Money provided under a formula grant program is allotted according to a pre-set formula, based on population, per capita income, specialized clientele, or some other measure of need or a combination of measures specified in the authorizing legislation. Such grants are usually made to state governments but may be made to local governments and can be passed through state governments to institutions within the state. There may be provisions for reallocation of unused funds or restrictions on the rate of program growth or decline. Also specified is the percentage of program cost that the federal government will share with the recipient population to be served. Whatever the formula, the discretion of the federal agency is limited to applying the formula and to setting rules for operation of the program within the limits of the formula.

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