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The Present Situation
The Federal Grant Program
During the 1950's and 1960's Federal grants to State and local governments and to nongovernmental recipients grew significantly in relative and absolute terms. Measured by the National Income Accounts, Federal grants to State and local governments increased from $2.2 billion in 1950 1 to $21.7 billion in 1970.? This growth resulted largely from the highway program (initiated in 1957) and the expansion of socially oriented programs administered by the Departments of Health, Education and Welfare (HEW), Labor, and Housing and Urban Development (HUD).
The number of grant programs also rose sharply in the 1960's. In 1964, the Library of Congress identified 216 authorizations for Federal grant programs for assistance to State and local governments. In 1966, the Library identified 399 authorizations; 4 most of the new programs were in the fields of education, urban development, health, welfare,
and labor and were assigned primarily to HEW, HUD, and the Office of Economic Opportunity (OEO). In 1971, the Office of Management and Budget (OMB) identified more than 500 grant programs; 5 however, some of the programs listed separately are based on the same authorization.
In fiscal 1970, the value of Federal grants awarded to State and local governments (about $21.7 billion) was more than three times greater than that of awards to nongovernmental recipients (about $6.4 billion).6 HEW dominates Federal grant programs since it funded more than half the totals to both governmental and nongovernmental grantees.? The largest HEW grant programs are those of the Social and Rehabilitation Service, with its $8.5 billion for programs assisting the welfare of individuals, and the Office of Education (OE), with its $3 billion in grants benefiting largely the educational systems of the country. HEW grants to State and local governments were almost three times those awarded to other HEW grantees.
The next largest program is in the Department of Transportation (DOT), with its $4.5 billion in grants largely for the construction programs of the Federal Highway Administration. Other large grant programs are administered by the Departments of Labor, Agriculture, and HUD. Grants to States and local units dominate in all of these programs.'
Federal grant programs also grew significantly during fiscal years 1971-1973. Federal aid to State and local governments increased
1 1971 Statistical Abstract of the United States. Table No. 438, Federal Grants to State and Local Governments by Purpose: 1950 to 1970, p. 273.
? Table 1, infra. The Commission estimated that an additional $6.4 billion consisted of awards to nongovernmental recipients. Statistics on these types of awards are not readily available or easily compiled as they are not reported in the Statistical Abstract of the United States, the National Income Accounts, or the Special Analyses of the U.S. Budget. The OMB catalog was the primary source for these data. Although the National Income Accounts do not separately identify Federal grants awarded to nongovernmental organizations and individuals, budgetary and other sources indicate substantial growth of Federal grants awarded to these recipients.
* U.S. Congress, Senate, Committee on Government Operations. Catalog of Federal Aid to State and Local Governments, hearings before the Subcommittee on Intergovernmental Relations of the Committee on Government Operations, 88th Cong., 2d sess., Apr. 15, 1964.
* Labovitz, Number of Authorizations for Federal Assistance to State and Local Governments, Legislative Reference Service, Library of Congress, July 5, 1966.
• Catalog of Federal Domestic Assistance. OMB, 1971 edition. & Fig. 1. * Table 1. * Ibid. ' Ibid.
$39.1 BILLION (EST.) Source: Special Analyses Budget of the United States Government
Fiscal Year 1973, Table P-9, Federal Aid to State and
by Commission. Figure 2. Federal Aid to State and Local Govern
ments by Function, Fiscal 1972.
TOTAL $28.1 BILLION
grants, which it calls "grant-contracts,” than is customary in many procurements. The Office of Saline Water of the Department of the Interior issues both grants and contracts for research but treats them in a fashion that makes them relatively indistinguishable; its decision to use a grant or a contract is based on the type of recipient rather than on the nature of the research or the agency's purpose in funding it.
The term "grant-in-aid” was originally used to describe grants to State and local governments but now it also is used to describe grants to other types of recipients. It is usually associated with the large formula-type asa sistance programs of HEW and DOT. The De
Source: Commission Studies Program.
Figure 1. Distribution of grant funds, by type of re.
cipient, fiscal 1970.
10 Special Analyses, Budget of United States Government, Fiscal Year 1973, table P-4, Federal-Aid Expenditures by Agency, P. 245. Figures rounded by the Commission.
TABLE 1. DISTRIBUTION OF GRANT FUNDS, BY GRANTING AGENCY,
(Millions of dollars)
232 644 *
From Department of the Treasury, unless otherwise noted.
"Special Research Support Agreements" and cost-reimbursement contracts for nonprofit institutional
i Represents funding for programs incorporated into EPA in fiscal 1971.
78 e 69 23 a
partment of Agriculture (USDA) uses the term "formula grant" instead of "grant-inaid." The Public Health Service (PHS) Act authorizes NIH to award "grants-in-aid” in support of research and training projects but authorizes other PHS units to award “grants”. in support of similar activities.
Grants and contracts are used “interchangeably" (within agencies and among agencies) for the same types of projects. For basic research, NIH and NSF use grants; the Office of Naval Research (ONR) uses contracts; and the Atomic Energy Commission (AEC) uses a "special research support agreement” which is operationally similar to the ONR contract. The interchangeable use of grants and contracts is most widespread when significant agency involvement occurs during performance of the assistance activity. In such cases, the “older" agencies, such as AEC and the National Aeronautics and Space Administration (NASA),
tend to use contracts, but the "newer” agencies, such as DOT, HUD, and EPA, tend to write complicated grants; NSF and others do both.
Some agencies admit that they use grants to avoid the requirements, such as advance payment justifications, which apply to contracts. Some agencies use more grants in June to obligate funds before the end of the fiscal year because grants are quicker to process than contracts. Some program officials who have responsibility for negotiating and administering grants, but not contracts, tend to shift to contracts when they are busy in order to place the workload elsewhere. These practices may give Federal agencies administrative discretion not intended by the Congress.
There are wide variances in agency administrative (and presumably technical) involvement in similar kinds of projects. NSF applies less administrative effort to its basic
research grants than ONR does to its basic research contracts. The Economic Development Administration (EDA) of the Department of Commerce closely monitors construction under its grants-in-aid; HEW tries to do so but does not always succeed; OEO states that it does not have the staff to worry about construction under its grants-in-aid. UMTA procedures for administering research, development, and demonstration grants provide for very detailed Government oversight. UMTA officials state that such procedures are necessary because UMTA often deals with small municipalities and transit authorities that lack expertise in project management. HUD officials, however, report that they impose a minimum of administrative control on their Model Cities grants because the municipalities have their own rules and regulations for fiscal, procurement, and other matters. Needless to say, HUD and UMTA sometimes deal with the same municipalities.
The tendency of the executive branch to either over- or under-administer grant-type programs is generally recognized. A recent OMB report notes that:
Federal programs still are too often cluttered by unnecessary controls, regulations, clearances, reports and other impediments ... Wide variations in agency requirements, each of which may have some logic by itself, result in serious workloads on State and local governments with few or no national benefits which could not be realized under Government-wide standardized proce
dures and requirements. 11 The General Accounting Office (GAO) and congressional committees often note underadministration (or inadequate administration) of grant-type programs. Too much, too little, or the wrong kind of Federal involvement demonstrates uncertainty concerning the relationships of the Government and the recipient in many of these programs.
Grant-type assistance instruments reveal wide variances in agency requirements. The instruments used by some agencies explicitly cover particular subjects; those used by other agencies in similar circumstances do not.
Further, agency use of a nonstandard procurement provision in a grant instrument does not mean that the standard provision is inappropriate. For example, UMTA and EPA use a shortened version of the “Covenant Against contingent Fees.” This version eliminates the exceptions provided in the basic statute (41 U.S.C. 254) and, therefore, imposes more stringent prohibitions on grantees than are imposed on contractors under the Federal Procurement Regulations (FPR).
Agency practices also differ with respect to "subcontracting" under grants. EDA and HEW review and approve significant subcontracting under their grants-in-aid ; the Law Enforcement Assistance Administration (LEAA) and OEO do not. Some State and local government purchasing agents believe that there is considerable waste of Federal funds because the State and local grantees often are not required by their grants to use the procurement services of State and local governments. They also note that Federal “grant" agencies often are not staffed to assist on procurement problems when asked to do so.
There is sometimes insufficient Federal involvement or use of standards when significant procurements occur under grant-type relationships. Agency staffs do not always recognize that some lower-tier procurements under a grant would benefit from the guidance provided by procurement rules, regulations, or standards.
A comparison of clauses ordinarily used in procurement contracts with those ordinarily used in grant-type instruments reveals that:
• Statutory authorizations for grant-type assistance seldom require clauses such as Buy American, Walsh-Healey, Davis-Bacon, Convict Labor, Officials Not to Benefit, and Covenant Against Contingent Fees in granttype instruments. In the absence of Government-wide guidance on the use of such clauses, some of the agencies are using such clauses in grant-type instruments even though their utility in most such instruments is doubtful. • Some program authorizations contain requirements such as Davis-Bacon, although the organic statutes do not apply the requirements to grant-type transactions. The resulting Government-wide uncertainty could
11 U.S. Office of Management and Budget, Basic Plan for the Federal Assistance Review (FAR) Program, 3rd Year, July 1, 1971, pp. 1-2 and D-16.
be reduced if statements of the applicability of requirements were in the organic statutes, not in individual program statutes. • The clause requirements for grant-type instruments can be, but are not always, much simpler than those in procurement contracts. Government-wide guidance on "procurement-type" clause requirements for grant-type instruments would be useful and relatively easy to provide.
for its training programs, the Department of Labor writes some 7,000 cost-reimbursement contracts with State and local governments because it does not have statutory authority to use grants. In the absence of specific statutory authority, the agencies can (under Public Law 85–934) use grants only for basic research at nonprofit institutions of higher education or at other nonprofit organizations whose primary purpose is the conduct of scientific research.
Federal Control and Guidance
Enabling and appropriation statutes for grant programs cause confusion. As a group they lack consistency in requirements, terminology, level of detail, and emphasis. Because the UMTA statute requires the use of "grants," when the agency feels that it must exercise a good deal of control, it uses "grantcontracts.” NIH appropriation statutes provide funds specifically for “grants,” thereby limiting agency discretion in making the most suitable arrangements. EPA inherited a number of programs with different statutory restrictions and is having difficulties trying to reconcile them.
The statutes are inconsistent in specifying the circumstances under which they require the use of grants. The agencies generally prefer to use grants for transactions that require little agency involvement or participation during performance. However, in many Federal programs the authorization statutes require the use of "grants” even though the programs require substantial agency involvement during performance as is the case of the Office of Education in its grants for construction of educational facilities; USDA in its grants for water and sewer planning; and LEAA in its grants for information system demonstration projects. The program statutes, by requiring the use of grants in such cases, are a major source of the Government-wide inconsistency, confusion, and uneven management attending Federal grant-type assistance.
Most of the agencies have inadequate statutory authority to employ grant-type instruments in grant-type transactions. Each year,
There is uncertainty as to what the roles and responsibilities of the agency and the recipient should be. Agencies often do not know to what extent Congress expects Federal control of, or participation in, a program or the extent to which the agency and its program officials will be held responsible for the activities of recipients. Thus, there is an understandable tendency for Federal administrators to protect themselves by placing excessive requirements on recipients, thereby diminishing the recipient's flexibility to use the assistance effectively. Without clear direction from some source, it is natural for much of the bureaucracy to react in this self-defensive way. An OMB study in 1969 generally found overadministration of research projects at colleges and universities 12 and, as a consequence, OMB issued Circular A-101 limiting the types of approvals the agencies could require recipients to obtain.
Uncertainty at the Federal level is reflected at the recipient level. Recipients who must deal with different requirements of different agencies are uncertain of their roles and responsibilities in complying with Federal procedures.
A variety of media is used to issue Government-wide guidance to granting agencies. What guidance there is occurs in various GSA and OMB issuances, letters to agencies from
12 U.S. Bureau of the Budget, report on the Project Concerning the Policies, Procedures, Terms and Conditions Used for Research Projects at Educational Institutions, June 20, 1969.