In what scenario are categorical grants used?

Categorical grants are specifically designed for particular purposes or activities defined by the grantor, typically the federal government. These grants come with strict requirements that dictate how the funds can be utilized, ensuring that the money goes towards targeted programs, such as education, healthcare, or infrastructure projects. This narrow definition helps to ensure that the resources are aligned with specific policy objectives and needs of the community or state.

In contrast to more flexible funding mechanisms, such as block grants, which allow for broader application of funds, categorical grants impose limitations that focus on achieving narrowly defined goals. This specificity means that the receiving entities, whether they are state or local governments, must adhere to the guidelines set by the grantor regarding expenditures and project implementation, often requiring reports and accountability measures related to the funds used for the designated purpose.