The federal government spent approximately 30 percent of its annual budget in fiscal year 2011 on purchasing services and supporting local and state governments, tribal organizations, nonprofit organizations, and for-profit firms through contracts and grants. The nonprofit sector, in turn, relies heavily on government for revenue to perform services and provide goods to clients. As of 2010, nearly one-third of revenue sources for reporting public charities come from the government (Blackwood, Roeger, and Pettijohn 2012). This brief provides an overview of the main funding mechanisms the government uses and highlights the characteristics of contracts and grants.