There are a lot of federal grant opportunities out there—if you know where to look and what to do. With funding reaching $1.1 trillion in 2023 for state, local and tribal governments, finding the right funding, writing the perfect grant application, and nailing post-award management are all part of the big picture. [Source]
As a leading provider of grant management solutions, we understand the need to tailor your grant management software (GMS) to your industry’s nuances. We also recognize that it is just as important to adjust the approach you need to take during the application process to cater to each unique grant funding type.
Learning the similarities and differences between the four main types of federal grant funding will help you achieve the best results. This article provides an overview of the distinct federal funding structures to aid in your search for sources of grant revenue.
Four Types of Federal Grant Funding to Help You Achieve Your Mission
1. Competitive Grant: Based on the Merits
Also known as “discretionary” funding, this type of grant is awarded based on a competitive process, which includes proposal selection considered by a single reviewer or a team of reviewers. Financing of this type is determined by the merits of the application and is not predetermined.
Examples of competitive grants include funding for arts and humanities grants, scientific research, and some student tuition programs.
It is crucial to understand the grant’s criteria to ensure your application is as competitive as possible. In some cases, you may communicate with the organization awarding the funding to have any questions resolved.
2. Formula Grant: Based on Predetermined Award
Unlike a competitive grant, formula grants are awarded to recipients who are predetermined, and the term “formula” refers to the way the grant funding is allocated to recipients. Formula grants, in contrast, are non-competitive.
Legislation and regulations set the formula for this type of funding, so funders must adhere to that when awarding grants. Typically, the funds from these grants are awarded across the states by a specific formula. Next, the choices of which projects to support are made on the local level, and funding is recurring. All eligible applicants who meet the minimum requirements stated in the application process are entitled to receive funding.
So, what does the formula include?
In short, it is different for every program. This means it’s essential that you research the different government agency websites and the authorizing legislation.
Examples of formula grants include the federal government’s contributions to state and local governments for programs such as Medicaid, education, and transportation infrastructure.
The Infrastructure Investment and Jobs Act (IIJA) is a prime example of a legislative act that provides funding through a mix of both competitive grants and formula grants. With $1.2 trillion in funding, this is a significant source of funds for state, local, and tribal governments seeking to implement transportation, water, energy, and other infrastructure-related projects. For more information on how this legislation impacts and funds specific grant programs, read our article, “IIJA: Leveraging Available Funds”.
3. Continuation: Renewal Grants
As its name implies, continuation grants offer current award recipients the option of extending or renewing existing program funding. This can apply to one or more additional budget period(s) to renew grants that would otherwise expire, according to Grants.gov. Depending on the grant program, some can be restricted to existing grantees while others encourage applications from both new applicants and current grantees.
Because continuing applications often receive priority for continuation funding grants, it’s good to keep in mind that if you’re a new applicant, entering a partnership with a currently funded entity could be beneficial.
4. Pass-Through Grants: Issued by a Federal Agency
Federal agencies issue pass-through grants to a state agency or institution. From there, they transfer the funds to other state agencies, units of local government, or other eligible groups per the award eligibility terms. [Source]
Under this funding structure, states can distribute these funds as competitive or non-competitive, based on terms and authorizing legislation of the primary award. This gives state governments both flexibility and autonomy over the use of federal grant funds.
Prospective applicants must keep in mind that they’ll need to search and apply through their state’s grants office for pass-through grants.
The terms and audit regulations for pass-through grants are established by the initial authorizing agency or institution, often called the prime recipient, while the secondary recipients are called subrecipients. The prime recipient then issues the sub-awards as either competitive or non-competitive awards dictated by the initial terms and authorizing legislation.
An example of a pass-through grant is the State and Local Fiscal Recovery Funds (SLFRF) program, established by the American Rescue Plan Act (ARPA). The SLFRF program distributes $350 billion to state, local, and tribal governments to support COVID-19 recovery efforts. Download our Explainer: Treasury’s SLFRF Interim Final Rule on Obligation and Updated FAQs for information on managing SLFRF funds.
How To Set Yourself Up for Success with the Different Types of Grant Applications
Understanding these four different grant types empowers you to assess which federal funding is right for you. Knowing the application process for each grant type helps you ensure your application is thorough and in line with its specific guidelines and considerations to maximize your chances of successfully winning funding.
Our Federal Grant Funding: Types and Best Ways to Progress Your Opportunities Explainer provides detailed application guidelines specific to grant type. Plus, you’ll get additional resources and tips to support you from application through the full award cycle.
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