In order to get pandemic relief funding out the door quickly, federal agencies are primarily using new and existing federal contracts and financial assistance awards to distribute the money. Do you know the difference? Here are the details.
- Federal contracts are agreements between the federal government and a prime recipient to provide goods and services to the government for a fee. For example, the Department of Health and Human Services awarded General Motors a $476 million contract to make ventilators.
- Financial Assistance includes grants, loans, direct payments, and other financial assistance that are made to eligible recipients for specific purposes. For example, the Department of Education funds student loans; the National Endowment for the Arts provides fellowships; and hospitals and universities receive grants for research and development.
Below are the most recent numbers for obligations (what the government has promised to pay) by the government for contracts and all financial assistance (the numbers are updated on Monday, Wednesday, and Friday). The totals for Financial Assistance are so much greater than contracts because of the huge increases in unemployment benefits, along with the stimulus checks and programs like the Paycheck Protection Program. You can find all the details on our Pandemic Response Funding interactive dashboard.
TYPES OF GRANTS
Most grants go to state and local governments but can also be distributed to universities and non-profit organizations. The purpose of the grants is to fund projects that provide public services, support innovative research, and programs to “promote the general Welfare.”
- Block Grants
- Example: State health departments or agencies receive block grants for the prevention and treatment of substance abuse.
- Formula Grants are distributed to state and local governments based on a "formula," such as total population.
- Examples: Medicaid and the National School Lunch Program
- Project Grants are for a specific purpose with a time limit
- Examples: Fellowships, scholarships, research and development, construction.
- Cooperative Agreements are grants that require close oversight by federal agency.
Loans, Direct Payments, and Other Financial Assistance
- Loans -- There are two types of federal loans:
- Direct loans -- Most of these are student loans.
- Guaranteed loans -- If the borrower fails to repay the loan, the government takes over the loan and repays the bank. The Paycheck Protection Program is an example.
- Direct Payments are cash payments to individuals, private firms or institutions
- Other Financial Assistance includes assistance not covered by other assistance definitions, such as certain types of insurance.