With federal money making up a significant portion of their budgets, state and local leaders do not need another reminder that these grants are essential. What they do need is a clear-eyed strategy for managing them, especially since these federal funds are less predictable than they used to be.
Major disruptions over the past year have included shifting federal agency guidance, sudden enforcement actions, grant cancellations and resulting legal challenges. For state and local governments, this means the rules that they planned around can suddenly change, reporting burdens can spike without warning and grants that once looked safe can turn into a fight.
While specific impacts vary by jurisdiction, the practical effect on cities, counties and states is the same: The consistent, long-term federal funding stream that leaders thought they could count on for years to come has suddenly been disrupted. Officials can better respond to this new reality when they have a detailed understanding of their federal grant portfolio. But the diffuse nature of these grants can make it difficult to have a complete picture of all funding without a centralized capacity to monitor, manage and maximize federal resources.
This is why governments should treat grants management capacity not as a bureaucratic add-on but as core infrastructure in the same category as budgeting, debt management and procurement.
A centralized federal grants management function can play offense and defense while keeping the system running at the same time. On offense, it improves the ability to pursue and win competitive funding by maintaining a pipeline of opportunities, aligning applications to shared priorities and supporting grant development. On defense, it helps leaders understand what is at risk when federal guidance shifts, enforcement posture changes or funding becomes entangled in litigation or politics. In daily operations, it strengthens implementation, performance management and compliance so that awards turn into outcomes.
In most government operations, federal grants are spread out, with numerous federal agencies awarding funds to myriad state or local departments. One office might win a competitive grant award, another could manage a federal formula program and a third could pass grant funds through to subrecipients. Because federal grant reporting frequently lives in spreadsheets — with institutional knowledge often living in people’s heads — no one person or office usually understands a jurisdiction’s full federal funding picture. That model can limp along in stable times, but when uncertainty rises it can lead to failures with big consequences.
When no one owns the whole portfolio, lack of visibility makes it difficult to answer basic questions quickly. How much federal funding is at stake? What has been obligated but not spent? Which awards have looming deadlines? Which programs are exposed to policy changes?
Without a centralized view, governments miss opportunities because they cannot prioritize. Competitive programs reward readiness and coherence, but fragmented systems encourage agencies to chase what they notice independently. That approach produces duplicative pursuits, mismatched narratives and missed chances to align match dollars, project plans, partnerships and permitting into one compelling package that increases funding and produces greater impact.
Fragmentation also increases compliance risk. Federal assistance comes with real conditions: procurement standards, subrecipient monitoring and audit requirements. For example, the Uniform Grants Guidance requires consistent policies, procedures and accountability controls for managing federal grant awards. When those responsibilities are handled inconsistently across agencies and without a standardized approach, governments risk negative audit findings, delayed reimbursements, questioned costs and the potential for funding clawbacks.
These capacity gaps can become opportunity gaps. Smaller jurisdictions and under-resourced agencies often struggle the most with grant development, reporting and compliance. Centralizing the grants management function in a budget agency or executive’s office can lower those barriers by providing shared support, increasing collaboration and creating common accountability.
Centralization does not necessarily mean stripping agencies of ownership or expertise. Done well, it can instead create a center of gravity that turns federal funding from a set of disconnected transactions into a portfolio that government staff can manage strategically and defend when it is threatened.
Effective Grants Management in Action
While a centralized view of federal funding is more the exception than the rule, some state and local governments have taken important steps to improve their strategic grants management.
Colorado’s Office of Federal Funds and Strategic Initiatives, for example, was initially established to manage State and Local Fiscal Recovery Funds under the American Rescue Plan Act — a situation that required moving pandemic funding quickly while also managing compliance risk. This dual mandate made centralized coordination essential, particularly for programs with more complex federal requirements.
Over time, the model expanded beyond pandemic funds to encompass a broader federal funding strategy. The office aligned funding decisions with statewide priorities while strengthening implementation and grants management by providing common resources, including access to on-call grant writing support for agencies.
Colorado invested in tracking federal funds across government through dashboards to show where dollars were flowing, providing insights into where deadlines and risks were emerging. In the current federal environment, this capacity also plays an important defensive role: By maintaining visibility into the full federal grants portfolio, the office can identify which awards are exposed to policy shifts, funding delays or changes in federal enforcement and guidance.
Similarly, Massachusetts’ Federal Funds and Infrastructure Office, which is charged with coordinating a whole-of-government strategy to leverage federal opportunities, has built the capability to analyze the impact of potential changes in federal funding. In addition, the office manages a pool of matching funds to support applicants pursuing federal programs and administers technical assistance grant programs for municipalities, tribes and regional planning agencies.
Other examples include the Wyoming Budget Department’s Grants Management Office, which takes a strategic approach to federal grants and provides support to fill capacity gaps across the state, and the Hawaii Office of Federal Awards Management, which advances grants management, administration and oversight for state departments.
Core Capacities to Emulate
While specific centralization models differ, they share a few core capacities:
• Portfolio visibility. Having a centralized inventory of current-landscape federal funds received — including awards, obligations, spend-down, key deadlines, match requirements, subrecipients and risk assessments — is essential in today’s unstable environment. With this data on hand, leaders can answer basic questions quickly and manage grants proactively instead of reactively.
• Built-in compliance and audit readiness. Federal audit expectations are unforgiving, and the price of inconsistency is often paid later— with interest. Risk can be managed through standardized policies for procurement, documentation, subrecipient monitoring and reporting that is embedded in operations instead of tacked on at the end.
• Governance and prioritization process. This involves creating a coordinated mechanism for identifying additional federal grant opportunities to pursue. This function should sit close enough to leadership to be meaningful and close enough to agencies to be usable. It should help leaders align grant pursuits with statewide or local priorities, resolve interagency conflicts and convene the right players quickly when federal rules shift.
• Shared services to raise system performance. This can include grant development assistance, templates, benefit-cost capacity, partnership facilitation and surge resources during peak application windows. It can also include technical assistance that enables local governments and subrecipients to pursue and implement federal funds effectively.
Recent federal changes can be viewed as a stress test that reveals what modern government operations require. Federal grants are too important to state and local government fiscal health and service delivery to be managed through fragmentation, especially when uncertainty is the new normal.
Jed Herrmann is a director in the state and local government practice at Guidehouse, where he co-leads the firm’s grants management and program implementation practice. A senior fellow at the Center for Digital Government, he previously worked for state and local governments as well as the White House Office of Management and Budget.
Disclosure: The Center for Digital Government and Governing are both owned by e.Republic.
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