Proposed Changes in Federal Matching and Maintenance of Effort Requirements for State and Local Governments

GGD-81-7: Published: Dec 23, 1980. Publicly Released: Dec 23, 1980.

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GAO explored the appropriateness of the Federal matching maintenance of effort requirements on State and local governments as a tool for attaining Federal policy objectives.

GAO found that matching and maintenance of effort requirements are often not effective in accomplishing their intended purposes of generating State and local government fiscal and managerial commitments to Federal programs. Further, even when effective from this standpoint, the requirements can produce unintended adverse effects by distorting State and local priorities and screening out needy grantees. Consequently, changes are needed in both matching and maintenance of effort requirements. While more stringent requirements would promote Federal fiscal and managerial objectives, they could correspondingly jeopardize the ability of the intergovernmental grant system to promote State and local fiscal stability and to provide a minimum level of federally funded services nationwide. Maintenance of effort provisions are designed to prevent State and local grantees from reducing their spending in federally funded program areas. Their aggregate burden on State and local governments has become an important issue due to the rapid growth of matching Federal grant programs over the past 15 years as well as the recent wave of fiscal constraints and expenditure reductions faced by all levels of government. For this reason, their appropriateness and effectiveness have become important issues for the entire public sector. Matching requirements need to be used more sparingly and only where a clearly articulated Federal interest does not conflict with the broader purposes of Federal grant programs themselves.

Matters for Congressional Consideration

  1. Status:

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should use matching requirements more sparingly in Federal programs and only after careful deliberation.

  2. Status:

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should amend the Intergovernmental Cooperation Act of 1968 (42 U.S.C. 4201) to enact a standard maintenance of effort requirement applicable to those grant programs where Congress wants to prevent fiscal substitution.

  3. Status:

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should make match rates more uniform wihin each functional area to avoid conflicts that may impede the achievement of Federal objectives. In making such changes, Congress should consider how much latitude the States should have to modify federally determined matching requirements.

  4. Status:

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should, to facilitate making match rates more uniform, consider amending the Intergovernmental Cooperation Act of 1968 to enable the President to propose plans to standardize match rates within functional program areas subject to Congressional approval.

Recommendation for Executive Action

  1. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Director of the Office of Management and Budget (OMB) should direct that OMB include information on maintenance of effort requirements in the description of each Federal program listed in the Catalog of Federal Domestic Assistance.

    Agency Affected: Executive Office of the President: Office of Management and Budget

 

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