There are a variety of types of grants the federal government provides. They can be mandatory or discretionary in nature. Mandatory grants may be further classified into block grants, open ended, or close ended. Direct grants may be mandatory or discretionary.
In a mandatory grant program, Congress directs awards in specific amounts to one or more classes of prospective recipients that meet specific criteria for eligibility. These grants are usually awarded on the basis of formulas prescribed by statute or regulation rather than on the basis of an individual project review. In other words, “mandatory” means just that – applicants need not compete for funds but instead need only demonstrate that they meet the relevant eligibility criteria to establish their entitlement to funding.
Mandatory grants are typically awarded to state governments and sometimes to other entities. Mandatory grants include block, open-ended, and close-ended grants.
- Unlike direct grants, block grants are programs for which the federal government gives states, localities, or regional entities a fixed amount of funds that they, in turn, distribute to other entities for the purposes of performing program services. Block grants are designed to offer grantees flexibility in designing programs, targeting resources, and devising administrative mechanisms to provide services to meet specific needs.
- “Block grantees” have substantial discretion in decisions relating to supported activities, with relatively minimal federal oversight or administrative restrictions. After the federal government has given funds to the block grantee, the grantee takes on primary responsibility for setting up procedures for the disbursement of funds to eligible entities for the purpose of implementing the federal program goals.
- Typically regarded as mandatory grants to states, some block grants consist of what had been several smaller, specific-purpose grants consolidated into one “block.” Block grants usually provide greater flexibility of use of the provided funds and place fewer federal administrative restrictions on the recipients.
- An open-ended grant is a type of mandatory grant where the legislation authorizes appropriation of funds sufficient to pay a set portion of the recipient’s (normally state’s) total cost without an upper limit, hence “open-ended.” Open-ended grants are sometimes referred to as “open-ended entitlement grants,” due to the entitlement of individual citizens to funds under the awards.
- A close-ended grant is a type of mandatory grant where the award constitutes an upper limit on the amount of funds the federal government may pay for the activities, hence “close-ended.”
A discretionary grant is awarded on the basis of a competitive process. The federal government uses discretionary grants to fund program activities when it is appropriate and essential for the government to identify the best possible projects to achieve particular program objectives.
Discretionary grants are awards that permit the Federal government, according to specific legislation, to exercise judgment (discretion) in selecting the project or proposal to be supported and selecting the recipient organization through a competitive process. The award amount is determined either through a negotiation agreement between the recipient and the grants office/program office or on a formula basis. Discretionary grants are also referred to as “project” grants. Additionally, the funds for these programs are appropriated annually at the discretion of the Congress. Discretionary grants and cooperative agreements are used to support demonstration, research, training, service, construction, and conference projects.
How the Application Process Works for Discretionary Grants:
- Prospective grantees apply directly to the federal governmental agency charged with administering the program. The agency reviews applications in light of relevant legislative and regulatory requirements, published selection criteria, and the relative strength of those applications. The review process gives the agency discretion to determine which applications best address the program requirements and are, therefore, most worthy of funding.
Direct grants involve a funding relationship directly between the federal government and an end-user grantee responsible for carrying out the public purpose for which the grant program is established. Direct grants may be mandatory or discretionary but in all cases are founded upon a funding agreement to which the federal grantor agency and the grantee are parties. The grantee, in turn, is directly accountable to the federal government for the implementation and management of the grant.