As budgets tighten and taxpayers call for spending transparency, the demand for data standards is rising. The federal government’s response includes open data initiatives in the executive and legislative branches, which will impact both the grantors and recipients of federal dollars.

Currently, U.S. spending information is gathered at the agency level with varying standards and incompatible formats, resulting in fragmented, inconsistent data. Government buyers lack access to pricing and performance data, and public sector agencies are unable to track the performance of grant funds they award.

It’s part of the reason why the government pays too much for goods and services. It also makes reporting on the use of taxpayer dollars nearly impossible.

The Digital Accountability and Transparency Act (DATA Act), making a promising second attempt through the U.S. Congress, seeks to solve these problems by overhauling federal data through standardization of data elements, formats and processes; transparency through the reporting of aggregated data; and ROI clarified with advanced analytics. Waste, fraud and abuse would be more difficult to achieve, and easier than ever to expose.

However, federal spending reform would create a ripple effect, impacting all those receiving federal dollars. In 2013, this included nearly $400 billion in private sector contracts and more than $500 billion in federal grants — most of which is distributed to state, county and municipality governments and agencies.

Tax dollars often support the maintenance of day-to-day services, leaving little left over to propel America’s neighborhoods toward higher standards of living — through investments in infrastructure, technology, green energy, education, and safety. In order to perpetuate these efforts and win funding, government officials must understand and prepare for grant reporting changes coming down the pike.

A primary tenet of spending reform is transparency. Federal efforts will shed light on external spending, as reported on USAspending.gov, as well as internal expenditures, including salaries, supplies and facilities. Government entities will need to implement the tools, processes and safeguards to collect, track, measure and report on all federal funds. And as public-private partnerships become more common, the need to enforce compliance on nonprofit sub-recipients will be heightened.

“I think [new data reporting requirements] will have a positive effect in that they will provide management of entities that receive federal funds — enabling them to have a good handle on projects they are trying to implement with federal dollars,” says Jesse Buggs, Director, Office of Grant Development and Administration, City of Bowie, Md.

With the rise of performance-based reporting and grant distribution, governments will also need to solve for reporting return on investment. Entities that prove the most capable of delivering results will be awarded future funds.

Finally, open data will facilitate cooperation. By having insight into the books of nearby organizations, governments will be able to collaborate around common goals and projects, leading to coordinated efforts and shared success.

Says Buggs, “I think it would be nothing but an asset to all of us. The whole concept of data transparency enables us to see the kinds and levels of projects that others are engaged in. This way, we can see to what extent we might be able to collaborate with each other and thus enhance the services we provide to citizens.”

Adam Roth, president and CEO of StreamLink Software

Adam Roth is the president and CEO of StreamLink Software.