Comments to OMB on Universal ID Number for Federal Grantees

OMB has proposed a policy requiring all federal agencies to use a common identifying number for all federal grant applicants and grantees. Our comments support this concept, but oppose proposed use of Dun and Bradstreet's system for this purpose. You can download the original copy of our comments, or read the summary here:December 30, 2002

Sandra R. Swab
Office of Federal Financial Management, OMB
Room 6025
New Executive Office Building
Washington, D.C. 20503

RE: DUNS Comments
Proposed Policy of Use of a Universal Identifier by Grant Applicants

Dear Ms. Swab,

We are writing to respond to the notice proposing use of a universal identifying number for federal grants, and specifically to the proposal to designate Dun and Bradstreet’s Data Universal Numbering System (DUNS) for this purpose. We appreciate the opportunity for input on this proposal.

The issue of grant streamlining has been a priority of OMB Watch for some time. We worked with former Sen. John Glenn of Ohio to develop the Federal Financial Assistance Management Improvement Act of 1999 (FFAMIA) after participating in a series of physical and online conferences sponsored by the Ohio Association of Nonprofit Organizations and OMB Watch that involved roughly 100 nonprofit federal grantees. FFAMIA attempted to address some of the concerns expressed during the online conference. Since that time we have joined with the Urban Institute and GuideStar to co-sponsor a project to give nonprofits information and a vehicle for input into how the federal government streamlines its grant application and reporting processes.

We fully support the concept of a universal identifying number for federal grant applicants, for all of the reasons stated in the proposal. A universal identifier would greatly simplify the grants process for organizations that receive federal funds from more than one agency, as well as creating consistency throughout the process. However, we strongly urge you to reconsider use of the DUNS number for this purpose, for the reasons set out below.


A Public Number for a Public System

It is better to build federal grant system on the foundation of a federal number, which can be operated by the government in the interests of efficiency, effectiveness and transparency. A federal numbering approach will have value to a wide range of commercial and governmental interests. In the same way that latitude and longitude, street address, and state abbreviations provide value to UPS, FedEx, newspapers, advertisers, and so on, a high-quality federal number will provide undisputed identification for functions in addition to the grants system, such as insurance, trade monitoring, security, and sales. It can also become a mechanism for nonprofit
monitoring and accountability across federal agencies.

Moreover, there are at least two systems that could be converted into a federal identifying number: the employer identification nubmer (EIN) and ACES. An EIN is given to all business entities, including nonprofit corporations. To the extent that the government feels a need to develop a more sophisticated ID system that tracks affiliates or subsidiaries, then the EIN can be modified with extensions to reflect such entities. However, we are uncertain why the government would want to monitor affiliate actions when it has not yet established any system for monitoring subgrants -- a far larger issue and accountability problem.

Quality Control

Use of the DUNS number as a universal identifier may appear to save time and money in the short run, but unless there is legislation or regulation that places certain mandates on DUNS operations, it will be difficult to maintain minimum safeguards over multiple DUNS, sham changes in DUNS numbers, and so forth. Mastercard or VISA would not rely on an external numbering scheme for its accounting system, so why should the government? Any basic quality control mechanism must be based on an in-house numbering approach whose internal accuracy sets the parameters of accuracy in any other activities. Otherwise, federal quality control mechanisms are at the mercy of the whims of DUNS management.

DUNS Has Hidden Costs

DUNS will be expensive and its licensing approach will limit data dissemination. While it is true that D&B will not charge for giving out DUNS numbers, D&B will charge the federal agencies to use DUNS in its database/search & retrieval system. Moreover, there may be limits on third parties ability to use the DUNS numbering system unless that party has a license with D&B. Even now, EPA does not disseminate DUNS numbers because it would cost hundreds of thousands of dollars per year in additional licensing fees.



Accountability

Federal monitoring, reporting, and enforcement interests are inconsistent with the commercial requirements for the DUNS number. DUNS numbering procedures are not strict enough to support federal oversight or prevent fraudulent grant transactions. This weakness would become apparent in any litigation or prosecution arising out of grant fraud. For example, a prosecutor may be unable to address fraudulent reporting behavior where a respondent utilizes multiple, confusing DUNS numbers to hide the linkages between certain databases. On the other hand, if there were a federal numbering system the prosecutor might be able to show that attempted false numbering was an aspect of the preparation for the criminal act. This would be especially true if the procedures for obtaining the federal number were strict (already required for quality control). Moreover, in an enforcement proceeding, it might prove difficult to reconcile relatively lax DUNS numbering with strict evidentiary requirements for the prosecution. This is especially true in those circumstances where the government has the burden of proof.

Transparency

The proposed policy states that DUNS “will provide the public with a uniform business practice since the DUNS number is already in use by those entities seeking Federal contracts.” We do not see how use of DUNS helps the public get information about how federal grant funds are being spent, or why there is a need for a common practice between the federal grants and procurement systems. A better alternative, the Employer Identification Number provided by the Internal Revenue Service, would provide the public with a key data element that could be used to search IRS Form 990 information returns filed by nonprofits, in order to know more about organizations receiving grants, how much overall government income they receive and how it is spent.

FFAMIA does not require alignment of grants and contract systems, and for good reason. Recipients of federal grants are usually either state, local or tribal governments or nonprofit organizations that operate for the public good. The grant funds they receive are spent to provide important services to the public, such as job training, drug counseling, after school care or research on cures for disease. In contrast, federal contractors are generally selling the government goods for its operations, such as computers, combat planes or other supplies or they are providing another service or product to the government. While some large nonprofits may apply for and receive federal contracts to provide research services, the vast bulk of the entities participating in the procurement process are for-profit businesses seeking to make a profit, with the government as customer.

The task of streamlining the federal grants process over all agencies and all their various departments is enormous enough by itself without bringing in the unnecessary complication of trying to fit the round procurement peg into the square grants hole.



DUNS Data Elements Inapplicable to Nonprofits, State/Local Governments

Our review of the DUNS application on the Dun and Bradstreet website revealed few data elements that apply to nonprofits and many that are inapplicable. For instance, the drop down menu under “Legal Structure”, a required question, only offers for-profit answers. Other questions refer to “ownership”, “primary line of business” and other for-profit oriented data elements that are difficult or impossible for nonprofits to answer.

The DUNS Application Will Become a Barrier to Small, Faith-Based and Grassroots Organizations When Applying for Federal Funds

In addition to its efforts to simplify the grants system, the federal government has placed a major emphasis on recruiting small faith-based and community organizations to apply for grants. The DUNS application is very likely to function as a barrier to their participation by asking inapplicable and confusing questions. Small organizations will not have any reason to get a DUNS number unless they become interested in applying for federal grants. They should not be subjected to an unnecessary and time consuming process before they can file a grant application.

Getting a DUNS number is not quick, and could cause some organizations to lose opportunities to apply if deadlines are close. For example, the Dun and Bradstreet website says an application takes about 14 business days to process. As an experiment I applied for a number for my civic alliance on December 13, and have had no response.
If this delay is typical, it is likely to be problematic for many small nonprofits.

Conclusion

Because we oppose use of the DUNS number as the federal government’s universal identifying number for federal grant applicants and grantees, we have not answered the specific questions relating to DUNS in the proposed policy. It is our hope that OMB will explore other possibilities before making a decision. We would be glad to meet with you to discuss EIN or ACES as alternatives, and the experience we have had with the EPA in this area.

Yours truly,


Kay Guinane,
Counsel, Community Education Center