Assessing the Potential to Improve Grants Management Using Blockchain Technology

MITRE’s study results support the hypothesis that improvements in grants management for both federal agencies and grant recipients can be enabled through the use of blockchain technology. The primary benefit to federal agencies was improved decision making through improved transparency, quality, and timeliness of grant financial and performance information. The primary benefit to grant recipients was reducing redundant reporting to multiple grantmaking entities and auditors. Payment efficiency was a secondary benefit.

Achieving the identified benefits will require addressing the Actions Needed items identified by those we interviewed, as well as other actions to mitigate the challenges and barriers identified by the interviewees. Those most often cited were:

• Control of access to and protection of personally identifiable information (PII) and sensitive/proprietary information
• Need for artificial intelligence and analytics to make effective use of all the information
• Changes to regulations, policies, and procedures to clearly define responsibilities and accountabilities in a new business operating model where federal and non-federal grants management processes are more integrated

Five potential barriers were identified related to the impact on states based on the few states interviewed; the magnitude and extent of the impact across all states is not yet known.

Findings in three key communities are described below.

Grants Management Community:

• Reduces grant recipients’ redundant reporting to multiple grantmaking entities and auditors
• Improves payment efficiency for second- and third-tier grant recipients
• Supports more informed decision making by federal grantmaking entities
• Must be integrated with grantmaking and grant recipient entities’ systems used to manage day-to-day grants management operations

Financial Management Community:

• Improves transparency, quality, and timeliness of financial information
• Must be integrated with payment request and processing systems

Inspector General Community:

• Improves ability to detect fraud, waste, and abuse
• Improves ability to efficiently conduct audits

Based on our study results, we developed recom­mendations should the federal government seek to pursue implementation of the proposed grants management business operating model and a Dis­tributed Grants Ledger solution based on block­chain technology.

We recommend the federal government set up a grants management blockchain demonstration project, or proof of concept. A demonstration project would test a subset of Benefits and further explore a subset of Actions Needed, Challenges, and mitigation actions and engage a consortium of federal, public, and private sector grantmaking and grant recipient entities to evaluate the results.

We recommend that in parallel with a demon­stration project, the federal government initiate further analysis of complex challenges and barriers and determine the magnitude and the extent of the state-related Barriers. In addition, the fed­eral government should, also in parallel, prioritize, sequence, and further analyze Actions Needed and mitigation actions identified by the study to ensure successful adoption of the proposed business op­erating model and blockchain technology.