Summary: GAO supports reform of the intergovernmental system; however, in some functions, there are clear economies of scale favoring a national operation. In other cases, program effectiveness may be promoted by the consistent application of a single set of standards on a nationwide basis. However, efficiency and effectiveness may sometimes depend on the ability to respond to widely varying local conditions. In considering change with respect to functions which were previously in the domain of State and local governments, the original reasons for Federal involvement should be examined to see if they are still applicable. There is value in maintaining relationships to which people are accustomed; however, when such historical arrangements have proved to be ineffective, they should be changed. The fiscal capacity of each State depends on the nature and condition of that State's economy, its tax structure, and the levels of services it has historically provided. It is also influenced substantially by the condition of the national economy. Once the decision has been made to shift responsibility from one level of government to another, there remains the job of assuring that the transition is as smooth as possible and that the legislation accomplishes its intended purposes. Over the next few years, GAO will monitor the transition to block grants, review State and local government auditing coverage, report on services provided under block grants, and evaluate the effectiveness of block grant programs. Prior State experience in the predecessor categorical programs should be a determinant in designing transitions. To the extent that this involvement existed, administrative frameworks and institutional knowledge are in place; the continuation of Federal outlays from past commitments has proved to be a transition aid in three block grants, allowing States some breathing room in making the initial adjustments to block grants and reduced budget levels. Federal agencies responsible for requirements such as uniform relocation assistance, merit personnel systems, fair labor standards, environmental protection, political activity constraints, and civil rights matters should clarify for the States whether they apply to block grants. Federal regulations and reporting requirements have been greatly reduced; however, GAO will periodically perform audits and program reviews and review the mechanisms which States use to ensure accountability for block grant funds.
