Proposed Changes in Federal Matching And Maintenance of Effort Requirements for State and Local Governments [open pdf - 3MB]
"Federal matching and maintenance of effort requirements do not often effectively promote the Federal interest of enhancing the fiscal and management commitments of State and local governments to Federal programs. While more stringent Federal requirements would promote these Federal fiscal and managerial objectives, they would screen out needy grantees from participating in the program, thus jeopardizing the ability of the intergovernmental grant system to provide services of national interest on a nationwide basis. Also, by encumbering State and local funds in a growing number of federally funded areas, the requirements induce distortion of State and local budget priorities and may promote fiscal stress as well. GAO recommends that matching requirements be strengthened but used more sparingly and only where a clearly articulated Federal interest does not conflict with the broader purposes of Federal programs themselves. Maintenance of effort requirements serve a clear, primary Federal interest, but should be changed to more effectively prevent fiscal substitution while not penalizing bona fide State and local spending reductions."
GAO Report: GGD-81-7