In the United States, a federal grant is a monetary award of financial assistance. Contrary to widely held misconceptions – often promoted in books and TV ads – this grant isn’t free money from the government, but instead comes with certain requirements and obligations which the grantee is expected to fulfill.
Federal grants are governed by the Federal Grant and Cooperative Agreement Act of 1977, according to which “…the principal purpose of the relationship is to transfer a thing of value to the State or local government or other recipient to carry out a public purpose of support or stimulation authorized by a law of the United States instead of acquiring (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government.”
Although the Act goes on to state that “substantial involvement is not expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement,” the recipient of the grant is subject to government oversight, and performance measures must be met during the funding period. A failure to fulfill these requirements can lead to legal repercussions, which might involve prison in the event of improper use or outright theft of public funds.
Federal grants are primarily aimed towards state and county governments or non-profit agencies, with only a few available for individuals. None of the grants are meant for personal financial assistance, and are only given for a charitable public purpose or work that benefits the general public. For individuals seeking federal funding or loans, federal grants are not appropriate, and other avenues such as state development agencies should instead be explored.
Over 1,000 grant programs are offered by the 26 grant-making agencies, which fall into 21 broad categories. Four main types of grants exist: block grants, project grants, categorical grants and earmark grants. Each is meant to fulfill a specific purpose.
Block grants are large grants provided to state or local governments for use towards a general purpose, which allows the receiving agency to have greater flexibility in terms of how the money is utilized.
Project grants are aimed specifically towards funding research projects, and often go towards medical research. It is required of the individual to acquire certain qualifications prior to applying for this grant,
Categorical grants come with a narrowly defined purpose. The recipient is usually required to come up with funds to match the federal money provided.
Earmark grants are congressional appropriations which are not awarded on a competitive basis. They have become highly controversial over the past few years due to their abuse by members of Congress, where they are sometimes used as a means to promote personal or other related interests.