The Federal Funding Accountability and Transparency Act: Background, Overview, and Implementation Issues

Publication Date: October 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

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Abstract:

On September 26, 2006, President Bush signed S. 2590, the Federal Funding Accountability and Transparency Act, into law (P.L. 109-282). In an attempt to expand oversight of federal spending, including earmarks, the new law requires the Office of Management and Budget (OMB) to establish a publicly available online database containing information about entities that are awarded federal grants, loans, and contracts. Federal agencies award over one trillion dollars annually in those three categories of financial assistance -- $460 billion in grants, $360 billion in contracts, and $260 billion in direct and guaranteed loans -- accounting for nearly one-third of the federal government's total expenditures and obligations.

According to the sponsors of the legislation, the new database will deter "wasteful and unnecessary" spending, since government officials will be less likely to earmark funds for special projects if they know the public could identify how much money was awarded to which organizations, and for what purposes. S. 2590 was a companion bill to H.R. 5060, which also called for the creation of a federal awards database. The bills differed in several respects, however, most notably in that S. 2590 required information on federal contracts to be made available to the public, but H.R. 5060 did not. Because contracts represent over $340 billion in federal awards, the scope of the Senate version was significantly broader.

While the intent of the legislation is widely lauded -- it was endorsed by leaders of both parties and an array of business, union, and watchdog organizations -- concern has been expressed by 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. Some observers also believe that the cost of establishing and maintaining the new database may exceed the Congressional Budget Office (CBO) estimate.

This report summarizes the legislative history and key provisions of P.L. 109282 (S. 2590), compares it to H.R. 5060, and discusses challenges that are associated with implementing the new law's proposed database and that may prove to be areas for future congressional oversight. This report will be updated as events warrant.