AIG. Again. Let us add our voices to the outcry over the bonus scam. Outrageous. Worse than outrageous is the damage it does to the Obama agenda, particularly the still critical moves to come on the economic rescue plan, as Tom Friedman pointed out in a March 18 opinion column in the New York Times.
What to do? On the recipient side of bailout funds, it will always be difficult to get real transparency and build trust. However, on the input side, the government itself, there is a lot that can be done.
But there's something even more disturbing than the AIG bonuses themselves.
It has to do with an aspect of transparency that is getting a bit of short shrift, in our opinion. There's a lack of visibility into the clear responsibility within government for overseeing the use of so many billions, this oversight, so to speak, from no less an authority than President Obama. Jennifer Loven and Martin Crutsinger's AP story reported in today's Boston Globe quotes the president: "Nobody here was responsible for supervising AIG and allowing themselves to put the economy at risk by some of the outrageous behavior that they were engaged in. We are responsible, though. The buck stops with me. And my goal is to make sure that we never put ourselves in this kind of position again."
Responsibility is the flip side of accountability, two roles in one relationship. While AIG is accountable, the government is responsible. Clarifying--making transparent--the structure of responsibility, aka the org chart (see our dynamic map of the top levels of the US Government in your browser, which takes a moment to load), is one way the government can directly increase the public's trust and govern more effectively. This is a much more direct route to developing trust, and will apply much more broadly across the multiple complex agendas of this administration.
To this point, we've written "Mapping the Recovery," another NetAge Report, this one on transparency, accountability, and responsibility particularly as they apply to tracking the recovery spending as laid out by the Office of Management and Budget (OMB). We are posting Part 1 today (after the break below). In this first part, we describe the network of accountability and responsibility, and how the accounting system IS NOT the organizational system, although it sort of looks like it. In the second part, which we'll post tomorrow, we look specifically at how OMB has set up the data to track the recovery funds, how its multiple elements can be mapped, and, most important, what's missing (hint--responsibility).
-- Jeff Stamps
Transparency and Accountability
During the week before the U.S. Congress passed the massive $787 billion stimulus bill, President Obama’s Chief of Staff sent a memo to the most senior leaders of the new administration. In it, Rahm Emanuel said that the heads of all departments and agencies—from the Secretary of Treasury to the Chair of the Federal Reserve—needed to be “preparing for implementation of the pending recovery legislation.” The week after the bill’s passage, Peter Orszag, director of the Office of Management and Budget (OMB), sent a follow-up memo to the same leaders, laying out the “initial implementing guidance for the American Recovery and Reinvestment Act.” Both memos (two pages and sixty-two pages respectively) pointed to the importance of and commitment to two core principles: transparency and accountability.
Information transparency is the metaphorical extension of optical transparency, the ability to see into and through physical materials, as if they were enclosed in glass. The initial guidance memo lays out some requirements to achieve transparency, principally that all major communications and weekly progress reports must be available on the web, in easily digestible forms. By early March, the first postings of actions and reports were available on both the main tracking site, Recovery.gov, and those of many of the agencies, each with its own unique web flavor.
The memo also specifies how to track accountability through “Formula Block Grant Allocation Data.” This is the heart of the matter, comprising the chunks of money that make up the recovery spending—grants, contracts, loans, and loan guarantees. Where transparency is the ability to see what’s going on, accountability is about what you see when you look.
The concept of accountability is embedded in a concrete logical relationship and thus can be tracked. This structure shows that there is a role of responsibility as well as accountability in the relationship. After looking closely at the data categories, it seems that responsibility is missing from the OMB model for tracking recovery spending. Filling the gap and creating more transparency on the responsible side of the funding equation enables more trust in the government, which is extremely important right now, to say the least.
Network of Accountability and Responsibility
Accountability is an ethical concept with simple network logic: “B is accountable to A,” two nodes connected by a directed link. When you connect nodes together with links, you get networks.
The Latin derivation of accountability contains the root “to calculate,” hence its ancestry in the (ac)counting professions and the manipulation of data. The behavioral derivation is from the money lending systems of ancient Greece and Rome, of lenders sending money to borrowers who were then accountable to them. Money flows from lender A to borrower B.
There are two parties to the relationship, each with different roles. The lender (A) is responsible while the borrower (B) is accountable. Often used as synonyms, “responsibility” and “accountability” represent the two endpoints of a shared relationship. We can see how important, and how different, these roles are in a mortgage relationship, a non-trivial matter in these harrowing times. Bankers are responsible for the use of their (organization’s) funds and verifying the prospective homeowner’s ability to repay, while borrowers are accountable for the funds with contractual obligations to the lender.
The two-part terminology also applies to the vertical, hierarchical form of the relationship. From the President and CEO at the top through executive and supervisory layers to non-managerial staff, in each reporting relationship there are two stances—the “from” role, which identifies the responsible leader while the “to” role identifies the accountable follower. Hierarchies are critical because they represent the real infrastructure of responsibility and accountability that hold the organization together and support all the other forms of links that enable the enterprise to operate. Org charts are responsibility charts. People in positions are responsible for those below them and accountable to people above.
Making the organization of government transparent, which is simply to hook all its org charts together from top to bottom into one digital org chart, brings benefits far beyond tracking responsibility for the recovery money. Transparency of responsibility and accountability in government as a whole is the foundation for developing trust in our common enterprise. Trust, qualitative as it is, is the basic currency for both politics and the economy. It is arguably the most important factor in both long-term recovery and success in all the other areas of concern to the Obama administration—e.g., health care, energy, and education.
The two roles in the funding relationship represent two spheres of trust, the responsible government and the accountable recipients. Transparency on the recipient side, especially in the private sector, will always be difficult, and trust will be hard to grow. However, the administration has a more direct ability to increase its own transparency and responsibility, and thereby generate more trust in government itself, a very broad benefit.
Accounting and Organizational Structures
OMB carefully sets out data categories for tracking the recovery spending. While they appear to contain components that identify organizations, e.g. things are labeled “agency,” “program,” and the like, which do in fact correspond to boxes on the government’s org charts, these components actually represent parts of the accounting system. The three levels of the government’s accounting code (formally, the Treasury Accounting Symbol, or TAS)—which identifies agency, program account, and (optionally) sub-account—do not represent the real organizational hierarchy, just the budget buckets.
While this might appear to be a fine point, it is instead a crucial distinction. Accounts do not authorize—people-in-positions do. Authorization for dispensing funds comes from unique individuals who serve in specific positions embedded in an administrative hierarchy of organizational responsibility and accountability, aka the government’s org chart.
While the organization hierarchy and the accounting hierarchy overlap in the agency (e.g., a cabinet department or independent agency) and in a specific program, the organization is not the accounting system. In fact, the program dispensing the funds may be administered many levels away from the most senior leadership position.
In reality, somebody in some official position—a civil servant job—signs off on each grant. Typically, teams manage the grants. These teams have a supervisor who reports to an executive linked to the head of the agency up a chain of some number of reporting links. This is the chart of responsibilities for the recovery money.
We can see this responsibility-string through the example of a recovery program listed on Grants.gov. The “Extramural Research Facilities Improvement Program” represents $300 million in new grants to funnel through the National Center for Research Resources, which is part of the National Institutes of Health (NIH), which is part of the Department of Health and Human Services, the agency accountable to the president for the money (see Figure 1). Ultimately, the president is responsible for the actions taken by all the departments and agencies in the Executive Branch, and is accountable to Congress and its authorizing legislation. Finally, Congress is accountable to the U.S. people come election time, the beneficiaries, we hope, of the recovery funding.
While the accounting system is a highly simplified structure, the responsible official is likely to be eight or more links—“degrees of separation”—from the highest, most responsible official, the president himself. Making the leadership hierarchy transparent is a key part of developing trust in the government’s actions.
By following the recovery money down a chain of responsibility from its agency to a specific position and person, we can see each chunk of funds as it flows through the whole executive branch. By making the entire network of connections transparent, oversight and accountability become simple by-products of the funding process. People in their government jobs will be much more likely to act responsibly if the results of their work are visible to all, not just to their supervisors.
Transparent network maps, of the type we’re proposing and which we picture at the opening of this report, help everyone, both inside and outside government, gain better information and understanding of what’s happening as it’s happening. This kind of transparency allows corrections and improvements in programs before they’re too late, enabling large numbers of people to engage in the critical conversations about the economic meltdown and recovery. We need all the brains we can get in solving our common problems.