What are the different types of grants?

Trying to figure out all the grant lingo – federal grants or foundation grants or proposal or application –  can be confusing.

In this podcast, Holly will break down the different types of grants in simple ways!

You will know what a discretionary grant is versus a formula and have a way to even memorize this. Want to apply to a foundation, but have no idea on which ones to apply to?

Federal Grants

In the United States, federal grants are economic aid issued by the federal government. These grants are awarded to organizations or individuals to carry out a specific purpose of the United States government.

Types of federal grants:

  • Categorical grants: Narrowly defined purposes (i.e., categories). Much of the time, recipients must match a percentage of the grant.
  1. Project grants: Fund research (medical, science, etc.) and other projects
  2. Formula grants: Determined by law
  • Block grants: Large grants given to state or local governments for a general purpose.

The states and territories then disperse these monies: think Medicaid and Temporary Assistance to Needy Families (like food stamps).

  • Earmark grants: Specified in the appropriations of the U.S. Congress and are not competitive grants. We are not going to talk about this one, but I wanted to include it with the different types in case you come across it.

State Grants & Contracts

Definition: State and local governments often receive much of their funding from the federal government as they can promote economic efficiency due to localized knowledge to implement a program more efficiently and effectively than the federal government (i.e., pass-through funding). These grants may help foster policy experimentation at the state and local levels that would be difficult to achieve in a single national program. Other ways of funding

state government grants are via state tax dollars. The amount of funding and percentage of funding for state grants varies from state to state.

Formula vs. Discretionary grants

Formula grant programs are non-competitive awards based on a predetermined formula. These programs are sometimes referred to as state-administered programs. A formula grant is a type of mandatory grant that is awarded based on statistical criteria for specific types of work. There is an actual formula to allocate costs. Medicaid is an example of a formula grant. Per the legislation, there is an open-ended matching formula in which the federal government provides matching funds to state governments for all activities that fall within Medicaid coverage. If regulations are followed, and the services are compliant, the state receives the grant monies.

Additionally, formula grants are generally for U.S. state, local, or territory governments rather than for private organizations. Individuals do not directly receive formula grants.

Discretionary grants are funds awarded through a competitive process. The agency reviews applications, in part through a formal review process and peer-review panel. Discretionary grants are most commonly what you will seek.

Contracts are basically either made through grant formulas or discretionary funding through federal, state, or government agencies. These differ in regular and cooperative grants in the formalities. If we were to compare the two mechanisms, we would say that a contract has two parties exchanging promises where one party delivers and the other party pays. A grant, however, has two parties wherein one party gives the money and another party performs the objectives in hopes of achieving them. A contract is legally binding, and nonperformance can be dealt with in court whereas nonperformance of a grant can result in the organization paying back monies and essentially being blacklisted.

Foundation Grants

A foundation grant is monetary assistance provided to individuals and small businesses by companies, citizens, government, and non-government organizations. The money awarded as a grant is meant to meet particular needs and is not required to be repaid.

Once again, this isn’t free money (loader). Foundation grants are awarded to others who are the best match to carry out the vision and mission of the foundation. The foundation may still ask for reports and receipts. Many times, when you receive grants from foundations, it is from foundations in your community. Therefore, they may be familiar with what your organization does and will know (and see) that your organization is being responsible in implementing the grant. This transparency could be vital in your organization continuing to win awards each time the foundation opens its grant cycle. Many foundations do not even receive unsolicited grants or may not in the future, so it is important that your organization is consistent and persistent in developing a relationship with these foundations.

*This article and podcast is an excerpt from Holly’s bestselling book, The Beginner’s Guide to Grant Writing


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