Every year, the federal government spends over a trillion dollars on grants to local, tribal, and territorial governments. The big question is where does that money go next. Using pass-through grants, these agencies can funnel federal resources to the communities they serve.
Understanding the nuances of pass-through grants can help government grantmakers distribute resources more effectively. Pass-through grants help local, tribal, and territorial governments ensure that the federal funding creates real impact for community members.
What is a pass-through grant?
A pass-through grant, sometimes known as pass-through funding or pass-through payment, is a federal grant that awards funds to state governments, which then distribute sub-awards to local offices and organizations, including counties, cities, towns, and native organizations.
The overall goal of a pass-through grant is to implement a federal program on a ground level.
For example, a pass-through grant might look like a federal agency providing government aid to a state-run non-profit organization to deliver funds to the public in the local area.
As the name implies, in pass-through grants, funding “passes through” the state level to local organizations and agencies. Because it’s federal funding, organizations that act as intermediaries must adhere to strict reporting and accounting standards to ensure transparency and accountability.
5 Benefits of using pass-through grants
Using pass-through grants can help government grantmakers do their job more effectively both at the individual level and as an agency.
Maximize funding impact
Pass-through grants enable government agencies to amplify the impact of federal funding by partnering with community organizations. That’s because nonprofits and other established organizations have the infrastructure and relationships to implement projects where they’re needed most—in the community.
By passing the funding to local organizations, government agencies extend the impact of their funding without having to manage every aspect of the program directly. This ensures that the bulk of the funding goes toward programming rather than rebuilding infrastructure that already exists.
Make programming more impactful
By tapping into local organizations, government agencies access local expertise, knowledge, and relationships. Because they’re already in the community, on-the-ground organizations typically have a better understanding of community needs and challenges. This means they can create customized programming that’s more effective and better aligned with community priorities.
Streamline funding administration
Government employees can take a big administrative burden off themselves (and their team) by using pass-through funding, which allows agencies to build relationships with and manage a handful of grant recipients rather than a huge number of grantees. This approach reduces administrative tasks and costs for government agencies, while strengthening relationships that already exist within the community.
Government employees might not have the knowledge or experience to effectively implement certain projects. For instance, a public health initiative might require medical expertise that a grantmaker likely does not have. By using pass-through grants, you can partner with intermediary organizations that have expertise and experience in specific areas.
Because these organizations are better equipped to manage the complexities of the projects, they are more likely to produce better outcomes and, as a result, lower the risk of mismanaging funds.
Add additional layers of compliance
Intermediary organizations act as an additional layer of accountability in the grant process. They are responsible for ensuring that funds are used for their intended purposes. So they create levers for accountability beyond the local organization’s oversight. This reduces the risk of misappropriation of funds or non-compliance with grant terms.
Monitoring and tracking are the biggest challenges of pass-through grants
Because pass-through funding naturally moves through multiple agencies or organizations, the main challenge is monitoring and tracking funds once they shift into the hands of the intermediaries.
Grantmaking employees must ensure there’s a robust infrastructure to track funds. It’s on them to verify that the funds reach intended recipients and that everyone along the line adheres to all reporting and compliance requirements.
This additional level of transparency can add a layer of complexity because a government employee may not have direct control over how the organization uses the funds. They have to enforce the checks and balances to ensure the grant funding is not mismanaged or misused.
5 Examples of pass-through grants
Pass-through grants allow government organizations to work with established partners to implement targeted projects or programs.
By utilizing intermediary organizations, government agencies tap into expertise, local knowledge, and existing relationships. This gives them the ability to tightly align community programming to the overall grant objectives, and ensures that the program structure matches community values and preferences.
Here are a few examples of pass-through grants in action.
Many governments and international organizations provide pass-through grants to local non-governmental organizations (NGOs) and nonprofits in developing countries to implement projects focused on areas like healthcare, education, infrastructure development, and poverty alleviation.
The United States Agency for International Development (USAID) often provides pass-through grants to reputable NGOs working on the ground in various countries to carry out specific development initiatives.
Juntos Aprendemos is an initiative focused on increasing access to quality education for Colombian children and adolescents. USAID partners with local governments and civil society organizations (CSOs) to support more than 400 education centers and community associations, with the goal of reaching 142,000 kids.
After natural disasters, when aid needs to move quickly, governments and organizations disburse pass-through grants to established relief organizations. These intermediary organizations are responsible for delivering emergency aid, distributing resources, and implementing reconstruction projects.
For example, after a major earthquake or fire, the Federal Emergency Management Agency (FEMA) in the US might provide pass-through grants to NGOs like the Red Cross to support disaster relief efforts.
After the recent wildfires in Maui, FEMA approved more than $65 million in assistance for survivors, funneling a good portion of that funding to local agencies and organizations to distribute to community members.
Local governments use pass-through grants to support community development projects. They might partner with nonprofit organizations or community groups to improve public spaces, provide social services, or enhance local infrastructure.
For example, a city government could pass through funding to a community-based organization to renovate a public park and provide recreational programs for residents.
The City of Denver uses pass-through grants for its Certifiably Green Denver Equity Funding. It serves as the intermediary, using federal funds to provide grants to women and minority-owned small businesses looking to fund sustainability projects.
Government agencies concerned with environmental protection often provide pass-through grants to conservation organizations or research institutions. These intermediaries conduct scientific research, manage protected areas, or run public education campaigns.
The US Fish and Wildlife Service (USFWS) is known for providing pass-through grants for various conservation initiatives. Through the North American Wetlands Conservation Act grants, the USFWS funnels federal funds to local agencies and organizations to support projects that align with the goals of the North American Wetlands Conservation Act, which was passed to protect, enhance, and restore wetlands and waterfowl in the United States, Mexico, and Canada.
Governments and healthcare agencies may use pass-through grants to support healthcare programs run by nonprofit healthcare providers or research institutions. A government health department might provide pass-through funding to a local hospital to conduct outreach and awareness campaigns for public health issues.
In 2022, the Center of Disease Control (CDC) launched the Mpox vaccine equity pilot program to reach populations most affected by Mpox who had low rates of vaccination. The CDC partnered with local public health departments and community-based organizations across Atlanta to create vaccination programs in conjunction with LGBTQIA+ community events.
Be the connection point
In delivering federal funding to community organizations, state and local governments play an essential role. They are the connection point. These grantmakers are the ones who help federal initiatives find traction within local communities.
Whether you’re operating at the state or local level, it’s worth remembering that federal funding often moves like water. It seeks the most familiar, reliable, straightforward paths. Using the right grant management software will help your agency become a natural part of the flow—making you a partner federal agencies trust and local organizations want to work with.
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