Federal Grants & Cooperative Agreements

The Federal Grant and Cooperative Agreement Act of 1977 establishes the legal framework for how the federal government distributes over $750 billion annually to state and local governments, universities, nonprofits, and other recipients. The Act defines three instruments — procurement contracts, grants, and cooperative agreements — and requires agencies to use the correct instrument based on the nature of the relationship. This seemingly technical distinction shapes how most federal domestic spending reaches communities, from highway construction to biomedical research to school lunch programs — all subject to OMB Uniform Guidance oversight.

Current Law (2026)

Parameter	Value
Governing statute	Federal Grant and Cooperative Agreement Act (31 U.S.C. §§ 6301–6308)
Annual federal grant spending	~$750+ billion
Number of grant programs	~2,000+ across federal agencies
Key regulation	2 CFR Part 200 (OMB Uniform Administrative Requirements)
Oversight	OMB (policy), agency inspectors general (compliance), GAO (accountability)
Single audit threshold	$1,000,000 in federal awards (raised from $750,000 effective fiscal years beginning on or after Oct 1, 2024)
Grant portal	Grants.gov (central application portal)
Top grant agencies	HHS, Education, Transportation, HUD, USDA

Legal Authority

31 U.S.C. § 6301 — Purposes (promotes understanding of federal expenditure relationships and eliminates unnecessary administrative requirements on award recipients)
31 U.S.C. § 6303 — Using procurement contracts (agencies must use procurement contracts when the principal purpose is acquiring property or services for the government's direct benefit)
31 U.S.C. § 6304 — Using grant agreements (agencies must use grants when the principal purpose is transferring value to carry out a public purpose — and no substantial federal involvement during performance is anticipated)
31 U.S.C. § 6305 — Using cooperative agreements (agencies must use cooperative agreements when the purpose is the same as a grant but substantial federal involvement during performance is anticipated)
31 U.S.C. § 6307 — Interpretative guidelines (OMB Director may issue guidelines for consistent use of contracts, grants, and cooperative agreements, and may exempt transactions from the Act)

Key Numbers

$750+ billion annually in federal grants and cooperative agreements — more than half of all federal discretionary spending flows through the grant system; the largest single program is Medicaid (hundreds of billions to states), followed by education formula grants, highway and transit grants, HUD housing programs, and NIH/NSF research grants
~2,000+ grant programs across federal agencies listed on Grants.gov; finding the right program for a specific need — among programs with overlapping purposes, different eligibility rules, and different performance requirements — is a significant specialized skill
$1,000,000 single audit threshold: any non-federal entity (state, local government, university, nonprofit) that spends $1 million or more in federal awards in a single fiscal year must undergo a Single Audit — an independent audit examining both financial statements and compliance with federal program requirements; the threshold was raised from $750,000 to $1 million by OMB's 2024 revision (effective for fiscal years beginning on or after October 1, 2024); the prior $750,000 threshold itself replaced a $500,000 threshold in the 2014 Uniform Guidance
2 CFR Part 200 (the "Uniform Guidance") — the single comprehensive federal regulation governing all grants and cooperative agreements, issued by OMB; it replaced multiple agency-specific circulars (A-21, A-87, A-110, A-122, A-133) in 2014, creating a unified rulebook that all federal awarding agencies and all recipients must follow
Indirect cost rates: grantees can recover a portion of their overhead costs (rent, utilities, administrative staff, IT) through negotiated indirect cost rates; nonprofits and universities negotiate these rates with a cognizant federal agency; the rate multiplied by direct costs determines recoverable overhead; the de minimis indirect cost rate of up to 15% of modified total direct costs (raised from 10% by the 2024 Uniform Guidance revision) is available to organizations without a negotiated rate — a significant financial benefit for smaller nonprofits
90-day post-award reporting: most grants require financial and performance reports within 90 days of the period of performance end date; missing reporting deadlines can trigger audit findings, require reimbursement of funds, or result in suspension of future awards
DOGE impact on federal grants: beginning in early 2025, the executive branch terminated or suspended thousands of federal grants across multiple agencies (NIH, USAID, education, environmental) — cancellations that were challenged in court and created significant uncertainty about existing award commitments and future program funding

How It Works

The Act establishes a three-part framework. Procurement contracts are used when the government is buying something — goods or services for its own use — and are governed by the Federal Acquisition Regulation. Grants are used when the government is transferring funds to support a public purpose (education, research, public health) and doesn't expect to be substantially involved in how the recipient carries out the work. Cooperative agreements are the middle ground — same transfer purpose as a grant, but with substantial federal involvement during performance, such as collaboration on research design or joint decision-making.

The practical significance is enormous. Federal grants flow to every state, county, and major city in America. Medicaid, the largest single grant program, distributes hundreds of billions annually to states for healthcare. Title I education funding, highway formula grants, Community Development Block Grants, NIH research grants, and thousands of other programs all operate through the grant framework. The distinction between grants and cooperative agreements matters for oversight — cooperative agreements give the federal agency a role in directing the work, while grants give recipients more autonomy.

OMB Uniform Guidance (2 CFR Part 200) is the comprehensive regulation that governs federal grants administration. It covers everything: pre-award requirements, cost principles (what grant funds can pay for), audit requirements, procurement standards for subrecipients, and financial management. The Uniform Guidance replaced multiple agency-specific circulars in 2014, creating a single set of rules for all federal grants. Any organization receiving federal grant funding must comply with 2 CFR 200.

The Single Audit Act requires any non-federal entity spending $750,000 or more in federal awards in a year to undergo an annual audit. These single audits — performed by independent auditors — examine both the entity's financial statements and its compliance with federal program requirements. Single audit results are reported to the Federal Audit Clearinghouse and are used by federal agencies to assess recipient risk.

Grants.gov serves as the central portal for finding and applying for federal grant opportunities. Agencies must post discretionary grant announcements on Grants.gov, providing a single access point for the thousands of grant programs available annually.

How It Affects You

If you work for a state or local government managing federal grant programs: The Uniform Guidance (2 CFR Part 200) defines what you can and can't charge to federal grants — cost principles that determine whether a given expense is "allowable, allocable, and reasonable" using federal funds. Personnel costs (the largest cost in most grants), equipment, indirect costs, and subrecipient management are all governed by 2 CFR 200. The practical compliance risk is spending federal funds on activities or costs that aren't allowed under the specific program's terms — even if the expense seems reasonable — because auditors check against the Compliance Supplement requirements for each program, not just general reasonableness. If your organization spends more than $1 million in federal awards in a year (the 2024-revised threshold; previously $750,000), budget for a Single Audit (~$15,000-50,000+ depending on the organization's size and complexity) — and make sure your financial management system produces the program-level expenditure data auditors will need.

If you work in sponsored research at a university: Your federally negotiated indirect cost (IDC) rate — the percentage applied to direct costs to recover overhead — is one of the most financially significant numbers in your research administration budget. Rates vary widely by institution (from under 40% to over 60% of Modified Total Direct Costs) and are negotiated with the cognizant federal agency (typically HHS Division of Cost Allocation for universities). Disputes over IDC rates — whether costs are included in the rate, whether the rate is applied correctly, whether facilities and administrative cost pools are appropriately allocated — are among the most common issues in federal research grant audits. Also: post-award reporting deadlines under 2 CFR 200 are real — missing the 90-day closeout window for financial reports can result in audit findings and jeopardize future award eligibility.

If you're a nonprofit applying for or managing federal grants: The de minimis indirect cost rate of up to 15% (raised from 10% by the 2024 Uniform Guidance revision) — available to any organization without a federally negotiated rate — is often left on the table by nonprofits that don't know about it. You don't need to negotiate it; you just need to apply it consistently. On a $500,000 grant at the full 15% rate, that's $75,000 in recoverable overhead costs. Also critical: if you receive federal pass-through funds from a state or larger nonprofit (as a subrecipient), the Uniform Guidance applies to you just as if you received the award directly from a federal agency — your pass-through entity is required to communicate this and monitor your compliance. Don't assume that because you didn't apply directly to a federal agency, federal rules don't apply to your program.

If you're tracking or challenging the 2025 federal grant terminations: The Trump administration's termination of thousands of federal grants beginning in January 2025 — across NIH, USAID, education, and other agencies — raised fundamental legal questions about whether the executive branch can unilaterally terminate grants that were lawfully awarded and accepted without congressional action. Federal courts issued temporary restraining orders and preliminary injunctions in multiple cases (covering NIH grants, international development contracts, and education awards) finding that terminations appeared to violate both the grants' terms and conditions and statutory spending requirements. The legal theory on the government's side — that the executive has inherent authority to rescind any federal spending obligation — conflicts with established federal contracts and grants law holding that once an award is made and accepted, it creates binding obligations. If your organization received a termination notice, consult a federal grants attorney before accepting the termination; you may have appeal rights under the award's terms and conditions, and the legal landscape is actively evolving through court decisions.

State Variations

Federal grants law applies uniformly. However, states play a major role as pass-through entities:

States receive formula grants (Medicaid, highway, education) and pass funds to local governments, school districts, and service providers
State administrative capacity affects how effectively federal grants reach intended recipients
States may impose additional requirements on subrecipients beyond federal minimums
State match requirements vary by program — many federal grants require states to contribute matching funds
State audit infrastructure (state auditors, oversight offices) supplements the Single Audit process

Implementing Regulations

2 CFR Part 200 — Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the "Uniform Guidance" — governs all federal grants and cooperative agreements)
2 CFR Part 1 — OMB guidance applicability (§§ 1.205, 1.210 — applicability to federal financial assistance, federal agencies, and others)
2 CFR Part 1108 — DOD grant and agreement regulations (§§ 1108.110, 1108.130 — cooperative agreement and cost-type contract definitions)
2 CFR Part 1104 — DOD award format (§§ 1104.100, 1104.105 — award format, general terms and conditions)
2 CFR Part 910 — Department of Energy Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (43 sections — DOE's agency-specific overlay on the OMB Uniform Guidance (2 CFR Part 200); the most distinctive feature is DOE's extension of Uniform Guidance requirements to for-profit entities, which are generally excluded from standard 2 CFR Part 200):
- Adoption and extension (§§ 910.120–910.122): DOE adopts 2 CFR Part 200 for all DOE financial assistance and extends the definition of "Non-Federal entity" to include for-profit organizations — enabling DOE to apply Uniform Guidance standards to the private energy R&D companies that receive the bulk of DOE research funding (national laboratories, technology developers, clean energy companies)
- EPACT cost-sharing requirement (§ 910.130): most DOE grants for research, development, demonstration, or commercial projects awarded after August 8, 2005 (under the Energy Policy Act) must include cost-sharing from non-federal sources; SBIR/STTR programs and programs with statutory cost-share provisions are excepted; cost-sharing levels vary by program but are typically 20% or more of total project cost
- For-profit cost principles (§ 910.352): for-profit recipients must follow cost principles in 48 CFR Part 31.2 (the FAR's cost principles for commercial organizations) rather than the cost principles in 2 CFR Part 200; patent prosecution costs are not allowable unless the award document specifically authorizes them
- For-profit payment (§ 910.354): DOE prefers reimbursement (paying after the recipient incurs costs) over advance payments for for-profit recipients; advance payments require special justification — a departure from the standard approach under 2 CFR Part 200 where cost reimbursement is the norm
- For-profit audit threshold (§§ 910.500–910.521): for-profit entities that spend $750,000 or more in DOE awards in a fiscal year must obtain a compliance audit under DOE's Subpart F (distinct from the 2 CFR Part 200 Single Audit for nonprofits/governments); if any single award reaches $750,000, that award must be audited; reports due 30 days after receiving the auditor's report or 9 months after period end, whichever is earlier; audit findings require a corrective action plan and management decision from DOE
- Intellectual property (§ 910.362): small businesses generally elect to own inventions made under DOE awards; for other for-profit recipients, DOE typically retains or acquires patent rights; recipients who do own inventions must report on utilization for at least 10 years from initial disclosure (§ 910.364)
- Change of control (§ 910.368): recipients must notify the DOE Contracting Officer if organizational control changes — defined as another party acquiring more than 50% of voting power, a merger leaving prior owners without majority, or sale of substantially all assets; contracting officer must consent before any novation of financial assistance agreements (§ 910.370)
- Research misconduct (§ 910.132): recipients must have systems to prevent, detect, and respond to research misconduct; investigation procedures must include inquiry, investigation, and adjudication phases; DOE may impose administrative actions (debarment, award termination) for substantiated misconduct
10 CFR Part 602 — DOE Epidemiology and Other Health Studies Financial Assistance Program: governs grants and cooperative agreements awarded by DOE's Office of Environment, Health, Safety and Security for epidemiological studies of radiation-exposed populations, health effects research at DOE facilities, and related occupational medicine programs. The program funds studies of radiation health effects at nuclear weapons sites, uranium mill worker cohorts, and populations near DOE facilities — research driven by AEA § 31 obligations (42 U.S.C. §§ 5902, 5914, 5917). Key features: project periods generally not to exceed 5 years (§ 602.12); fee payments are permissible in appropriate circumstances (§ 602.14), unlike most research grants; human subjects research requirements apply; recipients must comply with DOE orders on worker health and safety in addition to standard 2 CFR Part 200/910 requirements. The program is the primary federal funding mechanism for research into long-term health outcomes of occupational radiation exposure — data used to set radiation protection standards and to compensate sick workers under EEOICPA.
10 CFR Part 605 — DOE Office of Science Financial Assistance Program: governs grants and cooperative agreements for basic scientific research funded by DOE's Office of Science — the single largest funder of basic physical sciences research in the U.S., with an annual budget exceeding $8 billion for research in high-energy physics, nuclear physics, materials science, chemistry, and advanced computing. Part 605 implements DOE's Office of Science grant process from solicitation through closeout. Key features: applications evaluated and awards made within 6 months of solicitation close (§ 605.10); no cost sharing requirement unless specifically stated in the program announcement (§ 605.13); research misconduct procedures required (§ 605.11); project periods generally not to exceed 5 years. Part 605 governs DOE's research grants to universities (the primary recipients), national laboratories acting as sub-recipients, and industrial research performers. The Office of Science is distinct from applied-technology DOE programs (EERE, ARPA-E) that have their own grant program regulations; Part 605 is specifically for fundamental research with no near-term commercialization requirement.

Pending Legislation

No standalone federal grants management reform bills pending in the 119th Congress. Grant-related provisions are typically included in appropriations and authorization bills across policy areas.

Recent Developments

The Infrastructure Investment and Jobs Act (2021) and Inflation Reduction Act (2022) together created hundreds of billions in new discretionary grant programs — broadband deployment (BEAD program, $42.5B), clean energy and climate infrastructure, water and sewer systems, and electric vehicle charging. This represented the largest single expansion of the federal grant system in decades. The volume of new programs strained both agency grant-making capacity and state/local recipient readiness: state broadband offices created specifically to receive BEAD funding had to be built from scratch; municipal wastewater utilities unaccustomed to federal competitive grants had to develop applications and program management capacity. OMB and awarding agencies issued extensive technical assistance to help new recipients navigate 2 CFR 200 compliance, but the GAO has flagged that rapid disbursement of large grants without adequate recipient capacity increases the risk of misuse, waste, and eventual audit findings.

The 2025 executive grant terminations represent the most significant disruption to the federal grants system since its modern framework was established. Beginning in January 2025, the Trump administration terminated thousands of grants across NIH (particularly climate, diversity, and international health research), USAID (across foreign assistance programs), DOE (clean energy), and multiple other agencies. The legal basis advanced by the executive branch — inherent executive authority to rescind grant awards — was challenged in federal courts, with several judges issuing preliminary injunctions on grounds that the terminations appeared to violate the award terms and conditions, the Administrative Procedure Act, and in some cases statutory spending requirements. The termination wave also prompted Congress to examine whether the Impoundment Control Act of 1974 (which requires the President to seek congressional approval before withholding appropriated funds) applies to executive grant cancellations at scale. As of April 2026, the legal landscape remains unsettled and actively litigated.

OMB revised the Uniform Guidance (2 CFR Part 200) in 2024, in updates effective April 2024, to reduce administrative burden and address equity in grant access. The 2024 revision raised the simplified acquisition threshold for procurement under grants, updated indirect cost rate provisions, strengthened requirements for equity in grant outreach and eligibility criteria, and clarified treatment of certain digital infrastructure and data costs. These revisions reflect a decade of experience since the 2014 consolidation of agency-specific circulars into the Uniform Guidance. The digital modernization of grants management continues through the Grants Management Center of Excellence at GSA, which is developing shared grant management platforms that would reduce the burden of operating separate grants management systems at each federal agency — a long-recognized efficiency opportunity that remains partially unrealized.