Over-compliance and the new normal: How governments can modernize in the scrutiny era
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COMMENTARY | As grantmakers contend with growing demands for federal compliance, transparency and fiscal integrity, the need for effective technology is greater than ever.
When the Trump administration took office, few doubted that change was coming. Elon Musk, appointed to lead the newly created Department of Government Efficiency, had campaigned on promises to cut two trillion dollars from federal spending. Many of President Trump’s closest advisors were also vocal skeptics of large nonprofits and federal pass-through programs.
But the scale and speed of the administration’s executive actions caught even seasoned observers off guard. Billions in federal grants were frozen overnight. Entire programs and departments vanished. Grantmaking agencies found themselves under a microscope as every outgoing dollar to nonprofits, community organizations and local governments became subject to ideological scrutiny and heightened expectations around purpose and alignment.
While the initial shockwaves originated at the federal level, their effects have rippled just as forcefully through state and local governments. With so much of their funding tied to federal sources — whether for infrastructure, housing, broadband, education or public health — state and local governments now face rising pressure to prove their compliance. Whether acting as direct grantees or as passthrough administrators, they must produce audit-proof documentation, real-time transparency and strict adherence to federal guidance like 2 CFR 200.
As grantmakers contend with growing demands for compliance, transparency and fiscal integrity, the need for effective technology is greater than ever. But real progress requires more than the purchase of a new system. It calls for a strategic, organization-wide approach that reduces redundant systems, integrates data across departments, streamlines workflows and dismantles the silos that keep teams operating in isolation. Success depends not just on software, but on aligning people, processes and platforms around a shared commitment to efficiency and audit-readiness.
Technology, especially a modern, compliance-centered grants management system, orGMS, has become essential infrastructure for any state and local government adapting to today’s funding environment. A well-designed GMS should do more than track grant activity; it must enable agencies to meet complex reporting and audit requirements, monitor subrecipient performance in real time, and consolidate program data into a single, accessible system.
Just as importantly, it should also improve the constituent experience by offering streamlined applications, faster decision-making and mobile-friendly access. In an environment defined by scrutiny and resource constraints, technology is not just a tool. It’s a strategic asset for resilient, responsive government.
Yet many state and local governments still manage grants through a mixture of disconnected systems. These duplicative solutions not only come with a high price tag, but they also undermine the need to provide real-time, audit-ready data and effectively track subrecipient activity across programs. In this environment, system consolidation isn’t a luxury. It’s quickly becoming a compliance imperative.
At this year’s National Grants Management Association’s Annual Training, grants expert Matt Hanson, managing director at Witt O’Brien’s, predicted that the federal government would increasingly distribute formulaic funds to states. If this happens, state and local governments won’t just inherit more funding, they’ll inherit more compliance responsibility. Regulations like NEPA, Davis-Bacon, Build America Buy America and others will significantly increase the complexity of data collection, procurement controls and reporting. With fewer resources and less direct federal oversight, state and local governments must be prepared to handle federal-level compliance obligations with limited capacity and infrastructure.
One thing is abundantly clear: Government grantmaking is being reshaped in real time. For state and local governments, success will require operational agility, resilient infrastructure and the right technology. As oversight, compliance and reporting demands intensify, modern grants management systems — designed to strengthen compliance, reduce administrative burden and enhance public service delivery — won’t just help agencies survive the scrutiny era. They’ll position them to serve their communities more effectively and sustainably for years to come.