States and Localities Seek Voice in Federal Grants Overhaul

From: Governing

State and local officials are telling the feds that a new council designed to overhaul the grant process is leaving out an important stakeholder: grant recipients.

First, some history: last month, Office of Management and Budget (OMB) Director Jack Lew announced the creation of a new group — the Council on Financial Assistance Reform — tasked with identifying the best ways to deliver, oversee and report federal grants. The new council replaces two similar government boards.

The intention is to streamline the federal grant process by eliminating unneeded regulation and reporting requirements. It’s also expected to develop more standardized reporting requirements. The effort is part of the president’s larger campaign to cut waste that was announced in June.

But organizations representing state and local governments are miffed that they don’t have a voice on the council, which includes the OMB Controller and senior officials from nine federal agencies, but no governors or mayors.

More than 80 percent of federal aid flows through states and localities, so they are well-positioned to give recommendations on how to improve the grant process, they argue. State and local governments received more than $600 billion in federal grants in the 2010 fiscal year, according to the OMB.

Leaders from all the major organizations representing state and local governments sent a letter to Lew Thursday, criticizing the feds’ decision to not include state and local officials on the council. They write that while they applaud the council’s goals, the lack of state and local officials involved “undermines the important work of the council before it even commences.”

The council would likely get input from states and localities, as well as other stakeholders, but the organizations say that’s not enough. “State and local governments have a wealth of experience and expertise gained from administering, funding and carrying out federal programs that are best shared through our direct participation in the Council,” the groups write. 

Governing called the OMB Thursday to ask why states and localities weren’t included, but officials there have not responded.

The push to reform the grant system comes on the heels of a June report from the Government Accountability Office that highlighted many faults with the federal grant system. In many cases, federal agencies performed reviews that were intended to evaluate grant applicants only after they had been approved. And when agencies did perform audits of the grant process, they often failed to implement changes to respond to the problems they noticed.

The report identified an estimated $125.4 billion in “improper payments” in the 2010 fiscal year that didn’t conform to government standards.

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