LEDGER Act: Federal Spending Transparency

LEDGER Act

In the complex landscape of federal spending, transparency and accountability are paramount. Recent revelations regarding trillions of dollars in untraceable funds have ignited a renewed call for rigorous oversight. Enter the Locating Every Disbursement in Government Expenditure Records (LEDGER) Act, a bill sponsored by Senator Rick Scott (R-FL) and Roger Marshall (R-KS), aiming to overhaul the U.S. Department of the Treasury’s payment tracking system. This legislation promises to shed light on the often opaque world of government disbursements and bring increased visibility to taxpayer dollars.

A Push for Fiscal Responsibility

The LEDGER Act was introduced as a measure to increase transparency in federal spending. The bill aims to provide greater clarity on how taxpayer dollars are spent, and to reduce the possibility of waste, fraud, and abuse. This legislation is part of an ongoing effort to push for greater fiscal responsibility within the Federal Government. The pending legislation, while still not law, if passed could significantly strengthen transparency, and accountability.

The Impetus: DOGE Report $4.7 Trillion Dollar Revelation

The genesis of the LEDGER Act can be traced to a Government Accountability Office (GAO) report, often referred to as the “DOGE” report (Department of the Treasury’s Government-wide Funds). This report denoted $4.7 trillion in federal payments lacking proper traceability codes, raising serious concerns about the government’s ability to track and account for its spending.

The GAO’s findings delved into the Treasury’s processes for recording and categorizing federal payments. They found that a significant portion of disbursements were not being assigned the necessary codes to identify the purpose, source, and recipient of the funds. The Treasury uses Treasury Account Symbols (TAS) to tie payments to budget-level items, however, many TAS fields, that are optional, were left blank. This created a massive blind spot, making it impossible to trace the money trail in a detailed, transaction-by-transaction manner. The GAO found this by analyzing the raw data coming from the treasury, and finding gaps in the transactions with TAS data recorded, that would allow for proper tracking.

This revelation highlighted a significant gap in the Treasury’s financial management. Without proper traceability codes, it becomes exceedingly difficult to follow the money trail, increasing the risk of waste, fraud, and abuse. The DOGE revelation served as a reminder of the need for enhanced transparency and accountability in Federal spending.

What the LEDGER Act Does: A Transaction-Level Revolution

The LEDGER Act seeks to address the shortcomings identified in the DOGE report by mandating the implementation of a comprehensive traceability code system for all federal payments. While there are no specific implementation details at this time, if passed the bill is passed, based it’s stated intent and the GAO report’s findings, it is likely the bill will require the Treasury to track each individual payment transaction with specific metadata. This metadata would likely include:

• Purpose of Payment: A clear description of what the funds were used for.
• Funding Source: Identification of the specific agency, program, or appropriation that funded the payment.
• Vendor or Recipient: Details about the entity or individual receiving the payment.
• Contract or Grant Numbers: Relevant identifiers for contracts or grants associated with the payment.
• Date and Time of Transaction: Precise timestamps for each payment.

This level of granularity would create an audit trail, allowing for detailed analysis of federal spending patterns. The LEDGER Act is likely to enhance the Treasury Account Symbol (TAS) system, by making the optional fields required, and adding greater detail to the TAS system. The administration has since mandated the use of this field. See our Article on Modernizing Government Financial Systems and use of Hyperledger technology.

Implementation: A Transformation of Treasury Operations

If passed, the LEDGER Act would require a significant transformation of the Treasury’s payment processing systems. The Treasury would be tasked with:

• Developing and Implementing Traceability Codes: Creating a standardized system of codes that can be applied to all federal payments.
• Integrating with Existing Systems: Modifying existing payment systems to accommodate the new traceability code requirements.
• Establishing Data Standards: Defining clear and consistent data standards for the traceability codes to ensure accuracy and uniformity.
• Creating a Centralized Database: Developing a centralized database to store and manage the transaction-level data.
• Developing Reporting Tools: Creating tools that allow agencies, auditors, and oversight bodies to generate reports and analyze spending patterns.
• Providing Training: Training federal employees on the new traceability code system and data entry procedures.
• Oversight and Auditing: Creating a system that allows for regular audits and oversight of the new systems.

This would likely involve investment in technology, software development, and training. The Treasury would need to work closely with other Federal agencies to ensure seamless integration and data sharing.

A New Era of Visibility and Accountability

The LEDGER Act promises to usher in a new era of visibility and accountability in federal spending. By providing transaction-level data, it would enable:

• Enhanced Auditing: Accountants and auditors would have access to detailed transaction records, making it easier to identify errors, irregularities, and potential fraud.
• Improved Management: Agency managers would have real-time insights into spending patterns, allowing them to make more informed decisions.
• Increased Government Oversight: Oversight bodies and lawmakers would have the tools to scrutinize federal spending and hold agencies accountable.
• Greater Public Transparency: The public would have access to more detailed information about how their tax dollars are being spent.

Government Accounting:

Our Federal Government has a maze of accounting systems, and tools to track Federal Spending. The Federal government discloses portions of this data on various websites based on the type of spending. They are generally broken down in these categories:

• Awards: These represent funds given to non-federal entities, such as contractors, grantees, and loan recipients. Significant budget items included in awards are; federal contracts to private companies for military equipment, or infrastructure, and grants to state and local governments for programs.
• Accounts: These represent all federal spending, including internal agency operations, such as employee salaries, and operating expenses. Significant budget items included in accounts are; military personnel pay, Social Security payments, and Medicare payments.

Public Disclosure and how the LEDGER Act changes differ from Other Systems

The LEDGER Act’s focus on transaction-level detail sets it apart from existing Federal spending data systems:

• Federal Procurement Data System (FPDS): This system focuses specifically on Federal procurement awards, which are contracts for goods and services. While FPDS provides detailed information on these contracts, it does not track other forms of federal spending, such as grants or loans, and it does not provide transaction-level details. (FPDS.gov)
• USASpending.gov: This website aggregates data from FPDS and other sources to provide a broader view of federal spending. However, it only includes a subset of total federal spending. It excludes classified information, personally identifiable information (PII), and some proprietary data. Furthermore, according to the GAO USAspending.gov has billions in transactions each year that are listed as unreported by agencies, where no data or visibility is made to the public, highlighting a lack of transparency. While it does show some account level spending, it is designed to show award spending and does not contain transaction level detail. (USAspending.gov)
• U.S. Treasury Fiscal Data: This data provides a comprehensive overview of the entire federal budget, including revenue, spending, and debt. However, it does not offer the granular, transaction-level detail that the LEDGER Act would provide. It shows high level financial information. (FiscalData.Treasury.gov)

The LEDGER Act would complement these systems by providing a deeper layer of accountability. It would allow for a more comprehensive understanding of how federal funds are being used, from the initial award to the final payment.

Is this a Big Deal?

At the Tax Project Institute our goal is to educate the public on what citizens contribute to our country and the transparency of how our government spends their contributions. While it may seem somewhat shocking that there is so little oversight that $4.7 Trillion dollars is untraceable, it really should not come as much of a surprise given that the TAS codes had been made optional. Additionally, the Government has a number of checks in place, like the GAO and our Improper Payments (including Fraud) Tracking Systems (Figure 1), that perform audits and account for weaknesses in controls and processes, and call out places for Government improvement. What is most concerning is the lack of accountability and controls to address these findings that these processes find. For example Government agencies are required by law to report spending to USASpending.gov but yet in a GAO audit only 103 of 152 agencies reported (68%) (Figure 2).

As of this date, the USASpending.gov site shows trillions in “Unreported” data from 2017 (as far back as it goes) to date.

We should note, that there has been significant progress in these numbers recently, indicating a new emphasis and progress in this area. You can use the USASpending.gov site or the enhanced version available from the Tax Project Institute (Requires Free Registration)

So bottom line, is it a Big Deal? – no, while shocking the revelations really aren’t anything new, but the chance of getting the ONLY source of Federal Government Wide spending at the transaction level, with enforcement of record keeping to trace all payments to budget line items is a very big deal indeed and could go down ultimately as a landmark in Government Transparency.

Conclusion: A Step Towards Ongoing Fiscal Transparency

The LEDGER Act represents a significant step towards greater fiscal responsibility and transparency in federal spending. By mandating transaction-level tracking, it would provide unprecedented visibility into how taxpayer dollars are being used. While implementation may require significant effort and investment, the potential benefits in terms of accountability and oversight are substantial.

The bill’s success, if passed, will depend on the Treasury’s ability to develop and implement a robust process to ensure ongoing enforcement of traceability code system. However, if successful, the Locating Every Disbursement in Government Expenditure Records (LEDGER) Act would be a crucial piece of ongoing government transparency, ensuring that taxpayer dollars are used wisely and efficiently.