Getting a Grant is Just the First Step: Administrative Capacity and Successful Grant Implementation

• Published date: 01 April 2024
• DOI: http://doi.org/10.1177/02750740231206823
• Author: Iuliia Shybalkina
• Date: 01 April 2024

Getting a Grant is Just the First Step:

Administrative Capacity and Successful

Grant Implementation

Iuliia Shybalkina

Abstract

This study examines the link between the pace of utilizing the awarded intergovernmental grants and the administrative capac-

ity of recipient government organizations. Past research focused on the relationship between higher administrative capacity

and obtaining grants. However, there is a lack of attention to how capacityaffects grant funds utilization, which iscritical for

achieving societal impact. To address this issue, the study analyzes the Coronavirus Relief Fund (CRF) established by the

CARES Act to aid state and local governments with COVID-19-related expenses. The study justif‌ies and performs multiple

regression analyses using data from various sources, including the U.S. Department of the Treasury, the U.S. Census Annual

Survey of Public Employment and Payroll, and the Government Finance Off‌icers Association. The study discovered that f‌inan-

cial administrative capacity was positively linked to the proportion of funds spent early in the CRF program rollout, a f‌inding

that withstood scrutiny when employing various measures of administrative capacity. However, the connection between

capacity and spending tapered off toward the end of the program rollout, potentially due to workload stabilization, increased

program clarity from the federal government, capacity-building by recipients, and the use of external experts. The f‌indings of

this study carry signif‌icant implications for both research and practice, underlining the necessity of studying the implementa-

tion stage of government grant programs and investing in building administrative capacity within recipient organizations.

Keywords

intergovernmental grant, administrative capacity, funds absorption

A community can obtain a grant to perform a planning function

or build a facility but still lack the time, staff, skills, and instru-

mentalities to effectively use the funds. (Honadle, 1981, p. 577)

Introduction

Intergovernmental grants play a critical role in federal

systems like the United States (Oates, 1999). However,

grants can also impose a signif‌icant burden on recipients,

and recipients’varying levels of preparedness to meet these

costs can hinder some governments’ability to participate in

the intergovernmental playing f‌ield (ACIR, 1978). One key

factor affecting a government’s ability to handle intergovern-

mental grants is its administrative capacity (Ingraham &

Donahue, 2000). While several studies have demonstrated

that higher administrative capacity is associated with a

higher likelihood of pursuing and obtaining grants (Bickers

& Stein, 2004; Collins & Gerber, 2006; Hall, 2008; Lowe

et al., 2016; Manna & Ryan, 2011), little attention has been

given to how administrative capacity impacts the use of

grant funds after receipt. To maximize the impact of grant

funds and avoid penalties, it is critical to utilize them fully

and follow established regulations (GAO, 2016). Therefore,

this study examines the relationship between administrative

capacity and the percentage of grant funds used.

The investigation centers around the utilization of the

Coronavirus Relief Fund (CRF), a federal grant totaling

$150 billion, established through the CARES Act in March

2020 to aid state and local governments in covering expenses

related to the COVID-19 pandemic. The bulk of the grant

was awarded to 204 primary recipients, including 50 state

governments, 116 large counties, and 38 large cities (CRS,

2021). The federal government imposed strict rules on the

use of funds and reporting but provided poor guidance to

Martin School of Public Policy and Administration, University of Kentucky,

Lexington, KY, USA

Corresponding Author:

Iuliia Shybalkina, Martin School of Public Policy and Administration,

University of Kentucky, Lexington, KY, USA.

Email: iuliia.shybalkina@uky.edu

Article

American Review of Public Administration

2024, Vol. 54(3) 287–302

© The Author(s) 2023

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/02750740231206823

journals.sagepub.com/home/arp

recipients. The funds were utilized for important purposes,

such as public payroll, business programs, medical supplies,

and distance learning technology. However, many recipients

experienced a slow absorption of funds (Leachman, 2020;

NAPA, 2021), which may be attributed to the burdens inher-

ent in the CRF program. Therefore, this study aims to explore

the relationship between recipients’administrative capacity

and the proportion of the award used, to determine if

higher administrative capacity leads to greater utilization of

grant funds.

Specif‌ically, the study examines the relationship between

recipients’capacity and the proportion of the award spent

during three cumulative periods of 2020 (2nd quarter, 2nd–

3rd quarters, and 2nd–4th quarters). To measure administra-

tive capacity, the study utilizes two novel methods: the

number of f‌inancial administration employees per 100,000

residents and the receipt of the Certif‌icate of Achievement

for Excellence in Financial Reporting from the Government

Finance Off‌icers Association (GFOA). The study also

includes numerous control variables to minimize bias, such

as variables characterizing the severity of the COVID-19

pandemic, political forces, and preparedness to withstand

f‌iscal shocks. The study draws data from the U.S.

Department of the Treasury, the U.S. Census Annual

Survey of Public Employment and Payroll, GFOA, and

other sources.

Despite facing a massive health and economic crisis, the

average recipient spent only a fraction of their award, with

19.7% spent by the end of June 2020, 30.4% by the end of

September 2020, and 69.1% by the end of the year, which

was the original deadline to use the funds. The study found

that f‌inancial administrative capacity was positively associ-

ated with the proportion of funds spent early in the

program rollout. This f‌inding remained robust when using

either measure of administrative capacity. For instance, a

10% increase in employees was associated with up to a

0.52 percentage point increase in spending in the f‌irst 3

months. Moreover, GFOA winners spent up to 10.4 percent-

age points more than other recipients during the same period.

However, the relationship between capacity and spending

diminished late in the program rollout, potentially due to

workload stabilization, increased program clarity from the

federal government, capacity-building by recipients, and

the use of external experts from higher-level and peer govern-

ments, professional associations, or consulting f‌irms.

The study’sf‌indings have signif‌icant implications for both

research and practice. From a research perspective, the study

highlights the importance of studying the implementation

phase of government grant programs, in addition to the appli-

cation and receipt phases. This shift in focus can lead to a

more comprehensive understanding of the challenges in

intergovernmental relations and improve grant effectiveness.

Moreover, the study contributes to the ongoing discourse on

administrative capacity by proposing innovative measures to

assess capacity and demonstrating the link between capacity

and the success of grant implementation. By showing that

capacity matters in grant implementation, the study empha-

sizes the importance of investing in building internal admin-

istrative capacity within recipient organizations and

expanding access to external experts who can help recipients

overcome capacity constraints. Additionally, the study’s

f‌indings suggest that grant programs need to be designed to

reduce the burden on grant recipients.

The Signif‌icance of Administrative

Capacity in Federal Systems

Intergovernmental Grants

Intergovernmental grants are commonly used to f‌inance sub-

national spending. For example, in 2017, state governments

in the United States received 32% of their general revenue

from the federal government, while local governments

received 32% of their general revenue from state govern-

ments and 4% from the federal government (according to

the Annual Survey of State and Local Government

Finances). Throughout the 20th century, federal–local inter-

action was more extensive than the current 4%, driven by ini-

tiatives such as the New Deal, Urban Renewal, general

revenue sharing system, and post-9/11 policies. However,

over time, this interaction level has diminished, partly due

to the capacity constraints experienced by local governments

(Davidson, 2007; Griff‌in, 2007; Inman, 1987). These grants

serve several important functions (Oates, 1999). First, they

support activities with spillover effects. Second, they can

redistribute funds from wealthier to poorer areas. Third,

they allow combining more localized program administration

while keeping tax collection at the national level.

Additionally, due to institutional and other constraints, state

and local governments must rely on the federal government

to respond to economic, natural, and health-related disasters

(Green & Loualiche, 2021; Miao et al., 2018).

However, one concern about the federal aid system is that it

can impose high costs on recipients, such as application and

implementation expenses (ACIR, 1978; Stein, 1981).

Therefore, recipients must be willing and capable of managing

grant programs (Gargan, 1981; Handley, 2008). In addition,

there may be other conditions that recipients must meet, such

as having enough f‌inancial resources to fulf‌ill matching

requirements (Hall, 2008). Consequently, grants are more

likely to go to governments with the ability to absorb a range

of associated costs (Collins & Gerber, 2006; Stein, 1981).

However, this ability may be inversely related to need, based

on size, wealth, and demographics, which raises equity con-

cerns (Collins & Gerber, 2006; Gargan, 1981; Stein, 1981).

Administrative Capacity

The government’s ability to effectively utilize its resources to

carry out its policy objectives (Ingraham & Donahue, 2000,

288 American Review of Public Administration 54(3)