The government utilizes funding given to federal departments and agencies to offer a variety of grants. These government grants can be used for a number of purposes, but in each case, priorities and guidelines are set and the receiver of the grant must abide by the guidelines.
The types of government grants include earmark grants, formula grants, block grants and project grants. Project grants are the most widely-known type of government grants as these are awarded to businesses for research and development purposes through a number of federal departments. The popular SBIR/STTR programs award project grants to small businesses for start-up, expansion and commercialization of ideas and projects.
Earmark government grants
Earmark grants have become increasingly controversial because political lobbyists can assist in obtaining the grants. Lobbyists are individuals who try to sway a political candidate or member to align with their political views or interests. These individuals can be constituents of a government official or legislator, or a business can participate in lobbying. Earmark grants are provided for specific purposes and projects, so a legislator can try to implement earmarks into legislation that would provide funding for projects or organizations located in his or her state or hometown. This can be viewed as controversial because the legislator may be so focused on their own state that they neglect the needs of others, even if those needs are deemed more critical. Earmarks are sometimes considered a selfish, me-first funding where the legislator tries to get as much money for his or her constituents as possible. On the other side of the coin, some say that legislators are elected for the purpose of the betterment of their state, so retaining these earmarks are part of their jobs.
Formula grants
Funding that is dictated by law is considered a formula grant. These government grants provide money to governments based on formulaic elements. The grant created indicates how much money can be calculated for the recipient and where and how the money should be utilized. Areas where formulas are used include population, levels of poverty, mortality rates and housing density. Government grants such as these are noncompetitive.
Categorical grants are a type of formula grant that have very defined, specific provisions of use. State and local governments are awarded either direct or pass-through grants. Direct grants must be used by the governing body. Pass-through grants are given to the governing body to create a grant program for awarding funds to organizations and businesses.
Government block grants
State and local governments receive federal block grants in the form of a large sum of money with broad and limited restrictions on how the money must be spent. The local and state governments then use the money to fund programs and award smaller grants. These programs make it hard to measure success of the grants across governing bodies even if the funds are given to similar organizations because there are few restrictions on usage. So while two states may award funding for drug education services, the services are able to use the funding in a variety of ways. One state service may fund classes while another state service could buy resources. Although block government grants are less tangible to compare, they can be more beneficial by allowing services and organizations the freedom to use the money where it is most needed.
This article is written by Jon Emge who is a Senior Debt Advisor writing for a range of financial sites includingwww.debtadvice.net and www.debtconsolidationloans.org.uk