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 Home > News & Policies > August 2001

Barriers to Community-Based Organizations and Other Small and Newcomer Organizations
The routine design and operation of Federal competitive and formula grant programs are overwhelming and off-putting to smaller-scale organizations, both sacred and secular, and to those considering collaborating with Government for the first time. Some aspects of the programs are intimidating or create nearly insuperable barriers for small or new groups. To be sure, the ability of applicants to fulfill requirements ought to be strengthened. At the same time, burdensome requirements that cannot be sufficiently justified, or whose aims can be accomplished in other, less onerous, ways, should be eliminated or modified.

Barrier 7: The Limited Accessibility of Federal Grants Information
Federal discretionary grant programs typically announce the availability of funds in the Federal Register and on the program's or the respective Department's Website. These sources are not everyday reading for small faith-based and community groups; these places are regular information sources only for organizations that have already decided that they might have a chance to win Federal funds and that can dedicate staff attention to monitoring funding announcements. Moreover, grant information organized by Department and program is fully accessible only to seekers who have figured out in advance which Department, and thus which Website-or rather, which several Departments, and thus which several Websites-might be funding a service that their organization offers or is interested in developing. (There is a joint Website, the Federal Commons ( which provides help by serving as a single point of entry, listing broad subject categories that in turn lead to programs in the various Departments with links to further information).

Most Federal social service funding is distributed via formula grants to State and local governments rather than directly to nongovernmental organizations through Federal discretionary grants. Thus, groups that somehow hear of a major new Federal funding initiative should usually look to State and local officials to discover how to compete for the funds, rather than trying to figure out which Federal program has control of the funds. However, news about Federal spending does not usually explain the difference between formula and discretionary grants and the resulting difference in application pathways.

Even without this additional complexity it is difficult for newcomers to move from the sidelines to the frontlines. The audit of Education programs noted that there is no natural starting point for newcomers on the Department's Website and that the Department's guide to its grants process could be located only with difficulty.

An experienced Pittsburgh faith-based organization with a $3 million dollar annual budget to serve the poor has found the Federal grants application process to be so complex that it was forced to resort to a professional grant consultant to identify and apply for likely Federal grants.

Barrier 8: The Heavy Weight of Regulations and Other Requirements
Applicants for Federal support encounter a dizzying array of statutory and regulatory requirements. Each program has its own specifications and guidelines. Departments have additional rules. In addition, some 50 separate Federal requirements apply across the board to Federal grants. Each of these regulations and requirements reflects important social, environmental, legal, and health concerns. However, the collective weight of these can make it exceedingly difficult for smaller, community-based, and grassroots organizations to compete for Federal social service dollars. While many of these requirements are irrelevant to many social service providers, all applicants are nonetheless required to affirm compliance with all of them.

In the case of formula grants, one crosscutting Federal rule authorizes state and local governments to add to the Federal regulations their own usual procurement rules, so long as these do not conflict with specific Federal requirements. Thus, applicants may find themselves subjected to an additional layer of requirements beyond those authorized by the Federal program statute and regulations and the additional across-the-board Federal mandates referenced above.

Barrier 9: Requirements to Meet Before Applying for Support
The Labor Department's Employment and Training Administration discretionary grants are typically multi-million dollars in size. To ensure that funds are appropriately spent, DOL requires grantees to have an extensive financial and administrative management system. This means that, in order to compete to win a grant, an organization must already have the systems in place to handle the additional income that will come from winning a DOL grant.

For an Education grantee to be able to charge to a Federal grant indirect costs that it incurs to provide the services, it must have negotiated an approved indirect cost rate with the Department. Without knowing what that rate is, an applicant for funding cannot figure out whether it will be able to provide the services within the offered grant funds. But establishing the indirect cost rate takes at least 90 days while the typical time between publication of an Education application notice and the deadline for applications is only 60 days. In other words, before ever competing for an Education Department grant, an organization must first have negotiated with the Department to get an approved indirect cost rate.

Barrier 10: The Complexity of Grant Applications and Grant Agreements
Solicitations for grant applications at Labor are repetitive and overly long, stating eligibility and other requirements more than once, lifting technical language directly from the authorizing statute, and including information from the legislative history that is only marginally pertinent and contributes to the complexity of the document.

Grant agreements at HUD and other Departments typically only cross-reference many of the applicable regulations and statutes, leaving it up to the grantee to track down, order, and assimilate a huge number of documents.

At DOJ, the application kit for the Edward Byrne Memorial State and Local Assistance Discretionary Program totals 58 pages. Approximately 1,000 pages of Federal statutes are referenced in the application process. For the DOJ's Weed and Seed Grant Program, the application kit for new applicants is 74 pages long, and it references some 1,300 pages of Federal statutes-a stack of paper nearly 6 inches tall.

Education has prepared a user-friendly, non-technical explanation of its discretionary grants application process, a 33-page document. However, the guide emphasizes that applicants must not rely on it as their sole source of information and it directs them to the department's general regulations-some 300 pages of legal details.

Barrier 11: Questionable Favoritism for Faith-Based Organizations
Despite the general Federal wariness about Government funding of religious organizations, occasionally Federal programs veer sharply in the opposite direction, specifying that only faith-based providers are eligible to participate. Earlier this year, for example, the Center for Substance Abuse Prevention, part of SAMHSA at HHS, announced funding to expand capacity for groups battling substance abuse and HIV in minority communities. Because of the "well-documented acceptance and trust" of faith-based organizations in minority communities, the announcement limited eligibility to faith-based organizations and to youth-serving organizations in collaboration with faith-based groups. Notwithstanding the good intentions, such a requirement raises constitutional questions and, of course, it creates a barrier for secular programs, some of which themselves have won "acceptance and trust" in their communities.

Barrier 12: An Improper Bias in Favor of Previous Grantees
It is natural for experienced grant applicants to have a competitive edge in applying for funds. They more readily find out about funding opportunities, know the application process, and are familiar with the grants management requirements. They also have an edge because of their relationship with program and grants managers.

Some Federal programs deliver further unfair advantage to previous Government grantees by building a bias into the application process. DOL's "Susan Harwood Training Grant" program funds groups to train employers and employees to recognize, avoid, and prevent workplace safety and health hazards. The program requires applicants to demonstrate not only topical and managerial experience but also either past receipt of a Government grant or a firm commitment of collaboration from an organization that has managed Government funds previously. The awards process for the Education Department's "Fund for the Improvement of Education" gives extra prior experience points to applicants who operated a program during the previous funding cycle.

Barrier 13: An Inappropriate Requirement to Apply in Collaboration with Likely Competitors
Requiring grantees to coordinate their services with other service providers can be an important way to ensure that Federal funding achieves maximum results. But a requirement that grant applicants must demonstrate support from other providers who may be competitors can instead result in the exclusion of effective organizations. But this peculiar requirement exists in some Federal programs. Each Center identified at least one program with such an anti-competitive application requirement:

  • HHS: The National Family Caregiver Support Program required applicants to gain the support of the respective Area Agency on Aging, which is simultaneously a coordinating mechanism and a competitor for the same grants. (The Administration on Aging at HHS has now removed the condition).

  • DOJ: OJP grants in many cases require an applicant or grantee to cooperate with other non-governmental organizations, which can leave a faith-based or community-based provider at the mercy of groups, whether faith-based or secular, who do not share its unique vision or concept of service.

  • DOL: The Welfare-to-Work formula grants required nongovernmental applicants to submit their applicants in conjunction with the local workforce investment board, which was a competitor. (However, if the local board refused to cooperate, the applicant could sidestep the requirement by showing it had made a reasonable request in a timely manner).

  • HUD: The Continuum of Care process to comprehensively address homelessness requires extensive coordination. The government agencies and larger providers that may need to be involved in order to administer the system may not have much interest in involving smaller and newer organizations. In addition, a successful application by any one group depends on the quality of the proposed or existing overall system over which the applicant may have little or no control.

  • ED: The GEAR UP program (Gaining Early Awareness and Readiness for Undergraduate Programs) and two bilingual education programs limit eligibility for grants to nongovernmental groups that can demonstrate a partnership with the local education authority-which may, be unwilling to work with a qualified community-based or faith-based organization.

Barrier 14: Requiring Formal 501(c)(3) Status without Statutory Authority
By statute, many Federal discretionary and formula grant programs require applicants to be nonprofit organizations. Some programs permit applicants to prove nonprofit status by giving evidence of nonprofit incorporation under State law (or even by demonstrating that the organization provides services in the public interest and uses its net proceeds to improve or expand such services). Incorporation under State law is relatively uncomplicated and inexpensive. However, many Federal programs routinely require applicants not merely to demonstrate nonprofit status but also to demonstrate formal 501(c)(3) status under the Internal Revenue Code. This is a heavier burden, often requiring hundreds of dollars in filing and attorney's fees and requiring a number of months to prepare the application and then win approval from the IRS. This heavy burden is often imposed unilaterally by Federal officials despite the absence of any statutory authorization for it.

At HHS, many programs require 501(c)(3) status, despite the lack of a statutory requirement, because program managers treat an IRS status letter as a verifier of nonprofit status. Despite silence in both statutes and regulations, some HUD programs require applicants for discretionary grants to prove 501(c)(3) status, and other HUD programs impose the requirement through the formula grant system on applicants seeking Federal funding through State or local governments. Program officials and attorneys for the Community Technology Centers program at Education insist that applicants must prove 501(c)(3) status, although there is no such statutory or regulatory requirement. At DOJ, applicants routinely are required to demonstrate 501(c)(3) status to prove that they are nonprofits, even though only the Juvenile Justice and Delinquency Prevention Act does not contain that specific statutory requirement.

Barrier 15: Inadequate Attention to Faith-Based and Community Organizations in the Federal Grants Streamlining Process
Because all of the Federal Government's service partners, including large nonprofit organizations and even State Governments, encounter significant difficulties in applying for and managing Federal grants, Congress directed all of the major Federal grant-making organizations work together to simplify and improve in 1999, that the grants process. The Initial Plan required by the Federal Financial Assistance Management Improvement Act was sent to Congress in May 2001. It outlines a detailed plan to determine how the various grants programs work and how they can be improved. The report also includes a summary of comments received from grantees and other interested parties. The grants reform process-the Federal Grant Streamlining Program-holds considerable promise to eliminate or minimize barriers that particularly hobble smaller and newcomer organizations.

However, without reform of the reform process itself, it is unlikely that the Federal grants process can be made as welcoming to faith-based and community-based organizations as it should be. HHS, the lead Department in the reform process, solicited comments about problems of the grant process and the draft reform plan through typical Federal channels-publication in the Federal Register, information on the HHS Website, and five consultation meetings with grant constituencies. Although faith-based and community-based organizations face the highest barriers in the Federal grants process, they seem not to have been full participants in the comments process: Of the comments received from 77 sources and summarized in the Interim Plan, only a handful, at most, came from such organizations. Almost all of the comments are from larger, traditional recipients, such as State Governments and their associations, Indian tribes, universities, and large nonprofit service organizations.

Similarly, the workgroup structure for the streamlining process includes only two grantee subgroups-one subgroup for "universities and research nonprofits," and a second one, for "State, local, and tribal governments and other non-profits." But the faith-based and community-based organizations that face the highest hurdles in seeking Federal support have distinct concerns not likely to be given sufficient attention if collapsed into an "other nonprofits" residual category.

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