Certified Government Financial Manager (CGFM) Practice Exam 2026 – Your All-in-One Guide to Exam Success!

A formula grant is characterized by the use of a predetermined formula outlined in legislation to determine both the recipients of the funds and the amounts awarded. This means that eligibility and funding levels are not subject to individual application merit or competitive selection; instead, they are based on specific criteria established by law, such as demographic factors or specific needs outlined for the population that requires assistance.

The key aspect of formula grants is their objective and systematic distribution process, which ensures a fair allocation of resources based on the established formula. This contrasts with competitive grants, where the selection process is based on the merit of the applications submitted. While some grants may have matching fund requirements, it is not a defining characteristic of all formula grants. Additionally, formula grants do not rely on the discretion of awarding agencies, as the funding distribution is strictly guided by the formula set forth in the law.