Grants to State and Local Governments: An Overview of Federal Funding Levels and Selected Challenges
Published: 2012-09-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.
section_title: What GAO Recommends
paragraphs: GAO is not making any recommendations in this report.

section_title: Letter
paragraphs: 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.
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. 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.
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.
subsections: section_title: Background
paragraphs: Grants constitute one form of federal assistance consisting of payments  in cash or in kind to a state or local government or a nongovernmental  recipient for a specified purpose.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.
Taken as a whole, federal grant
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.
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. Each of these grants  strikes a different balance between the interests of the federal grant- making 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.
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.
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.
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.
section_title: 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
paragraphs: 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  amount of, and percentage of, grant outlays to state and local  governments for the top 5 grant-making agencies.
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. 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.
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). However, during this  period the proportion of federal grant outlays to state and local  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.
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  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. Figure 4 also shows the upturn in federal grant  outlays in 2009 and 2010 that were the result of the Recovery Act.
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.
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. By fiscal year 2011, outlays for health- related 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.
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.
subsections: section_title: While the Number of Federal Grant Programs Has Generally Increased over the Last Three Decades, a Definitive Figure Is Not Available
paragraphs: 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  federally funded grant programs compared to ACIR’s count of 633.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.
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. the number of federal grant programs using the information included in  the CFDA database.
section_title: Grants Challenges Reflect the Diversity and Complexity of Grants Management for State and Local Governments
paragraphs: 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.
subsections: section_title: Lack of Appropriate Performance Measures and Accurate Data Limit Agencies’ Ability to Effectively Measure Grant Program Performance
paragraphs: 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.
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). 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. 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.
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  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. 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.
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 long- standing 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,  especially for water consumption data—which can be incomplete and  inaccurate and is often not available in electronic form.
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   We recommended, among other things, that DOE should  reviewed. 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.
GAO-11-379.
section_title: Numerous Federal Grant Programs, Created over Time without Coordinated Purposes and Scopes, Can Result in Grants Management Challenges
paragraphs: 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. 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. 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.
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  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. 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.
section_title: Because of Its Complexity, Grants Management Benefits from Effective Collaboration among Intergovernmental and Nongovernmental Participants
paragraphs: 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. 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.  We have also recommended these same key practices to strengthen  partnerships between government and nongovernmental entities, such as  nonprofit organizations. 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  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. 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.
GAO, Transportation-Disadvantaged Populations: Federal Coordination Efforts Could  Be Further Strengthened, GAO-12-647, (Washington, D.C.: June 20, 2012). 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. 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.
section_title: Internal Control Weaknesses in Grants Management and Oversight Processes Affect Federal Agencies’ Ability to Ensure Grant Funds Are Spent Effectively
paragraphs: 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  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. 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.
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. 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.  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.
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.
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.  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.
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.
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. 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  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. 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.
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. 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.
GAO, Improper Payments: Remaining Challenges and Strategies for Government-wide  Reduction Efforts, GAO-12-573T (Washington, D.C.: Mar. 28, 2012). the U.S. Government. 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. 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.
section_title: A Lack of Organizational, Financial, or Human Capital Capacity Impacts the Ability of Grant-making Agencies and Recipients to Effectively Manage Grant Programs
paragraphs: 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  School Improvement Grant program.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.
States and districts both struggled  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. 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.
GAO, Disaster Recovery: FEMA’s Public Assistance Grant Program Experienced  Challenges with Gulf Coast Rebuilding, GAO-09-129 (Washington, D.C.: Dec. 18, 2008). 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. 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.
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.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: 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 similarly- reliable 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  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.
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.
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.
section_title: Appendix II: Sources of Information on Grants
paragraphs: 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. 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. 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,  in accordance with OMB guidance for agency data submissions.490,000 grant-related transactions were reported by federal agencies for  fiscal year 2011.
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, things, periodic and comprehensive statistics about governments and  their financial activities.    and provides, among other  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.
Table 2 summarizes data elements included and not included in these  data sources and provides more information about them.
13 U.S.C. § 161.
subsections: section_title: Data source OMB budget data: Historical Tables (specifically, Table 12.3 and other series 12 tables)
paragraphs: 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.  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.
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.
section_title: Appendix III: Cross-cutting Grants Legislation and OMB Circulars/Agency Grants Regulations
paragraphs: 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.  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.published standards for establishing consistency and uniformity in the  administration of grants and other types of financial assistance to state   In 1971, OMB  and local governments and certain Indian tribunals. 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.” 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. Thereafter, Congress enacted the Federal Grant  and Cooperative Agreement Act of 1977 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.
In 1984, the Administration created the President’s Council on  Management Improvement, assigning the Deputy Director of OMB as  Chairman of the Council. While the Council’s role was to review overall 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. 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. 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.
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. 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, 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” and the  requirement to maintain a drug-free workplace as a precondition of  receiving grant funding. Subsequent to the enactment of each of these  acts, OMB issued guidance for agencies to implement the requirements  of the acts.
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   The act builds off other legislative initiatives, such as the  Act of 1990. Single Audit Act, to improve financial management practices in the federal  government. The Chief Financial Officers Act created within OMB the  Office of Federal Financial Management with specific statutory  responsibility for financial management policy, including grants  management, for the federal government.the lead role in financial management, no entity had been statutorily  vested with the responsibility to coordinate financial management  practices in the federal government.
While OMB had long taken  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 grant- making agency to develop and implement a plan that simplifies the  application, administration, and reporting procedures for financial  assistance programs. coming up with a common application and reporting system. Following  Public Law 106-107 and the President’s announcement of the E- government 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. 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.2007 to fulfill the Act’s requirements.
Pub. L. No. 106-107, 113 Stat. 1486 (Nov. 20, 1999).
OMB consolidated its grants-related circulars 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. 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. The comment period closed at the end of March 2012; OMB has  not yet issued proposed guidance based on comments received.
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  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.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: 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.
section_title: Selected GAO Products on Grants Management Issues
subsections: section_title: Energy Efficiency
paragraphs: 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.
section_title: Education
paragraphs: 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.
section_title: Healthcare
paragraphs: Medicaid: Federal Oversight of Payments and Program Integrity Needs  Improvement. GAO-12-674T. Washington, D.C.: April 25, 2012.
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.
section_title: Homeland Security, Disaster Preparedness, and Justice
paragraphs: 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.
section_title: Transportation
paragraphs: 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.
section_title: Government-wide Grants and Other Grants Management Issues
paragraphs: 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.
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.
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.