Government has perfected awarding grants

The federal government awarded $1.26 trillion to state and local governments in FY2022, primarily through grants. States then distributed $662 billion to local governments, while nonprofits received $294 billion in government grants. Grantmaking is crucial in putting public policy into action at the local level. State agencies utilize grants to support various initiatives, such as improving rural health, preventing homelessness, expanding broadband access, and stimulating economic development.

Most agencies already have a system in place for managing the financial side of grants, including tracking applications, awards, drawdowns, and procurement. However, these systems were not designed to answer the most important question: Are the grants working? The existing grant management systems do not connect with the organizations that receive the funds, such as community organizations, faith-based organizations, and nonprofits with varying employee counts.

The process of supporting grantees after awarding a grant, known as "post-award delivery," is currently ad hoc. Program officers collect required documents, chase outcome data on a cycle, and maintain records of communications. The tools available to them were not designed for this specific purpose, leading to scattered information and a lack of communication about updates or changes in federal guidance.

State agencies act as both grantors and grantees, often within the same week. They receive federal funds with requirements attached and then distribute them to their partners with additional state requirements. This creates a complex chain of grantors and grantees, where every fracture repeats at every tier. Consequently, questions and answers travel slowly up the chain, causing delays and placing the receiving organization at the bottom of the chain.

To better understand grantee performance and improve program effectiveness, three additional metrics should be considered: agency throughput, capacity, and cohort variance. Agency throughput measures the time between appropriation and the actual use of funds in the field, measured at the agency level over multiple years. Capacity assesses whether a recipient can run the program in the next cycle with less support than needed in the current cycle.

Cohort variance compares the average grantee performance across clusters of organizations with varying levels of success.

Today, recipients generate a continuous stream of intelligence regarding their questions and responses, which grantors currently discard. However, analyzing this data could provide valuable insights into the effectiveness of grants and help identify emerging implementation problems. Implementing a better infrastructure to capture and share this information would enable routine questions to be answered instantly using approved guidance, cluster emerging issues, and maintain knowledge across turnover.

This shift from a one-to-one communication model to a many-to-many approach would allow agencies to identify challenges early, share answers more efficiently, and build capacity across grantee cohorts, ultimately leading to better grant performance and improved outcomes for the communities they serve.