Public money reaches communities by more than one road. Some of it is divided among governments by a formula, some goes to the strongest applications in an open competition and some is directed to a named project by a member of Congress. If you chase the wrong kind for your project, you can spend months writing an application to a program that was never going to fund it.
This article explains how each route works, what you do differently in each and how to match a project to the route most likely to fund it. It is written for nonprofits and local governments, and it uses a hypothetical example to make the choice concrete.
Formula funding: the money is divided before you apply
In a formula grant, the amount each recipient gets is set by a distribution formula, not by a review of proposals. The Congressional Research Service describes formula grants as allocating money to state or local governments according to a formula set by federal statute, typically supporting ongoing activities and often passing through an intermediary.
The Community Development Block Grant (CDBG) is a clear example. HUD says it sets each entitlement community's annual allocation by a statutory dual formula, with measures of need such as poverty, population and housing conditions. It distributes funds to each state by a statutory formula too, and states award grants only to non-entitlement units of local government.
Notice what that means if you are a nonprofit. You usually can't apply to the federal agency for a formula allocation. Your route runs through the government that receives it: you make the case to the city, county or state that decides how the funds are used, often through its own application process. Pass-through funding and subawards explains the rules that follow the money to you, and finding state and local funding covers where to look.
Competitive funding: the agency picks among applications
In a competitive program, the agency publishes a notice, applicants submit proposals and reviewers score them. CRS describes this type, often called project grants, as funding specific projects or the delivery of specific services for fixed periods of time, and notes that they are often called discretionary grants.
Federal rules shape the process. Under 2 CFR 200.204, the agency must announce openly competed opportunities publicly, and under 2 CFR 200.205 it must run a merit review of applications for discretionary awards unless a statute prohibits it. The notice describes how that review works. How to read a funding notice shows how to find it.
An Assistance Listing tells you which kind of program you're looking at. Under 2 CFR 200.203, each listing must state whether the program will issue awards on a discretionary or non-discretionary basis, and the labels roughly line up with competitive and formula.
Congressionally directed spending: a member of Congress sponsors it
The third route is directed to a particular project by a member of Congress. The House calls it community project funding and the Senate calls it congressionally directed spending. House Rule XXI, clause 9 defines a "congressional earmark" as a provision or report language included primarily at the request of a Member, Delegate, Resident Commissioner or Senator, for spending targeted to a specific State, locality or congressional district, other than through a statutory or administrative formula-driven or competitive award process.
CRS summarizes what the House requires of the member who asks:
- A written statement to the committee chair and ranking member with the member's name and the name and address of the intended recipient.
- A certification that the member or the member's spouse has no financial interest in the earmark.
- Evidence of the project's merit and community support, which the House Appropriations Committee asks for.
Committees can also add their own rules, such as deadlines, online forms, matching funds, limits on the number of requests and exclusions for certain accounts. That means two things for you. The request goes through your own member's office, not an agency portal. And eligibility depends on the committee and account for that year, so check the member's published guidance before you plan around it.
A hypothetical example: three routes for one project
Say a community health center wants to put a mobile dental unit on the road to serve rural neighborhoods. The project costs $600,000: $380,000 for the vehicle, $140,000 for equipment and $80,000 for the first year of operations.
- Formula route. The center checks whether its state receives formula funds for health or community development and passes some to nonprofits. It asks the state agency how those funds are distributed and when. Timing and amounts depend on the state.
- Competitive route. The center searches for federal notices on rural health access. A competitive program may pay for the staff and operating costs, but the notice's allowable costs decide whether it can cover a vehicle.
- Directed route. The vehicle and equipment are one-time costs, which often suit a one-time request better than ongoing salaries. The center contacts its member's office, reads the published guidance and prepares a short request with evidence of need and community support.
The center might pursue more than one: an earmark request for the $520,000 of one-time costs, and a competitive application for operating support.
Choose your route before you write
Ask four questions about your project:
- What is it, in cost terms? One-time capital and ongoing operations can suit different routes.
- Who is eligible? Formula money often goes to governments first. Check the statute and the notice.
- What is your timeline? Competitive notices and member request windows follow different calendars. Appropriations and the federal calendar explains why timing varies.
- Who do you already know? Directed requests depend on your relationship with your member's office. Formula funds often depend on your standing with local officials.
Your next step
Pick one project that needs funding. Write down its total cost and split it into one-time and ongoing costs. Then name the route you think is most likely to fund each part, and find one person to ask: a state agency contact for formula funds, a program officer for a competitive notice or your member's grants staff for a directed request.
For the competitive notices on your list, SoliContraX can take you from the notice to a first draft built from your own materials, then help you finish it. See how to get started.
Sources
- Federal Grants to State and Local Governments: Overview and Characteristics (Congressional Research Service, RS20669)
- Community Development Block Grant Program (U.S. Department of Housing and Urban Development)
- 2 CFR 200.203, Requirement to provide public notice of Federal financial assistance programs (eCFR)
- 2 CFR 200.204, Notices of funding opportunities (eCFR)
- 2 CFR 200.205, Federal agency review of merit of proposals (eCFR)
- Earmark Disclosure Rules in the House: Member and Committee Requirements (Congressional Research Service, RS22866)