GRANTS TO STATE 

AND LOCAL 

GOVERNMENTS

An Overview of 

Federal Funding 

Levels and Selected 

Challenges

Report to Congressional Requesters

September 2012

GAO-12-1016

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-1016, a report to 

congressional requesters 

September 2012

GRANTS TO STATE AND LOCAL GOVERNMENTS

An Overview of Federal Funding Levels and Selected 

Challenges

Why GAO Did This Study

Grants are a form of federal assistance 

consisting of payments in cash or in 

kind for a specified purpose and they 

represent an important tool for 

achieving national objectives. They 

vary greatly, including in the types of 

programs they fund, the methods they 

use to allocate funds to recipients, and 

the amount of discretion they give to 

the grant recipient on how the funds 

are spent. The Office of Management 

and Budget (OMB) has previously 

estimated that grants to state and local 

governments represent roughly 80 

percent of all federal grant funding, 

with the balance going to recipients 

such as nonprofit organizations, 

research institutions, or individuals. In 

a time of fiscal constraint, continuing to 

support the current scope and breadth 

of federal grants to state and local 

governments will be a challenge. 

In response to a request, this report 

(1) provides information regarding the 

amount of grant funding to state and 

local governments for fiscal year 2011, 

how such funding has changed over 

the last three decades, and difficulties 

related to identifying the exact number 

of such grant programs; and 

(2) identifies selected grants 

management challenges that have 

been identified in previous work by 

GAO and federal IGs over the last 

several years. Towards this end, GAO 

analyzed data from OMB and the 

Catalog of Federal Domestic 

Assistance and conducted a review of 

previous reports from GAO and federal 

IGs.

What GAO Recommends

GAO is not making any 

recommendations in this report

What GAO Found

Federal outlays for grants to state and local governments totaled more than $606 

billion in fiscal year 2011. Over the last three decades, these grants have 

consistently been a significant component of federal spending, but the focus of 

this spending has changed over time. For example, during this period the 

proportion of federal outlays to state and local governments dedicated to 

Medicaid grants more than tripled, rising from 2.4 percent of total federal 

government outlays in 1980 to 7.6 percent in 2011. The increase in federal 

outlays for Medicaid and other health-related grant programs was offset by an 

approximately equivalent decrease in grants to state and local governments 

targeted for other areas such as transportation, education, and regional 

development. 

GAO’s prior work and the work of others have also shown that the number of 

federal grant programs directed to state and local governments has generally 

increased over the last three decades. However, definitively determining the 

number of such grant programs presents difficulties. The lack of consensus on a 

methodology for how to define and count grant programs and data limitations in 

the Catalog of Federal Domestic Assistance further complicates this effort. 

GAO and federal inspectors general (IG) have previously reported on a variety of 

management challenges involving federal grants to state and local governments, 

many of which can be grouped into the following five topic areas: 

• Challenges related to effectively measuring grant performance: A lack of 

appropriate performance measures and accurate data can limit agencies’ 

ability to effectively measure grant program performance. This can affect the 

ability of federal agencies to ensure that grant funds are effectively spent.

• Uncoordinated grant program creation: Numerous federal grant programs 

have been created over time without coordinated purposes or scope. This 

can result in grants management challenges such as unnecessary 

duplication across grant programs and unnecessary overlap in funding. 

• Need for better collaboration: A lack of collaboration among grant program 

participants can impede effective grant implementation in areas such as 

knowledge sharing and defining clear leadership roles. 

• Internal control weaknesses: When internal controls in grants management 

and oversight are weak, federal grant-making agencies face challenges in 

achieving program goals and assuring the proper and effective use of federal 

funds. Effective controls can help to avoid improper grant payments. 

• Lack of agency or recipient capacity: Capacity reflects the organizational, 

financial, and human capital resources available for the implementation of 

grant programs. A lack of capacity can adversely impact an agency’s or 

recipient’s ability to manage and implement grant programs. 

View GAO-12-1016. For more information, 

contact Stanley J. Czerwinski at (202) 512-

6806 or czerwinskis@gao.gov or Beryl H. 

Davis at (202) 512-2623 or davisbh@gao.gov. 
Page i GAO-12-1016 Grants to State and Local Governments

Letter 1 

Background 2

Grants to State and Local Governments Have Consistently Been a 

Significant Component of Federal Spending but the Focus of 

Grant Spending Has Changed Over the Last Three Decades 7

Grants Challenges Reflect the Diversity and Complexity of Grants 

Management for State and Local Governments 15

Appendix I Objectives, Scope, and Methodology 32

Appendix II Sources of Information on Grants 35

Appendix III Cross-cutting Grants Legislation and OMB Circulars/Agency Grants 

Regulations 39

Appendix IV GAO Contact and Staff Acknowledgments 46

Selected GAO Products on Grants Management Issues 47

Tables

Table 1: Government-wide and Program-Specific Grant 

Requirements 7

Table 2: Information about the Sources for Data on Federal 

Spending on Grants 37

Figures

Figure 1: Grant Life Cycle of Federal Grant-making Agency and 

Grant Recipient 5

Figure 2: Amount and Percentage of Federal Outlays for Grants to 

State and Local Governments by Top Five Agencies, 

Fiscal Year 2011 (Dollars in Billions) 8

Contents
Page ii GAO-12-1016 Grants to State and Local Governments

Figure 3: Federal Outlays for Grants to State and Local 

Governments and Medicaid, in 2011 Constant Dollars, 

Fiscal Years 1980 to 2011 9

Figure 4: Federal Outlays for Grants to State and Local 

Governments and Medicaid as a Percentage of Total 

Federal Outlays, Fiscal Years 1980 to 2011 10

Figure 5: Federal Outlays for Grants to State and Local 

Governments by Top Five Functions as a Percentage of 

Total Federal Grants Outlays, Fiscal Years 1980 to 2011 12

Figure 6: Selected Federal Grants-Related Legislation Timeline 39
Page iii GAO-12-1016 Grants to State and Local Governments

Abbreviations

ACIR U.S. Advisory Commission on Intergovernmental Relations

CFDA Catalog of Federal Domestic Assistance

CFFR Consolidated Federal Funds Report

CMS Centers for Medicare & Medicaid Services

COFAR Council on Financial Assistance Reform

CRS Congressional Research Service

DHS Department of Homeland Security

DOE Department of Energy

Education Department of Education

EECBG Energy Efficiency and Conservation Block Grant

FAADS Federal Assistance Awards Data System

FFATA Federal Funding Accountability and Transparency Act

FEMA Federal Emergency Management Agency

GDP gross domestic product

GSA General Services Administration

HHS Department of Health and Human Services

HUD Department of Housing and Urban Development

IG Inspector General

JAG Justice Assistance Grant

Justice Department of Justice

NARA National Archives and Records Administration

OMB Office of Management and Budget

Recovery Act American Recovery and Reinvestment Act of 2009

SHSP State Homeland Security Program

UASI Urban Areas Security Initiative

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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Page 1 GAO-12-1016 Grants to State and Local Governments

United States Government Accountability Office

Washington, DC 20548

September 25, 2012

Congressional Requesters

Federal grants fund a wide array of activities. They help build and 

maintain our nation’s infrastructure by funding highways, bridges, and 

mass transit systems. Grants help educate young people by supporting 

the construction of school buildings, the hiring of teachers, and increasing 

student access to higher education. They also help care for the sick and 

economically disadvantaged by funding medical services, nutrition

programs, and housing assistance. Federal grants are diverse, varying

greatly in both size and the grantees who receive them. Some can be 

small, such as a research grant from the National Science Foundation for 

less than a couple of thousand dollars, or they can be very large, such as 

Medicaid grants to individual states, which are worth billions of dollars.

Grant recipients may include states and their agencies, local 

governments, tribal governments, nonprofit organizations, research 

institutions, or individuals. Regardless of these differences, Congress 

created the many varieties of grants to help meet national objectives. 

However, as the federal government faces deepening, long-term fiscal 

challenges, its ability to continue to support the current scope and breadth 

of federal grants will be a challenge.

In response to your request regarding the operation of federal grants, 

funding levels, and the challenges grant programs have faced, in this 

report we provide information on (1) the amount of grant funding to state 

and local governments for fiscal year 2011, how such funding has 

changed over the last three decades, difficulties related to identifying the 

number of such grant programs; and (2) selected grant challenges 

involving federal grants to state and local governments that have been 

identified in our previous work and that of federal inspectors general (IG) 

over the last several years. In scoping the research objectives for this 

work we limited our review to federal grants involving state and local 

governments because reliable historical data exist for this group of grants 

and according to the Office of Management and Budget (OMB) they 

represent roughly 80 percent of all federal grant funding. We could not 

identify a similarly reliable data source for the wider universe of all federal 

grants.

 
 

Page 2 GAO-12-1016 Grants to State and Local Governments

To determine key information regarding grant funding for fiscal year 2011, 

the growth in grant funding over the last three decades, and shifts in the 

focus of grant funding during that time, we used data from OMB.1

We conducted this performance audit from March 2012 to September 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

We 

obtained the data for fiscal years 1980 through 2011 and converted them 

to 2011 constant dollars for a more accurate comparison of grant 

spending from year to year. We determined the data were sufficiently 

reliable for the purposes of this report. In addition to OMB, we identified 

other sources of data on federal grant funding, and then analyzed and 

described how the data in each source differs. In an effort to identify the 

number of grant programs, we looked at the Catalog of Federal Domestic 

Assistance (CFDA), a data base containing information on federal 

assistance programs. We also reviewed our prior work, and the work of 

others, on federal grants in the CFDA, reviewed studies by the 

Congressional Research Service, and discussed the issue with OMB and 

the General Services Administration (GSA). To identify key issues and 

challenges related to the structure and operation of grants management, 

we reviewed our previous reports and audits as well as those from federal 

IGs and others. We also searched various federal, public policy, and 

research organizations’ websites to identify relevant reports and other 

literature regarding federal grant programs and how they are structured 

and managed. Finally, we discussed various issues related to federal 

grants and data on grant funding and programs with OMB and GSA, as 

these agencies have government-wide responsibilities related to grants, 

grants management, and grants data. Appendix I contains further 

information on our scope and methodology.

Grants constitute one form of federal assistance consisting of payments 

in cash or in kind to a state or local government or a nongovernmental 

 

1 See Office of Management and Budget, Fiscal Year 2013, Historical Tables, Budget of 

the U.S. Government. Specifically, Table 12.3, Federal Outlays for Grants to State and 

Local Governments, by Function, Agency, and Program: 1940–2013.

Background
 

Page 3 GAO-12-1016 Grants to State and Local Governments

recipient for a specified purpose.2

• Categorical grants are the most restricted, permitting funds to be used 

only for specific activities related to their purpose, such as funding for 

the narrowly defined purpose of nutrition for the elderly.

Taken as a whole, federal grant 

programs are extremely diverse. They can vary greatly in numerous ways 

including size, the nature of their recipients, and the type of programs 

they fund. Grant programs can also vary in two important dimensions—

the amount of discretion they give to the recipient in how the funds will be 

used, and the way they are allocated or awarded. Typically, grants are 

grouped into three types based on the amount of discretion given to the 

recipient for the use of funds: categorical grants, block grants, and 

general purpose grants.

• Block grants are less restrictive, funding broader categories of 

activities, such as community development or public health, and 

generally give greater discretion to recipients in identifying problems 

and designing programs to address those problems.

• General purpose grants, such as revenue sharing, offer the greatest 

amount of discretion to the recipient, as they require only that the 

funds be spent for government purposes. 

However, grant categories with regard to categorical grants and block 

grants are not rigid and sometimes overlap occurs.3 Each of these grants 

strikes a different balance between the interests of the federal grantmaking agency that funds be used efficiently and effectively to meet 

national objectives, and the interests of the recipient to use the funds to 

meet local priorities and to minimize the administrative burdens 

associated with accepting the grant.

 

2 GAO, A Glossary of Terms Used in the Federal Budget Process, GAO-05-734SP

(Washington, D.C.: September 2005) and “Chapter 10, Federal Assistance: Grants and 

Cooperative Agreements” in GAO, Principles of Federal Appropriations Law, Third Edition, 

Volume II, GAO-06-382SP (February 2006). 

3 For example, some block grants have characteristics normally associated with 

categorical grants. This type of variation in the characteristics of specific block grants

explains why there is some disagreement concerning precisely what constitutes a block 

grant and how many of them exist.
 

Page 4 GAO-12-1016 Grants to State and Local Governments

Grant programs also vary in the methods they use to allocate or award 

funds, that is, by formula or through discretionary project grants.

• Formula grants allocate funds based on distribution formulas 

prescribed by legislation or administrative regulation.

• Project grants are generally awarded on a competitive basis to eligible 

applicants for specific projects. OMB has emphasized the use of 

competitive grants as a means of increasing innovation in grant 

proposals.

While these labels help classify grants based on prominent 

characteristics, they should not be understood to be mutually exclusive 

definitions, as more than one can apply to a given grant program. For 

example, the federal government distributes Community Development 

Block Grant funds to states using a formula, but states redistribute the 

funds to localities, sometimes as project grants.

While there is substantial variation among grant types, competitive grants 

generally follow a life cycle that includes announcement, application, 

award, post-award, and closeout, as seen in figure 1. Once a grant 

program is established through legislation, which may specify particular 

objectives, eligibility, and other requirements, a grant-making agency may 

impose additional requirements on it. For competitive grant programs, the 

public is notified of the grant opportunity through an announcement, and 

potential recipients must submit applications for agency review. In the 

award stage, the agency identifies successful applicants or legislatively 

defined grant recipients and awards funding. The implementation stage 

includes payment processing, agency monitoring, and recipient reporting, 

which may include financial and performance information. The closeout 

phase includes preparation of final reports, financial reconciliation, and 

any required accounting for property. Audits may occur multiple times 

during the life cycle of the grant and after closeout.
 

Page 5 GAO-12-1016 Grants to State and Local Governments

Figure 1: Grant Life Cycle of Federal Grant-making Agency and Grant Recipient

Federal agencies do not have inherent authority to enter into grant 

agreements without affirmative legislative authorization. In authorizing 

grant programs, federal laws identify the types of activities that can be 

funded and the purposes to be accomplished through the funding. 

Legislation establishing a grant program frequently will define the 

program objectives and leave the administering agency to fill in the details 

by regulation.

Federal Grant Programs 

Are Established by Law 

and Subject to Many 

Different Legal 

Requirements
 

Page 6 GAO-12-1016 Grants to State and Local Governments

Grant programs are typically subject to a wide range of accountability 

requirements under their authorizing legislation or appropriation and 

implementing regulations so that funding is spent for its intended purpose. 

For example, the Department of Housing and Urban Development (HUD) 

administers grants to aid states and localities in providing affordable 

housing for low-income families. Congress mandated that HUD 

administer these grant programs in a manner that furthers fair housing. 

HUD regulations direct grant recipients to prepare planning documents 

and maintain certain records proving the legislation’s fair housing 

requirements as a condition to receiving funds. Congress may also 

impose requirements on specific funding for grant programs. The 

American Recovery and Reinvestment Act of 2009 (Recovery Act)

required increased reporting and oversight on both grant-making

agencies and recipients for many different grant programs receiving 

additional funding under the Recovery Act.

In addition, grant programs are also subject to cross-cutting requirements 

applicable to most assistance programs (see table 1 for more 

information). For example, recipients of grant funds are prohibited from 

using those funds to lobby members and employees of Congress and 

executive agency employees. OMB is responsible for developing 

government-wide policies to ensure that grants are managed properly 

and that grant funds are spent in accordance with applicable laws and 

regulations. For many decades, OMB has published guidance in various 

circulars to aid grant-making agencies with such subjects as audit and 

record keeping and the allowability of costs. For a detailed discussion of 

grants management legislation and OMB’s role in developing grants 

policy, see appendix III.
 

Page 7 GAO-12-1016 Grants to State and Local Governments

Table 1: Government-wide and Program-Specific Grant Requirements

Grant-making Agency Grant Recipient

Specific to individual grant 

programs

Grant program’s authorizing statute

Appropriation act providing funding for grant 

program

Grant program regulations issued by grantmaking agency

Grant agreement (terms and conditions)

Applicable to all grant programs Government-wide funding requirements

Executive orders and OMB circulars on grants 

management

Government-wide grant regulations:

(1) Administrative requirements (“common rule”) 

(2) Cost principles

(3) Drug-free workplace

(4) Suspension and debarment

(5) Anti-lobbying requirements

(6) Audit and reporting requirements

Source: GAO. 

Grants are an important tool used by the federal government to provide 

program funding to state and local governments. OMB has previously 

estimated that grants to state and local governments represent roughly 80 

percent of all federal grant funding, with the remaining approximately 20 

percent going to recipients such as nonprofit organizations, research 

institutions, or individuals. Federal outlays for grants to state and local 

governments totaled more than $606 billion in fiscal year 2011, equivalent 

to 4.1 percent of the gross domestic product (GDP) in that year. For 

comparison, federal outlays for national defense were 4.7 percent of GDP 

during the same period.

With outlays of $275 billion in fiscal year 2011, Medicaid is by far the 

federal government’s largest single grant program and by itself accounted 

for 45 percent of federal grant outlays to state and local governments in 

that year. The Department of Health and Human Services (HHS), which 

administers the Medicaid program, is the largest grant-making agency, 

with grant outlays of almost $348 billion in fiscal year 2011, or about 57 

percent of the total federal grant outlays to state and local governments. 

However, even when Medicaid is excluded, HHS remains the largest 

federal grant-making agency. While many federal agencies award grants, 

the large majority of grant outlays to state and local governments are 

made by just a few agencies, with the top five accounting for more than 

90 percent of those grant outlays in fiscal year 2011. Following HHS, the 

next four agencies with the largest amount of grant outlays to state and 

local governments in fiscal year 2011 were the Departments of Education

(Education), Transportation, HUD, and Agriculture. Figure 2 shows the 

Grants to State and 

Local Governments 

Have Consistently 

Been a Significant 

Component of 

Federal Spending but 

the Focus of Grant 

Spending Has 

Changed Over the 

Last Three Decades
 

Page 8 GAO-12-1016 Grants to State and Local Governments

amount of, and percentage of, grant outlays to state and local 

governments for the top 5 grant-making agencies.

Figure 2: Amount and Percentage of Federal Outlays for Grants to State and Local 

Governments by Top Five Agencies, Fiscal Year 2011 (Dollars in Billions)

Federal outlays for grants to state and local governments increased from 

$91 billion in fiscal year 1980 (about $221 billion in 2011 constant dollars) 

to more than $606 billion in fiscal year 2011.4

 

4 Constant dollar amounts reflect adjustments for inflation (e.g., the purchasing power of 

the $91 billion spent in 1980 represents about $221 billion in fiscal year 2011 dollars).

Figure 3 shows the total 

federal outlays for grants to state and local governments over the period 

from fiscal years 1980 to 2011, in constant dollars, and the increasing 

amount of this total that went to Medicaid over time.
 

Page 9 GAO-12-1016 Grants to State and Local Governments

Figure 3: Federal Outlays for Grants to State and Local Governments and Medicaid, in 2011 Constant Dollars, Fiscal Years 

1980 to 2011

While the past three decades have witnessed a dramatic growth in 

federal grants to state and local governments in absolute dollar terms, the 

same is not true when one considers these grant outlays as a proportion 

of total federal spending. As shown in figure 4, grant outlays to state and 

local governments as a percentage of total federal outlays in fiscal year 

2011 were at a roughly comparable level to what they were more than 30 

years earlier (16.8 percent versus 15.5 percent).5

 

5 Another way to understand federal grant outlays during this period is to consider them as 

a percentage of the nation’s GDP. Federal grants to state and local governments were 

equivalent to 3.4 percent of GDP in 1980 and 4.1 percent of GDP in 2011. While this 

figure has fluctuated somewhat over the last 30 years, it has not demonstrated the 

dramatic growth seen in federal grant outlays when viewed in constant dollar terms that is 

shown in figure 3.

However, during this 

period the proportion of federal grant outlays to state and local 
 

Page 10 GAO-12-1016 Grants to State and Local Governments

governments dedicated to Medicaid more than tripled, rising from 2.4 

percent of all federal outlays in 1980 to 7.6 percent in 2011. The increase 

in outlays for Medicaid and other health-related grant programs was offset 

by an approximately equivalent decrease in the share of outlays for other 

grants to state and local governments.

Figure 4: Federal Outlays for Grants to State and Local Governments and Medicaid as a Percentage of Total Federal Outlays, 

Fiscal Years 1980 to 2011

The dip in federal grant outlays to state and local governments as a 

percentage of total outlays during the 1980s, seen in figure 4, was likely 

due to a variety of factors, including efforts undertaken at the time to 

merge categorical grant programs in several functional areas into block 

grants and also reduce funding levels. For example, as part of the 

Omnibus Budget Reconciliation Act of 1981, nine block grants were 

created from about 50 of the 534 categorical programs in effect at that 

time. Overall, funding for the categorical grants bundled into these block 

grants was reduced 12 percent, about $1 billion, from their combined 

funding level the previous year. State officials believed that funding 
 

Page 11 GAO-12-1016 Grants to State and Local Governments

reductions would not result in the loss of services for recipients because 

the reductions would be offset by administrative efficiencies, although in 

our subsequent work we found that the administrative cost savings were 

difficult to quantify.6

Grant outlays can also be analyzed historically using OMB’s grant 

programs’ functional categories. In fiscal year 2011, the five largest grant 

program categories by government function were health; income security; 

education, training, employment, and social services; transportation; and 

community and regional development. Figure 5 shows federal grant 

outlays to state and local governments broken out by these five

governmental functions, from fiscal year 1980 to fiscal year 2011.

Figure 4 also shows the upturn in federal grant 

outlays in 2009 and 2010 that were the result of the Recovery Act.

 

6 GAO, Block Grants: Characteristics, Experience, and Lessons Learned, 

GAO/HEHS-95-74 (Washington, D.C.: Feb. 9, 1995).
 

Page 12 GAO-12-1016 Grants to State and Local Governments

Figure 5: Federal Outlays for Grants to State and Local Governments by Top Five Functions as a Percentage of Total Federal 

Grants Outlays, Fiscal Years 1980 to 2011

Health function grant outlays were 17 percent of total grant outlays to 

state and local governments in fiscal year 1980—lower than either 

income security or education.7

 

7 The government function grant program categories do not necessarily overlap with 

program groupings by grant-making agency.

By fiscal year 2011, outlays for healthrelated grant functions increased to almost 50 percent of these total grant 

outlays. While outlays for health-related grants experienced a relatively 

steady increase in the last three decades—more than doubling in 30 

years—outlays for other grant functions generally decreased relative to 

the total of all federal grants to state and local governments during the 

same period.
 

Page 13 GAO-12-1016 Grants to State and Local Governments

OMB and others have noted that the relative growth and contraction of 

grant outlays for different purposes reflects a broader shift in the focus of 

federal outlays for grant programs. According to OMB data, since the 

1980s, funding has shifted from providing grants to state and local 

governments for physical capital and societal activities (e.g., highways, 

mass transit, sewage treatment plants, public education, government 

administration and community development), toward grants for payments 

for the benefit of individuals or families. These grants benefitting 

individuals are primarily entitlement programs such as Medicaid, 

Temporary Assistance for Needy Families, child nutrition programs, and 

housing assistance. In fiscal year 1980, the percentage of grant outlays 

for the benefit of individuals and families was just under 36 percent. By 

fiscal year 2011, federal outlays for grants benefitting individuals and 

families, a major component of which is Medicaid, had grown to almost 

two-thirds (64 percent) of all grant outlays to state and local governments.

There are various sources for data on the amount the federal government 

spends on grants, including OMB budget data, USAspending.gov, and 

Census Bureau surveys of state and local governments. See appendix II 

for more detail about these data sources and their differences. The 

various differences in each data source can create challenges for those 

examining federal grants management issues and for congressional 

oversight of grants administration.

Our prior work and the work of others have shown that the number of 

federal grant programs to state and local governments has generally 

increased over the last three decades. However, determining a definitive 

number of federal grant programs presents certain difficulties. Efforts to 

accurately track the number of federal grant programs over time have 

been complicated by the fact that different entities have counted grant 

programs differently for decades. Both OMB and the former U.S. Advisory 

Commission on Intergovernmental Relations (ACIR) periodically 

published counts of the total number of federally funded grant programs 

during the 1980s and 1990s, but because they used different 

methodologies to determine which grant programs to include, they came 

up with different results. For example, in 1995 OMB identified 608 

While the Number of 

Federal Grant Programs 

Has Generally Increased 

over the Last Three 

Decades, a Definitive 

Figure Is Not Available
 

Page 14 GAO-12-1016 Grants to State and Local Governments

federally funded grant programs compared to ACIR’s count of 633.8

Although the CFDA is the single authoritative, government-wide

compendium and source document for descriptions of federal programs 

that provide assistance or benefits to the public, as the experiences of 

OMB and ACIR suggest, a simple tally of the CFDA database will not 

provide an accurate count of the number of federally funded grant 

programs.

OMB 

no longer issues formal counts of federally funded grant programs and 

there is no current consensus on the methodology used to count federal 

grant programs.

9

 

8 As another example of different methodologies, ACIR included in its counts all direct 

cash grants to state or local governmental units, other public bodies established under 

state or local law, or their designee; payments for grants-in-kind, such as purchases of 

commodities distributed to state or local governmental institutions; payments to 

nongovernmental entities when such payments result in cash or in-kind services or 

products that are passed on to state or local governments; payments to state and local 

governments for research and development that is an integral part of their provision of 

services; and payments to regional commissions and organizations that are redistributed 

at the state or local level to provide public services. In contrast, OMB counted only those 

federal grants for traditional governmental operations, as defined in OMB Circular A-11. 

The definition covered only grants that “support state or local programs of government 

operations or provision of services to the public.” Accordingly, it excluded federal grants 

that went directly to individuals, fellowships, most grants to nongovernmental entities, and 

technical research grants.

This is due to a number of reasons. First, according to GSA 

officials, there is not a one-to-one relationship between individual grant 

program opportunities and overarching CFDA programs. Multiple grant 

programs can trace their legal authority back to a single CFDA program 

description and CFDA number. CFDA programs contain broader 

objectives than individual grant opportunities. Second, not all of the 

programs listed in the CFDA have current appropriations. CFDA is a 

catalog containing active funded and inactive non-funded programs which 

have been archived at an agency’s request. Third, officials from GSA told 

us that each agency determines how to organize and describe their 

programs for publication in the CFDA, as long as the agency adheres to 

the underlying requirement to describe the program’s legal authority, 

administering office, funding, purpose, benefits, and beneficiaries. These 

are among the many factors that complicate efforts to accurately count 

9 As of the end of May 2012, the CFDA listed a total of 2,240 federal assistance programs, 

including 239 items under a search for formula grants and 1,530 items under a search for 

project grants. CFDA data are available on the Web at http://www.CFDA.gov. 
 

Page 15 GAO-12-1016 Grants to State and Local Governments

the number of federal grant programs using the information included in 

the CFDA database.

Over time, growth of both the numbers of grant programs for state and

local governments and their level of funding has created greater diversity 

and complexity in federal grants management. Substantial variation in the 

way federal agencies administer these programs has further increased 

their complexity. As a result, the management of grants to state and local 

governments presents both grant-making agencies and grant recipients 

with a variety of challenges. We and others have previously reported on 

many of these issues which can be grouped into the following broad 

themes: (1) challenges related to effectively measuring grant 

performance; (2) uncoordinated program creation; (3) need for better 

collaboration; (4) internal control weaknesses in grants management and 

oversight; and (5) lack of agency or recipient capacity.

In our past work, we have reported that effective performance 

accountability provisions are of fundamental importance in assuring the 

proper and effective use of federal funds and determining if grant program 

goals are met. Two issues that we have previously identified as important 

for effectively reporting on grant performance are having appropriate, 

high-quality performance measures and accurate performance data.10

Lack of Appropriate Performance Measures. While the principles of 

good governance indicate that agencies should establish performance 

measures to demonstrate how they intend to achieve their program goals 

and measure the extent to which they have done so, selecting the 

measures by which a grant program’s performance is assessed can be 

challenging.11

 

10 GAO, Grants Management: Enhancing Performance Accountability Provisions Could 

Lead to Better Results,

We have previously reported on the general attributes of 

appropriate grant performance measures, noting that measures should be 

linked to agency goals and missions; be clearly stated; include 

GAO-06-1046 (Washington, D.C.: Sept. 29, 2006).

11 GAO, Agencies’ Annual Performance Plans under the Results Act: An Assessment 

Guide to Facilitate Congressional Decisionmaking, GAO/GGD/AIMD-10.1.18 

(Washington, D.C.: February 1998); and The Results Act: An Evaluator’s Guide to 

Assessing Agency Annual Performance Plans, GAO/GGD-10.1.20 (Washington, D.C.: 

April 1998).

Grants Challenges 

Reflect the Diversity 

and Complexity of 

Grants Management 

for State and Local 

Governments

Lack of Appropriate 

Performance Measures 

and Accurate Data Limit 

Agencies’ Ability to 

Effectively Measure Grant 

Program Performance
 

Page 16 GAO-12-1016 Grants to State and Local Governments

measurable targets; and be objective, reliable, and balanced. However, 

we have found that while agencies may implement measures with some 

of these attributes, other key attributes may not be incorporated. For 

example, the Department of Justice (Justice) developed and implemented 

86 new performance measures for the Edward Byrne Memorial Justice 

Assistance Grant (JAG) funds to state and local governments for criminal 

justice activities in 2009. While Justice continued to make efforts to 

improve these measures in 2009, we reported that 19 of the JAG 

performance measures we reviewed generally lacked, in varying degrees, 

several key attributes of successful performance measurement systems, 

including clarity, linkages with strategic or programmatic goals, objectivity, 

reliability, and the measurability of targets.12

In another example of an agency’s publishing measures that do not 

necessarily contribute to its ability to assess grant program effectiveness, 

Department of Homeland Security (DHS) implemented some 

performance measures for the State Homeland Security Program (SHSP) 

and Urban Areas Security Initiative (UASI) in the fiscal year 2011 grant 

guidance. However, the type of measures DHS published in the SHSP 

and UASI guidance did not contribute to DHS’s ability to assess the 

effectiveness of these grant programs, but instead provided DHS with 

information to help it measure completion of tasks or activities. We 

recommended, among other things, that DHS revise its plan to ensure the 

timely implementation of performance measures to assess the 

Specifically, we found that 14 

of the 19 measures were not clearly defined; 14 of the 19 measures were 

not linked to Justice’s strategic or programmatic goals; 13 of the 19 

measures were not reliable; and 17 of the 19 measures did not have 

measurable targets. Our report noted that by more fully incorporating 

such attributes of effective performance measures into its performance 

measurement and reporting system, Justice could facilitate accountability, 

be better positioned to monitor and assess results, and subsequently 

improve its grants management. We recommended that Justice should, in 

revising its performance measures, consider incorporating key attributes 

of successful performance measurement systems, such as clarity, 

reliability, linkage, objectivity, and measurable targets. Justice concurred 

with the recommendations in our report and they have actions underway 

that address the recommendations. 

 

12 GAO, Recovery Act: Department of Justice Could Better Assess Justice Assistance 

Grant Program Impact, GAO-11-87 (Washington, D.C.: Oct. 15, 2010).
 

Page 17 GAO-12-1016 Grants to State and Local Governments

effectiveness of these grants. According to DHS, it has efforts under way 

to develop additional measures to help it assess grant program 

effectiveness; however, until these measures are implemented, it will be 

difficult for DHS to determine the effectiveness of these grant-funded 

projects, which totaled $20.3 billion from fiscal years 2002 through 

2011.13

Data Collection and Validation Challenges. Grant programs often rely 

on recipients’ administrative systems to provide performance information.

Our prior work has shown that agencies relying on third parties for 

performance data can have difficulty collecting the data as well as 

ascertaining its accuracy and quality. In past work, we have also found 

that the availability and credibility of performance data has been a longstanding weakness. An example of this can be seen in our November 

2011 report on federal “green building” initiatives that foster—in part

through the use of grant funds—construction and maintenance practices 

designed to make efficient use of resources, reduce environmental 

problems, and provide long-term financial and health benefits in the 

nonfederal sector. Eleven agencies implemented 94 federal initiatives, 47 

of which were funded by grants. Agency officials reported that they may 

not have had information on the results of green building initiatives for the 

nonfederal sector, in part because they faced several challenges in 

gathering appropriate and reliable performance data, such as utility usage 

data for multifamily properties. These difficulties included obtaining the 

resources necessary to develop systems for accurate data collection, a 

lack of industry standards for performance data collection, third party 

utility companies’ diverse policies governing data sharing, as well as the 

utility companies’ wide-ranging capacities to collect data. In particular, 

HUD officials told us the quality of utility data can vary by utility company, 

As we have previously reported, performance measures that 

evaluate program results can help Congress make more informed policy 

decisions regarding program achievements and performance. Agencies 

could facilitate accountability, be better positioned to monitor and assess 

results, and subsequently improve their grants management by including 

key attributes of successful performance measurement systems in their 

performance measure revisions. 

 

13 GAO, Homeland Security: DHS Needs Better Project Information and Coordination 

among Four Overlapping Grant Programs, GAO-12-303 (Washington, D.C.: Feb. 28, 

2012).
 

Page 18 GAO-12-1016 Grants to State and Local Governments

especially for water consumption data—which can be incomplete and 

inaccurate and is often not available in electronic form.14

In other instances, actual performance data may not be available until 

after the completion of the grant project. For example, Department of 

Energy (DOE) officials said that for the Energy Efficiency and 

Conservation Block Grant program (EECBG) actual energy savings data 

are generally available only after a project is completed; therefore, to 

comply with the program’s reporting requirements, most recipients 

reported estimates calculated using the Environmental Protection 

Agency’s Portfolio Manager tool. While DOE officials said they had 

anecdotal examples of program successes, DOE had experienced 

challenges in assessing the reasonableness of the energy-savings 

estimates provided by recipients because DOE did not require recipients 

to use the most up-to-date estimating tool when calculating and reporting 

energy-savings estimates. Consequently, DOE could not identify 

instances where recipients’ estimates may need to be more carefully 

reviewed.15 We recommended, among other things, that DOE should 

solicit information on recipients’ methods for estimating energy savings 

and verify that recipients use the most recent version of the estimating 

tool. To address our recommendation, DOE issued guidance effective 

June 23, 2011, that eliminates the requirement for grant recipients to 

calculate and report estimated energy savings. DOE officials said the 

calculation of estimated impact metrics will now be performed centrally by 

DOE by applying known national standards to existing grantee-reported 

performance metrics. Based on DOE’s action, we concluded that DOE 

has addressed the intent of this recommendation. Even in federal grants 

with designs that favor performance accountability, challenges related to 

collecting and reporting performance data can affect the extent to which 

performance accountability can be achieved. 

 

14 GAO, Green Building: Federal Initiatives for the Nonfederal Sector Could Benefit from 

More Interagency Collaboration, GAO-12-79 (Washington, D.C.: Nov. 2, 2011).

15 GAO-11-379. 
 

Page 19 GAO-12-1016 Grants to State and Local Governments

In our 2012 Annual Report: Opportunities to Reduce Duplication, Overlap 

and Fragmentation, Achieve Savings, and Enhance Revenue, we 

reported on examples of how multiple federal grant programs, created 

without coordinated purposes and scopes, can result in structural grants 

management challenges.16 One example involved four DHS grant 

programs—the State Homeland Security Program, the Urban Areas 

Security Initiative, the Port Security Grant Program, and the Transit 

Security Grant Program. DHS’s Federal Emergency Management Agency 

(FEMA) allocated about $20.3 billion to recipients through the four 

programs from fiscal years 2002 through 2011. These four grant 

programs have similar goals and fund similar activities in overlapping 

jurisdictions. For instance, many jurisdictions within designated Urban 

Areas Security Initiative regions also apply for and receive State 

Homeland Security Program funding. Similarly, port stakeholders in urban 

areas could receive funding for equipment such as patrol boats through 

both the Port Security Grant Program and the Urban Areas Security 

Initiative, and a transit agency could purchase surveillance equipment 

with Transit Security Grant Program or Urban Areas Security Initiative 

funding. We, as well as DHS’s IG, concluded that FEMA should use more 

specific project-level data in making grant award decisions in order to 

identify and mitigate potential duplication. Our work, and the work of the 

DHS IG, concluded that coordinating the review of grant projects 

internally would give FEMA more complete information about applications 

across the four grant programs that could help FEMA identify and mitigate 

the risk of unnecessary duplication across grant applications.17

In another example of this challenge, we found instances where Justice 

could improve how it targets nearly $3.9 billion to reduce the risk of 

potentially unnecessary duplication across more than 11,000 grant 

awards it makes annually. Justice’s grant-making agencies had awarded 

We 

recommended in February 2012, among other things, that FEMA take 

steps to ensure that it collects project information with the level of detail 

needed to better position the agency to identify any potential unnecessary 

duplication within and across the four grant programs. DHS concurred 

with our recommendation in this area.

 

16 GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 

Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington, 

D.C.: Feb. 28, 2012).

17 GAO-12-342SP. 

Numerous Federal Grant 

Programs, Created over 

Time without Coordinated 

Purposes and Scopes, Can 

Result in Grants 

Management Challenges
 

Page 20 GAO-12-1016 Grants to State and Local Governments

funds from different grant programs to the same applicants whose 

applications described similar—and in some cases, the same—purposes 

for using the grant funds. While we acknowledged that there may be 

times when Justice’s decision to fund recipients in this manner is 

warranted, our work found that Justice made grant award decisions 

without visibility over whether the funds supported similar or the same 

purposes, thus potentially resulting in unintended, and unnecessary, 

duplication. We found that Justice had not assessed its grant programs to 

determine the extent to which they may overlap with one another and 

determine if consolidation of grant programs may be appropriate. Further, 

Justice’s grant-making agencies had not established consistent policies 

and procedures for sharing grant application information that could help 

them identify and mitigate unnecessary duplication in how recipients 

intend to use their grant awards.18 We recommended that Justice should 

conduct an assessment to better understand the extent to which the 

department’s grant programs overlap with one another and determine if 

grant programs may be consolidated to mitigate the risk of unnecessary 

duplication. To the extent that Justice identifies any statutory obstacles to 

consolidating its grant programs, it should work with Congress to address 

them, as needed. Justice concurred with our recommendations in this 

area. Addressing structural challenges such as these may achieve cost 

savings, enhance revenue, and could result in greater efficiencies in grant 

programs.

 

18 GAO, Justice Grant Programs: DOJ Should Do More to Reduce the Risk of 

Unnecessary Duplication and Enhance Program Assessment, GAO-12-517 (Washington, 

D.C.: July 12, 2012).
 

Page 21 GAO-12-1016 Grants to State and Local Governments

The process of distributing federal assistance through grants is 

complicated and involves many different parties—both public and 

private—with different organizational structures, sizes, and missions. In 

previous work, we have identified lack of collaboration among and 

between federal agencies, state and local governments, and

nongovernmental grant participants as a challenge to effective grant 

implementation.19 Because grants management can be complex, 

collaboration among the grant participants, particularly with regard to 

information sharing, is important. With this in mind, we have identified key

practices to enhance and sustain collaboration among federal agencies.20

We have also recommended these same key practices to strengthen 

partnerships between government and nongovernmental entities, such as 

nonprofit organizations.21

 

19 For the purpose of this report we use the term “collaboration” broadly to include 

interagency activities that others have variously defined as “coordination,” “cooperation,” 

“integration,” or “networking.” We have done so since there are no commonly accepted 

definitions for these terms and we are unable to make definitive distinctions between 

these different types of interagency activities. See GAO, Results Oriented Government: 

Practices That Can Help Enhance and Sustain Collaboration among Federal Agencies,

In that same report, we describe an example 

related to hurricane recovery that involves difficulties in collaboration 

between federal agencies and state and local case management 

providers. Disaster case management is a process that assists people in 

identifying their service needs, locating and arranging services, and 

coordinating the services of multiple providers to help people recover 

from a disaster. State and local agencies providing federally funded 

disaster case management services faced challenges in, among other 

things, obtaining timely and accurate information from the federal 

agencies overseeing the disaster case management programs. While 

FEMA had a lead role in coordinating other types of disaster assistance 

after Hurricanes Katrina and Rita, its role for coordinating disaster case 

management was not explicit. Initial coordination activities among federal 

agencies and case management providers were minimal following the 

GAO-06-15 (Washington, D.C.: Oct. 21, 2005). Here, we use this definition to describe 

collaboration among intergovernmental participants as well as between nongovernmental

grant stakeholders.

20 Examples of key practices for collaboration include establishing mutually reinforcing or 

joint strategies, and establishing compatible policies, procedures, and other means of 

operating across agency boundaries. For additional details, see GAO-06-15. 

21 GAO, Disaster Assistance: Greater Coordination and an Evaluation of Programs’ 

Outcomes Could Improve Disaster Case Management, GAO-09-561, (Washington, D.C.: 

July 8, 2009).

Because of Its Complexity, 

Grants Management 

Benefits from Effective 

Collaboration among 

Intergovernmental and 

Nongovernmental 

Participants
 

Page 22 GAO-12-1016 Grants to State and Local Governments

hurricanes. As a result, we found that some victims may not have 

received case management services while others may have received 

services from multiple providers.22

In another example of collaboration challenges, 80 federal grant 

programs are authorized to provide funding for transportation for 

disadvantaged populations and involve several federal agencies, 

including the Departments of Agriculture, Education, HHS, HUD, Interior, 

Labor, Transportation, and Veterans Affairs.

We recommended, among other 

things, that FEMA establish a time line for developing a disaster case 

management program that includes practices to enhance coordination 

among stakeholders involved in this program. FEMA agreed with our 

recommendations in this area and reported that it would take steps to 

coordinate with stakeholders. Among other actions, FEMA has since held 

a disaster case management summit, and participants made 

recommendations for improving coordination among federal and 

nonfederal stakeholders that will be included in the disaster case 

management program guidance.

23 These grantors may 

provide funds to state and local agencies that can be used for 

transportation expenses to help individuals access federal programs, 

including education, employment, medical care, or other human 

services.24 To improve the efficiency and effectiveness of human services 

transportation by coordinating related programs at the federal level and 

promoting the maximum feasible coordination at the state and local 

levels, the federal grant-making agencies collaborate through an 

Interagency Transportation Coordinating Council on Access and Mobility 

(Coordinating Council). In our past work we have reported that while 

some collaboration efforts have shown promising results, obstacles 

continued to impede other attempts at collaboration between grant 

participants.25

 

22

In 2011, we reported that while some federal agencies 

GAO-09-561. 

23 GAO, Transportation-Disadvantaged Populations: Federal Coordination Efforts Could 

Be Further Strengthened, GAO-12-647, (Washington, D.C.: June 20, 2012).

24 Some federal programs, such as those administered by Veterans Affairs, may provide 

direct transportation services to beneficiaries, as opposed to funds to state and local 

agencies to provide these services. 

25 GAO, Transportation-Disadvantaged Populations: Some Coordination Efforts Among 

Programs Providing Transportation Services, but Obstacles Persist, GAO-03-697

(Washington, D.C.: June 30, 2003). 
 

Page 23 GAO-12-1016 Grants to State and Local Governments

were developing guidance and technical assistance for transportation 

coordination, other federal departments still had more work to do in 

identifying and assessing their transportation programs, working with 

other federal departments to identify opportunities for additional 

collaboration, and developing and disseminating policies and recipient 

guidance for coordinating transportation services.26 In June 2012, we 

reported that several state and local officials told us that there was not 

sufficient federal leadership and guidance on how to coordinate 

transportation services for the disadvantaged and that varying federal 

program requirements may hinder coordination of transportation services, 

acting as barriers to collaboration. In that report, we recommended that in 

order to promote and enhance federal, state, and local coordination 

activities, the Secretary of Transportation as the chair of the Coordinating 

Council, as well as the member agencies of the Coordinating Council, 

should complete and publish a strategic plan and report on their progress 

in implementing their recommendations. Education and Veterans Affairs 

generally agreed with our report, while HHS, HUD, and the Department of 

Transportation neither agreed nor disagreed.

When awarding and managing federal grants, effective oversight and 

internal control is important to provide reasonable assurance to federal 

managers and taxpayers that grants are awarded properly, recipients are 

eligible, and federal grant funds are used as intended and in accordance 

with applicable laws and regulations. Internal control comprises the plans, 

methods, and procedures agencies use to be reasonably assured that 

their missions, goals, and objectives can be met. In numerous reviews 

over the years, we and agency IGs have identified weaknesses in 

agencies’ internal controls for managing and overseeing grants. When 

such controls are weak, federal grant-making agencies face challenges in 

achieving grant program goals and assuring the proper and effective use 

of federal funds which can help avoid improper payments.

Control Weaknesses in Monitoring and Overseeing Grant Programs.

Agencies are responsible for overseeing and monitoring implementation 

of their grant programs to help ensure that recipients are meeting 

program and accountability requirements. Oversight procedures for 

 

26 GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save 

Tax Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011) 

Internal Control 

Weaknesses in Grants 

Management and 

Oversight Processes Affect 

Federal Agencies’ Ability 

to Ensure Grant Funds Are 

Spent Effectively
 

Page 24 GAO-12-1016 Grants to State and Local Governments

monitoring the recipients’ use of awarded funds, including site visits and 

review of recipient reports, can help agencies determine whether 

recipients are operating efficiently and effectively and whether program 

funds are being spent appropriately. Risk-based monitoring programs can 

help identify those areas in need of oversight resources. When agencies 

do not consider certain risk factors when selecting recipients for site 

visits, they may not know where to focus their monitoring resources. For 

example, in February 2011, the IG at the National Archives and Records 

Administration (NARA) reported that NARA, among other things, had not 

developed a risk-based process for monitoring and determining which 

grants to review.27

Federal agencies award grant funds to recipients, often states and local 

governments, and then those grant recipients may award, or pass 

through, subgrants to subrecipients.

The IG found that NARA did not consider relevant 

factors, such as a program’s age or size, or the experience of the 

recipient. The IG concluded that without a more structured process for 

determining and assessing risk, NARA could not provide adequate 

assurance that risks associated with its grant programs are properly 

addressed and mitigated. According to the IG, NARA subsequently took 

corrective actions, including developing selection criteria for grantee site 

visits and desk audits and determining their frequency.

28 It is important that grant recipients 

identify, prioritize, and manage potential at-risk subrecipients to ensure 

that grant goals are reached and funds are used properly. In April 2011, 

we reported on DOE’s use of Recovery Act funds for the EECBG 

program. 29

 

27 NARA/OIG Audit Report No. 11-03, Audit of NARA’s Oversight of Selected Grantees’ 

Use of Grant Funds, Feb. 16, 2011.

We found that EECBG recipients used various methods to 

monitor sub-recipients, with some recipients providing more rigorous 

monitoring than others. DOE officials acknowledged that many recipients 

are resource constrained, limiting their ability to monitor subrecipients and 

ensure compliance with applicable federal requirements. DOE gathered 

specific information on recipient monitoring practices during on-site visits. 

28 A subrecipient is an entity that receives a grant award from the prime recipient of an 

award and is accountable to the prime recipient for the use of the federal funds provided 

by the subaward.

29 GAO, Recovery Act: Energy Efficiency and Conservation Block Grant Recipients Face 

Challenges Meeting Legislative and Program Goals and Requirements, GAO-11-379

(Washington, D.C.: Apr. 7, 2011).
 

Page 25 GAO-12-1016 Grants to State and Local Governments

However, because not all recipients were to receive site visits, DOE did 

not have specific information on monitoring for many recipients, and 

therefore, did not know whether those monitoring activities were 

sufficiently rigorous to ensure compliance with federal requirements. We 

recommended that DOE explore a means to capture information on the 

monitoring processes of all recipients to make certain that recipients have 

effective monitoring practices. DOE has taken some actions to increase 

their monitoring efforts; however, the actions may not result in capturing 

information on the monitoring practices of all recipients.

Medicaid, the largest federal grant program, has also been the subject of 

numerous reviews. The challenges faced by HHS’s Centers for Medicare 

& Medicaid Services (CMS) in overseeing fiscal management of the 

Medicaid program have been well-documented in our past work.30

Government-wide Issues. Our work has identified weaknesses in grant 

oversight and accountability issues that span the government, including 

challenges in oversight of undisbursed grant award balances and 

significant levels of improper payments in grant programs.

Because of concerns about the program’s fiscal management, size, 

growth, and diversity, Medicaid has been on our list of high-risk programs. 

Areas of concern in the Medicaid program include improper payments 

and inconsistent reviews of managed care rate setting by CMS.

We have found issues and raised concerns about timely grant closeouts, 

including undisbursed funds remaining in grant accounts, across the 

federal government. For grant programs with a defined end date, closeout 

procedures help ensure that grant recipients have met all financial 

requirements, provided final reports, and returned any unused funds. We 

have reported that some agencies lack adequate systems or policies to 

properly monitor grant closeouts or did not deobligate funds from grants 

eligible for closeout in a timely manner.31

 

30 GAO, Medicaid: Federal Oversight of Payments and Program Integrity Needs 

Improvement, 

When agencies do not conduct 

closeout procedures in a timely manner, unused funds can be prevented 

from being used to help address the purpose of the grant. Further, failure 

to close out a grant and deobligate any unspent balances can allow 

GAO-12-674T (Washington, D.C.: Apr. 25, 2012). 

31 GAO, Grants Management: Action Needed to Improve the Timeliness of Grant 

Closeouts by Federal Agencies, GAO-12-360 (Washington, D.C.: Apr. 16, 2012).
 

Page 26 GAO-12-1016 Grants to State and Local Governments

recipients to continue to draw down federal funds even after the grant’s 

period of availability to the recipient has ended, making these funds more 

susceptible to waste, fraud, or mismanagement. In April 2012, we 

reported that, as of September 30, 2011, more than $794 million 

remained in expired grant accounts in the Payment Management System, 

the largest civilian federal payment system which made 68 percent of all 

federal grant disbursements in fiscal year 2010.

32

Federal agencies reported an estimated $115.3 billion in improper 

payments in fiscal year 2011. Many of the programs reporting improper 

payments were federal grant programs, including Medicaid and the 

National School Lunch program. Strong preventive controls are important 

as they serve as the front-line defense against improper payments, and 

effective monitoring and reporting are important to help detect emerging 

improper payment issues. In March 2012, we reported that many 

agencies and programs are in the process of implementing preventive 

controls that involve activities such as training, which can be a key 

element in any effort to prevent improper payments from occurring.

These accounts were 

more than 3 months past the grant end date and had no activity for 9 

months or more, with some balances remaining in grant accounts several 

years past their expiration date. Subsequently, OMB issued guidance 

instructing federal agencies to take appropriate action to close out grants 

in a timely manner.

33

In addition to weaknesses and issues found in our and IG reviews of 

agencies’ grants-related controls and individual grant programs, we 

identified grants management as a significant deficiency in internal control 

in our fiscal year 2011 audit of the consolidated financial statements for 

For 

example, CMS’s Medicaid Integrity Group trains state-level staff and 

sponsors education programs for beneficiaries and providers. Along with 

strong preventive controls, effective detection techniques, such as data 

mining and recovery auditing to quickly identify and recover improper 

payments, are important for reducing improper payments.

 

32 GAO-12-360. 

33 GAO, Improper Payments: Remaining Challenges and Strategies for Government-wide

Reduction Efforts, GAO-12-573T (Washington, D.C.: Mar. 28, 2012).
 

Page 27 GAO-12-1016 Grants to State and Local Governments

the U.S. Government.34 A deficiency in internal control exists when the 

design or operation of a control does not allow management or 

employees, in the normal course of performing their assigned functions, 

to prevent or detect and correct misstatements on a timely basis.35 We 

reported that these internal control deficiencies could adversely affect the 

federal government’s ability to ensure that grant funds are being spent in 

accordance with applicable program laws and regulations. We based our 

finding on audits of agencies’ fiscal year 2011 financial statements, where 

auditors at several federal agencies found grants management internal 

control deficiencies, primarily regarding inadequate monitoring and 

oversight of grant programs. For example, the auditor at HUD reported 

issues regarding timely action and follow-up with noncompliant recipients, 

as well as inadequate procedures to identify noncompliant recipients. We 

reported that these internal control deficiencies could adversely affect the 

federal government’s ability to ensure that grant funds are being spent in 

accordance with applicable program laws and regulations.

The capacity of grant-making agencies and recipients is a key issue in 

grants management which can impact program success. Capacity 

involves both the maintenance of appropriate resources and the ability to 

effectively manage those resources. Building sufficient capacity is a 

challenge that may involve significant costs or tradeoffs. Three relevant 

types of capacity are organizational, human capital, and financial.

Organizational capacity captures the degree to which the grant-making

agency or recipient is institutionally prepared for grants management and 

implementation. This may include having appropriate leadership, 

management structure, and size to efficiently and effectively implement 

the program and adapt as needed. For example, we recently reported 

that capacity was a concern for states, school districts, and schools in the 

 

34 The 2011 Financial Report of the United States Government includes our report and 

was issued by the Department of the Treasury on December 23, 2011, and is available 

through GAO’s website at http://www.gao.gov/financial.html and Treasury’s website at 

http://www.fms.treas.gov/fr/index.html. 

35 A deficiency is categorized as a material weakness or a significant deficiency. A 

material weakness is a deficiency, or combination of deficiencies, in internal control over 

financial reporting such that there is a reasonable possibility that a material misstatement 

of the entity’s financial statements will not be prevented or detected and corrected on a 

timely basis. A significant deficiency is less severe than a material weakness, yet 

important enough to merit attention by those charged with governance.

A Lack of Organizational, 

Financial, or Human 

Capital Capacity Impacts 

the Ability of Grant-making

Agencies and Recipients to 

Effectively Manage Grant 

Programs
 

Page 28 GAO-12-1016 Grants to State and Local Governments

School Improvement Grant program.36

Human capital capacity measures the extent to which an organization has 

sufficient staff, knowledge, and technical skills to effectively meet its 

program goals. Human capital needs shift over time as programs change 

and face new challenges. Human capital needs also shift as new 

technology is implemented and the organization finds new ways to 

leverage expertise. Human capital challenges at the federal, state, and 

local level can underlie the operational difficulties faced during program 

implementation. For example, we have previously reported that during the 

initial phases of Gulf Coast rebuilding following the hurricanes in 2005, 

officials at both the federal and state level initially lacked the human 

capital capacity to administer the public assistance grant program.

States and districts both struggled 

to develop the necessary staff capacity to successfully support and 

oversee the program implementation because of resource constraints. 

Officials from Education and several states told us that the grant required 

states to support local reform efforts to a much greater extent than they 

had in the past, and staff in some states had not yet developed the 

knowledge base to fulfill these responsibilities. Some states noted that 

such capacity limitations meant that time staff could devote to 

administering the program and monitoring district implementation was 

significantly limited.

37

Insufficient financial resources at the grant-making agency or recipient to 

administer or implement the grant can also limit the effectiveness of a 

grant in a number of ways. Financial capacity constraints may lead some 

recipients, such as nonprofits, to reduce the population served, the scope 

of services offered, and possibly forgo or delay physical infrastructure and 

technology improvements and staffing needs. We have previously 

In 

addition, local applicants initially lacked the staff to fully participate as 

partners in the program. Shortages of staff with the right skills and 

abilities, as well as the lack of continuity among rotating FEMA staff, 

contributed to delays in developing public assistance projects in Louisiana 

and Mississippi.

 

36 GAO, School Improvement Grants: Education Should Take Additional Steps to 

Enhance Accountability for Schools and Contractors, GAO-12-373 (Washington, D.C.: 

Apr.11, 2012).

37 GAO, Disaster Recovery: FEMA’s Public Assistance Grant Program Experienced 

Challenges with Gulf Coast Rebuilding, GAO-09-129 (Washington, D.C.: Dec. 18, 2008). 
 

Page 29 GAO-12-1016 Grants to State and Local Governments

reported that because many nonprofits view cuts in clients served or 

services offered as unpalatable, they have reported that they often 

compromise vital “back-office” functions, which over time can affect their 

ability to meet their missions.38 Further, nonprofits’ strained resources 

limit their ability to build a financial safety net, which can create a 

precarious financial situation for them. Absent a sufficient safety net, 

nonprofits that experience delays in receiving their federal funding may be 

inhibited in their ability to bridge funding gaps. When funding is delayed, 

some nonprofits have reported that they either borrow funds on a line of 

credit or use cash reserves to provide services and pay bills until their 

grant awards are received. Collectively, these issues place stress on the 

nonprofit sector, diminishing its ability to continue to effectively partner 

with the federal government to provide services to vulnerable populations.

 

38 GAO, Nonprofit Sector: Treatment and Reimbursement of Indirect Costs Vary among 

Grants, and Depend Significantly on Federal, State, and Local Government Practices,

GAO-10-477 (Washington, D.C.: May 18, 2010).
 

Page 30 GAO-12-1016 Grants to State and Local Governments

Since this report does not contain any new audit work that evaluates the 

policies or operations of any federal agency in this report, we did not seek 

agency comments. However, because of the role of OMB and GSA in 

producing or managing data on grant outlays and the number of grant 

programs, we shared drafts of relevant excerpts of this report with 

cognizant officials at these agencies and we made technical clarifications 

where appropriate. 

We are sending copies of this report to other interested congressional 

committees, the Acting Director of OMB, and the Acting Administrator of 

GSA. This report is available at no charge on the GAO website at 

http://www.gao.gov. If you have any questions about this report, please 

contact Stanley J. Czerwinski at (202) 512-6806 or czerwinskis@gao.gov, 

or Beryl H. Davis at (202) 512-2623 or davisbh@gao.gov. Contact points 

for our Offices of Congressional Relations and Public Affairs may be 

found on the last page of this report. Key contributors to this report are 

listed in appendix IV.

Stanley J. Czerwinski

Director, Strategic Issues

Beryl H. Davis

Director, Financial Management and Assurance
 

Page 31 GAO-12-1016 Grants to State and Local Governments

List of Congressional Requesters

The Honorable Tom Carper

Chairman

The Honorable Scott Brown

Ranking Member

Subcommittee on Federal Financial Management, Government

 Information, Federal Services, and International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Tom Coburn, M.D.

Ranking Member

Permanent Subcommittee on Investigations

Committee on Homeland Security and Governmental Affairs

United States Senate
Appendix I: Objectives, Scope, and 

Methodology

Page 32 GAO-12-1016 Grants to State and Local Governments

Our objectives were to describe (1) the amount of grant funding to state 

and local governments for fiscal year 2011, how grant funding to state 

and local governments has changed over the last three decades, and 

difficulties related to identifying the number of such grant programs; and 

(2) selected grant challenges involving federal grants to state and local 

governments that have been identified in our previous work and that of 

federal inspectors general (IG) over the last several years. In scoping the 

research objectives for this work we decided to limit our review to federal 

grants involving state and local governments because reliable historical 

data exist for this group of grants and, according to the Office of 

Management and Budget (OMB), such grants represent roughly 80 

percent of all federal grant funding. We could not identify a similarlyreliable data source for the wider universe of all federal grants. To do this 

work we took the actions described below and we discussed various 

issues related to federal grants and data on grants funding and programs 

with officials at the OMB and the General Services Administration (GSA), 

as these agencies have government-wide responsibilities related to 

grants, grants management, and grants data.

To determine key information regarding grant funding for fiscal year 2011, 

the growth in grant funding over the last three decades, and shifts in the 

focus of grant funding during that time, we used OMB data, specifically, 

OMB’s Historical Table 12.3, Total Outlays for Grants to State and Local 

Governments, by Function, Agency, and Program: 1940 – 2013 and 

Table 12.2, Total Outlays for Grants to State and Local Governments, by 

Function and Fund Group: 1940 – 2017. We extracted the data for fiscal 

years 1980 through 2011 and converted each fiscal year’s outlay amount 

to 2011 constant dollars which reflect adjustments for inflation. We sorted 

the data by agency and budget function (i.e., purpose of the spending) to 

identify the top five grant-making agencies and the top five functions for 

which grants were awarded. To determine grant outlays as a percentage 

of total outlays, we also used OMB’s Historical Table 6.1, Composition of 

Outlays: 1940-2017. As these are budget data that has undergone 

rigorous review by OMB, they are generally considered sufficiently 

reliable for most of our purposes. Therefore, we determined the data were 

sufficiently reliable for the purposes of this report.

To describe issues related to identifying the number of grant programs, 

we reviewed our prior work and the work of others on federal grants and 

the Catalog of Federal Domestic Assistance (CFDA), the single 

authoritative, government-wide compendium and source for descriptions 

of federal programs that provide assistance or benefits to the American 

public. We reviewed research regarding methodologies used to count 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 33 GAO-12-1016 Grants to State and Local Governments

grant programs published by the Congressional Research Service (CRS). 

We discussed issues related to CFDA numbers and their relationship to 

the number of grant programs with GSA, the agency responsible for 

maintaining CFDA. We also inquired into issues regarding counting the 

number of grant programs with OMB. The on-line version, 

www.CFDA.gov, allows one to search for assistance programs using a 

number of search options, including the federal agency providing the 

assistance, program name, and assistance type.1

In addition to the OMB data described above, we identified other sources 

of data for information on the amounts of federal grants funding, including 

USASpending.gov and Census Bureau data. We analyzed and compared 

the different sources and describe how the data elements in each source 

differ. We discussed issues relating to USASpending.gov, including the 

reliability of the data, with GSA, the agency responsible for maintaining it. 

See appendix II for details about the data sources we identified and how 

they differ.

To identify key issues and challenges related to the structure and 

operation of grants management, we reviewed previous relevant reports 

and audits by us, federal inspectors general (IG), and others. We 

searched GAO’s online database for grants management-related reports 

from 1995 to the present, and reviewed selected relevant reports. To 

identify more recent issues and challenges for the examples in this report, 

we reviewed selected GAO reports from 2006 to 2012. For IG reports, we 

searched websites for IGs of large and small grant-making agencies for 

reports related to grants management and financial statement audit 

reports where internal control weaknesses are identified. We determined 

whether the issues and challenges we identified still existed by reviewing

our recommendation follow up work. For reports by others, we 

researched follow up work by the applicable IGs. We also searched 

various federal, public policy, and research organizations’ websites, 

including those for the CRS and OMB, to identify relevant reports and 

other literature regarding federal grant programs and how they are 

structured and managed.

 

1 The CFDA can be downloaded in a printable version. We used the online version 

(CFDA.gov) so we could conduct various searches more easily.
Appendix I: Objectives, Scope, and 

Methodology

Page 34 GAO-12-1016 Grants to State and Local Governments

We shared drafts of the relevant sections of this report with cognizant 

officials at OMB and GSA. They generally agreed with the contents of this 

report and we incorporated their technical clarifications where 

appropriate.
Appendix II: Sources of Information on Grants

Page 35 GAO-12-1016 Grants to State and Local Governments

Various sources exist for data on the amount the federal government 

spends on grants, including Office of Management and Budget (OMB) 

budget data, USASpending.gov, and Census Bureau surveys of state and 

local governments. Each source was established and is used for slightly 

different purposes and contains different data elements. The various 

differences in each data source can create challenges for those 

examining federal grants management issues when trying to identify the 

scope of federal spending on grants. This appendix explains the purposes 

for and the differences in data contained in each source.

OMB Budget Data. OMB collects data from federal agencies each year 

to prepare the President’s budget. OMB uses this data for a number of 

purposes related to the budget, including producing Historical Tables and 

Analytical Perspectives. One series of Historical Tables contains 

information on federal outlays for grants to state and local governments. 

According to OMB, the purpose of this series of Historical Tables is to 

identify federal government outlays that constitute income to state and 

local governments to help finance their services. Analytical Perspectives, 

according to OMB, is designed to highlight specific subject areas or 

provide other presentations of budget data that put the budget in context.

USASpending.gov. In response to the Federal Funding Accountability 

and Transparency Act (FFATA), OMB established USASpending.gov in 

December 2007 to enhance the transparency of government 

expenditures.1 FFATA required that OMB establish a publicly available 

online database that would allow users to search for detailed information 

about entities that are awarded federal grants, loans, contracts, and other 

forms of financial assistance. The Congressional Research Service 

(CRS) reported that the premise of the law was that by making details of 

federal spending available to the public, government officials would be 

less likely to fund projects that might be perceived as wasteful. In 

addition, the new database required by the law would also help citizens 

better understand how the government distributes funds.2

 

1 The General Services Administration now oversees and administers USASpending.gov.

For grant 

awards, federal agencies report the amount of obligations they incur and 

information on the recipients of those awards, starting in fiscal year 2007, 

2 CRS, The Federal Funding Accountability and Transparency Act: Background, 

Overview, and Implementation Issues. RL33680 (Washington, D.C.: Jan. 31, 2008).

Appendix II: Sources of Information on 

Grants 
Appendix II: Sources of Information on Grants

Page 36 GAO-12-1016 Grants to State and Local Governments

in accordance with OMB guidance for agency data submissions.3

Census Bureau Surveys. The Census Bureau collects data from state 

and local governments, including data on grants provided by the federal 

government. This census of governments is one component of the 

nation’s economic census required by law,

Over 

490,000 grant-related transactions were reported by federal agencies for 

fiscal year 2011.

4

Consolidated Federal Funds Report. Prior to fiscal year 2011, the

annual Consolidated Federal Funds Report (CFFR) was prepared by the 

Census Bureau from data submitted by federal agencies to the Federal 

Assistance Awards Data System (FAADS) and other selected agency 

data. With the enactment of FFATA, which required agencies to report 

data elements in addition to those that were captured by FAADS, and due 

to funding issues, the Census Bureau stopped publishing the CFFR after 

the fiscal year 2010 report. The information is now available for the public 

to review on USASpending.gov.

and provides, among other 

things, periodic and comprehensive statistics about governments and 

their financial activities. 

Table 2 summarizes data elements included and not included in these 

data sources and provides more information about them.

 

3 OMB Memorandum M-09-19, Guidance on Data Submission under the Federal Funding 

Accountability and Transparency Act (FFATA) (Washington, D.C.: June 1, 2009).

4 13 U.S.C. § 161.
Appendix II: Sources of Information on Grants

Page 37 GAO-12-1016 Grants to State and Local Governments

Table 2: Information about the Sources for Data on Federal Spending on Grants

Data source Data elements included Data elements not included Time period covered

OMB budget data:

Historical Tables 

(specifically, Table 12.3 and 

other series 12 tables)

Outlaysa

“Grants” includes cooperative 

agreements

for grants to state and local 

governments

b

Outlays for grants to some 

nonprofit organizations, for 

profit institutions, and 

individuals

Outlays for some basic 

research awarded by 

competitive grants 

(Note: Data for those grants 

are included in other tables or 

categories of OMB data, but 

they are combined with 

nongrant outlays, so just the 

grants portion cannot be 

isolated) 

Detailed information on 

recipients

Information on the number of 

individual grant programs

1940 through the 

current budget 

period

USASpending.gov Obligationsc

(Note: Data for grants can be 

separated from that for other 

assistance types) 

incurred by federal 

agencies for grant awards and other 

types of financial assistance (e.g., 

loans, cooperative agreements)

Each obligation transaction has 

associated information including the 

name of the federal agency making 

the award, information about the 

recipient, and CFDA number

Recipient information includes type 

(government, nonprofit or for profit 

organization, individual); name; and 

address

Some grant awards less than 

$25,000

Grants awarded by the Legal 

Services Corporation and the 

Corporation for Public 

Broadcasting

d

 

Fiscal year 2000 

through present

Census Bureau Surveys Intergovernmental revenue to state 

and local governments which 

includes grants, taxes, and loans

(Note: Data for grants cannot be 

separated out of the revenue 

amounts) 

Grants to nongovernmental

recipients

1951 through 

present

Source: GAO analysis.

a

Outlay means a payment to liquidate an obligation (other than the repayment of debt principal or 

other disbursements that are “means of financing” transactions). Outlays generally are equal to cash 

disbursements, but also are recorded for cash-equivalent transactions, such as the issuance of 

debentures to pay insurance claims, and in a few cases are recorded on an accrual basis such as 

interest on public issues of the public debt. Outlays are the measure of government spending. 
Appendix II: Sources of Information on Grants

Page 38 GAO-12-1016 Grants to State and Local Governments

b

Cooperative agreements are another form of financial assistance similar to grants, but where the 

federal agency is more involved with the recipient in implementing the program. 

c

An obligation is a definite commitment that creates a legal liability of the government for payment of 

goods and services ordered or received. An agency incurs an obligation, for example, when it awards 

a grant. 

d

OMB’s guidance for submitting data to USASpending.gov states that, under the Recovery Act, 

agencies are required to report all transactions, but can aggregate amounts under $25,000, and that 

agencies should begin to include aggregate information for all funding types. GSA officials told us 

agencies are not required by FFATA to include awards under $25,000 related to non-Recovery Act 

spending. 
Appendix III: Cross-cutting Grants Legislation 

and OMB Circulars/Agency Grants Regulations

Page 39 GAO-12-1016 Grants to State and Local Governments

Federal grants are typically subject to a wide range of substantive and 

other requirements under the particular program statutes as well as 

implementing agency regulations and other guidance that applies to 

them. They are also governed by many additional cross-cutting 

requirements that are common to most federal assistance programs.1

Figure 6: Selected Federal Grants-Related Legislation Timeline

Figure 6 shows the relevant grant-related public laws that are discussed 

below.

The Office of Management and Budget (OMB) has long been involved in 

grants management in the executive branch since its reorganization 

within the Executive Office of the President in 1970.2

 

1 We focus this discussion on the history and current status of government-wide grants 

management. While we focus exclusively on grants, many of the legal requirements and 

guidance discussed also apply to other forms of federal assistance.

In 1971, OMB 

published standards for establishing consistency and uniformity in the 

administration of grants and other types of financial assistance to state 

2 OMB was previously the Bureau of the Budget, which was established within the 

Department of the Treasury in 1921 but transferred to the Executive Office of the 

President in 1939. 

Appendix III: Cross-cutting Grants 

Legislation and OMB Circulars/Agency 

Grants Regulations
Appendix III: Cross-cutting Grants Legislation 

and OMB Circulars/Agency Grants Regulations

Page 40 GAO-12-1016 Grants to State and Local Governments

and local governments and certain Indian tribunals.3 However, even with 

the publication of OMB’s circular for grant administration, the Commission 

on Government Procurement studying federal spending practices in the 

early 1970s found that “federal grant-type activities are a vast and 

complex collection of assistance programs, functioning with little central 

guidance in a variety of ways that are often inconsistent even for similar 

programs and projects.”4 The Commission also found that because there 

were no statutory guidelines for executive agencies to distinguish 

between assistance relationships, such as grants and procurement 

relationships with nonfederal entities, agencies were inappropriately using 

grants to avoid competition and certain requirements that apply to the 

procurement system.5 Thereafter, Congress enacted the Federal Grant 

and Cooperative Agreement Act of 19776 to establish standards for 

executive agencies in selecting the most appropriate funding vehicle. The 

act directed OMB to provide guidance to executive agencies to promote 

consistent and efficient use of funding vehicles, and in 1978, OMB issued 

supplementary interpretive guidelines to help agencies distinguish 

between assistance programs and procurement relationships.7

In 1984, the Administration created the President’s Council on 

Management Improvement, assigning the Deputy Director of OMB as 

Chairman of the Council.8

 

3 The first Circular was A-102, “Uniform Administrative Requirements for Grants-In-Aid to 

State and Local Governments.” In 1976, OMB published Circular No. A-110, “Grants and 

Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit 

Organizations.” 41 Fed. Reg. 32,016 (July 30, 1976). 

While the Council’s role was to review overall 

4 See S. Rep. No. 95-449 (Sept. 27, 1977), citing The Report of the Commission on 

Government Procurement, Vol. I, pp. VII-VIII, December 1972.

5 S. Rep. No. 95-449.

6 Pub. L. No. 95-224, 92 Stat. 3 (Feb. 3, 1978), codified, as amended, at 31 U.S.C. §§ 

6301-6308. The act directs executive agencies to use grant agreements or cooperative 

agreements when the principal purpose of the relationship between the Federal 

government and the nonfederal entity is to transfer a thing of value to the nonfederal entity 

to carry out a public purpose of support or stimulation. The law further states that 

“substantial involvement is not expected between the executive agency and the [grantee] 

when carrying out the activity contemplated in the agreement.” Substantial involvement 

refers to performance of the funded activity rather than oversight of the grant use.

7 43 Fed. Reg. 36,860 (Aug. 18, 1978).

8 Executive Order 12479, Management Reform in the Federal Government, 49 Fed. Reg. 

22,243 (May 29, 1984). 
Appendix III: Cross-cutting Grants Legislation 

and OMB Circulars/Agency Grants Regulations

Page 41 GAO-12-1016 Grants to State and Local Governments

management of government programs, several interagency task forces 

were created under the Council to review various aspects of grants 

management. Based on recommendations of one task force, the 

President issued Executive Order No. 12549 in 1986 requiring agencies 

to participate in a government-wide nonprocurement debarment and 

suspension system. Thereafter, OMB issued guidelines prescribing the 

program coverage, government-wide criteria, minimum due process 

procedures, and other guidance for the system.9 Another interagency task 

force explored streamlining the existing guidance for managing federal 

aid programs, and based on that review, in 1987, the President directed 

OMB to revise Circular No. A-102, “Grants and Cooperative Agreements 

with State and Local Governments” to specify uniform, government-wide 

terms and conditions for grants to state and local governments.10 The 

President further directed executive agencies to propose and issue 

common regulations adopting the terms and conditions set out by OMB 

verbatim, modified where necessary to reflect inconsistent statutory 

requirements.11

OMB circulars on grants provide policies to be followed by the grantmaking agencies, not the grantees. Therefore, prior to the publication of 

the first grants management common rule in 1988, executive agencies 

themselves issued regulations to govern their own grant requirements for 

grantees. Subsequently, each grant-making agency issued four common 

rules for grants: two are modeled after OMB’s grants management 

circulars covering cost principles, administrative requirements, and audit; 

a third common rule deals with the prohibition on using grant funds to 

lobby; and a fourth common rule covers suspension and debarment12

 

9 52 Fed. Reg. 20,360 (May 29, 1987). Executive Order No. 12689, (54 Fed. Reg. 34,131 

(Aug. 18, 1989)) and section 2455 of the Federal Acquisition Streamlining Act of 1994, 

(Pub. L. No. 103-355), established government-wide effect for debarment, suspension, or 

other exclusions for participants in both procurement and nonprocurement activities. 

and 

drug-free workplace requirements. The federal grant-making agencies’ 

10 See 53 Fed. Reg. 8028 (Mar. 11, 1988) (OMB final revisions to Circular No. A-102).

11 Memorandum on Grants to State and Local Governments, President Ronald Reagan 

(March 12, 1987). 

12 In Executive Order No. 12549 (51 Fed. Reg. 6370 (Feb. 21, 1986)), the President 

directed the establishment of a common system for debarment and suspension for 

assistance programs. 
Appendix III: Cross-cutting Grants Legislation 

and OMB Circulars/Agency Grants Regulations 

Page 42 GAO-12-1016 Grants to State and Local Governments

common rules are largely identical regulations that are binding on their 

grantees.

There were several grant-related laws enacted during the 1980s that 

focused on promoting accountability and transparency, and preventing 

abuse, within federal assistance programs. The Single Audit Act, as 

amended,13 provides uniform requirements for annual audits of 

nonfederal entities that expend more than $500,000 in federal awards 

annually. Prior to this act’s enactment, there were no uniform audit 

requirements for state and local government grantees, and these 

grantees were often subject to overlapping and conflicting audit 

requirements associated with each of the assistance programs in which 

they participated. Congress enacted other federal statutory provisions 

applicable to all recipients of federal funds, including the prohibition 

against lobbying with grant funds under the “Byrd Amendment”14 and the 

requirement to maintain a drug-free workplace as a precondition of 

receiving grant funding.15 Subsequent to the enactment of each of these 

acts, OMB issued guidance for agencies to implement the requirements 

of the acts.16

One of the key efforts to make government operations more efficient and 

effective and to prevent waste, fraud, abuse, and financial 

mismanagement came with the passage of the Chief Financial Officers 

Act of 1990.17 The act builds off other legislative initiatives, such as the 

Single Audit Act, to improve financial management practices in the federal 

government.18

 

13 31 U.S.C. §§ 7501-7507. The Single Audit Act was enacted in 1982, and substantially 

amended in 1996. OMB’s implementing guidance is contained in Circular No. A-133, 

Audits of States, Local Governments, and Non-Profit Organizations. 

The Chief Financial Officers Act created within OMB the 

Office of Federal Financial Management with specific statutory 

14 31 U.S.C § 1352.

15 Drug-Free Workplace Act of 1988, Pub. L. No. 100-690, Title V, Subtitle D, § 5153, 102 

Stat. 4181 (Nov. 18,1988), codified at 41 U.S.C. § 8103. 

16 Both the Single Audit Act of 1984 (Pub. L. No. 98-502) and the Byrd Amendment 

(Section 319 of Pub. L. No. 101-121), included a requirement OMB to issue guidance for 

the agency implementation of, and compliance with, the requirements of the act. 

17 Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990).

18 See H.R. Rep. No. 101-818(I) (Oct. 6, 1990).
Appendix III: Cross-cutting Grants Legislation 

and OMB Circulars/Agency Grants Regulations

Page 43 GAO-12-1016 Grants to State and Local Governments

responsibility for financial management policy, including grants 

management, for the federal government.19

Along with the executive branch’s efforts to streamline and simplify grants 

management in the 1980s and 1990s, Congress enacted the Federal 

Financial Assistance Management Improvement Act of 1999, commonly 

known as “Public Law 106-107,” which required each federal grantmaking agency to develop and implement a plan that simplifies the 

application, administration, and reporting procedures for financial 

assistance programs.

While OMB had long taken 

the lead role in financial management, no entity had been statutorily 

vested with the responsibility to coordinate financial management 

practices in the federal government.

20 OMB was directed to coordinate this effort by 

coming up with a common application and reporting system. Following 

Public Law 106-107 and the President’s announcement of the Egovernment initiative in his 2002 Fiscal Year Management Agenda, OMB 

established Grants.gov as a central storehouse for information on 

thousands of grant. To further improve transparency and provide the 

public with information on federal spending, Congress enacted the 

Federal Funding Accountability and Transparency Act of 2006.21 The Act 

directed OMB to ensure the existence and operation of a single 

searchable website to be used by the public that shows the name of the 

entity receiving a federal award, the amount of the award, information on 

the award, and other information.22

The executive branch’s recent efforts focus on streamlining administrative 

requirements and improving the effectiveness of single audits. In 

furtherance of Public Law 106-107’s requirements (discussed above), 

OMB launched USAspending.gov in 

2007 to fulfill the Act’s requirements.

 

19 31 U.S.C. § 504.

20 Pub. L. No. 106-107, 113 Stat. 1486 (Nov. 20, 1999).

21 Pub. L. No. 109-282, 120 Stat. 1186 (Sept. 26, 2006).

22 Currently pending before Congress is a bill that would expand the scope of spending 

transparency currently required under the Federal Funding Accountability and 

Transparency Act of 2006. Among other things, the Digital Accountability and 

Transparency Act of 2012 (DATA Act), H.R. 2146, 112th Cong. (2012) would establish a 

new Federal Accountability and Spending Transparency Board charged with collecting 

spending information and publishing that information in formats that make it easy to 

search, sort, and download, thus removing OMB’s responsibility over spending 

transparency. 
Appendix III: Cross-cutting Grants Legislation 

and OMB Circulars/Agency Grants Regulations

Page 44 GAO-12-1016 Grants to State and Local Governments

OMB consolidated its grants-related circulars23 as well as the agency 

common rules into Title 2 of the Code of Federal Regulations. Currently, 

OMB is in the process of re-issuing guidance for each of the common 

rules under Title 2, allowing federal grant-making agencies to simply 

adopt the regulations and thereby create a central point for all grantees to 

locate all grant government-wide requirements. Concurrent to the 

streamlining effort, OMB is also working with other stakeholders to 

evaluate potential reforms in federal grant policies.24 In an effort to reduce 

improper payments, OMB created the Single Audit Workgroup with 

federal and state members who studied a variety of options for improving 

the effectiveness of single audits. In February 2012, OMB published an 

advanced notice of proposed guidance detailing a series of reform ideas

that would standardize information collection across agencies, adopt a 

risk-based model for single audits, and provide new administrative 

approaches for determining and monitoring the allocation of federal 

funds.25

Until the fall of 2011, OMB coordinated grants management policy 

through two federal boards: the Grants Policy Committee, which was 

established in 1999, and the Grants Executive Board, which was 

established in 2004. The Grants Executive Board oversaw the 

implementation work groups and the Grants.gov initiative while the Grants 

Policy Committee was composed of grants policy experts from across the 

federal government whose mission it was to simplify and streamline grant 

administration policies. In October 2011, OMB announced the creation of 

the Council on Financial Assistance Reform (COFAR) which replaced 

these two federal grant bodies. The COFAR is charged with identifying 

The comment period closed at the end of March 2012; OMB has 

not yet issued proposed guidance based on comments received.

 

23 There are currently a total of six OMB circulars on grants, but only three apply to any 

one type of grantee. Grantees are grouped by (1) states, local governments, and Indian 

tribes, (2) educational institutions, and (3) nonprofit organizations. OMB published three 

different circulars on cost principles for each group, published two circulars on 

administrative requirements (one for states, local governments, and Indian tribes and 

another for educational institutions and nonprofit organizations combined), and one 

circular on audit requirements covering all three groups. Circular No. A-133, covering audit 

requirements, has not been codified into Title 2.

24 See Exec. Order No. 13520, Reducing Improper Payments and Eliminating Waste in 

Federal Programs, 74 Fed. Reg. 62,201 (Nov. 25, 2009). 

25 Reform of Federal Policies Relating to Grants and Cooperative Agreements: Cost 

Principles and Administrative Requirements (including Single Audit Act), Advance Notice 

of Proposed Guidance, 77 Fed. Reg. 11,778 (Feb. 28, 2012). 
Appendix III: Cross-cutting Grants Legislation 

and OMB Circulars/Agency Grants Regulations

Page 45 GAO-12-1016 Grants to State and Local Governments

emerging issues, challenges, and opportunities in grants management 

and policy and providing recommendations to OMB on policies and 

actions to improve grants administration. According to OMB officials, the 

COFAR is also expected to serve as a clearinghouse of information on 

innovations and best practices in grants management. In contrast to the 

Grants Policy Committee and the Grants Executive Board, which together 

included members from 26 agencies, the COFAR is made up of the OMB 

Controller, representatives from the largest eight grant-making agencies, 

and a representative from one of the smaller federal grant-making

agencies. The latter serves a rotating two-year term. Also unlike the 

Grants Policy Committee, which largely consisted of program level grants 

staff, the membership of the COFAR is at a higher level, being made up 

of the Chief Financial Officers of participating agencies. OMB officials told 

us that the COFAR is now working toward identifying priorities in grants 

management that may include various initiatives that were started by the 

defunct Grants Policy Committee and Grants Executive Board. Details on 

these have yet to be decided.
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 46 GAO-12-1016 Grants to State and Local Governments

Stanley J. Czerwinski, (202) 512-6806 or czerwinskis@gao.gov

Beryl H. Davis, (202) 512-2623 or davisbh@gao.gov

In addition to the individuals named above, Peter Del Toro, Assistant 

Director, Kimberly A. McGatlin, Assistant Director, Laura M. Bednar, 

Maria C. Belaval, Anthony M. Bova, Amy R. Bowser, Melissa L. King, and 

Diane N. Morris were the major contributors to this report. Additionally, 

Virginia A. Chanley, Jason Kelly, and Robert Robinson also made key 

contributions.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contacts 

Staff 

Acknowledgments
Selected GAO Products on Grants 

Management Issues

Page 47 GAO-12-1016 Grants to State and Local Governments

Green Building: Federal Initiatives for the Nonfederal Sector Could 

Benefit from More Interagency Collaboration. GAO-12-79. Washington, 

D.C.: November 2, 2011.

Recovery Act: Energy Efficiency and Conservation Block Grant 

Recipients Face Challenges Meeting Legislative and Program Goals and 

Requirements. GAO-11-379. Washington, D.C.: April 7, 2011.

School Improvement Grants: Education Should Take Additional Steps to 

Enhance Accountability for Schools and Contractors. GAO-12-373. 

Washington, D.C.: April 11, 2012.

School Improvement Grants: Early Implementation Under Way, but 

Reforms Affected by Short Time Frames. GAO-11-741. Washington, 

D.C.: July 25, 2011.

Recovery Act: Head Start Grantees Expand Services, but More 

Consistent Communication Could Improve Accountability and Decisions 

about Spending. GAO-11-166. Washington, D.C.: December 15, 2010.

District of Columbia Public Education: Agencies Have Enhanced Internal 

Controls Over Federal Payments for School Improvement, But More 

Consistent Monitoring Needed. GAO-11-16. Washington, D.C.: November 

18, 2010.

University Research: Policies for the Reimbursement of Indirect Costs 

Need to Be Updated. GAO-10-937. Washington, D.C.: September 8, 

2010.

Grant Monitoring: Department of Education Could Improve Its Processes 

with Greater Focus on Assessing Risks, Acquiring Financial Skills, and 

Sharing Information. GAO-10-57. Washington, D.C.: November 19, 2009.

Discretionary Grants: Further Tightening of Education’s Procedures for 

Making Awards Could Improve Transparency and Accountability. 

GAO-06-268. Washington, D.C.: February 21, 2006.

Medicaid: Federal Oversight of Payments and Program Integrity Needs 

Improvement. GAO-12-674T. Washington, D.C.: April 25, 2012.

Selected GAO Products on Grants 

Management Issues

Energy Efficiency

Education

Healthcare
Selected GAO Products on Grants 

Management Issues 

Page 48 GAO-12-1016 Grants to State and Local Governments

National Institutes of Health: Awarding Process, Awarding Criteria, and 

Characteristics of Extramural Grants Made with Recovery Act Funding. 

GAO-10-848. Washington, D.C.: August 6, 2010.

National Institutes of Health: Completion of Comprehensive Risk 

Management Program Essential to Effective Oversight. GAO-09-687. 

Washington, D.C.: September 11, 2009.

Justice Grant Programs: DOJ Should Do More to Reduce the Risk of 

Unnecessary Duplication and Enhance Program Assessment. 

GAO-12-517. Washington, D.C.: July 12, 2012.

Managing Preparedness Grants and Assessing National Capabilities: 

Continuing Challenges Impede FEMA’s Progress. GAO-12-526T. 

Washington, D.C.: March 20, 2012.

Homeland Security: DHS Needs Better Project Information and 

Coordination among Four Overlapping Grant Programs. GAO-12-303. 

Washington, D.C.: February 28, 2012.

Recovery Act: Department of Justice Could Better Assess Justice 

Assistance Grant Program Impact. GAO-11-87. Washington, D.C.: 

October 15, 2010.

Hurricane Recovery: Federal Government Provided a Range of 

Assistance to Nonprofits following Hurricanes Katrina and Rita. 

GAO-10-800. Washington, D.C.: July 30, 2010.

Disaster Recovery: FEMA’s Long-term Assistance Was Helpful to State 

and Local Governments but Had Some Limitations. GAO-10-404. 

Washington, D.C.: March 30, 2010.

Disaster Assistance: Greater Coordination and an Evaluation of 

Programs’ Outcomes Could Improve Disaster Case Management. 

GAO-09-561. Washington, D.C.: July 8, 2009.

Disaster Recovery: FEMA’s Public Assistance Grant Program 

Experienced Challenges with Gulf Coast Rebuilding. GAO-09-129. 

Washington, D.C.: December 18, 2008.

Homeland Security, 

Disaster Preparedness, and 

Justice
Selected GAO Products on Grants 

Management Issues

Page 49 GAO-12-1016 Grants to State and Local Governments

Transportation-Disadvantaged Populations: Federal Coordination Efforts 

Could Be Further Strengthened. GAO-12-647. Washington, D.C.: June 

20, 2012.

Surface Transportation: Competitive Grant Programs Could Benefit from 

Increased Performance Focus and Better Documentation of Key 

Decisions. GAO-11-234. Washington, D.C.: March 30, 2011.

Intercity Passenger Rail: Recording Clearer Reasons for Awards 

Decisions Would Improve Otherwise Good Grant-making Practices. 

GAO-11-283. Washington, D.C.: March 10, 2011.

Metropolitan Planning Organizations: Options Exist to Enhance 

Transportation Planning Capacity and Federal Oversight. GAO-09-868. 

Washington, D.C.: September 9, 2009.

Transportation-Disadvantaged Populations: Some Coordination Efforts 

Among Programs Providing Transportation Services, but Obstacles 

Persist. GAO-03-697. Washington, D.C.: June 30, 2003.

Grants Management: Action Needed to Improve the Timeliness of Grant 

Closeouts by Federal Agencies. GAO-12-360. Washington, D.C.: April 16, 

2012.

Improper Payments: Remaining Challenges and Strategies for 

Government-wide Reduction Efforts. GAO-12-573T. Washington, D.C.: 

March 28, 2012.

2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 

Fragmentation, Achieve Savings, and Enhance Revenue. 

GAO-12-342SP. Washington, D.C.: February 28, 2012.

Federal Grants: Improvements Needed in Oversight and Accountability 

Processes. GAO-11-773T. Washington, D.C.: June 23, 2011.

Grants.gov: Additional Action Needed to Address Persistent Governance 

and Funding Challenges. GAO-11-478. Washington, D.C.: May 6, 2011.

Government Performance: GPRA Modernization Act Provides 

Opportunities to Help Address Fiscal, Performance, and Management 

Challenges. GAO-11-466T. Washington, D.C.: March 16, 2011.

Transportation

Government-wide Grants 

and Other Grants 

Management Issues
Selected GAO Products on Grants 

Management Issues

Page 50 GAO-12-1016 Grants to State and Local Governments

Opportunities to Reduce Potential Duplication in Government Programs, 

Save Tax Dollars, and Enhance Revenue. GAO-11-318SP. Washington, 

D.C.: March 1, 2011.

Recovery Act: Opportunities to Improve Management and Strengthen 

Accountability over States’ and Localities’ Uses of Funds. GAO-10-999. 

Washington, D.C.: September 20, 2010.

Recovery Act: Further Opportunities Exist to Strengthen Oversight of 

Broadband Stimulus Programs. GAO-10-823. Washington, D.C.: August 

4, 2010.

State and Local Governments: Fiscal Pressures Could Have Implications 

for Future Delivery of Intergovernmental Programs. GAO-10-899. 

Washington, D.C.: July 30, 2010.

Legal Services Corporation: Improvements Needed in Controls over 

Grant Awards and Grantee Effectiveness. GAO-10-540. Washington, 

D.C.: June 11, 2010.

Nonprofit Sector: Treatment and Reimbursement of Indirect Costs Vary 

among Grants, and Depend Significantly on Federal, State, and Local 

Government Practices. GAO-10-477. Washington, D.C.: May 18, 2010.

Streamlining Government: Opportunities Exist to Strengthen OMB’s 

Approach to Improving Efficiency. GAO-10-394. Washington, D.C.: May 

7, 2010.

Electronic Government: Implementation of the Federal Funding 

Accountability and Transparency Act of 2006. GAO-10-365. Washington, 

D.C.: March 12, 2010.

Recovery Act: Status of States’ and Localities’ Use of Funds and Efforts 

to Ensure Accountability. GAO-10-231. Washington, D.C.: December 10, 

2009.

Grants Management: Grants.gov Has Systemic Weaknesses That 

Require Attention. GAO-09-589. Washington, D.C.: July 15, 2009.

Recovery Act: Consistent Policies Needed to Ensure Equal Consideration 

of Grant Applications. GAO-09-590R. Washington, D.C.: April 29, 2009.
Selected GAO Products on Grants 

Management Issues

Page 51 GAO-12-1016 Grants to State and Local Governments

Single Audit: Opportunities Exist to Improve the Single Audit Process and 

Oversight. GAO-09-307R. Washington, D.C.: March 13, 2009.

Nonprofit Sector: Significant Federal Funds Reach the Sector through 

Various Mechanisms, but More Complete and Reliable Funding Data Are 

Needed. GAO-09-193. Washington, D.C.: February 26, 2009.

Grants Management: Attention Needed to Address Undisbursed 

Balances in Expired Grant Accounts. GAO-08-432. Washington, D.C.: 

August 29, 2008.

Grants Management: Enhancing Performance Accountability Provisions 

Could Lead to Better Results. GAO-06-1046. Washington, D.C.: 

September 29, 2006.

Grants Management: Grantees’ Concerns with Efforts to Streamline and 

Simplify Processes. GAO-06-566. Washington, D.C.: July 28, 2006.

Principles of Federal Appropriations Law: Third Edition, Volume II. 

GAO-06-382SP. Washington, D.C.: February 2006.

Grants Management: Additional Actions Needed to Streamline and 

Simplify Processes. GAO-05-335. Washington, D.C.: April 18, 2005.

Federal Assistance: Grant System Continues to Be Highly Fragmented. 

GAO-03-718T. Washington, D.C.: April 29, 2003.

Grant Programs: Design Features Shape Flexibility, Accountability, and 

Performance Information. GAO/GGD-98-137. Washington, D.C.: June 22, 

1998.

Federal Grants: Design Improvement Could Help Federal Resources Go 

Further. GAO/AIMD-97-7. Washington, D.C.: December 18, 1996.

Block Grants: Issues in Designing Accountability Provisions. 

GAO/AIMD-95-226. Washington, D.C.: September 1, 1995.

Block Grants: Characteristics, Experience, and Lessons Learned. 

GAO/HEHS-95-74. Washington, D.C.: February 9, 1995.

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