GRANT STRATEGY: Understanding the Four Types of Federal Grant Funding
GRANT STRATEGY: Understanding the Four Types of Federal Grant Funding

By Amanda Day, Grants Development Consultant - State & Local Government

Investments in federal grants have increased considerably over the past several years, particularly with the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA). Knowing how to navigate the current grant funding landscape can be a challenge, and understanding how grant funds are awarded can help organizations when they decide to apply for grant funding. There are four main types of grant funding at the federal level: competitive grants, pass-through grants, formula grants, and continuation grants.


Competitive Grants


Competitive grants are a type of grant funding that is awarded through a competitive application process. When grantseekers start the process of looking for grants, they are typically researching competitive grants, as they are the most common type of grant utilized by nonprofits, individuals, and state agencies. A competitive grant is a grant where the funder asks for a Request for Proposal (RFP). The proposals typically provide information about the applicant’s organization and project, including the problem they will use the grant funds to solve, how they will solve the problem, a detailed budget, and a description of the expected outcomes. The Competitive grant process allows funding agencies to quickly select RFP’s that align with their priorities, goals, and funding availability. The selection process is based on criteria such as the quality of the proposal, the qualifications of the applicant, and what impact the project, or projects, will have. This ensures that grant funding goes to the most deserving organizations and supports the most impactful projects. After the applications have been submitted, a committee reviews the applications for eligibility and ensures that the application has been filled out accurately, selections are made, and funds are awarded to the winning candidates.


Formula Grants


Formula grants award funds based on a predetermined formula and are not competitive programs. Formula amounts are determined by several different criteria, including population statistics, poverty levels, violent crime reports, and unemployment information. Federal regulations set the formulas for this type of grant, so the funders must adhere to that formula when determining which applicants will receive awards. Every program is different but typically, the funds from formula grants are divided among State agencies, then States choose which projects to support at the local level. All eligible applicants who meet the application requirements are entitled to receive this type of funding.


Pass-Through Grants


The next type of funding is called a pass-through grant. These grants are issued by a federal agency to a state agency, then sub awarded to other state agencies, local governments, or other eligible groups. This can be done through an application process or by direct allocation to eligible entities. This type of funding gives state governments more control over the use of federal grant funds and the ability to choose which projects will support the state’s goals and objectives. Applications for pass-through funds are usually shorter and less complicated than Federal grant applications. Prospective applicants can search and apply for these funds through individual state agencies such as Homeland Security, Department of Education, and Department of Transportation.


Continuation Grants


Last is the continuation grant. This award is an extension or renewal of an existing program that has been funded. Therefore, this type of grant benefits recipients that were awarded funds for multi-year projects but need additional funds to either finish or continue a program. Continuation grants are usually non-competitive, but applicants may have to compete against new grantseekers for available funding. This kind of grant tends to be awarded to programs that benefit society rather than construction or infrastructure. Types of programs include drug treatment programs, health and human services programs, and agricultural projects. Successful applicants need to prove they have been successful during the initial grant period, they complied with all reporting requirements, and that the program is meeting its goals and objectives.



Having a solid understanding of the current grant funding landscape is important when organizations are in the initial stages of exploring financial assistance options for upcoming projects. By knowing what types of grants are typically available, it is easier to determine where to commit your team’s time and energy. There may be more than one type of grant that would be beneficial to your organization and/or project, so educating yourself is a crucial first step.