Why Federal Dollars Rarely Make It Back Home

A complex system of applications and accountability make some federal grants simply out of reach of small governments

The Federal Government spends a lot of money. Last year, Washington spent nearly $1 Trillion in discretionary spending that did not go towards activities related to National Defense. Many of these dollars are spent in grant-making programs that offer dollars to state and local governments. Local government leaders are motivated to go after these dollars; brining federal dollars back home is good for communities.

And these federal grants can be vital for supporting states and local governments. However, smaller communities, especially in the Midwest, face significant challenges in accessing these funds. In the June 2024 edition of Government Finance Review, authors Katherine Barrett and Richard Greene talked wrote about the struggles smaller communities have in securing federal grants in an article entitled, “Why Federal Grant Money Can Be So Elusive”. As someone who spent considerable time and effort securing federal grants for local government, I found this article very representative of my own experiences.

Today’s publication is devoted to spend some time exploring some of these challenges and their implications, aiming to provide valuable insights into the complexities of securing federal grants for small communities, like the ones here in Miami County.

Understanding Federal Grants

The federal government allocates more money to states and local governments through grants than contracts. Significant legislative efforts, such as the American Rescue Plan Act, the CARES Act, the Bipartisan Infrastructure Law, and the CHIPS and Science Act, have made vast sums available. For instance, the American Rescue Plan Act appropriated $350 billion for state and local fiscal recovery funds, while the Bipartisan Infrastructure Law allocated $1.2 trillion for transportation and infrastructure projects. Despite these funds, smaller communities often struggle to access these resources effectively.

Complex Application Processes for Federal Grants

Accessing federal grants is complex. Senator Gary Peters of Michigan noted, "More than 50 different federal agencies distribute grants to more than 131,000 recipient organizations for over 1,900 grant programs, each with its own application and award process that can be difficult to navigate." This complexity is a significant barrier for smaller communities with limited administrative capacity.

Elena Boyd, a senior manager at Accenture, highlights five key challenges:

1. Complex Funding Streams: Local grant managers often lack direction amidst numerous available grants, leading to confusion and inefficiency.

2. Resource Constraints: Communities with dedicated grant writers have an advantage. Boyd states, "Funding distribution can be biased in favor of communities with dedicated grant writers versus those that don’t."

3. Matching Funds Requirements: Many grants require matching funds, which can be a hurdle for cash-strapped entities. Without necessary financial resources or partners, many communities miss out on available grants.

4. Technological Limitations: Effective grant management requires technological tools that many smaller communities lack. Boyd mentions, "They don’t have the technological tools to do grant management effectively."

5. Post-Award Management: Securing the grant is only the beginning. Detailed work in grants administration, compliance, and reporting is necessary, adding to the burden on small communities.

Real-World Implications for Small Communities

These challenges are not just theoretical. Pari Sabety of U.S. Digital Response recalls, "We interviewed a guy from a small town in Ohio who said, 'I've lived here and run transportation in this little town for 30 years. I can count on the fingers of one hand the number of federal grants we finally decided we could go after. Five federal grants for 30 years.' That's all they did. Why? Because they said it wasn’t worth it. It's just so hard to go after it."

The inability to navigate the grant system effectively means that many communities miss out on crucial funding that could significantly impact their development and the well-being of their residents.

The Role of Technology in Federal Grant Management

Efforts are being made to simplify the grant application process. For instance, the Federal Grant Finder, developed by U.S. Digital Response, offers a more user-friendly alternative to grants.gov. This site provides a single source to search all federal grants and allows users to save searches and collaborate with others. Despite these improvements, the fundamental complexity and resource requirements of the grant application process remain significant barriers.

Jeff Arkin, director of strategic issues for the U.S. Government Accountability Office, adds, "Smaller localities may not even know what’s out there or where to find them, or how to apply." This lack of awareness and guidance further complicates the situation for communities with limited resources.

Compliance and Reporting Challenges

Even after securing grants, the reporting requirements can be overwhelming. The State and Local Recovery Fund, for example, requires recipients to report on 103 data elements every three months. This level of detailed reporting can be impractical for smaller communities with limited administrative capacity.

Sabety explains, "There is a long history of the federal government setting up programs and having people come up with a wish list of data elements. These become the data elements that stay in perpetuity. There's a tremendous amount of inertia—everything's on autopilot. And it's all built on this notion that 'we'll collect all this data and then we'll put it in spreadsheets and try to analyze it and make sense of it.' And the reality is that they never really engage on the front end to say which of these data elements would be useful to us at the federal level and to you as the grantee."

This bureaucratic inertia means that communities are often burdened with unnecessary reporting requirements, further discouraging them from seeking federal grants.

The Need for Federal Support in Grant Applications

The challenges faced by smaller communities in accessing federal grants underscore the need for federal support. As Shelley Metzenbaum, a good government consultant, emphasizes, "The federal government needs to help states, localities, and other grant applicants learn from each other, share implementation tools, and find ways to submit high-quality applications that don’t favor richer communities over communities that have greater needs but fewer resources to prepare those applications."

Without such support, the disparity between well-resourced and under-resourced communities will only widen. Richer communities with dedicated grant writers and administrative support will continue to secure federal funds, while smaller, poorer communities will struggle to compete.

Implications for smaller communities

For smaller communities, especially those throughout our own county, these challenges have significant implications. The inability to secure federal grants can hinder infrastructure development, economic growth, and the overall quality of life for residents. Miami County, like many other small Midwestern communities, must navigate the complex federal grant landscape with limited resources.

This especially true when real challenges are on the horizon. Residential development, especially in the south-east corner of the county, is causing real stress on an overburdened school district and an undersized road network. Multiple townships across the county will be asking voters for funds this fall through the ballot box to support fire and EMS services. Water and Wastewater Infrastructure will continue to be areas where efficiencies could be helped by federal dollars to create more regional approaches to provide these critical services.

The example of the transportation official from a small Ohio town who managed to secure only five federal grants in 30 years highlights the difficulty of the task. This situation is emblematic of the broader challenges faced by similar communities across the Midwest and the nation.

The challenges faced by smaller communities in accessing federal grants are profound. From the complexity of the application process to the resource and technological constraints, these hurdles prevent many communities from benefiting fully from available federal funds. Even for our own home county and local communities, overcoming these barriers is essential to ensure they receive the support needed for their development and sustainability.

As Shelley Metzenbaum suggests, the federal government must play a proactive role in helping these communities learn from each other, share tools, and submit high-quality applications to ensure that resources are distributed equitably and effectively. Only through such concerted efforts can smaller communities hope to secure the federal support necessary for their growth and prosperity.

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