A Short History of Federal Grant Policy

Billions of dollars in Federal grants are awarded each year for programs and projects that benefit the public. This assistance is rooted in the Constitution and its call to "promote the general Welfare."

It wasn't until the 1970's, however, that Federal grant policy began to evolve into what it is today. In the 70's, Congressional lawmakers responded to reports that Federal agencies were using assistance awards, or grants, to pay for services. In doing so, they could side-step competition and procurement rules normally associated with government contracting.

The Federal Grant and Cooperative Agreement Act, passed in 1977, set out to guide government agencies in their use of Federal funds – particularly by defining the roles of contracts, cooperative agreements, and grants. Contracts, the law states, should be awarded when a Federal agency is acquiring something – an improved computer network, for example. Grants and cooperative agreements, meanwhile, should be awarded when a Federal agency is providing assistance, such as funding for a lower-income housing program in an at-risk urban community.

To help with the implementation of the law, the Office of Management and Budget (OMB) published guidance in 1978 directing agencies to ensure that grants funds be used only for assistance-based programs and projects.


Policy Formation

Since the 1970's, subsequent grant-related legislation has helped to further develop Federal grant policy. It works much like it did in 1977 and 1978: Congress creates the grant-related laws and regulations.

The Executive Office of the President – of which OMB is part – helps to implement the laws through Executive Orders and Guidance that define administrative rules.

Finally, the grant-making agencies create internal and external policies and procedures based on the OMB guidance. (See chart.) These agency-specific policies for award recipients do not carry the weight of law, though they may be required of award recipients if they are listed in the Notice of Award.


How Grant Policies Are Made

When a new law is added to the books, that is only the beginning.

Legal Hierarchy Key Roles Example
Statutes Regulations
Congress appropriates funds to Federal agencies and passes other grant-related legislation 2014: Congress passes DATA Act, which directs that all Federal award data be accessible to the public on a single website
Executive Orders Memoranda Circulars
Executive Office of the President issues guidance for implementing the legislation 2015: Executive Office of the President creates task force and launches pilot program to determine how DATA Act will be implemented
Administrative Policies & Procedures
Grant-making agencies develop administrative policies based on guidance 2017: Agencies adjust their  internal and external  policies to the final  guidance issued by the Executive Office of the President


Key Legislation

Other legislation has addressed everything from lobbying efforts to auditing requirements, to reporting procedures, to transparency and cross-agency data-sharing.

The OMB – along with other bodies – has continued to play an important role in interpreting and implementing the laws among the Federal government's awarding agencies. Today's current grant policies have been largely shaped by a range of statutes, regulations, Executive Orders and guidance.

To learn more about current grant policies, click below for summaries of the laws and their intended impact, beginning with the most recent:

The following pages further flesh-out the Federal grant policy: