Local Management of Federal Grants Determinants of Awards and Government Capacity

Abstract

A key interaction between federal and local governments comes from intergovernmental transfers and grants-in-aid. Popular grant programs include Community Development Block Grants (CDBGs) and Federal Transportation Formula Grants. Intergovernmental grants are a critical tool for local development, planning, and sustainable public finance. However, many funds awarded to local governments are difficult to spend, with some remaining unspent after the grant cycle. This study examines the factors that help determine the success of federal grant awards at the local level, and the drivers of local governmental capacity in grant management. A survey of 243 local government units was conducted to answer these important questions. A logistic regression that predicts localities’ ability to obtain at least one grant shows that grants are targeted to places with higher levels of local need, larger localities, and capacity, which also drive grant awards. Furthermore, a factor analysis shows that several descriptive elements of grant management capacity statistically cluster together. An OLS regression on these drivers of governmental capacity shows that larger places and previous experience in obtaining grants are positively associated with grant management capacity in local governments.