This study investigates the longitudinal political and administrative problems associated with federal–local government relations. The findings demonstrate four primary challenges of the system of federal grants-in-aid that hinder the relationship of policy design at the federal level and policy implementation in local communities: the politics of decentralization, subnational capacity, program accountability and program adaptability. A case study of the Community Development Block Grant, as assessed by the Advisory Commission on Intergovernmental Relations and the General Accounting Office between 1974 and the present, is included to demonstrate the application of these problems within the system. Although the “evolution of devolution” can greatly benefit the recipients of public services at the local level, it often operates within an unorganized and ineffective system that public managers at all levels of government must continue to develop.