This study examines the impact of federal funding levels on the program spending of faith-based and community organizations in Kentucky. Prior research indicates that organizations could increase spending on overall program expenses or decrease program spending relative to administrative costs as a result of greater reporting demands from federal funders. Three models of program spending are proposed: increased program spending relative to administrative costs (program enhancement effect), decreased program spending relative to administrative costs (administrative enhancement effect), and no net effect (neutral program-spending effect). The analysis supports the program enhancement effect and estimates that federal funding has a positive relationship with increased program spending relative to other expenses in faith-based and community organizations.Relationships between government and nonprofit organizations come in a variety of arrangements, and one of the most formalized involves funding from federal grants and contracts. In 2007, government grants and fees for contracted services provided 29.8 percent of overall public charity revenue and 48.6 percent of revenue for human service organizations (Wing, Roeger, and Pollak 2010). While governments seek to bring about societal changes in keeping with their political agendas (Hall 2010), as a substantial source of revenue for some organizations, federal funds can alter an individual organization's spending behavior. Nonprofit organizations within the United States have important implications for delivery of public services, and many eminent nonprofit scholars have labeled the increasing delivery of public