A Beginners Guide to the 4 Types of Federal Grant Funding

There are more federal grant funding opportunities than ever before and knowing where to find them and what managing them will entail isn’t always clear.

As a leading provider of grant management solutions, we can help you understand the funding that’s right for you so you can tailor your application approach and prepare to manage it.

This article will give you an understanding of the four main federal funding types you will come across in your search for grant revenue.

1. Competitive Grants - Based on the Merit of Your Proposed Project

Competitive grants are awarded through a process in which you plan and budget a project, write up a proposal to apply, and submit it to the funder. These grants are also known as “discretionary” funding.

Competitive awardees are chosen by a team of reviewers who read your grant proposal and evaluate your project to determine if it is a good fit for their funding.

The outcome of a competitive awarding process is not predetermined, and with federal funding, there are a lot of rules and regulations in place to keep the awarding process fair and equitable.

Examples of competitive grants can include funding for arts and humanities, some tuition programs available to students, and scientific research. 

TIP: When applying for a competitive grant, it is crucial to understand what is being asked of you in the application, and to have a very good understanding of your proposed project to make your application as competitive as possible. Having supportive technology like grants management software helps demonstrate to funders that you have the infrastructure in place to be responsible stewards of their funds.

2. Formula Grants – Awardees are Predetermined

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 mathematically allocated to recipients.  

So, what does the formula include? 

It is different for every program, but typically, a recipient must meet certain criteria thresholds to be considered for awarding. These criteria can be based on measurable things like population, median income, or number of students in a district. This means it’s essential that you research the different government agency websites and the authorizing legislation to see if your program qualifies.

Legislation and regulations set the formula for this type of funding, so funders must adhere to that formula when awarding grants.

Typically, the funds from formula grants are awarded to states, and the choices about which projects to support are made on the local level. All eligible applicants who meet the minimum requirements stated in the application process are entitled to receive funding, and the funding may be recurring over a period of years. 

Examples of formula grants include the federal governments’ contributions to state and local governments for programs like Medicaid health insurance, public education, and transportation infrastructure. Many new programs created through the Infrastructure Investment and Jobs Act are formulaic grants.

TIP: If your formulaic grant funding does not fully cover the cost of your project, you can supplement a formulaic award with competitive grants to make up the difference. AmpliFund’s Research tool can help you find additional competitive awards and other types of funding that your organization may want to consider.

3. Continuation Grants – Renewal of an Existing Grant

As its name implies, continuation grants offer current award recipients the option to extend their existing discretionary program funding. If you have completed year one of a three-year funded project, you may have to apply for a continuation award for any subsequent years. Essentially, these grants extend funding past the initial budget period. These awards are typically non-competitive, but that is not always the case, and you may have to compete against new applicants for funding depending on the program.

Applications for continuation awards are assessed based on the availability of funds, your performance during the first or second year of the grant, and if your project contributes to the interest of the federal government. To win a continuation award, you need to perform well in the first year of the award, maintain compliance, and meet your objectives.

Many continuation awards are awarded for projects that are not related to infrastructure or construction such as substance abuse programs, agriculture, and providing program funding for health and human services projects.

TIP: Because continuing applications often receive priority for these grants, entering a partnership with the currently funded entity could be beneficial. AmpliFund’s reminder features can help you keep track of deadlines to make sure you reapply for your continuation funding.  

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 their NEO recipients, or other eligible groups per the award eligibility terms.

Under this funding structure, states have the option to distribute these funds as competitive or non-competitive based on terms and authorizing legislation of the primary award. When you apply for pass-through funding for a housing program, you may be awarded a non-competitive formula grant, but for other types of projects the entity may also open a competitive awarding process to choose their recipients. With pass-through funding, the state government has both flexibility and autonomy over the use of federal grant funds and can decide how to award them.

That said, prospective applicants must search and apply through their state’s grants office for pass-through grants.

A lot of cities, counties, local, and tribal governments are now acting as pass-through entities for the first time while allocating their grant funding from the American Rescue Plan’s (ARPA) State and Local Fiscal Recovery Fund (SLFRF).

The ARPA-funded projects that state, local, and tribal governments are funding across the country include public health initiatives, offsetting the economic impacts of the pandemic, maintaining public services, water and technological infrastructure improvements, and even providing direct payments for essential workers.

TIP: Grant management software, like AmpliFund, helps grant makers allocate their funding faster and manage subrecipients more efficiently.   

Conclusion

We understand it can be daunting to start managing funding without experience, and ever-changing legislation doesn’t make it any easier.

Understanding these four different types of grants will help you determine which types of funding your organization might qualify for. It will also help you ensure your application is in its best possible shape to increase your chances of being awarded and demonstrate to the funder that you understand the structure of the award and the conditions that come along with managing it.

Using a grant management system like AmpliFund helps your organization manage your grant funding, report on the performance of the funds you receive, and maintain communication and transparency within your organization.

But to get to the point where you are managing a federal award, you must win one first. Get your copy of AmpliFund’s “How to Write an Effective Grant Proposal” eBook to make sure your application is as competitive as possible.

*Photo by xfotostudio from Getty Images Pro.