Background

The primary goal of federal financial assistance is to further a public purpose. There are two primary types of financial assistance awards grants and cooperative agreements. The Federal Grant and Cooperative Agreement Act of 1977, as amended, 31 U.S.C. § 6301-6308, (the Act) requires executive agencies to distinguish procurement relationships from assistance relationships with non-Federal parties and provides some general guidance to assist agencies in making these distinctions. The Act requires the use of procurement contracts for all agency acquisition activity and the use of financial assistance instruments (grants and cooperative agreements) for specified types of assistance relationships. Based upon this distinction, this chapter focuses primarily on financial assistance rather than procurement relationships, the characteristics of each type of assistance agreement, and provides guidance on distinguishing which type of assistance agreement is most appropriate given the specific situation.

Assistance agreements can vary depending on the type of legislative authority, type of awardees and type of program. They are normally cost-reimbursable agreements, only permissible charges directly related to the project, and the agreed-upon rate of indirect costs. These costs may be provided in advance via funds transfer or reimbursed to the grantee through a vouchering process. Most FMCSA grants operate on a reimbursement process. These agreements include deliverables but may require other submissions or objectives described in the award document and attachments.

The following three factors affect the decision to award assistance as a grant or cooperative agreement. However, final determination on which legal instrument to use should always be coordinated with MC-CC:

• Legislative or statutory authority: Federal agencies must be authorized by statute to stimulate or support an activity. This statutory authority from Congress must exist either in broad legislation or in a program-specific statute. Without any statutory or legislative authority, a Grants Officer may not use an assistance instrument.
• Principal purpose: If the primary purpose of a project is to support or stimulate a public purpose, a grant or cooperative agreement is appropriate when there is also statutory authority for the agency to provide that support or stimulation.
• Degree of Federal Government involvement: The distinction between a grant and a cooperative agreement is the expected level of Federal involvement and direction. If substantial involvement by the Government is anticipated, a cooperative agreement should be used. If substantial involvement by the Government is not anticipated, a grant should be used.