The Gallery: Are States Ready to Manage Federal Grant Funds?

Over $250 billion was allotted for state and local governments through federal grants and loans in the Recovery Act. Accenture’s Mark Howard discusses a recent joint survey with the National Association of State Auditors, Comptrollers and Treasurers that looks at how states could leverage ARRA requirements to be more efficient and competitive when applying for federal grants.

Are states prepared to compete for — and win — newly available federal grant funds? The $787 billion American Recovery and Reinvestment Act (ARRA) presents an unprecedented opportunity for states and their agencies, many facing current and projected financial shortfalls, to receive federal funding. But it also poses new challenges.

Accenture and the National Association of State Auditors, Comptrollers and Treasurers (NASACT) teamed up to conduct a nationwide survey exploring states’ current federal grants management practices. The survey yielded some important findings, painting a nationwide picture of inconsistency among states’ readiness to address ARRA’s opportunities and challenges. The survey results suggest that, without a centralized process for grants management, states may be leaving money on the table. At worst, they risk failing to recoup their administrative costs.

The message from the Accenture/NASACT survey is clear: the time has never been better for states to push for improvements to their grants management processes to tap more federal funds. The first step, understanding the administrative costs of managing grants, is crucial to actually managing those grants. Adopting a best practices model to centralize functions across the entire grants management life cycle can position states to receive optimal funding from all federal grants in the future, not just from ARRA.

The survey, which sought general background directly from state comptrollers, provided insight on the extent of decentralization within state agencies. The comptrollers were asked explicitly not to reach out to their state agencies in responding to the survey. Accenture and NASACT expected that, to some degree, comptrollers might not know the details of the grants management process. Asked how many applications their states had submitted in the last 12 months across all agencies, 76 percent of responding comptrollers said they did not know. Asked about the number of grants awarded during the same time period, 84 percent did not know. These responses could lead to the conclusion that the information is either being managed in a decentralized manner, or in a way that is not ultimately efficient.

The survey also wanted to determine how ARRA is causing state government practices to change. The hypothesis was that two factors could drive significant change: the influx of dollars (10 to 20 percent increases over current levels) and the attention and requirements ARRA demands. These factors did appear to be at work, but the impact of ARRA was inconsistent across states.

In terms of leading practices and potential areas for improvement, the findings reveal no uniform best practices among states for managing grants. They do, however, provide insight into the gaps that thwart states’ ability to adopt an end-to-end process for winning federal grant funds.

The survey contains a number of recommendations to improve states’ ability to adopt an end-to-end process for winning federal grant funds.

  • First, states should centralize the front end. Most states lack central visibility at the front end of the grants management lifecycle. Such a fractured process creates waste, rework and redundancy.
  • Next, centralize processes at the back end. Compared to the front end, there is relatively high visibility and control over the back-end — or post–award and financial management — phase. This simultaneously gives states more flexibility and tighter management over this area, and they would be better served by shifting their focus to improved outcomes and results throughout the grants management lifecycle.
  • States should also adopt enabling technologies. Cost/benefit analysis should be used to assess the business case for further investments in software solutions.

States should take advantage of ARRA as a lever for lasting change against a backdrop of rising state fiscal challenges. There are abundant opportunities for states to make dramatic improvements in their approach to pursuing and managing federal grants. Understanding the administrative costs of managing grants is a crucial first step. States can accomplish this with modifications and additions to their accounting process. And, again, adopting a best practice model to centralize functions across the entire grants management life cycle is the best way to ensure receipt of optimal funding — not just from ARRA, but from all federal grants in the future.

Mark Howard is Accenture’s state and local government practice, budget and performance management lead.

Download a copy of the full report by clicking here.

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