When does the federal government use a federal grant or a cooperative agreement?

When the U.S. federal government wants to buy goods or services from the private sector, it uses a procurement contract. In a similar fashion, when the federal government wants to support the activity of a non-profit organization or a lower level of government (state, county or municipality), it can do so by awarding a grant or entering into a cooperative agreement.

A Grant Is a Form of Aid

A grant is basically a form of aid, or financial assistance. Typically, when a grant is awarded, the government will have little involvement in the relevant activity and no obligation beyond monitoring and oversight. Congress authorizes appropriations of federal dollars, so grants must originally be associated with an act passed in Congress. After the act is passed, the federal agencies in the executive branch are able to develop criteria that will allow the funds to be awarded in support of specific activities. For example, the Department of Education might announce and award a grant to schools that develop innovative after-school programs.

Once a grant is awarded, the federal government will normally monitor the activity and require a progress report from the recipient. These requirements are designed to ensure the taxpayers’ money is being used as intended. Failure to properly report or failure to achieve the goals stated in the application may result in loss of eligibility for future grants. Of course, misuse of funds may result in penalties, requirements for reimbursement, or even criminal prosecution. 

Grant availability is directly related to the fiscal situation of the federal government. When the economy is positive, more money will be available. When economic conditions are difficult, less money will be available. In either scenario, grants will be awarded to those who take the time to research what is available, align their program to the criteria, prepare a thorough application, and provide the required reports. More information about the federal grant process is available at http://www.grants.gov/.

A Cooperative Agreement Is a Joint Project

Another source of federal funding is called a cooperative agreement. A cooperative agreement may be used when the federal government will be substantially involved in the activity. Like a grant, a cooperative agreement can be awarded to lower levels of government agencies and to non-profit organizations. An example of a cooperative agreement might be a federal agency that wants to conduct scientific research with a university.

Because a cooperative agreement involves federal agencies and federal dollars, the rules for application and compliance can be very complex. The Internet often simplifies the process by making information accessible. To find more information on applying for cooperative grants, visit http://www.grants.gov/. By clicking on “Advanced Search," you can select grants or cooperative agreements or other funding tools.

Although this discussion of grants and cooperative agreements focuses on non-profits and lower levels of government, there are opportunities for for-profit companies to apply for both. While for-profit organizations don’t typically qualify for grants and cooperative agreements, there are exceptions available for some forms of research and demonstration projects.

Those interested in applying for a grant or cooperative agreement will also find helpful information at the federal clearinghouse website, http://www.usa.gov/ and the Small Business Administration website, http://www.sba.gov/.