Recent Reforms of Intergovernmental Grants for Local Governments in Germany: Consequences for Accountability and Oversight

ABSTRACT Germany's intergovernmental grant system faces mounting complexity and administrative burden. Recent reforms seek to reduce bureaucracy through lump‐sum funding, decentralized audits, and outcome‐focused approaches. Drawing on Second Generation Fiscal Federalism Theory and program implementation research, this article analyzes three reform cases: climate protection grants, audit decentralization in North Rhine‐Westphalia, and social block grants in Saxony. We identify a critical trade‐off: Simplification efforts enhance procedural efficiency but may weaken oversight and accountability. The findings reveal that reform design determines whether accountability gaps emerge. We conclude that formular‐based allocation, indicator‐based evaluation, or decentralized audit capacity can balance flexibility with accountability in a less bureaucratic fiscal environment.