This report presents data on federal government aid to state and local governments by state and U.S. Outlying Area. Coverage is restricted to federal government expenditures for grants and other financial assistance to state and local governments for which data are available by state and outlying area. For fiscal year 2003 (October 1, 2002, to September 30, 2003), the statistics compiled cover $385.7 billion. The data is shown by federal agency and program whenever possible. Federal government aid to state and local governments includes the following: (1) Direct cash grants to state or local government units; (2) Payments for grants-in-kind, such as purchases of commodities distributed to state or local government institutions (e.g., School Lunch and Breakfast programs); (3) Payments to non government entities when such payments result in cash or in kind services passed on to state or local governments; (4) Payments to regional commissions and organizations that are redistributed to the state or local level; (5) Federal government payments to state and local governments for research and development that is an integral part of the provision of public services; and (6) Federal revenues shared with state and local governments. The examination and edit process the Census Bureau uses includes a comparison of reported data to information submitted for the prior year, and to budget amounts supplied by the Office of Management and Budget (OMB). All grants data are reconciled by budget account and to budget figures that each federal agency is required to submit annually to OMB, in accordance with OMB Circular A-11. Discrepancies are brought to the attention of the reporting agencies and, where warranted, revisions are made. The OMB also provides assistance in the classification of grants and in ensuring compliance with the reporting requirements. Wherever possible, this report uses statistics representing actual expenditures of the federal government during the fiscal year. Each agency reports a program or project name and a budget account number to identify separately each project or budget account from which expenditures were made. Table 1 is an organized compilation, by department and agency and or program, of nearly 500 of these state by state expenditure reports. Appendix A, presents further detail about the individual expenditure programs that underlie the categories presented in Table 1.