Government funded adult literacy organizations in the State of Washington receive partial funding from federal grants issued to the Washington State Board for Community and Technical Colleges (SBCTC). The SBCTC determines the accountability requirements by which all funded programs must abide. This research explores perceptions nonprofit adult literacy organization program managers in Washington have of state funding requirements and their impacts on quality of service. The result of this research is a theoretical model illustrating the perceived impacts of state funding requirements on program quality. The theoretical model emerged by employing the systematic process of Glaser & Strauss's (1967) grounded theory method of qualitative inquiry. The data analysis process consisted of open coding, axial coding, and selective coding for the purpose of arriving at a theoretical model. Research participants indicated that funding requirements are a heavy burden that can impede good work. They also indicated, however, that the benefits of being associated with SBCTC outweigh the costs. Despite strong anecdotal evidence, all participants reported that their programs have improved as a result of state mandated financial accountability practices. Ideally, this paper may encourage the SBCTC to examine the status quo in order to reduce the burden felt by program managers while maintaining valuable benefits. It may also allow start-up and privately funded organizations to weigh the costs and benefits of applying for state funding.