The federal government distributes billions every year to state and local governments in form of grants. The National Association of State Budget Officers (NASBO) reports federal funds made up 27.8% of total state expenditures in 2006. Those funds include direct payments, insurance, loans, grants and cooperative agreements. INPUT members frequently ask us about the best way to incorporate grants into their sales and business development strategies; so we thought we'd provide a brief primer on federal grants and cooperative agreements.

A grant is an agreement between the federal government and the awardee to transfer money, property, or services to accomplish a pre-defined public purpose. There is no substantial involvement by the federal government and the recipient beyond reporting requirements established in the grant. Grant programs typically are created and funded by 13 federal appropriations bills passed by Congress each year and there are several types of grants:

• Formula Grants -- An assignment of money to a predetermined set of recipients based on a formula that determines how much money each recipient will get. How the money may be used is also determined by the appropriations legislation.
• Block Grants -- An assignment of money to a predetermined set of recipients often based on a formula. However, recipients generally have more flexibility in how the grant dollars may be used.
• Discretionary Grants -- (sometimes called Project or Competitive grants). A specific amount of money is appropriated each year by Congress and organizations compete for awards. Applications are evaluated based on how well they meet the objectives and goals of the grant program.
• Cooperative Agreements -- Financial assistance is provided but the federal government remains involved throughout the life-cycle of the agreement. A Memorandum of Understanding (MOU) is usually signed by the federal government and the recipient.

In 2006, the last year for which complete data is available, the federal government distributed $512.8 billion to states, local governments and public universities in the form of grants and cooperative agreements:

Source: USAspending.gov and INPUT

The breakdown for local governments is as follows (in billions):

The top 10 federal agencies providing assistance to state and local governments are:

1. Health and Human Services/Health Care Financing Administration
2. Transportation/Federal Highway Administration
3. Health and Human Services/Office of the Secretary
4. Agriculture/Food and Nutrition Service
5. Housing and Urban Development/Community Planning and Development
6. Education/Compensatory Education Programs
7. Education/Office of Special Education Programs
8. Homeland Security/Federal Emergency Management Agency
9. Transportation/Federal Transit Administration
10. Housing and Urban Development/Public and Indian Housing

The top 10 grant programs are:

1. Medical Assistance Program (93.778)
2. Highway Planning and Construction (20.205)
3. Temporary Assistance for Needy Families (TANF) (93.558)
4. Title I Grants to Local Education Agencies (84.010)
5. Community Development Block Grants (14.228)
6. Special Education Grants to States (84.027)
7. National School Lunch Program (10.555)
8. Special Supplemental Nutrition Program for Women, Infants and Children (WIC) (10.557)
9. Disaster Assistance (83.516)
10. Federal Transit Formula Grants (20.507)

INPUT expects $3.2 trillion will be disbursed to states and localities in the form of grants and cooperative agreements between 2008 and 2013. Companies should keep in mind only a small fraction of grants may be used to fund technology. Due to federal requirements that call for recipients to obligate grant funds within a specific timeframe, those dollars are usually obligated soon after award. Therefore, if you plan to pursue recent awardees you may already be too late. Grant recipients will typically look to expand the scope of an existing contract or use term contracts to fulfill and technology needs they may have as a result of the grant award. Savvy companies will identify the federal discretionary grant programs that may be used to fund their products or services and provide governments informal assistance in development of their grant application. For more information on the grants that are dedicated to state and local technology, purchase or download INPUT's recent Insight Brief entitled, $3.2 Trillion in Federal Grants will Underwrite Major State and Local IT Spending between 2008 and 2013.

Gain more insight into homeland secuirty grants to state and local governments at INPUT's 3rd Annual State & Local MarketView event on June 4, 2008 in Tysons Corner.