Committee Meeting Memos

19006

Prepared by the North Dakota Legislative Council staff for the Budget Section
June 1999

IMPLEMENTATION OF A GRANT PREAPPROVAL PROCESS - BACKGROUND MEMORANDUM

Senate Concurrent Resolution No. 4050, which is attached as Appendix A, directs the Legislative Council to study the feasibility and desirability of implementing a grant preapproval process for every state agency except institutions of higher education. The resolution provides that this study is necessary for the following reasons:

State agencies apply for and receive various grants.
Many grants have restrictions on how grant funds or property may be used.
State funding may be required to continue projects after grant funds are exhausted.

The resolution also provides that 1999 Senate Bill No. 2431, which failed to pass, would have required the preapproval of state agency grant applications. The resolution provides that the failure of this legislation requires a review of the process of applying for grants to ensure that restrictions on grant funds do not violate state law or policy and to ensure that the grants do not obligate the state to provide future funding.

1999 SENATE BILL NO. 2431

Senate Bill No. 2431 would have required that, prior to submitting a grant application to a foundation or the federal government, state agencies must submit a copy of the application to the Office of Intergovernmental Assistance. (The name of the Office of Intergovernmental Assistance was changed to the Division of Community Services by 1999 Senate Bill No. 2179. Although this bill does not take effect until August 1, 1999, the agency's new name is used in the remainder of this memorandum.) The bill excluded all grants related to the normal operations of any statutory program and grants that were approved or appropriated by the Legislative Assembly. The bill would have required the Division of Community Services to review the application and issue a report including the following:

A summary of the grant and its purpose, including an analysis of how the grant will support existing state planning and policies.
Any conditions, terms, or requirements of the grant.
The amount of new funds to be obtained from the grant and the amount of state funds required to fulfill conditions of the grant.
The number of new employees needed to fulfill any duties or responsibilities created if the grant is received and plans to reduce or eliminate those positions after the term of the grant.
The effects of the grant on other state agencies or political subdivisions.
Whether the grant is duplicative of existing or proposed programs, policies, or grants.
The effects of the grant on individuals and private businesses or entities.
Whether any state laws, rules, or contracts must be superseded, modified, suspended, waived, or amended to obtain the grant or to fulfill the terms of the grant.
The reputation, policies, and goals of any foundation involved with the grant.
Whether the Legislative Assembly has indicated an intent to reject the moneys or the program fostered by the grant.

The bill also would have required the Division of Community Services to approve or reject the application within 30 days.

Testimony offered in opposition to the bill included the following concerns:

The bill had the potential to restrict research initiatives at higher education institutions.
The bill allowed the Division of Community Services 30 days to approve or reject a grant application, which could cause difficulty in submitting grant applications in the time allowed.

The bill failed to pass the Senate by a vote of 1 yea and 45 nays.

CURRENT GRANT REVIEW AND APPROVAL REQUIREMENTS

Office of Intergovernmental Assistance

The Division of Community Services currently reviews grant applications relating to various federal programs. Presidential Executive Order No. 12372, issued in 1982, allows states to develop processes for state and local officials to review and coordinate proposed federal financial assistance. The order requires the federal Office of Management and Budget to maintain a list of the official state entity, referred to as the "single point of contact," designated in each state to review and coordinate proposed federal financial assistance. The list of state single point of contact entities, as published in the 1998 Catalog of Federal Domestic Assistance, shows the Office of Intergovernmental Assistance as North Dakota's single point of contact. Also from the 1998 Catalog of Federal Domestic Assistance, the schedule attached as Appendix B lists federal programs requiring intergovernmental review pursuant to Executive Order No. 12372.

Major federal grant programs which are not subject to review pursuant to Executive Order No. 12372 include the following:

Catalog of Federal Domestic Assistance No.	Grant Title
84.010	Title I - Grants to local education agencies
17.249	School-to-work
93.994	Maternal and child health block grant
10.551	Food stamps
93.558	Temporary assistance to needy families
93.568	Low-income home energy assistance
93.575	Child care and development block grant
93.596	Child care
93.658	Foster care - Title IV-E
93.667	Social services block grant
93.778	Medical assistance program
93.959	Prevention and treatment of substance abuse block grant
17.225	Unemployment insurance

After the date the grant application is submitted to the appropriate federal agency, the federal agency allows the Division of Community Services between 30 and 60 days to review and comment on the application. The Division of Community Services has indicated that each year approximately 450 to 500 grant applications are reviewed by the agency. Of these applications, approximately 75 percent are from local units of government and nonprofit organizations. The Division of Community Services reviews each grant application to check for evidence of coordination with state agencies. If necessary, state agencies are contacted to review or comment on an application. After the review, a letter of clearance or a letter of comment is issued by the Division of Community Services. The letter of clearance indicates that the Division of Community Services has reviewed the application and determined that necessary coordination with state agencies has taken place. A letter of comment expresses concerns regarding a lack of coordination or conflict with state agencies.

The review process conducted pursuant to Presidential Executive Order No. 12372 does not include a comprehensive analysis of the grant, such as would have been provided by Senate Bill No. 2431, which included its affect on state agencies, political subdivisions, individuals, or private businesses; whether the grant is duplicative of existing programs, policies, or grants; and its compliance with existing state laws, rules, or contracts. Senate Bill No. 2431 would have applied to only state agencies. The review process conducted pursuant to Executive Order No. 12372 applies to political subdivisions and nonprofit organizations as well. The current review process applies to all grants listed on Appendix B, whether or not the grants were appropriated by the Legislative Assembly. Senate Bill No. 2431 would have applied only to grants not related to the normal operations of any statutory program and grants not appropriated by the Legislative Assembly.

Emergency Commission and Budget Section

The executive recommendation for the 1999-2001 biennium included $1,669,624,765 of federal funds. The Legislative Assembly appropriates moneys from the state general fund and from other funds which include federal and special funds. Federal or other funds that become available during the 1999-2001 biennium, which were not appropriated by the 1999 Legislative Assembly, can be received and spent by state agencies only after the appropriate approval is received, pursuant to the following North Dakota Century Code (NDCC) sections:

Section 54-16-04.1 - This section provides that:

The Emergency Commission may authorize a state agency to accept and spend up to $50,000 of federal funds which were not appropriated and which the Legislative Assembly did not indicate an intent to reject.
With the approval of the Budget Section, the Emergency Commission may authorize a state agency to accept and spend more than $50,000 of federal funds which were not appropriated and which the Legislative Assembly did not indicate an intent to reject.
The expenditure must be consistent with state law and with the terms of the grant.
The program may not commit the Legislative Assembly to provide matching funds in the future unless the program has been approved by the Legislative Assembly.
Except as provided in NDCC Chapter 54-16, federal funds may not be spent by a state officer unless those funds have been specifically appropriated.

Section 54-16-04.2

- This section provides that:

The Emergency Commission may authorize a state agency to accept and spend up to $50,000 of moneys from gifts, grants, donations, or other sources which were not appropriated and which the Legislative Assembly did not indicate an intent to reject.
With the approval of the Budget Section, the Emergency Commission may authorize a state agency to accept and spend more than $50,000 of moneys from gifts, grants, donations, or other sources which were not appropriated and which the Legislative Assembly did not indicate an intent to reject.

Filing of Requests With the Office of the Budget

North Dakota Century Code Section 54-44.1-05 provides that every state agency must file with the Office of the Budget a copy of any request to the federal government for funds, equipment, material, or services prior to submitting the request to the federal government. This section also provides that when the federal request has been approved by the federal authority, the state agency must resubmit the request to the Office of the Budget before any allotment or encumbrance of the federal funds can be made. This section does not provide for the review or approval of requests filed with the Office of the Budget.

PROPOSED STUDY PLAN

Receive testimony from representatives of the Division of Community Services on the process used by the agency for the intergovernmental review of federal programs, pursuant to Presidential Executive Order No. 12372.
Receive testimony from representatives of the Division of Community Services on the feasibility and estimated costs associated with implementing a grant preapproval process, as would have been provided by 1999 Senate Bill No. 2431 (which failed to pass).
Receive testimony from representatives of state agencies that receive a significant amount of federal grants on the feasibility of implementing a grant preapproval process. Agencies presenting testimony could include the Department of Human Services, Department of Public Instruction, State Water Commission, State Department of Health, Attorney General, State Board for Vocational and Technical Education, Job Service North Dakota, Housing Finance Agency, Game and Fish Department, Division of Emergency Management, and Department of Transportation. Testimony could also be provided on measures taken by the agencies to determine that proposed grants do not violate state law or policy and do not obligate the state to provide future funding.
Review grant preapproval processes used in other states.
Develop recommendations and proposed legislation necessary to implement the recommendations regarding the implementation of a grant preapproval process.
Prepare the committee's final report for presentation to the Legislative Council.

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