government could consider adopting an open-source or freely available numbering system.

4. Expand the DAIMS to reflect the full budget lifecycle. The federal budget follows a lifecycle, from the president’s proposed budget to congressional appropriations to payments. To properly track the flow of funds through this lifecycle, the spending data in DAIMS should reflect the budget as something that evolves over time from the beginning, with the receipt of tax revenues to final payments to grantees and contractors.

CFOs and CDOs likely recognize both the potential benefits of enhancing an organization’s ability to leverage data, and the challenges of changing the way public organizations manage data, observes Mader. “Working together, they will have to thoughtfully manage through the barriers to realize the potential benefits of readily available, transparent data,” says Mader, adding, “CFOs and other agency leaders would be wise to prepare their own organizations for change as the DATA Act takes hold at the federal level.”