Federal Funding Basics

Federal funds are distributed to states and communities through a variety of mechanisms. Each is designed to serve a particular purpose, and each comes with its own set of rules and requirements. Understanding the various types of funds is important because the funding mechanism of a particular funding source has an impact on the strategy employed to access funds. Below, we list the major types of federal funding sources, along with more detailed information on the largest federal funding sources that support afterschool programs. (Afterschool programs refer to the range of out-of-school time programming that can occur before and afterschool, on weekends, holidays and during summer months.)

Types of Federal Funding

The federal programs included in this database are grouped into the following categories:

Entitlement programs guarantee that all individuals who meet the eligibility criteria are served. Some federal entitlement funds flow directly to state agencies, which are responsible for operating the particular program or turning the funds over to local agencies to operate the program; in other states, city or county governments run the program. States may also use federal entitlement funds to contract with private nonprofit agencies to perform specific activities that are part of the state plan.

Formula or block grants provide states with a fixed allocation of funds to states based on an established formula that may, for example, be linked to a state’s poverty rate. On a regular basis, states must submit a general plan describing the broad functions and population to be served by the state program to the federal agency that oversees the program. Like entitlements, block grants flow directly to state agencies that are responsible for operating the particular program, sub-granting the funds through a proposal process, or otherwise turning the funds over to local governments or nonprofit agencies. Unlike entitlements, however, formula grants do not guarantee to cover everyone who is eligible.

Discretionary or project grants fund a wide range of targeted federal efforts, from preventing juvenile delinquency to improving infant health outcomes. Depending on the program requirements, state and local governments, community-based organizations, or coalitions of community groups and agencies can apply directly to the sponsoring federal agency to gain access to these funds through a competitive bidding process. Application for discretionary grants does not guarantee an award, and the amounts received by grantees are not predetermined by a formula.

Contracts between the state or federal government and other private or public agencies require the provision of specified services and often incorporate specific performance standards that contractors must meet.

Demonstration grants are pilot projects generally involving a small number of sites in an effort to learn about the effectiveness of a new program or approach. An effective demonstration grant program may lead to further funding in the form of discretionary grants. Demonstration grants also are awarded on a competitive basis and can go to state and local governments or to community-based organizations, depending on the program’s eligibility requirements.

Direct payments are funds paid by the federal government directly to individual beneficiaries who satisfy federal eligibility requirements. These programs may, however, be administered by an intermediate state agency.

Loan or Loan Guarantee programs enable community-based organizations, public and private entities, and some private businesses to borrow funds, sometimes at below-market rates, from public or private lenders for specific purposes. Loan programs can provide funds directly to a program or initiative or to community-based institutions that act as intermediaries. Loan funds go directly to the loan applicant, which is responsible for repayment. Loan Guarantee programs do not provide loan funds, but provide indemnification to lenders in the case of default by those responsible for loan repayment. Loan guarantees make it more attractive for private lenders to make potentially riskier loans.

Major Federal Funding Sources Supporting Afterschool

Afterschool initiatives are frequently supported, at least in part, by one or more of the following major federal funding sources for afterschool: the Child Care and Development Fund (CCDF), Temporary Assistance for Needy Families (TANF), the 21st Century Community Learning Centers, and federal food and nutrition programs.

The Child Care and Development Fund (CCDF) provides child care vouchers to subsidize the cost of care for low-income families as well as funds for state child care quality improvement initiatives. Nearly half of all children receiving CCDF subsidies are between the ages of five and 12. States are required to utilize at least 4 percent of their CCDF funds on quality activities and may also use discretionary funds earmarked by Congress for school-age care quality improvements and/or resource and referral activities. States may choose to use these funds to support initiatives to improve the quality and availability of school-age care, such as training programs or capacity-building grants for afterschool providers.

Temporary Assistance to Needy Families (TANF) funds, which provide financial support for low-income families, may also be used to support afterschool programs in ways consistent with one or more of the four purposes of the TANF program. States may either directly spend TANF funds on afterschool programs and initiatives, or states can transfer up to 30 percent of their federal TANF allocation to the CCDF. TANF funds transferred to CCDF are subject to all of the CCDF rules and requirements, and can be used to expand out-of-school time capacity-building and quality-enhancement efforts. Direct TANF spending can provide states with additional flexibility when it comes to afterschool care. For example, funds can support services for older youth and can support programs as well as individual subsidies for children.

The 21st Century Community Learning Centers (21CCLC) is the only federal funding source that exclusively supports afterschool programs. The purpose of 21CCLC is to support community learning centers that provide students with a broad array of academic enrichment services, including tutoring, homework help, and community service, as well as music, arts, sports, and cultural activities. When the program first began in 1998, the U.S. Department of Education made competitive awards directly to school districts. However, following the passage of the No Child Left Behind Act in 2002, 21CCLC was converted into a state formula grant program. As a result, the Department of Education awards grants to State Education Agencies (SEAs), which then manage statewide competitions to grant funds to eligible organizations.

Federal Food and Nutrition Programs may support snacks or meals for afterschool program participants. Afterschool programs may be able to receive reimbursements from one of four different food and nutrition programs administered by the U.S. Department of Agriculture: the National School Lunch Program: Afternoon Snacks, the Child and Adults Care Food Program, the Summer Food Service Program and the School Breakfast Program. Reimbursement from these programs can be used to free up funds already spent on meals and snacks to support other program components.