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.