Federal Grants to State and Local Governments

The federal government awards hundreds of billions of dollars in grants to state and local governments each year. These grants help finance a broad range of services, including health care, education, social services, infrastructure, and public safety.

Federal Grants to State and Local Governments and Medicaid, FYs 2010-2022

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However, administering grants on this scale comes with a number of challenges. For example:  

• Streamlining. The COVID-19 pandemic triggered office closures and other measures that could make it hard for organizations to meet the requirements for getting and using federal grant funding. In response, the Office of Management and Budget (OMB) issued 15 temporary exceptions to its requirements for how federal agencies administer grants. For example, agencies could allow grantees to delay reporting financial information by 3 months. All these flexibilities expired by Dec. 2020. But was this the best way to decrease administrative burdens while still preventing waste, fraud, and abuse? OMB should gather information on lessons learned and share the results.
• Transparency. Greater transparency of grant spending helps Congress and the public understand how and where federal grants are spent. However, the federal government’s official source of spending data, USAspending.gov, needs to improve its timeliness, completeness, and accuracy. Additionally, the Infrastructure Investment and Jobs Act’s competitive grant programs could improve the transparency of award decisions by clearly communicating award criteria and documenting the rationale for selections. 
• Effective oversight. In March 2021, the American Rescue Plan Act appropriated $350 billion in State and Local Fiscal Recovery Funds to help with the COVID-19 pandemic. The Treasury is responsible for administering and monitoring these funds. Officials in selected states and localities identified challenges with how Treasury administers these funds. For example, Treasury has a contact center to respond to recipients' questions. But some state and local officials said that the center's phone and email assistance was not timely—partly due to limited staffing.