Federal Grants

How It Works

Major federal grant programs flowing to cities include HUD Community Development Block Grants (CDBG, approximately $3.3 billion annually), HOME Investment Partnerships (approximately $1.5 billion), Surface Transportation Block Grants administered by state DOTs, Justice Department COPS hiring grants, EPA Clean Water State Revolving Fund and Drinking Water State Revolving Fund, and disaster recovery funding from FEMA and HUD CDBG-DR. The Uniform Guidance at 2 CFR 200 governs federal grant administration, requiring cities to maintain internal controls, conduct procurement under specified thresholds, track time and effort for federally funded staff, and submit Single Audits under the Single Audit Act if federal expenditures exceed $750,000 per fiscal year. Grant amounts are publicly tracked through USASpending.gov, the federal spending transparency portal mandated by the Federal Funding Accountability and Transparency Act (FFATA) of 2006. Grants fall into three types: formula grants (allocated by population, poverty rate, or other statutory criteria), project/competitive grants (awarded based on applications), and pass-through grants (federal funds administered by states). The American Rescue Plan Act of 2021 (ARPA) provided $350 billion in Coronavirus State and Local Fiscal Recovery Funds with significantly fewer restrictions than typical federal grants, creating both opportunity and risk: cities that used ARPA for one-time capital investments strengthened their position, while cities that backfilled operating deficits face a fiscal cliff in 2026. Federal grant concentration and dependence factor into the revenue diversity (10%) calculation of the CitySpend Fiscal Health Score.

Related Terms

• Intergovernmental Revenue, Money a city receives from federal or state government through grants, shared taxes, or direct transfers.
• Community Development Block Grant (CDBG), A major federal grant program administered by HUD that provides cities with funding for housing, infrastructure, and economic development in low- and moderate-income areas.
• Revenue Diversity, The degree to which a city's revenue comes from multiple sources (property tax, sales tax, fees, grants) rather than being concentrated in a single stream.