True, But That's a Feature, Not a Bug

It Costs $200B to Manage $500B In Federal Grants

It’s really easy to point out and decry waste in the government. Virtually all governments have waste. The Federal government is a monumental waste machine when it comes to money. The tab is $200 Billion just to manage all the grant money it remits each year. (Office of Management and Budget figures, 39% of spend on grants is for administration)

That pays for paperwork, salaries, benefits, offices, pensions, supplies and all the other costs of having an administrative staff oversee everything...

I'm not quite sure how they got these numbers, but they sound reasonable, if not conservative even.  Are they counting the costs of the Federal government to write the RFPs, evaluate the proposals, and administer the fund as well as the overhead at the grant receiving end?   I do know a lot about the latter, having been in soft-money science for more years than I care to recount.

The various entities that receive federal grant funds, which includes private and public college, NGOs, governments from all levels up to and including other federal agencies (funny how that works), can set their own overhead rates in conjunction with the granting agencies, and charge overhead. 

At the last institution I worked at, overhead was divided into three separate line items applied to different parts of a projects budget (including other overhead lines). Then 4% was added to the project as so-called "development funds", which were not supposed to considered overhead, but went to the top administration of the institution for... development?  Begging for more federal money.

As a result of the complicated formulas, it was annoying to calculate overhead when budgeting, but as a rule of thumb, if I expected to spend $1,000 in salaries, supplies, and equipment, the final budget would come almost exactly $1,500.  The administration fiddled with the rates annually, but rarely did the overall rate of overhead decline. 

A large bureaucracy has grown up in with relatively easy federal money, and the overhead from grants has fueled that growth.  And like any under-accounted streams of funds, a culture of abuse has grown up around it.