Agency Oversight

Federal grant dollars are enough to fund a small nation

Federal agencies spend more on grants than they do on procurements. Way more! The Government Accountability Office (GAO) found that spending could be more trans...

Tom Temin@tteminWFED

May 17, 2023 2:14 pm

8 min read

Federal agencies spend more on grants than they do on procurements. Way more! The Government Accountability Office (GAO) found that spending could be more transparent, and could stand a lot more oversight, than it does now. For more, Federal Drive with Tom Temin turns to Jeff Arkin, the GAO’s Director of Strategic Issues.

Interview Transcript:

Tom Temin And let’s talk about, first, the scope of dollars that the government spends on grants. I have to admit, I had a number in my mind for several years about roughly where it was. But when I looked at this report, I was blown away.

Jeff Arkin It is a big number. Federal grants play a very important role in funding our national priorities, such as responding to the COVID 19 pandemic. At the same time, federal grants represent a substantial financial commitment. For example, in fiscal year 2022, the federal government provided about $1.2 trillion in financial assistance to states, localities, tribal or territorial governments, and most of that is through grants. And to put that in perspective, that assistance accounted for about one out of every five federal dollars spent in 2022.

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Tom Temin And that money must have come partially from the bills other than normal appropriations, because the entire normal appropriation is only 1.5 trillion.

Jeff Arkin Yeah, that’s right. There has been a fairly large increase since 2019 due to the response to the COVID pandemic.

Tom Temin This is not really a report at any particular agency, but kind of an overview survey of where things stand in grant making. But it seems like it’s getting more complex as a result of the growth in numbers and the multiplicity of programs. Does GAO expect that to kind of be the status now forever?

Jeff Arkin There definitely has been a lot of growth in the number of programs, the diversity of grants available to recipients like state and local governments, and that does bring some complexity. Part of that is there’s a lot of variation in the ways that different federal agencies administer these grant programs, and that can be challenging for potential recipients and ongoing recipients.

Tom Temin And has grant making overtaken the agency’s abilities to control it and have oversight over it? Do they have the controls in place they need? What have you found there?

Jeff Arkin It’s definitely a challenge. Controls are extremely important. There’s always that balance between how to manage burden for recipients, but at the same time ensuring that there’s adequate oversight on the part of federal governments. That the money’s being distributed and spent according to the law and then the rules of all the various agencies. We have found some areas where there have been challenges. One example of that is improper payments, which is payments that are made either that should never have been made or made in the incorrect amount. That’s been a persistent problem for the federal government since 2003. Improper payments that totaled almost $2.4 trillion cumulatively. This most recent year, 2022, the estimate was $247 billion. So it’s a significant amount of money.

Tom Temin Yeah, and controls need to scale along with the spending. I guess is my question.

Jeff Arkin Yeah, absolutely. It’s incredibly important for agencies to have adequate internal controls in place to monitor these grant programs because it is again, it’s a lot of money going out. It’s being implemented not by the federal government but by other recipients. But the federal government and these individual agencies do have responsibilities to make sure the funds are being spent appropriately. Yeah.

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Tom Temin And that transparency question then gets into being able to see into those entities. Well, it’s really two questions. One is, can the public find out who’s getting grants, and by which agency and how much? But then there is the question of whether the government can see into the activities of the grant recipients and where the money goes from that initial stage. So let’s talk about maybe transparency in terms of the public being able to track this.

Jeff Arkin Sure. One important way that the public can track money sent to grant recipients is through usaspending.gov, which is the federal government’s public website that shows where money is being spent, which agency, which recipient. And there’s been a lot of progress over the years in terms of having that information available. There’s been some progress with agency, timeliness and completeness, but we have found a number of challenges there. Some examples, it’s not always clear where a grant award is actually going. There’s different information that different recipients put in or even what the award is about. And so it does make it hard to track, at least on an aggregate level, where is all this money going? How much is going to who? And that’s really the goal of some of the laws that created U.S.A. Spending.

Tom Temin We’re speaking with Jeff Arkin. He’s director of strategic issues at the Government Accountability Office. And what about the government’s own ability to see into the sub-grantees and so forth? Because especially at the state level, we’ve seen how the money can get fraudulently used.

Jeff Arkin And that’s definitely a challenge when an agency provides a grant, that grantee is responsible for reporting on what they’re doing. But sometimes grantees will provide additional funding to a sub-grantee. We call that a sub-award. Funds passed through to a different entity. And there are rules there that the the main grantee has to report on, generally, most of the awards that go to sub-awards, but we have found some problems with that. There are some sub-grants that don’t meet the threshold of reporting. We found some other errors, like duplicative awards or sub-awards that are larger than the amount of the actual grant, which can’t happen mathematically. So we have been finding some problems with that. It’s definitely an area that we are going to look into more in the near future.

Tom Temin Any other recommendations with respect to transparency and controls, I mean, you have recommendations agency by agency when you find something in their grant-making apparatus. But this is so widespread. Almost every agency has at least some grant making.

Jeff Arkin Yeah, absolutely. We do have some recommendations in particular some to Congress in ways that they can change a lot to help both with the monitoring and the improper payments side of things and also the reporting aspect of it. One example is requiring inspectors general to evaluate their own agencies and how are they complying with some of the rules about reporting information like we were talking about, so the public can be aware and Congress and members of Congress can be aware of what’s actually being spent when it’s being spent. And where is that money going. And again, where it may be going after it goes to the main grantee.

Tom Temin And one of the issues you’ve also raised in this latest kind of look see is the capacity on the part of potential grantees that has the capacity to know how to get a grant or to know how to account for a grant. What is that whole issue?

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Jeff Arkin Yeah, there can be a number of capacity challenges that grantees and or potential grantees can face. There are human capital capacity considerations. So smaller entities that don’t often receive funding may not have the same institutional knowledge or awareness of grant processes, and they may not even know that grants are out there. My name is on the GAO website as the person who does our grants work, and I get emails and calls from city managers of small towns to ask, where can I find out about grants that I can apply for that my my city can apply for that we can take advantage of. The recently passed infrastructure law as an example of that. I will get questions about where do I where do I go for this? And so it’s just a knowledge issue that isn’t necessarily a concern for, say, the state of California or the city of Philadelphia, where they have capacity to find those grants.

Tom Temin They probably have 500 full time people in a place like California that do nothing but grant proposal writing.

Jeff Arkin Yeah, that’s right. They do have staff for that. And a smaller entity, a nonprofit, a smaller county or town just doesn’t have the same level of resources.

Tom Temin Right. And I guess if you are looking at it from the grantee standpoint, almost any problem you can imagine probably has a federal grant program connected to it. So part of it is just knowing how to match what you need with what’s out there, because at $1.2 trillion, there’s grant money for everything.

Jeff Arkin Yeah, there are incredibly large number of grants and it’s hard to pin down an actual number, but it’s for what we can tell in the thousand to 2000 different type of grant programs, there’s anywhere from 500,000 plus grants out there at any given time, at least recently, based on some of the data we’ve seen. So there is a lot out there, and really just finding it can be a big part of the challenge for some of these smaller entities.