TABLE 26.--DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE GRANTS,
BY TYPE OF GRANT AND ELIGIBLE RECIPIENTS, JANUARY 1967

*"Universities" used as shorthand for institutions of higher education.

Source: Department of Health, Education, and Welfare, January, 1967.

development, education and programs to assist the disadvantaged, all of which have their greatest impact in such areas.

Figure 17 shows the estimated amount of Federal aid payments in metropolitan areas (Standard Metropolitan Statistical Areas) by major function, for the years 1961, 1966 and 1968. More than $10 billion of the grant total of $17.4 billion will be spent in SMSA's in 1968 "to fill the growing gap between their needs and resources." This represents an increase of almost $6.5 billion or 165 percent over the comparable 1961 figure, and an increase of about three billion dollars since FY 1966.*

Administrative and Fiscal Requirements

Inflexibility of Federal administrative and fiscal requirements is one of the most common criticisms of the expanding grant-in-aid system, particularly by State and local officials.

From State and local officials35/--a State attorney general:-

We have on many occasions seen complaints from members of State
and local governments in administration of the programs. A con-
sulting economist in (our State) states: "As a one-time admin-
istrator of the public assistance programs in (this State) under
the Social Security Act, I can testify to the rigidity of Fed-
eral administrative authority which hampered both needed and de-
sirable flexibility."

A State budget officer:

Federal requirements for specific forms of organization of State
and local governments to comply with Federal grants regulations
has seriously hampered the flexibility of State and local organ-
ization structure.

A county official:

The 701 planning program has in many instances harmed the plan-
ning of a city. Consulting planners spend too much time wading
through red tape.

From Federal officials36/--Secretary Weaver of HUD:

Certain Federal laws require the establishment of single State
agencies or counterpart local institutions, thus often reducing
the ability of State and local governments to organize in the
way they may deem best.**

An Executive Branch survey team reported last year that a major complaint about Federal administrative regulations is their rigidity. An extreme

For further detail, see Table A-23.

** In contrast to Secretary Weaver's comment are the views of middle management officials of Federal departments and agencies: "While the 'single agency' concept may produce significant reorganizational problems at the State level, little awareness of this difficulty was indicated by these Federal administrators."37/

Con

but minor example of this occurred in one city which was asked to prepare a map showing all municipal "public improvements" and the program's administrative manual defined "public improvements" to include street lights and fire plugs. siderable time was spent in reaching agreement that this requirement was unreasonable since it would be impossible to show all of these facilities on a map.

Some Washington-established standards and guidelines, including some in statutes, are unrealistic for implementing programs, especially in small towns and rural areas. Witness the South Carolina case study: population standards for Community Health Centers--75,000 to 200,000--miss the State's cities on both ends of the scale; the "workable program" concept is too rigid in its application to small communities; the "measure" of poverty, $3,000, has been criticized as not well suited to South Carolina where the costs of living in small towns and rural areas are very low and where even some State employees are paid at no more than that rate; the 50 percent limitation on use of 701 funds for mapping purposes is delaying comprehensive planning in the city of Columbia; some personnel standards cannot be met in today's labor market at salaries State agencies can pay; and standards for admission of trainees to summer institutes shut out the less qualified teachers who most need training.

The "single State agency" requirement is one of the most frequently criticized administrative standards. It requires either that a "single State agency" must be named to administer or supervise a grant-in-aid program or that a State agency be named as the "sole agency" for this purpose.

In the 1950's the (Kestnbaum) Commission on Intergovernmental Relations and the Council of State Governments concluded that this requirement initially had helped bring about greater integration of State administration on an agency or functional basis in such program areas as in the Federal Highway Act of 1916 and the Social Security Act of 1935. At the same time, the Council of State Governments found that the single agency rule in recent years has become the most important Federal deterrent to integrating related major functions in State administrative organization in some seven major grant-in-aid areas.38/

With the accelerated pace of change in governmental programs, State governments need more elbow room to adapt their administrative structures to new circumstances. A further premium is placed on flexibility by the increasing practice of "packaging" governmental programs on an interfunctional or interdisciplinary basis, as in the manpower field. Yet, as of 1965, grant legislation for at least one-third of the programs contained this single State agency requirement,39/ and at least three States--Oregon, Wisconsin and Hawaii--had reorganizational efforts thwarted by it.

In a 1964 report on controls associated with Federal grants for public assistance, the Advisory Commission recommended giving the Secretary of HEW discretion to waive the single State agency requirement for the public assistance titles when he is certain that the objectives of the program will not be endangered.40/ Title II of the proposed Intergovernmental Cooperation Act of 1967 would make such a waiver available to all departments and agencies and programs.41/

Fiscal reporting and accounting requirements have also contributed to tension in the administration of grant programs. In a 1963 survey of State and local officials by the Senate Subcommittee on Intergovernmental Relations, respondents were asked:42/ "Have variations among Federal agency requirements and differences between Federal and State requirements for the accounting of grant

funds and the reporting of expenditures there for caused difficulties in administering grants-in-aid?" Half the replies were "Yes." Three-quarters of the officials indicated an affirmative response to the question: "Should Congress consider legislation designed to enable uniform accounting and audit programs to be prescribed for grants?"43/

The Subcommittee survey also asked: "Have variations in the frequency, intensity and methodology of audits among Federal agency requirements and differences between Federal and State requirements caused difficulties in administering grants-in-aid?"44/ About 40 percent said "Yes." Finally, the officials were queried: "Should Congress consider legislation dispensing with the post-audit of grants by individual Federal agencies and the acceptance in lieu thereof of the audit report by the State auditing authority, provided (1) the State post-audit meets the Comptroller General's standards of adequacy and integrity and (2) the Comptroller General exercises the right of spot audits?"45/ Six out of seven respondents endorsed this proposal.

In its subsequent survey of Federal grant-administering officials,46/ the Subcommittee asked Federal administrators a similar battery of questions concerning the need for greater uniformity in accounting and auditing procedures, and then asked the General Accounting Office (GAO) to comment on the responses. Nine out of ten respondents felt that variations in audit requirements do not cause difficulties in State and local administration of their particular programs. Six out of ten thought all Federal aid programs should not be subjected to uniform accounting and audit procedures. A comparable proportion also opposed dispensing with departmental post-audits where a State's post-audit system meets the Comptroller General's standards and the Comptroller General exercises the right of spot audits.

The GAO felt the last question raises certain problems, since it assumes that the Comptroller General has prescribed auditing standards for guidance of State audit agencies, when such is not the case. Dispensing with Federal agency audits and reliance on GAO spot audits "would be an interference with, and dilution of, the primary responsibility of the Federal agencies to manage their programs," according to GAO and "would tend to impair the objectivity of our Office as an independent reviewer of Federal agency management performance."477

In commenting on the GAO's observations, the Subcommittee report

The GAO analysis assumed that the Comptroller should not
prescribe general standards for the guidance of State
audit agencies. This is good basic doctrine in the field
of Federal-State relations. But the Subcommittee's view
is that the question is different when it involves stan-
dards for the guidance of State agencies which audit the
application of Federal funds. The question is also dif-
ferent when State and local officials indicate that this
procedure would simplify the financial administration of
such funds. These were the bases for asking this question.

General improvement in the consistency and flexibility of administrative requirements in grant programs is a major objective of a new procedure initiated by President Johnson on November 11, 1966. In a special memorandum, the President requested the Director of the Bureau of the Budget and the heads