What distinguishes a categorical grant from a block grant?

The distinction between a categorical grant and a block grant primarily lies in the specificity of the purposes for which the funds are intended. A categorical grant is designed for narrowly defined purposes, meaning that the funds must be used for specific projects or programs as defined by the issuing authority. This focuses the use of the funds and often comes with detailed guidelines for spending, ensuring that the money achieves the intended outcomes for those specific areas, such as education, healthcare, or transportation.

This specificity contrasts with block grants, which offer greater flexibility. Block grants provide funding for a broader purpose and allow state and local governments more discretion in how to allocate the funds to meet their particular needs within the overarching goal. Therefore, the precise nature of a categorical grant requires adherence to specified objectives, emphasizing its characteristic of being narrowly defined.

The other options do not accurately capture the fundamental differences between the two types of grants, as categorical grants are not inherently more flexible, do not apply exclusively to federal projects, and reporting requirements generally exist for both grant types to ensure accountability and proper usage of funds.