10.11770899764004272195Jalandoni et al.Government Funding and.docx

10.1177/0899764004272195Jalandoni et al.Government Funding
and the Nonprofit Sector
Government Funding and the Nonprofit Sector:
Exploring a New Census Bureau Data Source—
The Federal Audit Clearinghouse
Nadine T. Jalandoni
Independent Sector
Claudia Petrescu
Eastern Michigan University
Gordon W. Green
University of Maryland
Using the information provided by the Federal Audit
Clearinghouse, maintained by the
U.S. Census Bureau, this research attempts to improve our
understanding of the nature,
scale, extent, and sources of federal funding to social service
and educational nonprofit
organizations. Using 2001 as the base year, this research is
divided into two parts. The
first part looks into federal funding provided to social service
organizations by laying out
the amounts of grants awarded by 57 different federal agencies
and looking into its geo-
graphic and per capita distribution. The second part traces
federal funding provided to
universities and provides information on the institutions and
states receiving the most

grants and the federal agencies that provided them. The data’s
utility, limitations, and
potential uses to academicians and practitioners are also
discussed.
Keywords: federal funding; nonprofit organizations; social
service; university; grants
This study is based on information obtained from the Federal
Audit Clearing-
house (FAC) maintained by the U.S. Census Bureau. Federal
law (Title 31 U.S.
Code, chap. 75) requires that all nonfederal entities expending
$300,000 or
more annually in federal awards must have an audit conducted
(referred to as
a “single audit”) in accordance with Circular A-133 issued June
27, 1994 by the
Office of Management and Budget (OMB; 2003). The types of
nonfederal enti-
ties covered by this circular include state and local governments
and nonprofit
organizations. Altogether, these entities file approximately
36,000 audits a
year, of which more than half are for nonprofit organizations.
This study
focuses on the awards received in 2001 by two major sectors of
nonprofit
Nonprofit and Voluntary Sector Quarterly, vol. 34, no. 2, June
2005 260-275
DOI: 10.1177/0899764004272195
© 2005 Association for Research on Nonprofit Organizations
and Voluntary Action
260

at WALDEN UNIVERSITY on June 9,
2015nvs.sagepub.comDownloaded from
http://nvs.sagepub.com/
organizations: social services and higher education. Similar
types of analysis
can be conducted on other sectors as well, but these two sectors
were chosen
because of their size and interest. At the time this article was
written, audit
information for nonprofit organizations prior to 2001 was not
available in an
easily accessible form, and not all of the data had been
compiled for a complete
accounting in 2002. Thus, using 2001 as the base year, this
study illustrates the
types of analyses that can be conducted as more data become
available.
The data in this study were obtained from summary electronic
forms (SF-
SAC) titled “Data Collection Form for Reporting on Audits of
States, Local
Governments and Non-Profit Organizations.” These forms are a
summary of
the information submitted in the full audits, and are maintained
by the U.S.
Census Bureau in an electronic database that is part of the FAC.
As noted by
the U.S. Census Bureau on its Web site
(http://harvester.census.gov/fac), the
summary form includes five basic kinds of information. The
section on Gen-

eral Information includes the affected fiscal and audit period,
type of audit,
employer identification number (EIN), and the federal oversight
agency. Basic
information about the nonfederal entity being audited, such as
the address,
phone number, contact name, and the auditee’s certification of
the complete-
ness and accuracy of information provided on the SF-SAC is
found under
Auditee Information. Auditor Information has the information
on the auditor
and the auditor ’s statement. Financial Statement and Audit
Information
shows the type of financial statement and audit results. Finally,
the Federal
Program Information includes information about the Circular A-
133 audit
results, federal awards administered by the nonfederal entity,
and an identifi-
cation of federal agencies required to receive the audit reporting
packages.
The SF-SAC electronic database at the U.S. Census Bureau is
completely
public and may be accessed free of charge by users with
personal computers
and Internet browsers (http://harvester.census.gov/fac). The
Web site at the
U.S. Census Bureau contains extensive background information
on Circular
A-133 as well as the single audit program. Powerful search
engines are avail-
able that enable the user to search for specific entities or
categories of entities,
as well as by the Catalog of Federal Domestic Assistance. The

information
contained in the SF-SAC form can be retrieved for use online or
downloaded
into a spreadsheet, as was done in this study. The database
classifies the vari-
ous nonprofit entities that receive federal grants and filed an
audit into seven
groups as shown in Table 1.
Although the number of individual entities identified totaled
19,325, their
multiple entries yielded over 126,000 records. The sheer size of
the database
presented some data downloading and manipulation challenges.
To keep the
analysis at a manageable level, only nonprofit social services
and nonprofit
institutions for higher education were downloaded for this
initial analysis.
This resulted in over 58,000 records for social services and
24,950 records for
higher education, which together composed about two thirds
(65%) of the
entire record file.
Government Funding and the Nonprofit Sector 261
The database offers opportunities for further study and research
in such
areas as

� programmatic analysis and assessment;
� comparative analysis within and between nonprofit subsectors
and the
impact of federal grants;
� specific organizations and their federal funding streams;
� identifying well-funded R&D programs in nonprofits and the
agencies
that sponsor them.
NONPROFIT SOCIAL SERVICE ORGANIZATIONS
The largest numbers of nonprofit organizations included in the
FAC data-
base are social service organizations. This coincides with
findings from other
studies, which also show that social or human services
organizations make up
the largest group of public charities (Weitzman, Jalandoni,
Lampkin, Pollak,
2002, Table 5.6) in the United States. The major variables
provided for analysis
include organization name, EIN, state, oversight agency,
funding agency, pro-
gram name, grant amount, direct funding, and major program.
Two major strategies for analyzing the data were adopted. The
first was to
lay out the amount of grants distributed by the 57 different
federal agencies
included in the database and determine which agencies awarded
the largest
amounts to social service. An assessment of the amount of
direct versus indi-

rect grants was also conducted. The second strategy looked at
the allocation of
grant dollars by state and the per capita distribution.
DISTRIBUTION OF FEDERAL GRANTS
BY FEDERAL AGENCY
The list of federal agencies by order of the amount of grants
expended is
provided in Table 2. Although many of the agencies that top the
list are famil-
262 Jalandoni et al.
Table 1. Nonprofit Entities in the Federal Audit Clearinghouse
Database
Code Entity Type No. of Auditees No. of Records
902 Nonprofit hospital 160 2,569
903 Nonprofit housing organization 5,806 13,087
904 Nonprofit institutions for higher education 1,298 24,950
906 Nonprofit transit organization 36 114
907 Nonprofit utility 157 366
908 Nonprofit social services 8,604 58,028
909 Nonprofit other organization 3,264 27,612
Total 19,325 126,726
263

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iar and predictable, such as the Department of Health and
Human Services
(DHHS), Department of Housing and Urban Development, and
the Agency
for International Development (AID), there were also a number
of less recog-
nizable entries. These include the Denali Commission
(established in 1998 as a
federal-state partnership for the development of Alaska) and the
Architec-
tural and Transportation Barriers Compliance Board. Even more

interesting
was discovering agencies such as the National Aeronautics and
Space Admin-
istration (NASA), the Library of Congress, and the Department
of Defense
(DOD) as sources of grants for social service organizations.
The total amount of federal grants expended in 2001 to social
service orga-
nizations that received grants of $300,000 or more amounted to
$24,609,388,254. The total number of grants totaled 58,115—
keeping in mind
that this does not equal total number of grantees, as social
service organiza-
tions could receive multiple grants. As the summary table
illustrates, 63% of
all grant money ($15 billion) and more than 49% (28,651) of all
grants awarded
to social service organizations originated from the DHHS,
making it the pri-
mary source of all grants in the area. The Department of
Housing and Urban
Development, Department of Agriculture, Department of Labor,
AID, and the
Department of Education complete the top six funding agencies,
providing
another 29% of all grant money to these organizations. More
than 92% of all
government grant dollars to social service organizations
captured in the FAC
database were disbursed through these six government agencies.
The database also provides information on the amount of direct
versus
indirect grants awarded by each federal agency and received by
the nonprofit

entity. Direct grants are defined as being “received directly
from a Federal
awarding agency,” whereas indirect grants are “received by a
subrecipient
from a pass-through entity.” A pass-through entity, which is
usually a state,
local government, or private organization, is defined as “a non-
Federal en-
tity that provides a Federal award to a sub-recipient to carry out
a Federal
program.”
Based on the audited statements of the reporting nonprofit
social service
organizations, a larger proportion of the grants was received
indirectly than
directly from federal agencies. Of the estimated $24.6 billion of
grants in the
database, 57%, or $14 billion, were in the form of indirect
grants, whereas 43%,
or $10.6 billion, were direct grants. Through this data source,
we can verify
that a substantial portion of federal spending to the nonprofit
sector is passed
through state or local government entities. This does not include
Medicare/
Medicaid payments, which are believed to be a large amount of
federal pass-
through dollars channeled mostly through individuals.
Among the top 10 federal agencies that provide federal funding,
AID gives
the highest proportion of direct funding to nonprofits, giving
out 90% of its
grants in this manner. It is important to note that most of these
grants were for

international programs. In the same way, 89% of grants from the
Department
of State, which also were largely for refugee or global
activities, were direct
funds. DHHS, the biggest federal awarding agency that focuses
mostly on
domestic programs, only gave 38% of its grants directly to
nonprofits. Only
23% of grants were awarded directly by the Department of
Agriculture, the
third-largest source of funds. The Department of Energy, with
more than $113
million in grants, only awarded 9% of them directly to
nonprofits. The data
suggest that nonprofits in the social service field that are
interested in compet-
ing for government grants need to be more strategic in finding
which agencies
offer them. Because a substantial amount of federal grants is
awarded indi-
rectly, the intermediary state and local agencies through which
these funds
pass through need to be identified as well.
Of interesting note, DOD awarded 90% of all its grants to
nonprofits directly.

DISTRIBUTION OF FEDERAL GRANTS
BY STATE
The second strategy pursued in the analysis of the data was to
examine the
geographical distribution of federal grants to nonprofit social
service entities
in all 50 states, the District of Columbia, and U.S. territories.
Table 3 summa-
rizes the results.
California topped all states, receiving almost $3.5 billion in
federal grants
for its social service organizations. New York, Pennsylvania,
Texas, and
Florida completed the top five, which together received about
40% of all grant
dollars recorded in the database. Delaware, Nevada, South
Dakota, Wyo-
ming, and North Dakota received the least amount of federal
grants.
To put this distribution into a comparative perspective, the total
number of
human and youth services organizations in each of these states
and their total
population were also gathered. Using the National Center for
Charitable Sta-
tistics (NCCS) Data Web
(http://nccsdataweb.urban.org/NCCS/Public/),
the number of organizations coded as human services and youth
services in
2001 in each state and the District of Columbia was determined,
as these
would equate most closely to the social service entities included
in the FAC

database. Data for state populations for 2001 were gathered
from the Cen-
sus Bureau. In addition, the per capita distribution of grant
dollars is also
presented.
As the table shows, the state rankings across three categories—
(a) amount
received, (b) number of human and youth services and, (c) total
state popula-
tion—were very close, leading us to believe that the distribution
of money
closely reflected the presence of numerous social service
agencies and the size
of the population. There was less consistency, however, in the
per capita distri-
bution among states. California ranked first in all categories,
but only 15th in
per capita distribution. Massachusetts appears to have fared
better than some
of the bigger states, receiving the 7th-largest amount of grant
dollars and rank-
ing 3rd in the distribution of dollars per capita, while ranking
10th in number
of social service agencies and 13th in population. Minnesota
was in a similar
position. Conversely, North Carolina, which ranked 9th in
number of social

267
T
ab
le
3
.
D
is
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o
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ta
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S
ta
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al
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u

n
ds
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ec
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($
)
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Y
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th
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k
P
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k
service agencies and 11th in population ranked only 21st in the
amount of
grants received and 47th in per capita distribution. The state of
Alaska ranked
2nd in per capita distribution, receiving a comparatively higher
amount of
grants vis-à-vis its smaller population. The District of Columbia
is the most
conspicuous anomaly, receiving the 15th highest amount of
grants and ranking
1st in per capita distribution, while ranking only 34th in number
of social ser-
vice entities and 50th in population. A couple of reasons may
account for this,
including the fact that the headquarters of several large social
service agencies
that have a national and/or international focus are located in the
District of
Columbia. Social service agencies located in the same city
hosting the federal
agencies may have an advantage in getting information on
federal grants,
particularly those that support programs that are national and
transnational
in scope.
Overall, the top 10 states (California, New York, Pennsylvania,

Texas,
Florida, Illinois, Massachusetts, Ohio, Michigan, and
Minnesota) that
received federal grants totaling $14.3 billion have 58% of all
grant money
awarded and also are home to 53% of the U.S. population.
Among the top 10
states receiving federal grants, an average of 60% to 70% came
in the form of
indirect grants. Pennsylvania and Michigan had higher ratios of
78% and 75%
indirect grants, respectively. New York and Minnesota were on
the lower end,
with awards split 50% between direct and indirect grants.
An investigation into the cause for the variations in per capita
distribution
lends itself to further research study.
NONPROFIT UNIVERSITIES AND
INSTITUTIONS OF HIGHER LEARNING
To further illustrate the wealth of information contained in the
database,
and to exemplify how this information could be used, four types
of analysis
were performed on the data on nonprofit universities. These
were
(a) Individual analysis
(b) Population analysis
(c) State analysis
(d) Funding agency analysis
INDIVIDUAL ANALYSIS OF A UNIVERSITY

The database provides information about each university that
has received
one or more grants from the federal government equal to or
more than
$300,000. For example, in fiscal year (FY) 2001, Northwestern
University, Illi-
nois, (EIN 362167817), received a total of $185,385,493 in
grants from 12 fed-
eral funding agencies. The database provides information on the
amount
received from each funding agency, the name of the program,
and the name of
the oversight agency. For example, DOD, under the program
DEV. NEW
EPIDEMIOLOGIC TOOLS gave Northwestern University a
grant of $15,247.
The oversight agency was DHHS. The grant was given to a
major university
program and used for R&D.
POPULATION ANALYSIS OF ALL UNIVERSITIES
An analysis of the number of grants received by each university
deter-
mined that out of 25,124 universities that received grants from
the federal gov-
ernment, only 32 universities received more than 100 grants.

Among these 32
universities
� Two universities (Northwestern and Rochester) received more
than
1,500 grants.
� Two universities (George Washington University and
Washington Uni-
versity in St. Louis) received between 500 and 1,000 grants.
� Eight universities (including Columbia and Duke) received
between 300
and 500 grants.
� Six universities (including Howard and Massachusetts
Institute of Tech-
nology) received between 200 and 300 grants.
� Fourteen universities (including New York University,
Georgetown,
and Johns Hopkins) received between 100 and 200 grants.
Table 4 below illustrates the differences and similarities
between these cate-
gories; an individual analysis has been made for one university
from each
category.
ANALYSIS BY STATE
Using frequency analysis, states can be ranked based on each of
the vari-
ables available in the database. For example, when ranking
states by number
of grants received, it is observed that seven states, including the

District of
Columbia (New York, Illinois, Pennsylvania, California,
District of Columbia,
Massachusetts, and Georgia) received 58.6% of all grants.
Among these, New
York received the largest number of grants (4,289), followed by
Illinois with
2,872 grants. These two states together received 28% of all
grants.
Regarding total amount of money1 received in grants by the two
first-
ranked states, New York received more than $4 billion
($4,223,865,787) and
Illinois was granted more than $1 billion ($1,156,020,038) in
grant money.
These two states represent 18% of the total amount of grant
money distributed
by the federal government in 2001.
The database also provided a variety of information on
individual states.
For example, the information obtained for the state of Arizona
(see Table 5)
includes
271

T
ab
le
4
.
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xa
m
p
le
o
f
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n
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ra
n
ts
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ec
ei
v
ed
N
o.
o
f
D
ir
ec
t
M
aj

or
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o.
o
f
To
ta
l
F
u
n
di
n
g
R
&
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E
xp
en
se
P
ro
gr

am
U
n
iv
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si
ty
of
G
ra
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ts
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m
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t
($
)
A
ge
n
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P
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an
t
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u
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cy
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ra
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ts
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ra
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ts
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ra
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h
w
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te
rn
U
n
iv
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si
ty
1,
94
1
18
5,

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3
12
D
H
H
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(8
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),
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O
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(
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1,
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2
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as
h
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n
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� Number of grants received: 17
� Total amount received in grants: $15,619,357
� Number of R&D grants: 1
� Number of grants designated for major program: 62
ANALYSIS BY FEDERAL FUNDING AGENCY
There were 59 agencies that provided a total of 25,124 grants;
the total value
of these grants amounted to $29,663,880,749. Among these,
four agencies
proved to be the largest providers of grants (see Table 6).
Four agencies (Denali Commission, Equal Employment
Opportunity Com-
mission, Interstate Commerce Commission, and Legal Services
Corporation)
provided only one grant each.
Analyzing the type of grants provided (R&D or not), it was
determined that
out of all grants,
� 47% were designated for R&D;
� 67% were designated for a major program.
Table 5. Funding Agencies That Provided Grants to Arizona
As a % of
Federal Agency No. of Grants Total Grants

Corporation for National & Community Service 1 1
Department of Agriculture 2 3
Department of Education 61 77
Department of Health and Human Services 8 10
Department of Housing and Urban Development 1 1
Federal Emergency Management Agency 1 1
National Aeronautics & Space Administration 2 3
National Science Foundation 3 4
Table 6. Funding Agencies and Grants Provided
No. of % Grants
Grants R&D Provided of % R&D
Funding Agency Provided Grants Total Grants Grants
Department of Health and Human Services 8,088 5,405 32.19 67
Department of Education 7,944 360 31.62 5
National Science Foundation 2,453 1,919 9.76 78
Department of Defense 1,549 1,304 6.17 84
A ranking of funding agency by R&D grants determined that
� Four agencies (Tennessee Valley Authority, Interstate
Commerce
Commission, Office of National Drug Control Policy, and
Smithsonian
Institution) rank number one in R&D grants. But they awarded
only be-

tween one and four grants.
� Two agencies (Department of Energy and DOD) awarded
between 80%
and 90% of their grants for R&D.
� Six agencies awarded between 70% and 80% R&D grants
(e.g., the Na-
tional Science Foundation [NSF]).
� Sixteen agencies awarded between 50% and 70% R&D grants
(e.g.,
DHHS).
� The rest of 29 agencies designated less than 50% of their
grants for R&D
(e.g., Department of Education).
When it comes to R&D, the significance of this database
becomes more evi-
dent when one reads the results of research conducted by
Powers (2004) on
how resources affect universities. Powers determined that
federal funding is
a positive significant predictor of university start-up activity.
He found that
although federal dollars have declined as a share of R&D
funding, many fed-
eral agencies are less likely to impose cost-sharing requirements
on grantees.
It was also established that institutional R&D is not just the
fastest growing
source of academic R&D, but it is also the “best barometer of
entrepreneurial
orientation of any of the R&D funding areas.”

The 57 funding agencies collaborate with 13 agencies in grants’
oversight.
The oversight agency with the highest number of grants to
oversee is the
Department of Education with 16,500 grants, followed by
DHHS with 7,850
and DOD with 459. The agencies with the lowest number of
grants (7) to over-
see were the Department of Agriculture and NSF. It is
interesting to note that
although NSF ranks high in number of grants awarded (2,453),
it ranks low in
number of grants it oversees (7).
DATA UTILITY AND LIMITATIONS
The FAC database undoubtedly contains a wealth of
information, both on
the detailed and aggregate levels, that would be of interest to
both researchers
and practitioners. The types of analyses employed for this study
are but a few
of the many that can be applied to the database to further
improve our under-
standing of the nature, scale, extent, and sources of government
funding of
nonprofit organizations. Other interesting approaches could
look into the
type and diversity of the nonprofit entities themselves that
receive the grants,
the kinds of programs that are funded, and any funding patterns
that may
emerge by state, agency, or entity. As the previous analyses
have shown, the
database can be dissected, sorted, and analyzed in several ways.
With the

availability of EINs for the nonprofit entities, comparisons and
verification
can even be made with information submitted by nonprofits in
their Form
990s.
The data on universities and other institutions of higher
learning may be
used by both practitioners and academia for the following
specific purposes:
� For universities to assess availability of various federal
grants and pro-
grams supported by the government;
� For universities to assess success and impact of programs and
activities;
� For university administrators to utilize as an aid in grant
proposals and
budget planning as it assists in evaluating which programs are
viable
and self sustainable;
� For researchers to explore which agencies fund R&D projects
and which
research areas are of highest priority;

� For prospective students to explore which universities receive
fund-
ing support and which areas of study are likely to receive
continued
funding;
� For those interested in analyzing aspects of equity in federal
funding
provided through universities;
� For donors and grantors who plan to fund universities and
want to eval-
uate their current funding streams;
� For state governments that need to evaluate and decide on
funding lev-
els for institutions;
� All those interested in the issues surrounding federal research
funding
mechanics.
For practical or research purposes, the information provided by
this data-
base can also be correlated with other information relevant to
higher educa-
tion such as state funding and public policies. This information
can be
obtained from sources such as the Census Bureau, the National
Education Re-
source Center, the National Center for Higher Education
Management Sys-
tems, and the National Center for Public Policy and Higher
Education, as well
as information and statistics provided by the Department of

Education.
When complete data for years beyond 2001 become available,
annual
trends and comparisons may also be identified and possibly
related to shifts in
public policy and economic conditions. The ability to do annual
comparisons,
however, has been somewhat compromised by the revision
issued by the
OMB in increasing the threshold for audit from $300,000 to
$500,000 begin-
ning in 2004, thus possibly eliminating a number of entities
currently included
in the database. Data collected for 2001 (currently the most
complete in this
format), 2002, and 2003 will be similar, but their composition
will change
slightly starting with data for 2004. By OMB’s own estimate,
the increase in
threshold could eliminate audit requirements for almost 6,000
entities.
This underscores a key limitation of the database in that
although it cap-
tures a large proportion of the government grants that flows into
the nonprofit

sector, it still provides just one piece, albeit a major piece, of
the puzzle. Cur-
rently, it does not allow us to derive the amount of grants to
nonprofits with
less than $300,000 in annual federal grants, and more
information may be lost
by 2004.
The Federal Assistance Awards Data System (FAADS), another
database
maintained by the Census Bureau, has some of the data needed
to fill in the
information gap for smaller government grants. Its current
format and its data
query tools, however, are still in the process of being improved
to allow for
some of the same type of data analyses.
Looking at the bigger picture, government grants and contracts
are a major
way that government supports the nonprofit sector, and the FAC
database
provides us with important information on its value and
complexity. How-
ever, government funding of the sector does take numerous
other forms, as
articulated by many nonprofit experts, including Rathgeb-Smith
(1998), who
lists them as “fees and third-party payments, tax credits and
deductions, tax-
exempt bonds, regulations encouraging nonprofit service
delivery.” We
would do well not to forget their contributions when looking
into the overall

support provided by government to the nonprofit sector.
Note
1. Observation: In calculating the total amount of grants
received by each university, the vari-
able to use is “amount received” through each program, and not
“total expenditure.”
References
Office of Management and Budget. (2003). Audits of states,
local governments, and non-profit
organizations. Federal Register, 68(124), 38401-38402.
Powers, J. B. (2004). R&D funding sources and university
technology transfer: What is stimulating
universities to be more entrepreneurial? Research in Higher
Education, 45(1), 1-23.
Rathgeb-Smith, S. (1998). Government financing of nonprofit
activity. In E. T. Boris & C. E. Steuerle
(Eds.), Nonprofits and government (pp. 177-210). Washington,
DC: Urban Institute Press.
Weitzman, M., Jalandoni, N., Lampkin, L., & Pollak, T. (2002).
The new nonprofit almanac and desk
reference. San Francisco: Jossey-Bass.
Nadine T. Jalandoni is the director of research services at
Independent Sector. She is coauthor of The New
Nonprofit Almanac and Desk Reference and other reports on
volunteering and giving. Previously, she
was associate executive director of a corporate foundation and
research manager at the United Way of South-
eastern Pennsylvania (Philadelphia).

Claudia Petrescu is an assistant professor of public policy and
public administration at Eastern Michigan
University. Her present research interests include best nonprofit
management practices, application of
business practices to the management of nonprofit
organizations, and the relationships between federal
funding, charitable giving, and the nonprofit sector.
Gordon W. Green is assistant director of the Welfare Reform
Academy at the University of Maryland Foun-
dation and also works at the American Enterprise Institute in
Washington, D.C. Previously, he was vice
president for research at Independent Sector and before that,
chief of the Governments Division at the U.S.
Census Bureau.

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