The Daunting Challenge of Following the Federal Money

As funding from Washington makes its way to the service-delivery level, it follows a complex path. We need a better understanding of where it goes and how it's used.
by | September 19, 2012

The federal stimulus program is over, but the Recovery Act left a legacy of valuable innovations and lessons for public administration at all levels of our federal system. Of particular note is the Obama administration's effort to promote transparency by implementing a federal grant-reporting system providing information on the use of federal funds across the Recovery Act's nearly 300 programs. And legislation pending in Congress--the DATA Act, which has passed the House--would institutionalize this system for all federal contracts and grants.

One barometer of the complexity of our federal system is deciding how far down the recipient chain these federal reporting requirements should extend. For the Recovery Act alone, the administration reports more than 277,000 awards. Most of these grants and contracts support extensive public and private service-delivery networks that are highly localized and diverse, and some are passed down through numerous layers. A typical social-services grant to California, for instance, will go to one of the counties, which might in turn pass the money down to cities or other local governments. But that's not the end of it, for these governments will then pass the money down to the nonprofits or other service providers that might actually provide child care, protective services or other functions.

The problem is that federal officials do not have a good understanding of what these networks look like. No one really knows how much of a burden would be imposed if the federal reporting requirement were imposed for all pass-throughs. Moreover, the farther down the rabbit hole we go in pursuing federal funding data, the more uneven is the capacity of recipients to account for these external funds.

It is for reasons such as these that the administration decided to impose reporting for Recovery Act funds only for the first sub-recipient in the federal funding chain. The DATA Act, on the other hand, would impose such requirements on all sub-recipients, down to a certain dollar threshold.

Beyond the burden question, there is much that needs to be learned about the real local environment and networks through which federal funds operate. For instance, we know that local governments and nonprofits often become consummate grant and contract aggregators--a single major program initiative often requires funding from multiple sources to address local needs. Thus, for instance, Pittsburgh used Recovery Act highway grants in concert with related grants to help fund a safe-streets initiative to install high-intensity lights--a purpose that would be difficult to discern looking at the specific objectives of the highway program.

Tracking the specific uses of federal funds becomes a murky proposition when so many funding pots are contributing to a single project. At some point the federal funds become fungible with other funding sources. All the federal government can know for sure is that its program was a part of a broader-based initiative to achieve an outcome, whether it is child care, preschool education or establishment of a drug court. The stovepiped Washington version of program accountability fails to do justice to the actual regimes of public and private providers that do the heavy lifting of implementation.

This local initiative and creativity is a strength of our system, even though it is difficult to understand from inside the Beltway. The inherently decentralized nature of our federal system complicates any conventional notion of accountability for federal dollars. Thanks to such management reforms as the Government Performance Results Act, federal agencies are awash in data about finances and performance of individual programs. However, they often have little perspective on what that means in the broader system of delivery.

In one survey of federal agencies that we did when I led the Government Accountability Office's work on federal grants, most federal grants managers confessed that they did not know how much total funding was provided for their broad program beyond the federal dollars alone. As one astute appropriations staffer put it, referring to the funding of federal drug-abuse initiatives: "What share of the elephant am I supporting?"

What are the implications of this for federal accountability? For one, we should continue our efforts to promote transparent reporting for federal programs, whether they are grants, contracts or loans. However, that information must be placed in a broader context to give it meaning--and this is where the cupboard is quite bare inside the Beltway.

We need more evaluations, by federal agencies and research institutions alike, to describe the shape and values of the many networks through which federal programs are brought to life at the service-delivery level. We need to supplement our top-down accountability reforms with an investment in understanding how the world of public management looks from the bottom up.

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