Authors: Heather Morgan and Jeff Myers

With the second Trump administration emphasizing smaller federal footprints and operational efficiency, agencies at the state and local level must be prepared to absorb more authority, manage tighter resources and deliver measurable results. In many instances, that transfer of responsibility may be enabled via grants management initiatives.

Success will depend on the ability of these agencies to act decisively: streamlining operations, adopting modern technologies and building resilience through proactive planning. As federal funding becomes less predictable, the pressure to demonstrate value and outcomes will only intensify. Now is the time for state and local grant makers and recipients to rethink their grants practices, moving beyond fragmented systems and legacy processes to position themselves for sustainable impact and long-term success.

There is a risk that some federal grants will end and that for the grants that continue, federal expectations and accountability demands may heighten. In short, everyone recognizes that funding from federal sources is at risk. To address this, state and local governments should adopt two strategies: contingency planning for resilient grants management; and streamlined processes and new technology for greater efficiency.

Contingency Planning for Resilient Grants Management

Agencies must proactively plan for the possibility of significant reductions—or complete elimination—of funding from federal programs. Effective contingency planning can enable grant-making organizations to navigate potential disruptions, mitigate risks and maintain some continuity in delivering services. It can also strengthen an agency’s ability to adapt quickly and responsibly under fiscal uncertainty.

Communicate early and well. One critical aspect of contingency planning is timely and transparent communication. Agencies should be prepared to rapidly assess and communicate the implications of funding cuts to beneficiaries, sub-awardees, contractors, support providers and other stakeholders. This includes recalibrating program expectations, performance outcomes and timelines. Contingency planning should also address necessary actions related to existing contracts, cooperative agreements and staffing commitments, ensuring compliance and operational readiness in the face of change.

Prioritize. Given that not all grantees demonstrate equal performance or alignment with strategic goals, agency leaders should establish clear criteria to prioritize support for top-performing or mission-critical recipients. Prioritization allows agencies to implement targeted funding adjustments rather than imposing uniform across-the-board cuts. Thus, if cuts are necessary, programs with the highest impact can be preserved, while those with lesser value and impact can be cut more aggressively or completely. For grantees that are considered lower priority, agencies should provide advance notice of potential risks to funding and timing.

Diversify and reduce risk by working to “braid” funding. A good contingency plan should identify alternate or complementary sources of funding—a braided funding model that combines resources from multiple streams (e.g., federal, state, philanthropic)—to reduce dependency on a single funding source.

Streamlining Processes and Embracing New Technology for Greater Efficiency

To meet rising demands with greater efficiency, state and local grant-making agencies must streamline business processes and align operations with strategic goals. A recent grants management survey indicated that many organizations spend over 35% of their time on compliance monitoring alone and over half of grantors are unable to effectively measure performance outcomes.

State and local government can address this by consolidating and standardizing IT systems, replacing fragmented platforms with a single, integrated solution to manage the full grants lifecycle. This enables consistent workflows, real-time data sharing, stronger financial integration and more reliable tracking of performance metrics.

Agencies should also re-engineer business processes to eliminate redundancies, accelerate approvals and reduce manual tasks. By integrating performance management capabilities, agencies can better monitor outcomes, identify areas for improvement and demonstrate impact through robust, data-driven reporting. Standardized templates and simplified reviews further enhance speed, consistency and accountability.

Further efficiency gains can be achieved by automating routine, low-value tasks using commercial off-the-shelf Software-as-a-Service grants management solutions that come with built-in Artificial Intelligence (AI) and Robotic Process Automation (RPA). These modern platforms can automate repetitive, low-value tasks such as eligibility checks, reporting validations and deadline reminders, allowing staff to focus on strategic oversight and technical assistance.

Many Federal agencies like the Department of Health and Human Services and the Department of Defense are already piloting AI solutions in these areas and continue to explore broader applications to improve accuracy, speed and oversight in grants administration. Just over 20% of grant recipients utilize Generative AI to help with applications and post-award reporting.

As the federal landscape continues to evolve, state and local grant-making agencies must respond with agility, foresight and innovation. By taking proactive steps today including modernizing systems, strengthening operational resilience, and focusing on outcomes, agencies can not only adapt to shifting federal responsibilities but lead the way in delivering efficient, accountable, and impactful grants programs.

About the Authors

• Heather Morgan is REI Systems’ Grants Management Offering Lead
• Jeff Myers is REI Systems Senior Director for Strategy and Corporate Development

* Source:  “2024 Annual Grants Management Survey” conducted by REI Systems, the National Grants Management Association (NGMA), and George Washington University (GWU). Survey Analysis Results, March 2025, may be found via: https://www.reisystems.com/insights/grants-management-survey-results/