How Grants Work

Grantmaking has been described by the federal government as a cost effective 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 grant funded program, inhouse. Outsourcing to non-profit organizations not only saves federal 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, a grant agreement then 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. 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.