Federal Assistance: Grant System Continues to Be Highly 	 
Fragmented (29-APR-03, GAO-03-718T).				 
                                                                 
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.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-718T					        
    ACCNO:   A06745						        
  TITLE:     Federal Assistance: Grant System Continues to Be Highly  
Fragmented							 
     DATE:   04/29/2003 
  SUBJECT:   Federal aid to localities				 
	     Federal aid to states				 
	     Federal grants					 
	     Financial management				 
	     Funds management					 

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GAO-03-718T

                                       A

Test i mony Before the Subcommittee on Technology, Information Policy,
Intergovernmental Relations and the Census, Committee on Government
Reform, House of Representatives

For Release on Delivery Expected at 10 a. m. EDT FEDERAL ASSISTANCE
Tuesday, April 29, 2003 Grant System Continues to

Be Highly Fragmented Statement of Paul L. Posner, Managing Director
Federal Budget Issues and Intergovernmental Relations, Strategic Issues

GAO- 03- 718T

Mr. Chairman and Members of the Subcommittee: I appreciate the opportunity
to be here today to discuss issues relating to the management of the
federal grant system. 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 extending back to the mid-
1960s. Like most of the earlier reforms, the act

seeks to: * Improve the effectiveness and performance of Federal financial

assistance programs;  Simplify federal financial assistance application
and reporting requirements;

 Improve delivery of services to the public; and  Facilitate greater
coordination among those responsible for delivering

such services. As such, the act seeks to address many of the
administrative burdens that confound the nation*s many grant recipients.
As the 106 th Congress found, there are still more than 600 different
federal financial assistance programs to implement domestic policy* in
fact, OMB*s latest count in 2001 found 668 different grant programs. On
the one hand, the administration*s efforts to implement the act seek to
streamline the flow of information on the various grants and develop
uniform application and reporting procedures. On the other hand, federal
grant recipients must still 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. In many cases,
numerous grants from several different agencies support

similar purposes and activities, giving rise to the potential for
fragmentation in service delivery. In testimony this morning you may hear
about the administration*s efforts

to implement this act. GAO has a responsibility to evaluate the
implementation of the act by 2005 and will soon begin developing an
approach and methodology for the study. This hearing provides valuable
information to help us understand the progress made and helps us better
understand congressional oversight interests. We look forward to working
with your subcommittee as well as other congressional clients as we
develop our approach and methodology for this study.

Today, I would like to provide a broader perspective on the structure of
federal grants to state and local governments in general and the kinds of
management and service delivery problems fostered by the proliferation of
federal assistance programs and the fragmentation of responsibility among
different federal departments and agencies. In my statement this morning,
I would like to offer a short history of grant management reform efforts,

describe the current profile of federal grants to states and local
governments, and discuss GAO*s recent work on these issues. Using the
homeland security grants as an example, I will explain how the system
continues to be highly fragmented, potentially resulting in a high degree
of

duplication and overlap among federal programs. Finally, I would like to
suggest a range of alternatives available to Congress as it weighs reforms
of the nation*s homeland security grant programs. This testimony draws
upon our wide- ranging ongoing and completed work

on federal grants management issues, grant reform efforts, homeland
security, and performance management initiatives. We conducted our work in
accordance with generally accepted government auditing standards.

Trends in Federal In 1862, Congress enacted the Morrill Act to help states
establish and

Grants maintain land- grant colleges. The act carefully specified the
grant*s

objectives, placed conditions on the use of revenue derived from the sale
of the granted lands, and required annual reports. This established the
pattern of categorical grants* providing needed resources for specific
purposes in exchange for acceptance of minimum national standards. In the
1960s, the number and dollar amount of federal assistance programs grew
substantially. (See fig. 1.) During this timeframe, major steps were taken
to broaden elementary, secondary, and higher education opportunities;
promote development in economically depressed areas; to help finance
health services and medical care for the indigent; launch a war

on poverty; and attempt a comprehensive physical, social, and economic
program to transform slum and blight- ridden cities into model
neighborhoods.

Figure 1: Total Outlays for Grants to State and Local Governments (Fiscal
Years 1940- 2008) 400

Billions of constant (1996) dollars 350 300 250 200 150 100

50 0

1940 1942

1944 1946

1948 1950

1952 1954

1956 1958

1960 1962

1964 1966

1968 1970

1972 1974

1976 1978

1980 1982

1984 1986

1988 1990

1992 1994

1996 1998

2000 2002

estimate estimate

estimate

Grants to state and local governments for payments to individuals All
other grants to state & locals

2004 2006 2008 Source: Budget of the United States Government, FY 2004,
Office of Management and Budget.

Growth in the both the numbers of new grant programs and the level of
funding created greater complexity. During the 1960s and into the 1970s,
various reforms were begun to address the complexity in the grant system.

In 1968, Congress passed the Intergovernmental Cooperation Act of 1968
that sought to improve the cooperation and coordination of activities
among levels of government. From 1969- 1973, the President initiated the
Federal Assistance Review* a government- wide effort with a goal to
streamline, simplify, and speed up the flow of federal assistance and
improve the federal government*s responsiveness to its state and local
partners. In addition, Federal Management Circular 74- 7, issued in 1974,
provided for standardized administrative provisions across grant programs.
The Joint Funding Simplification Act of 1974 permitted grantees to
streamline federal assistance by enabling them to combine funding from
several grants administered by one or more federal agencies. As previous
congressional committee reports have noted, these

administrative simplification initiatives, while useful in addressing
certain administrative burdens associated with grants, did not address the
more fundamental challenges stemming from the fragmented nature of the
grant system. For example, the House Government Operations Committee, the

predecessor to the House Government Reform Committee, noted that the
legislative consolidation of closely related categorical programs into
broader purpose grants and the placement of similar programs in a single
federal agency have more potential for significantly improving grant- in-
aid administration.

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. More
recently, in 1996 the 104 th Congress consolidated a number of welfare-
related programs into the Temporary Assistance for Needy Families block
grant. Notwithstanding these efforts, as figure 2 shows, over the last 20
years each period of consolidation was followed by a proliferation of new
federal programs. Moreover, some of the block grants were later
recategorized, as Congress added new set- asides and cost- ceilings to
address national

programmatic concerns, thereby limiting the grants* flexibility.

Figure 2: Trend in the Number of Federal Grant Programs to State and Local
Governments 1980- 2001 700

Number of grants 650 600 550 500 450 400 350 300 250 200

0 1980

1981 1982

1983 1984

1985 1986

1987 1988

1989 1990

1991 1992

1993 1994

1995 1996

1997 1998

1999 2000

2001 Year

Source: OMB analysis.

A sizable increase in the number of grant programs could be justified and
simply be an indication that as society evolves the nation*s needs also
change and we need new tools* in the form of new programs* at our disposal
to address those needs. As such, program proliferation may be an
indication that there is heightened congressional interest in ensuring
that federal funds are directed in such a way as to meet specific* more
narrowly defined* national goals and objectives. Nonetheless, the problems
associated with a proliferation of federal programs are compounded when
multiple grants are available for the same or similar purposes, forcing
grant recipients to package different programs with potentially
conflicting requirements to address common problems. Moreover, the total
funds available for many of these programs are quite

small. As figure 3 shows, the vast majority of available federal funds* 78
percent* are concentrated in 20 large grant programs. Stated differently,
Mr. Chairman, in 2001 169 federal grant programs were funded at less than
$5 million. Cumulatively, these small programs receive less than 1 percent
of all federal funds provided through the grant system. Figure 3: Grant
Fragmentation: Many Grants Were Funded At Less Than $5 Million

in 2001

456 258.7

191 169

66.8 20

5.6 0.4

Largest Programs of

Programs Programs

grant $50M or more

between $5M less than $5M

programs (not in top 20)

and $50M

Obligations (in billions) Number of programs Source: OMB analysis.

As you can imagine, at the recipient level, the funds available can be
quite small, particularly* as you may hear in the statements of members of
the second panel* in relation to the administrative effort and costs
incurred in applying for and managing the grant. For example, FEMA*s
Hazardous Materials Assistance program provided grants from *a few dollars
to $20,000* per applicant, according to the Catalog of Federal Domestic
Assistance. FEMA*s State Fire Training Systems Grants ranged from only

$25,000 to $30,000 per state. While these funds undoubtedly served
important purposes, the question is whether the funds could have been
provided through more efficient means.

Continuing Many of the same grants management challenges from the past are
still

Fragmentation in the with us today. GAO*s work over the years has
repeatedly shown that mission fragmentation and program overlap are
widespread in the federal

Structure of Federal government and that crosscutting program efforts are
not well

Grants coordinated. 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. 1 While
we noted that the large number and variety of programs tended to ensure
that a program is available to meet a defined need, we found that
substantial problems occur when state and local governments attempt to
identify, obtain, and use the fragmented grants- in- aid system to meet
their needs.

More recently, GAO has addressed mission fragmentation through the
framework provided under the Government Performance and Results Act (the
Results Act). The Results Act's key stages include defining missions and
outcomes, developing a strategy, measuring performance, and using
performance information. For example, we reported in 2000 on the 50
programs for the homeless that were administered by 8 federal agencies.
Housing services were provided under 23 programs operated by 4 agencies,
and food and nutrition services were under 26 programs administered by 6
agencies. 2

1 U. S. General Accounting Office, Fundamental Changes are Needed in
Federal Assistance to State and Local Governments, GAO/ GGD- 75- 75
(Washington, D. C.: Aug. 19, 1975). 2 U. S. General Accounting Office,
Managing for Results: Continuing Challenges to Effective GPRA
Implementation, GAO/ T-- GGD- 00- 178 (Washington, D. C.: July 20, 2000).

We recently identified 44 programs administered by 9 different federal
agencies that provided a range of employment and training services. 3 In
the late 1990s, the Congress tried to bring some unity to this fragmented
employment and training system by requiring states to provide most
federally funded employment- related services through a centralized
service delivery system* one- stop centers. Two years earlier, welfare
reform legislation provided states with the flexibility to focus on
helping needy

adults with children find and maintain employment. Despite the similar
focus, the welfare program was not required to be a part of the new
workforce investment system. We recently reported 4 that nearly all states
report some coordination of their welfare and workforce systems services
at the state and local level, but that several challenges remain. For
example, different definitions of what constitutes work as well as complex
reporting requirements under both programs hamper state and local
coordination efforts. Though some states and localities have found
creative ways to work around these issues, the differences remain barriers

to coordination for many others. Each of these programs is operated out of
a different federal agency; the welfare program is administered from the
Department of Health and Human Services (HHS), and the Department of Labor
(Labor) administers the workforce investment program. We found that HHS
and Labor have not addressed differences in program definitions

and reporting requirements. Fragmentation in

It falls to the 108 th Congress to redesign the nation*s homeland security
Homeland Security

grant programs in light of the events of September 11, 2001. In so doing,
Congress must balance the needs of our state and local partners in their
Grants for First

call for both additional resources and more flexibility with the nation*s
Responders goals of attaining the highest levels of preparedness. This
goal is too important, and federal resources too scarce, to worry about
holding our partners accountable after they have already spent the funds.

3 U. S. General Accounting Office: Multiple Employment and Training
Programs: Funding and Performance Measures for Major Programs GAO- 03- 589
(Washington, D. C.: Apr. 18, 2003.) 4 U. S. General Accounting Office,
Workforce Investment Act: States and Localities Increasingly Coordinate
Services for TANF Clients, but Better Information Needed on Effective
Approaches, GAO- 02- 696 (Washington D. C.: July 3, 2002).

Funding increases for combating terrorism have been dramatic and reflect
the high priority that the administration and Congress place on this
mission. These increases bring an added responsibility to ensure that this
large investment of taxpayer dollars is wisely applied. We recently
reported on some of the management challenges that could stem from
increased funding and noted that these challenges* including grants
management* could impede the implementation of national strategies if not
effectively addressed. 5 GAO testified before this subcommittee last year
on the development of

counter- terrorism programs for state and local governments that were
similar and potentially duplicative. We have identified at least 16
different grant programs that can be used by the nation*s first responders
to address the nation*s homeland security. These grants are currently
provided through two different directorates of the new Department of
Homeland

Security, the Department of Justice, and HHS and serve state governments,
cities and localities, as well as counties and others. Multiple fragmented
grant programs can create a confusing and administratively burdensome
process for state and local officials seeking to use federal resources for
pressing homeland security needs. This is illustrated in figure 4 which
shows the complex delivery structure for these 16 preparedness grant
programs.

5 U. S. General Accounting Office, Combating Terrorism: Funding Data
Reported to Congress Should Be Improved, GAO- 03- 170 (Washington, D. C.,
Nov. 26, 2002).

Figure 4: Web of Federal Homeland Security Grant Programs Department of
Homeland Security Department of Justice Department of Health and Human
Services

Border and Emergency

Office of Office of

Center for Health Transportation

Preparedness Justice

Community Disease

Resources Security

and Response Programs

Policing Control and

and Services (ODP)

(FEMA) Services

Prevention Administration State City/ County Law

Fire Emergency Public Health/

Enforcement Medical Service Hospitals Source: GAO analysis.

To illustrate the level of fragmentation across homeland security
programs, we have shown in table 1 significant features for the major
assistance programs targeted to first responders. 6 As the table shows,
substantial differences exist in the types of recipients and the
allocation methods for grants addressing similar purposes. For example,
some grants go directly to local first responders such as firefighters,
others go to state emergency

management agencies, and at least one goes to state fire marshals. The
allocation methods differ as well* some are formula grants while others
involve discretionary decisions by federal agency officials on a project
basis. Grant requirements differ as well* DHS* Assistance to Firefighters
Grant has a maintenance of effort requirement (MOE) while the State Fire
Training Systems Grant has no similar requirement.

6 This table is not meant to be all- inclusive; there are other* broader
purpose* grants which may also be used for first responder preparedness.

Table 1: Selected Characteristics of Homeland Security Grant Programs
Funding Formulas And Cost Sharing Grant Federal Agency Grantee Match MOE
Provisions

State Domestic ODP/ DHS State and local units of The funds are allocated
to the States on the basis Preparedness

government of a formula that provides a base amount to each Equipment
State, with the balance of the funds distributed on Support Program

the basis of population. Local Law Bureau of Justice

Local units of   The federal funds may not exceed 90 percent of the
EnforcementBlock Assistance in the

government total costs of a program. Grants Program

Office of Justice (LLEBG)

Programs, DOJ Federal funds may not be used to supplant state and local
funds.

Emergency FEMA/ DHS State and local units of

 For each state, a target allocation is derived by Management government
calculating the same proportion of available funds Performance

as the State received the prior year. Grants (EMPG)

A matching requirement is calculated for each State. Each recipient's cost
share percentage will increase by 1 percent over the prior year until the
50/ 50 level is reached.

Edward Byrne Bureau of Justice

State and local units of

  Each participant state receives a base amount of Memorial State

Assistance in the government $500, 00 or .25 percent of the amount
available for and Local Law

Office of Justice the program, whichever is greater, with the Enforcement

Programs, DOJ remaining funds allocated to each state on the Assistance
(Byrne basis of the state's relative share of total U. S. Formula Grant
population. Program)

Match for the formula grant programs will be provided for on a project-
by- project basis, statewide basis, unit- of- government basis, or a
combination of the above. The Act restricts the use of funds for
supplanting

state and local funds and land acquisition. State Homeland ODP/ DHS State
and local units of

FY2003 allocations determined by using a base Security Grant government
amount of .75 percent of the total allocation to the Program (SHSGP)

states (including DC and the Puerto Rico) and .25 percent of the total
allocation for the territories, with the balance of funds being
distributed on a population- share basis. State and Local ODP/ DHS
Providers of Training,

none Domestic

States, and local units Preparedness

of government Training Program

State and Local ODP/ DHS Providers of Exercise none Domestic

Support, States, and Preparedness

local units of Exercise Support

government

(Continued From Previous Page)

Funding Formulas And Cost Sharing Grant Federal Agency Grantee Match MOE
Provisions

State and Local ODP/ DHS Providers of Techincal none Domestic

Assistance Preparedness Technical Assistance

First Responder FEMA/ DHS Fire & emergency first

none Counter- Terrorism responders; law Assistance

enforcement personnel with operational and/ or incident mgt
responsibilities

State Fire Training FEMA/ DHS Representatives from none Systems Grants

the 50 State Fire (National Fire Training Systems Academy Training Grants)

Hazardous FEMA/ DHS States, locals, tribes, none Materials

US territories, State Assistance

Emergency Response Program

Committees, and Local Emergency Planning Commissions

Assistance to FEMA/ DHS Fire departments in   Applicants who protect a
population of 50, 000 or Firefighters Grant the States. An EMS

less must provide a nonfederal cost- share of not unit can apply if the

less than 10 percent of the total award. Applicants unit is under the

who protect a population of 50,000 or more must auspices of a fire

provide a nonfederal cost- share of not less than 30 department as defined
percent of the total award. above. This program also has a maintenance-
of- effort requirement.

Edward Byrne Bureau of Justice

State and local public  Federal funds may not be used to supplant state
Memorial State Assistance in the

safety entities. and local funds. and Local Law

Office of Justice Enforcement

Programs, DOJ Discretionary Grants Program

Public Safety Office of State and local units of

 Some grants, such as for hiring and the Schools Partnership and
Community

government Grant Program, require no local percentage match Community

Oriented Policing required. Other awards generally are made for 75

Policing Grants Services, DOJ percent of allowable project costs. (COPS)

(Continued From Previous Page)

Funding Formulas And Cost Sharing Grant Federal Agency Grantee Match MOE
Provisions

CDC - CDC/ HHS States, political none Investigations &

subdivisions of States, Technical

local health Assistance

authorities, and organizations with specialized health interests may
apply.

Public Health and Health Resources Federal agencies, none Social Services

and Services State and local Emergency Administration/

governments, and Fund*

HHS other service Bioterrorism

providers in areas Hospital

impacted. Preparedness Program Source: Catalogue of Federal Domestic
Assistance, December 2002.

Table 2 shows considerable overlap in the activities that these programs
support* for example, funding from both the State and Local Domestic
Preparedness Exercise Support Program and the State Domestic Preparedness
Equipment Support Program can be used for planning and conducting
exercises.

Tabl e 2: Overlap and Duplication in Homeland Security Grant Programs
Grant Equipment Training Exercises Planning

State Domestic Preparedness Equipment Support Program   

Local Law Enforcement Block Grants Program (LLEBG)   

Emergency Management Performance Grants (EMPG)   

Edward Byrne Memorial State and Local Law Enforcement Assistance

   

(Byrne Formula Grant Program) State Homeland Security Grant Program
(SHSGP)    

State and Local Domestic Preparedness Training Program 

State and Local Domestic Preparedness Exercise Support  

State and Local Domestic Preparedness Technical Assistance 

First Responder Counter- Terrorism Assistance 

State Fire Training Systems Grants (National Fire Academy Training Grants)


Hazardous Materials Assistance Program   

Assistance to Firefighters Grant    

Edward Byrne Memorial State and Local Law Enforcement Discretionary   


Grants Program Public Safety Partnership and Community Policing Grants
(COPS) 

CDC - Investigations & Technical Assistance 

Public Health and Social Services Emergency Fund* Bioterrorism Hospital

  

Preparedness Program Source: Catalogue of Federal Domestic Assistance,
December 2002.

The fragmented delivery of federal assistance can complicate coordination
and integration of services and planning at state and local levels.
Homeland security is a complex mission requiring the coordinated
participation of many federal, state, and local government entities as
well as the private sector. As the National Homeland Security Strategy
recognizes, preparing the nation to address the new threats from terrorism
calls for partnerships across many disparate actors at many levels in our
system. Within local areas, for example, the failure of local emergency
communications systems to operate on an interoperable basis across
neighboring jurisdictions

reflects coordination problems within local regions. Local governments are
starting to assess how to restructure relationships along contiguous local
entities to take advantage of economies of scale, promote resource
sharing, and improve coordination on a regional basis. The complex web of
federal

grants depicted in figure 4 suggests that by allocating federal aid to
different players at the state and local level, federal grant programs may
continue to reinforce state and local fragmentation.

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. For example, some local
officials have testified that rigid federal funding rules constrains their
flexibility and cannot be used to fund activities that meet their needs.
We have reported that overlap and fragmentation among homeland assistance
programs fosters

inefficiencies and concerns in first responder communities. State and
local officials have repeatedly voiced frustration and confusion about the
burdensome and inconsistent application processes among programs. We
concluded that improved coordination at both federal and state and local

levels would be promoted by consolidating some of these first responder
assistance programs. 7 Potential Alternatives In addressing the
fragmentation prompted by the current homeland

security grant system, Congress has several alternatives available.
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. These initiatives promise to
reduce administrative burdens at all levels and promote a more efficient
grants management process in general.

Going beyond these initiatives to address the underlying fragmentation of
grant programs remains a challenge for our federal system in the homeland
security area, as well as across other program areas. Several alternatives
have been pursued in the past to overcome problems fostered by
fragmentation in the federal aid structure. I will discuss three briefly
here*

block grants, performance partnerships, and grant waivers. Block grants
are one option that Congress has chosen to consolidate related programs.
Block grants currently are used to deliver assistance in such areas as
welfare reform, community development, social services, law enforcement,
public health and education. While such initiatives often involved the
consolidation of categorical grants, block grants also typically devolve
substantial authority for setting priorities to state or local
governments. Under block grants, state and local officials bear the
primary responsibility for monitoring and overseeing the planning,
management,

7 U. S. General Accounting Office, Combating Terrorism: Selected
Challenges and Related Recommendations, GAO- 01- 822 (Washington, D. C.,
Sept. 20, 2001).

and implementation of activities financed with federal grant funds.
Accordingly, block grant proposals generally call for Congress to make a
fundamental decision about where power and authority to make decisions
should rest in our federal system for a particular program area.

While block grants devolve authority for decisions, they can and have been
designed to facilitate some accountability for national goals and
objectives. Since federal funds are at stake, Congress typically wants to
know how federal funds are spent and what state and local governments have
accomplished. Indeed, the history of block grants suggests that the
absence of national accountability and reporting for results can either
undermine continued congressional support or prompt more prescriptive
controls to ensure that national objectives are being achieved. For
instance, the block grants enacted as part of the Omnibus Reconciliation
Act of 1981 were not implemented in a manner that encouraged consistent
reporting of program data. These block grants have been subject to at
least 58 subsequent congressional actions, many of which served to
recategorize the programs by tightening program requirements and limiting
the grantees* flexibility. 8 The consolidation of categorical grants,
however, need not be structured as

a block grant. In fact, federal funding streams can be combined while
retaining strong performance oriented accountability by state and local
governments for discrete federal goals and objectives. State and local
governments can be provided greater flexibility in using federal funds in
exchange for more rigorous accountability for results. One example of this
model involves what became known as *performance partnerships,*
exemplified by the initiative of the Environmental Protection Agency
(EPA). Under this initiative, states may voluntarily enter Performance
Partnership Agreements with their EPA regional offices which can include
major federal environmental grant programs. These agreements delineate
which problems would receive priority attention within a state and how the

state*s performance will be measured. Congress provided states with
flexibility to use funds from two or more environmental program grants in
a more flexible and streamlined manner. The benefits of the EPA
performance partnership system are ones that

should also be helpful for other areas such as homeland security. EPA
partnerships (1) allowed states to shift resources to address priority
needs

8 U. S. General Accounting Office, Block Grants: Increases in Set- Asides
and Cost Ceilings Since 1982, GAO/ HRD- 92- 58FS (Washington, D. C., July
27, 1992).

and fund crosscutting efforts that are difficult to support with
traditional grants, (2) provided a way to support innovative or unique
projects, (3) increased the focus on environmental results and program
effectiveness, and (4) fostered reduced reporting burden and improved
information management.

But we reported some significant implementation issues for the performance
partnership approach as well. In 1999, we reported 9 that the initiative
was hampered by an absence of baseline data against which environmental
improvements could be measured and the inherent difficulty in quantifying
certain results and linking them to program activities and the
considerable resources needed for high- quality performance measurement.

The challenge for developing performance partnerships for homeland
security grants will be daunting because the administration has yet to
develop clearly defined federal and national performance goals and
measures. We have reported that the initiatives outlined in the National
Strategy for Homeland Security often do not provide performance goals and
measures to assess and improve preparedness at the federal or national
levels. The strategy generally describes overarching objectives and
priorities, but not measurable outcomes. Lacking such measures and
outcomes at the national level will surely encumber the federal, state,
and local partners* ability to establish agreements on what sort of goals
are expected of our state and local partners, much less how they could be

measured. 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. In the

homeland security area, legislation has been introduced to provide waivers
for states to use funds from one category of federal assistance, such as
equipment, to support other homeland security activities such as training.
This approach could help recipients adjust available federal funds to
unique needs and conditions in each state. Unlike full grant

consolidation* which is legislated* each waiver must be approved by
federal agency officials before grantees could have the kind of
flexibility

9 U. S. General Accounting Office, Environmental Protection: Collaborative
EPA- State Effort Needed to Improve New Performance Partnership System,
GAO/ RCED- 99- 171 (Washington, D. C.: June 21, 1999).

they desire. Some might view the approval requirement as an additional
administrative burden while others consider the federal role essential to
ensuring accountability. Conclusions Mr. Chairman, we are eager to work
with your subcommittee and others to

improve the efficiency and effectiveness of our federal grant system.
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. We look forward to reviewing the

activities undertaken pursuant to the Act with an eye toward both
highlighting progress as well as identifying further improvements that can
be made at all levels of our federal system. We are also ready to assist
Congress in identifying the problems stemming from the underlying nature
of the grant system and in sorting through the tradeoffs Congress will
face in resolving these problems.

This concludes my prepared statement. I would be pleased to answer any
questions you or the members of the subcommittee may have at this time.

(450211)

GAO United States General Accounting Office

A

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 (see figure below). 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.

Total Outlays for Grants to State and Local Governments (Fiscal Years
1940- 2008).

Grants to state and local governments for payments to individuals All
other grants to state & locals

0 50

100 150

200 250

300 350

400 1940

1944 1948

1952 1956

1960 1964

1968 1972

1976 1980

2000 1984

1988 1992

1996 2004 estimate

2006 estimate 2008 estimate Billions of constant (1996) dollars

Source: Budget of the United States Government, FY 2004, Office of
Management and Budget. 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. We do not make any recommendations in
this testimony; however, if Congress chooses to address fragmentation in
the federal grant system more directly we have provided several

options. Fragmentation of the grant system could be addressed through
consolidation of programs with overlapping missions and objectives by (1)
combining multiple programs into block

grants, (2) establishing performance partnerships, and (3) providing for
waiver authority of federal funding restrictions and program rules when
requested and sufficiently justified by state or local governments.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 718T. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Paul Posner at (202) 512- 9573 or posnerp@ gao. gov.
Highlights of GAO- 03- 718T, a report to the

Subcommittee on Technology, Information Policy, Intergovernmental
Relations and the Census, Committee on Government Reform, House of
Representatives April 29, 2003

FEDERAL ASSISTANCE

Grant System Continues to Be Highly Fragmented

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