In  the 1960s, the number and dollar amount of federal assistance programs  grew substantially. Growth in the both the numbers of new grant programs and the level of  funding created greater complexity. Over the years, Congress at times has acted to improve the grant system  through consolidation. The Omnibus Budget Reconciliation Act of 1981  consolidated a number of social service programs into nine block grants  which allowed for greater state and local autonomy and flexibility in the  fashioning of local strategies to address federal objectives. As far back as 1975, GAO reported that many of the  fundamental problems in managing federal grants were the direct result of  the proliferation of federal assistance programs and the fragmentation of  responsibility among different federal departments and agencies. The fragmented delivery of federal assistance can complicate coordination  and integration of services and planning at state and local levels. Some have observed that federal grant restrictions constrain the flexibility  state and local officials need to tailor multiple grants to address state and  local needs and priorities. Actions  taken by federal agencies under the rubric of the Federal Financial  Assistance Management Improvement Act of 1999 will help to streamline  the process for obtaining aid across the myriad of programs and  standardize administrative requirements. Several alternatives  have been pursued in the past to overcome problems fostered by  fragmentation in the federal aid structure. Block grants are one option that Congress has chosen to consolidate  related programs. A third approach to overcoming fragmentation could be to provide in law  for waivers of federal funding restrictions and program rules when  requested and sufficiently justified by state or local governments. Improving the grant partnership among federal and nonfederal officials is  vital to achieving important national goals. The Federal Financial  Assistance Management Improvement Act of 1999 offers promising  opportunities to help those officials achieve their mutual goals through the  use of federal assistance programs.
Why GAO Did This Study

The Federal Financial Assistance Management Improvement Act of 1999 is one of the most recent in a series of efforts to reform the federal grants management system. The act seeks to improve the effectiveness and performance of Federal financial assistance programs; simplify application and reporting requirements; improve delivery of services to the public; and facilitate greater coordination among those responsible for delivering such services. GAO has a responsibility to evaluate the implementation of this Act by 2005 and will soon begin developing an approach and methodology for the study. This testimony describes the problems fostered by proliferation and fragmentation, which the Act addresses indirectly.

What GAO Found

While the Federal Financial Assistance Management Improvement Act of 1999 (FFAMIA) offers promising opportunities to improve the federal grant system, there remain over 600 different federal financial assistance programs to implement domestic policy. Federal grant recipients must navigate through a myriad of federal grant programs in order to find the appropriate source of funds to finance projects that meet local needs and address local issues. Despite the process reforms initiated under FFAMIA, the federal grant system continues to be highly fragmented, potentially resulting in a high degree of duplication and overlap among federal programs. Since the 1960s the number and dollar amount of federal grant programs has grown substantially. Growth in both the number of grant programs and the level of funding have created a high level of complexity in the system. While the act seeks to improve the effectiveness and performance of federal assistance programs by simplifying grant administration and facilitating coordination among grant recipients, Congress could also consider consolidating grants that have duplicative objectives and missions. Consolidation can be achieved through a variety of ways including combining multiple programs into block grants, establishing performance partnerships, and providing for waiver authority of federal funding restrictions and program rules when requested and sufficiently justified by state or local governments. Each of these alternatives has implications for accountability that Congress will face as it considers improvements to the federal grant system.