What are the Categorical Grants?

Categorical Grants – Overview

Categorical grants are also called conditional grants. These are provided by the United States Congress and are meant to be spent for precisely defined purposes.

Categorical grants are the primary source of federal aid for state and local governments. These can only be used for specified state and local government spending, such as roads, infrastructure, education, etc.

These grants are meant to help individual states improve the overall well-being of their residents. These funds are also helping to empower the US federal government to exert more power over the states within the policy area.

These grants are usually classified as categorical grants, block grants, and general revenue-sharing initiatives.

Distribution of Categorical Grants

Categorical Grants

Categorical Grants – Distribution of Categorical Grants

There are two main ways to distribute categorical grants: formula grants or project grants. Let’s check out the ways that different forms of categorical grants are distributed in the US:

Formula Grant Funding

Formula grants are meant for services that help a particular set of citizens. These may include children with disabilities or low-income students and such. Unlike project grants, formula grants do not include a competitive process.

Every applicant who applies and fulfills the criteria can receive funding based on a formula devised by the federal government.

Congress determines the specific amount of money spent in a particular field. Congress then uses the special formula to determine how to divide the total funding amount for different states. This formula can be based on project goals or population.

For instance, the US Department of Health and Human Services (DHHS) runs the Nutrition Services Incentive Program. This program provides funds for states to offer nutritious meals to the elderly in a specific geographical location.

The number of meals given by the particular state within the past year is used as a formula to determine the specific grant amount for the present year.

Project Grant Funding

Project grant funding is offered to help subsidize a specific service for a particular duration of time. These grants are highly competitive and follow a specific cycle. An agency can create funding programs based on its administration, mission, and congressional initiatives.

Next, the grant-making agency announces the grant opportunity and invites applications from specific groups.

The agency thoroughly reviews the applications before shortlisting the award-worthy applicants. The states compete for project funding through the application process.

The applicants who fulfill the most criteria are usually selected to be awarded project grant funding.

For instance, the US Department of Agriculture, Animal, and Plant Health Inspection Services operates the Wildlife Services Program.

The department regularly provides project grant funding in such cases. This grant is awarded to applicants committed to reducing damage caused by mammals and birds and those carriers of zoonotic diseases.

Head Start Categorical Grants

Head Start was an initiative started in 1965 as a summer school program. This program helps low-income students to catch up with their curriculum before they start their first year of school.

Today, Head Start serves more than 1 million low-income households every year by encouraging parental involvement and focusing on student health.

This program receives partial funding through categorical grants.

Since 2014, the US Congress has issued more than US$ 500 million towards the Head Start program. To receive this funding, Head Start organizations need to make regular reports and submit them for annual edits by the US Department of Health and Human Services.

Medicaid is probably the most well-known categorical grant as it is partially funded through it.

Funds are disbursed as formula grants to every state. Like Head Start, Medicaid is also specific to a particular group, especially low-income households.


Economists support the federal government’s categorical grant system as one of the most efficient ways to distribute public funding.

This system has proven efficient in aiding states to take care of low-income households and their under-served communities successfully for years.

Categorical Grants – FAQs

What are the different types of federal grants?

Federal grants have three primary subcategories;  categorical grants, block grants, and general revenue sharing. The United States federal government offers these grants through more than a thousand distinct grant programs.

What distinguishes category grants from block grants?

The distribution of funding is the primary distinction between Block Grants and Category Grants. Block grants offer broad funding for government agencies and organizations. 

However, Categorical grants are only applicable for specified state and local government spending, including infrastructure, roads, education, etc.

What are the different types of Categorical grants?

Project grants, formula grants, formula-project grants, and open-reimbursement grants are four variations of Category grants. These funds can assist the federal government of the United States in gaining additional policy authority over the states.

See Also

Grant Writing for Nonprofits

DHHS Grant Program

Foster Care Grants

Blue Cross Blue Shield Telehealth Grants

Current Version
August 3, 2023
Updated By
Andrea Morales G.
July 15, 2022
Written By
Shubham Grover

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