How Are Government Programs Funded?

Like all governments in the world, United States government also provides federal financial assistance to different programs and initiatives. Federal finance assistance is broad term but basically means transfer of money or anything valuable, from a federal agency to a non-federal one.

Any financial assistance helps further the cause that the government want to support under the laws governed by the United States congress. 

This can encompass a lot of different ways by which financing is provided to different programs. Some these ways include:

  • Grants
  • Cooperative agreements
  • Direct appropriations
  • Donations of property
  • Loans
  • Interest subsidies
  • Food commodities
  • Insurance

All of these different methods of funding serve different purposes and different legal and regulatory frameworks dictate the terms for each of them.

The Federal Grant and Cooperative Agreement Act, passed in 1977, is what guides the government on how to use the and assign the federal funds that are primarily tax dollars of the public. Further guidance by the Office of Management and Budget (OMB) published in 1978, tells how to implement this law. The funds are usually only used for assistance-based programs and projects.

The most common way of providing financial assistance to initiatives and programs is a federal grant. Billions of dollars in grant are given across country each year to “promote the general Welfare”, according to the constitution.

All the potential programs that can be assisted through grants are listed in the Catalog of Federal Domestic Assistance (CFDA).

The Grant Lifecycle

The grant lifecycle is a linear process divided into three important phases. If you are interested to see what these phases are, here is a brief summary:

Pre-Award Phase

In the first phase of the process, the agency that is providing the grant will develop a plan of action and a funding program based on its mission, the government policies, and the congressional initiatives.              

This will be followed by an announcement by the agency where the details of the grant, applicant requirements, and timelines will be shared. Here the agency will invite people to submit proposals on how the funds will be utilized. Usually these opportunities are announced on

Award Phase

In this phase, the grant providing agency will notify the programs and people who have been awarded the grant, after going through scrutiny by the panel making the decisions. Also, in this phase, the companies will finalize legal frameworks for the grant after an initial agreement. After that, the programs will be provided with awarded funds.

Post Award

After the funds are awarded and a designated time has passed, the grants management officer at the funding agency will start reviewing the awardee’s compliance with the agreement. This process is continuous till the life of the grant award and the awardee submits reports periodically about the progress of their project. 

Many agencies may also perform visits to ensure that tax dollars are being spent the way that they were supposed to. Auditing the programs is also part of the oversight by the federal grant awarding institution.

After a program finishes all the closeout requirements dictated in the grant agreement, a final review of all the financial and technical reports from the awardee, ends the grant cycle.

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