The Truth About Government Grants

Forget the Ads and Emails, Grants are No Free Lunch

Highway construction signs
Federal Grants Often Used for Highway Construction Projects. Joe Raedle / Getty Images

Contrary to what books and TV ads say, the U.S. government is not giving away "free grant" money. A government grant is not a Christmas present. According to the book American Government & Politics, by Jay M. Shafritz, a grant is, "A form of gift that entails certain obligations on the part of the grantee and expectations on the part of the grantor."

The key word there is obligations. Getting a government grant will get you lot of obligations and not fulfilling them will grant you a lot of legal troubles.

In fact, the tantalizing but false lure of “free” money from the government has spawned some potentially disastrous government grant scams.

Few Grants for Individuals

Most federal grants are awarded to organizations, institutions, and state and local governments planning major projects that will benefit specific sectors of the population or the community as a whole, for example: 

  • A neighborhood street paving project
  • A state-wide program to re-train displaced workers
  • A project to attract new businesses to a depressed downtown area
  • A regional water conservation program
  • A state or county-wide flood control project 

Organizations that get government grants are subject to strict government oversight and must meet detailed government performance standards during the duration of the project and funding period of the grant.

All project expenditures must be strictly accounted for and detailed audits are conducted by the government at least annually. All granted funds must be spent. Any money not spent goes back to the Treasury. Detailed program goals must be developed, approved and carried out exactly as specified in the grant application. Any project changes must be approved by the government. All project phases must be completed on time. And, of course, the project must be completed with demonstrable success.

Failure on the part of the grant recipient to perform under the requirements of the grant can result in penalties ranging from economic sanctions to prison in cases of improper use or theft of public funds.

By far, most government grants are applied for and awarded to other government agencies, states, cities, colleges and universities, and research organizations. Few individuals have the money or expertise necessary to prepare adequate applications for federal grants. Most active grant-seekers, in fact, employ full time staffs to do nothing but apply for and administer federal grants.

The plain truth is that with federal funding cutbacks and competition for grants becoming more intense, seeking a federal grant always requires a lot of time and potentially a lot of money up front with no guarantee of success.

Program or Project Budget Approval

Through the annual federal budget process, Congress passes laws making money -- lots of it -- available to the various government agencies for doing major projects designed to assist some sector of the public. The projects may be suggested by the agencies, members of Congress, the president, states, cities, or members of the public. But, in the end, Congress decides which programs get how much money for how long.

Finding and Applying for Grants

Once the federal budget is approved, funds for the grant projects start to become available and are "announced" in the Federal Register throughout the year.

The official access point for information on all federal grants is the Grants.gov website.

Who is Eligible to Apply for Grants?

The grant’s entry on the Grants.gov website will list which organizations or individuals are eligible to apply for the grants. The entry for all grants will also explain:

  • How the grant money can be used;
  • How to apply including detailed contact information;
  • How applications will be reviewed, judged and awarded; and
  • What is expected of successful grantees including reports, audits, and performance standards

Other Types of Federal Government Benefits

While grants are clearly off the table, there are several other federal government benefit and assistance programs that can and do help individuals with many needs and life situations

Beware the ‘Free’ Government Grant Scams

The illusion that government grants are somehow “owed” to taxpayers and are thus available for “free” has inevitably led to numerous dangerous grant-getting scams. Consider the following offer.

“Because you pay your income taxes on time, you have been awarded a free $12,500 government grant! To get your grant, simply give us your checking account information, and we will direct-deposit the grant into your bank account!”

So compelling! But as the Federal Trade Commission (FTC), the nation’s consumer protection agency warns, such money for nothing” grant offers are almost always scams.

Some ads will claim that just about anybody will qualify to get “free grants” to pay for education, home improvements, business expenses, even credit card balances. Along with email ads, grants scammers often make telephone calls claiming they work for a “government agency” that has “discovered” you qualify for a grant. In either case, the claim is the same: your application for a grant is guaranteed to be accepted, and you’ll never have to pay the money back.

No matter what the offer’s bait is, the hook is always the same. After congratulating them on their eligibility, the scammer asks their victim for their checking account information so the grant money can be “deposited directly” into their account or to cover a “one-time processing fee.” The scammer may even reassure the victims that they will get a full refund if they are not satisfied. Of course, the reality is that while the victims never see any grant money, they do see money disappear from the bank accounts.

As the FTC advises, consumers should never give out their bank account information to anyone they don’t know. “Always keep your bank account information confidential. Don’t share it unless you are familiar with the company and know why the information is necessary,” warns the FTC.

Persons who suspect they have been a victim of a government grant scam should file a complaint with the FTC online, or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.