Warning: If You Misuse Grant Money, You Have to Pay It Back!

After all the hard work of winning a grant, the last thing you want to do is pay it back. It is important to remember that grants come with restrictions. If you don’t abide by these regulations, the funding source can (and will) withdraw your grant. So, what warrants a misuse and how can you avoid it?

How Can You Misuse Grant Money?

Strict guidelines are provided by the funding source, regarding what you can and cannot do with the grant money. However, if you spend any of the grant money on something that is unallowable, you will be asked to return the grant. In many cases, if you’ve already spent the money, you could have to pay it back out of your own pocket! On top of this, the funding source may issue you a fine, ban you from applying for grants again, and you may even face jail time.

Anyone Can Misuse Funds

Anyone can misuse funds, whether you’re a small business, nonprofit organization, or government agency. As an example, Oklahoma’s “Governor’s Emergency Education Relief Funds” grant was intended to help students with school supplies during the COVID-19 pandemic. However, millions of dollars were misused to purchase Christmas trees, gaming consoles, electric fireplaces, and outdoor grills. As a result, Oklahoma ultimately returned $2.9 million in unspent relief money to the federal government and is also currently undergoing an investigation by federal auditors.

Three Ways to Help Manage Your Grant Award

Typically, funding sources will provide you with a list of appropriate uses for the funds, as well as invoicing/reporting timelines and other specific formats for you to follow. Additionally, grant funders suggest these three tips for post-award management:

1. Open a separate bank account for the grant.
   This helps to keep the grant money separate and avoid complications.
2. Keep a hard copy and an electronic copy of all reports and records.
   Record all reports, receipts, obligations, and expenditures and store them in both formats.
3. Make sure all changes and modifications have been approved by the funding source.
   Even if you are in doubt, submit it in writing to the funding source. It will be better than receiving a penalty for misrepresentation.
   

While grants are “free money,” they do come with strings attached. No grantor wants to see their funds wasted, abused, or used fraudulently. A failure to abide by the stipulations set forth by the funding source can result in severe consequences.