This week the Bureau of the Fiscal Service, a division of the U.S. Treasury, announced a project to use blockchain for grants to improve transparency. It’s an extension of an existing project which was initiated in 2017.
“By tokenizing relevant grant award information and combining it with grant payment information on the blockchain, we gain a new payment transparency that we couldn’t reach previously without significant and burdensome reporting,” said Craig Fischer, Fiscal Service Supervisory Program Manager.
The project is run with the Office of Financial Innovation and Transformation (FIT) and is supported by Deloitte.
Earlier this year, there was a Proof of Concept run with the National Science Foundation (NSF), which will dispense $8.3 billion in 2020 to fund research in U.S. colleges and universities. That experiment involved a permissioned, enterprise version of Ethereum and collaborated with San Diego State University and Duke University.
The latest six-month phase will look at the functional and legal implications of using blockchain.
One of the issues is that many grants are not direct but instead pass through third parties. So a key aim is to enable the visibility for sub-recipient payments. Simultaneously, it should make it easier for sub-recipients to get paid and at least see where the hold up is.
Some of the figures are an eye-opener. In 2018 grantees returned $20 billion in overpayments to the government. Grant managers spend 40% of their time on compliance, which could be significantly reduced using blockchain. And less than 1% of grant awards are fully consistent with budget data.