How Grants Work

Grantmaking has been described by the federal government as a resource wise way for a program funder to invest in services in a more cost effective manner than the cost for the government agency to provide these services or conduct the service program, inhouse. Outsourcing to non-profit organizations not only saves federal (or other funder) dollars, it is also most likely to be an effective, locally responsive way to address front line challenges.

For people who have not experienced a full grant making and reporting cycle, it is helpful to understand that, in the non-profit world, ‘A Grant is a Contract’.

A successful grant proposal defines the specific deliverables and costs, it is selected based on those deliverables, then a grant agreement concretizes those proposed activities, and when the funding is released it is to perform those delineated services or to make specific purchases.

One of the most common misunderstandings about grants is about how grants can be spent. For non-profit organization grants, and for many small business grants, every dollar that comes in from a grant must go out to do the proposed services or make the proposed purchases. There is no ‘extra’ or ‘free’ money to spend on unrelated costs. A grantee can not change activities in any significant way. If a collaborative wants to work together to qualify for funding, usually this process starts BEFORE the grant is written, not as an after thought or change of direction. The “I think you should just give me $10,000 of your grant”, as we have been told, is not how grant funding works.

For non-profits, in order to receive future grants, these rules are firm guidelines that must be followed in order to qualify for future funding.