	Background

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. 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

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. 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. While the Number of Federal Grant Programs Has Generally Increased over the Last Three Decades, a Definitive Figure Is Not Available

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. 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. Lack of Appropriate Performance Measures and Accurate Data Limit Agencies’ Ability to Effectively Measure Grant Program Performance

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. Numerous Federal Grant Programs, Created over Time without Coordinated Purposes and Scopes, Can Result in Grants Management Challenges

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. 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. 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. Three relevant  types of capacity are organizational, human capital, and financial. Appendix I: Objectives, Scope, and Methodology

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. 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. OMB Budget Data.
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 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.
GAOs 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 agencys or recipients ability to manage and implement grant programs.

What GAO Recommends

GAO is not making any recommendations in this report.