Types of Grants Explained

Grant types divide along two axes: how the funder selects recipients, and how the funder pays and controls the work. Competition versus formula sets the first. Instrument, payment basis, and permitted use of funds set the second. Both axes change what an applicant must prove.

Current figures — verified 2026-08-11

Item	Value	Source
Funded federal block grants	23 block grants, about $60.4 billion in FY2022, roughly 5.0% of federal grant-in-aid assistance	CRS R40486
Subaward amount included in modified total direct costs	The first $50,000 of each subaward	2 CFR 200.1
Department of Defense obligations through Other Transactions, FY2021–FY2024	$62.9 billion; prototype Other Transactions were 90% ($56.3 billion)	GAO-25-107546
Median share of foundation grant dollars awarded as general operating support	32% at the median foundation, 2022 survey year	Candid

These figures change. Verify against the linked source before relying on them. Report an outdated figure

Key takeaways

• Discretionary grants are competed; formula grants are allocated by statute.
• A cooperative agreement means the funder participates in the work itself.
• Subawards create monitoring duties; vendor contracts do not.
• Fixed amount awards pay for milestones, not for documented costs.
• Operating support funds the organization; project grants fund a defined activity.

What are the main types of grants?

Grant types answer two separate questions: how you get selected, and how you get paid. Selection is either competitive, formula-driven, or invitation-only. Payment is either cost-reimbursement against documented spending or fixed against completed milestones. A single award combines one answer from each column, and those combinations behave very differently.

The table below shows the five grant types an applicant is most likely to encounter, and the decision each one forces.

Grant type	How recipients are selected	What the funder wants proved	Typical burden
Discretionary grant	Open competition, merit review	Project design and capacity	High
Formula or block grant	Statutory allocation	Compliance and allowable use	Moderate, continuous
Cooperative agreement	Open competition	Willingness to co-direct work	High, ongoing
Subaward	Selected by a pass-through entity	Fit with the prime’s scope	Moderate
Operating support grant	Funder invitation or open cycle	Organizational health	Low to moderate

Underneath those five, federal law recognizes a longer taxonomy. The Congressional Research Service groups federal assistance into six mechanisms — project categorical, formula categorical, formula-project categorical, open-end reimbursement categorical, block grant, and general revenue sharing — arrayed along three axes: the federal administrator’s discretion, the recipient’s discretion in using funds, and the extent of performance conditions (CRS R40638). Project categorical grants are the most constrained on all three. The definitional groundwork sits in Grant Funding Fundamentals.

What is the difference between a discretionary grant and a formula grant?

A discretionary grant is awarded through competition: the agency publishes an opportunity, applicants submit, reviewers score, and a selecting official chooses. A formula grant is allocated by a statutory or regulatory calculation — population, poverty rate, per-capita income, road miles — with no federal competition at all. Eligible recipients receive an amount; they do not win one.

Block grants sit at the low-condition end of the formula family: broad functional purpose, formula distribution, comparatively few conditions on use. The current figures above give the count and dollar scale of funded federal block grants (CRS R40486).

The most useful category for a small applicant is the hybrid. In formula-project grants, money flows to a state by formula and the state then competes it out to local governments, nonprofits, and districts. The dollars are federal, the rules are federal, but the competition is run by a state agency and the applicant pool is a fraction of a national field. Applicants who search only national opportunity feeds never see those competitions, which is one reason state and local government grants reward a separate search habit.

Discretionary and formula funding also fail differently. A discretionary application fails at review. A formula award fails at compliance — an allocation arrives, and the risk is spending it on something the authorizing statute does not permit.

How is a grant different from a cooperative agreement or a contract?

A grant, a cooperative agreement, and a procurement contract are three legal instruments distinguished by two statutory questions: what is the principal purpose, and is substantial involvement expected. Assistance with no substantial federal involvement is a grant. Assistance with substantial involvement is a cooperative agreement (31 U.S.C. § 6305). Acquisition for the government’s own use is a contract.

Substantial involvement is not extra paperwork. Under 2 CFR 200.1, a cooperative agreement carries “substantial involvement of the Federal agency or pass-through entity in carrying out the activity.” In practice the program officer approves work plans, redirects effort mid-project, participates in technical decisions, or helps select sites. Funding notices for cooperative agreements are required to state what that involvement will be, and reading that paragraph before designing the work plan tells you how much unilateral control you will actually hold.

A fourth instrument sits outside all three. Other Transactions are neither grants nor procurement contracts and are not governed by the Federal Acquisition Regulation; Congress grants the authority agency by agency, and the current figures above show the scale at the Department of Defense (GAO-25-107546). The instrument choice test itself, with its consequences for intellectual property and competition, is worked through in grants versus contracts versus cooperative agreements.

What is a subaward, and when is a grant passed through?

A subaward is money a recipient passes to another organization so that organization can carry out part of the funded program. The entity passing the money becomes a pass-through entity; the entity receiving it becomes a subrecipient. Subawards are how a single federal grant reaches a coalition, a research consortium, or a network of local providers.

The classification is a substance test, not a labeling test. Under 2 CFR 200.331, the question is whether the entity carries out part of the federal program — making it a subrecipient — or provides goods and services within its normal business operations to many purchasers, making it a contractor. What the parties call the document does not control. Misclassification is a recurring audit finding because subrecipients trigger monitoring duties under 2 CFR 200.332 and contractors do not.

Subawards carry a budget consequence worth knowing before you build the numbers. Only part of each subaward counts in the modified total direct cost base that indirect rates are applied against, and the current figures above give the amount. A budget that assumes indirect recovery on the full subaward will be corrected downward. Ongoing obligations after the award are covered in subrecipient monitoring and pass-through funding.

What is a fixed amount award compared with a cost-reimbursement grant?

A fixed amount award pays a set amount for defined results. 2 CFR 200.1 defines it as funding “without regard to actual costs incurred,” where accountability rests “primarily on performance and results.” Cost-reimbursement is the default alternative: you spend, you document, you request the money back, and every dollar is tested against the cost principles.

The trade is symmetrical. A fixed amount award removes cost-detail reporting and lets a recipient keep the difference if it delivers the milestone for less. It also removes any ability to bill an overrun, and it shifts execution risk entirely onto the recipient. Underestimating effort on a fixed amount award is not recoverable.

Cost-reimbursement grants invert both sides. Overruns can sometimes be absorbed through rebudgeting or a supplement, but every transaction has to be documented, allocable to the award, and defensible years later. Fixed amount awards are also permitted at the subaward level when the pass-through entity determines the amount is adequate (2 CFR 200.333), which is a practical route for small partners without accounting depth.

What types of grants do private foundations make?

Private foundation grants divide by what the money is allowed to touch, not by how the recipient was selected. Five categories cover nearly all of it, and the category determines how much of your true cost the grant actually covers.

• Project or program grants. Restricted to a defined activity with its own budget, timeline, and outcomes. The most common form and the least flexible.
• General operating support. Unrestricted funds for the organization’s mission and core costs. The current figures above give the median share of foundation grant dollars awarded this way (Candid).
• Capacity-building grants. Funding for the organization’s own machinery — evaluation systems, financial infrastructure, fundraising capability, leadership development.
• Capital grants. Funding for buildings, land, equipment, or endowment, usually multi-year, usually contingent on a total campaign goal.
• Challenge and matching grants. Funds released only when the recipient raises a specified amount from other sources, used deliberately to recruit other funders.

Prize competitions are a separate instrument again. Federal agencies may “award prizes competitively to stimulate innovation that has the potential to advance the mission of the respective agency” (15 U.S.C. § 3719). A prize pays for a result already achieved and imposes almost no post-award administration, which makes it attractive to entities that could never pass a grant compliance review — and useless as a way to finance work that has not started.

What goes wrong when applicants misread the grant type?

Six errors follow directly from misreading a grant type, and each one costs money rather than merely time.

• Treating a cooperative agreement as a grant. Work plans get built assuming unilateral control, then get redirected by a program officer who has the authority to do it.
• Labeling a subrecipient a contractor. The monitoring obligations still attach; the finding arrives at audit, after the money is spent.
• Budgeting indirect costs on full subaward totals. Only part of each subaward sits in the base, so the recovery is smaller than the model predicted.
• Bidding a fixed amount award at cost. No overrun is billable, so a thin estimate becomes an unfunded liability.
• Applying for project funds to cover operating gaps. Restricted project money cannot fill a deficit, and the mismatch surfaces in the budget narrative.
• Searching only national competitions. Formula-project money competed at the state level never appears in a national opportunity feed.

Frequently asked questions

What is a block grant?

A block grant provides funding for a broad functional area — community services, social services, community development — distributed by formula with comparatively few conditions on specific use. Recipients are usually states or large local governments. Block grants give recipients more discretion than project categorical grants and impose fewer performance conditions in exchange.

Is a cooperative agreement harder to manage than a grant?

A cooperative agreement is not administratively heavier by definition; it is a different control relationship. The funding agency participates in carrying out the activity, which means shared decisions on scope and direction. Organizations that need to hold a fixed technical approach find that harder. Organizations seeking access to agency expertise often find it valuable.

What is the difference between a subaward and a vendor contract?

A subaward funds an organization to carry out part of the program, with programmatic decision-making and its own share of the objectives. A vendor contract buys goods or services the seller offers to many purchasers in its ordinary business. The determination is made on substance, and it decides whether monitoring duties apply.

Can one project combine several grant types?

Yes, and most substantial projects do. A single program can be funded by a federal discretionary award, a state formula-project subaward, a foundation general operating grant, and a corporate sponsorship at the same time. Each source carries its own allowable-cost rules, so the accounting must track them separately from the start.

What is a capacity-building grant used for?

A capacity-building grant funds the organization’s own infrastructure rather than services to beneficiaries: evaluation systems, accounting upgrades, strategic planning, board development, or staff recruitment. Funders make them when they judge that an organization’s growth is limited by internal machinery rather than by program demand.

Which grant type is easiest to win?

No grant type is uniformly easier. Competition depends on the size of the eligible pool, not the instrument. Formula-project competitions run by state agencies typically draw far smaller applicant fields than national discretionary programs, which usually matters more to the odds than the grant type itself.

Related topics

• Grant Funding Fundamentals — the hub for how the funding system is structured
• What Is a Grant? — the legal and economic definition
• Who Funds What: The Funder Landscape — which funders use which instruments
• The Grant Funding Lifecycle — how an award moves from appropriation to closeout

Sources

1. Congressional Research Service. Federal Grants to State and Local Governments: A Historical Perspective on Contemporary Issues, R40638, June 26, 2025. https://www.congress.gov/crs_external_products/R/PDF/R40638/R40638.35.pdf (accessed 2026-08-11)
2. Congressional Research Service. Block Grants: Perspectives and Controversies, R40486. https://www.congress.gov/crs_external_products/R/PDF/R40486/R40486.26.pdf (accessed 2026-08-11)
3. Legal Information Institute, Cornell Law School. 31 U.S.C. § 6305 — Using cooperative agreements. https://www.law.cornell.edu/uscode/text/31/6305 (accessed 2026-08-11)
4. Electronic Code of Federal Regulations. 2 CFR 200.1 — Definitions. https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/subpart-A/subject-group-ECFRed1f39f9b3d4e72/section-200.1 (accessed 2026-08-11)
5. Electronic Code of Federal Regulations. 2 CFR 200.331 — Subrecipient and contractor determinations. https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/subpart-D (accessed 2026-08-11)
6. Electronic Code of Federal Regulations. 2 CFR 200.332 — Requirements for pass-through entities. https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/subpart-D (accessed 2026-08-11)
7. Electronic Code of Federal Regulations. 2 CFR 200.333 — Fixed amount subawards. https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200/subpart-D (accessed 2026-08-11)
8. U.S. Government Accountability Office. Other Transactions: DOD Obligations and Use of Authority, GAO-25-107546, September 3, 2025. https://files.gao.gov/reports/GAO-25-107546/index.html (accessed 2026-08-11)
9. Legal Information Institute, Cornell Law School. 15 U.S.C. § 3719 — Prize competitions. https://www.law.cornell.edu/uscode/text/15/3719 (accessed 2026-08-11)
10. Candid. 4 things we learned about foundations and general operating support. https://candid.org/blogs/4-key-learnings-foundations-general-operating-support/ (accessed 2026-08-11)