There is often some misunderstanding about grant funding. I sometimes hear organizations think that grant funds can be used for whatever is needed within the organization. Or, some well-meaning board member will say, “well we have grant money in the bank, let’s just use that.” All organizations need to understand that grant funds are not “free money” and come with strings attached.
Government grants have clear regulatory requirements, program regulations and standard assurances. These requirements are spelled out in the law and failure to comply with all statutes, regulations, policies, guidelines and requirements can result in legal action against the organization. Indeed, submission of each government grant requires a signature by an organizational official acknowledging acceptance of and agreement to these requirements. If these requirements are not agreed to, the organization will not pass the initial technical review of the grant application. In many cases, when the grant is being submitted electronically, it can not even be submitted without agreeance.
However, foundation grants are not usually as clear on their expectations and requirements. It is generally expected that when an organization applies for foundation funding the funds received as a result of the request will be used for the purposes for which they were requested and subsequently awarded. In the event funds are not used for the purposes for which they were intended, they can be revoked.
For instance, an Oklahoma hospital was required to pay Garth Brooks $1 million dollars after a lawsuit was filed by Brooks because the hospital failed to construct a women’s health center for which the funds were donated. The judge in this case identified the use of funds for other projects as a breach of contract.
While most organizations may never face a lawsuit for failure to use grant money as indicated, it is important to note the following:
- The grant proposal becomes a legal document when it is submitted. As such, it is a written agreement by the organization that it will work to fulfill the project as described in the grant proposal.
- Some foundations also require a signed agreement upon receipt of the funds indicating funds will be used for the purposes for which they are awarded.
- Failure to use grant funds for which they were requested can lead foundations to decide that the organization will no longer receive funds from them. Thus, the impact of a poor decision can be felt by the organization for years, if not indefinitely.
Further, organizations that use funds for purposes other than those for which the funds were requested could be misappropriating funds. Funds that are awarded based on a grant proposal are essentially a designated funds. These, then, become permanently designated for that purpose. Just as any donor can designate where their funds are to be used within the organization, so it is with grant funds.
In the event grant funds are not used for the purposes for which they were intended, it will be noted by external auditors during an audit or financial review. Such a note could lead to an audit finding which in turn, could lead future funders to make a decision not to award the organization funds in the future.
Finally, even if the organization is never deemed to have misappropriated funds, faced a lawsuit or angry donors, using grant funds for the purpose for which they were designated is sound biblically. Essentially, when a grant proposal is written it becomes a promise to do what we said we would do. We are told over and over throughout the Bible that we should keep our promises; thus, our commitment to use grant funds for the purposes for which they are designated, even when it is difficult to do so, becomes a testament to the mission and integrity of the organization.