Federal funds provide approximately one-fourth of all State Revenues. In FY 1979, more than 300 federal programs provided over $1.7 billion to the State and its localities. Accompanying these funds are numerous federal requirements which influence State policies and procedures. Although the State may prefer to avoid some of the influences of these requirements, its options are limited by the penalties which may result from noncompliance.

This is the second report published under HJR 237 of the 1979 Session. An interim report was published as House Document 16 of the 1980 Session. The interim report provided information on the amount and distribution of federal funds in Virginia. It also raised issues regarding the accuracy of information which the General Assembly receives on federal funds during the appropriation process. Several recommendations of the interim report dealing with budgetary information and control have been acted on. In particular, legislative and executive attention has focused on improving the estimation of anticipated federal revenues.

Although steps have been taken to improve federal fund management, several areas require continuing legislative and executive attention. The recommendations in this report are suggested to strengthen the State's use of federal funds.