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Helping Those in Need: An Overview of the Federal Grants Process

If you are in the business of caring for people in need, you understand that resources are needed to do the work effectively. And chances are that if you had a little more money, you would be able to help more people and do your work better. If you run an organization to help those in need, you may be eligible to receive Federal money through grant programs.

What kinds of grants are available from the Federal government?

The Federal government uses two kinds of grants:

Grants handed out by an agency of the Federal government (also known as 'discretionary' grants) - for instance, a homeless assistance grant given out by the Department of Health and Human Services to a homeless shelter.

Grants that put Federal money in the hands of States, cities, or counties for them to distribute to charities and other social service providers, usually under their own rules and regulations (also known as 'formula' or 'block' grants).

Therefore, you can apply directly to the Federal government or you can apply for funds to an entity that distributes money it receives from the Federal government.

How can my organization find out about Federal grants?

The White House Office of Faith-Based and Community Initiatives has prepared a list of general information about more than 150 programs operated by the Departments of Agriculture, Commerce, Education, Health and Human Services, Housing and Urban Development, Justice, Labor, and Veterans Affairs, the Small Business Administration, and the U.S. Agency for International Development. The list - which is available in the brochure Federal Funding Opportunities for Organizations that Help Those in Need and at - includes programs from these agencies that are of interest to small, grassroots groups. Use this list as a starting point to find about opportunities that may interest you.

Once you find a program that interests you, you can get more information about when and how you can apply for funds from the agency contact in the listing. You can also use the Catalog of Federal Domestic Assistance, or CFDA, as a resource. To use the CFDA, locate the CFDA number from the information provided in the list in Federal Funding Opportunities for Organizations that Help Those in Need. Go to the CFDA website and search for assistance programs by program number (i.e. the CFDA Number).

How do I go about applying for a Federal grant?

All Federal grants must be announced to the public. These announcements (sometimes called a "Program Announcement," "Request for Proposal," "Notice of Funding Availability," or "Solicitation for Grant Applications") are the Federal government's way of looking for charities and other groups to provide a Federally-funded service.

Each grant announcement will contain instructions on how to apply, including where to get an application packet, information the application should contain, the date the application is due, and agency contact information.

Grant announcements are issued throughout the year. The majority of grant announcements are listed on, the single access point for over 1,000 grant programs offered by all Federal grant-making agencies. The Catalog for Federal Domestic Assistance also contains information about grant announcements. In addition, agency websites contain information on funding opportunities.

Many States and cities also have liaisons that can help faith-based and community applicants identify grant opportunities.

We are a small organization and we can't afford to hire a grant writer, accountant, and lawyer to help us seek a Federal grant. Is there any help for us?

Most Federal agencies have experts who are available to help organizations apply for and manage their grants. Applicants may call the official identified in the grant announcement or contact an agency's regional office. These agency staff are available to answer questions over the phone. They may also refer applicants to local or nearby technical assistance workshops or to organizations that are under contract with the Federal government to provide this kind of assistance.

Assistance may also be available from one of the nearly two dozen organizations funded by the Department of Health and Human Services' Compassion Capital Fund. These organizations help small faith-based and community organizations learn about the grants process. They may also help small groups with other challenges, such as training volunteers and staff or expanding the reach of the services they provide. They do this at no cost to your organization. You can learn more about the Compassion Capital Fund and the organizations it funds at

In addition, for general questions about writing a grant proposal, many State governments and cities provide grant-writing workshops, as do a number of non-profit organizations and foundations.

Is there any money specifically set aside for faith-based organizations?

No. While there are small programs like the Compassion Capital Fund that are designed to help faith-based and community groups with the challenges they face, the Federal government does not set aside funds specifically for those groups. However, each year hundreds of millions of dollars go to religious charities and grassroots groups to provide vital Federal services for the poor. The government does not ask, "Does your organization believe in God?" It asks, "Does your program work? Does it meet the specific requirements of the grant? Is it turning peoples' lives around? Is it accountable for the money it receives?"

What if I apply for a Federal grant, but my request is turned down?

There is no guarantee you will receive a grant if you apply. However, if you do not receive a grant, you should try to find out why you did not receive funding and how you could improve a future application. You can follow up with the program officer identified in the announcement. This individual will either be able to provide you with information about your application, or point you to the right person to contact. In addition, you may even be able to obtain written comments on your proposal, which could be a good learning tool.

Remember that many, many organizations compete for Federal funds, and many groups apply several times before they receive an award. Getting feedback on your application can help you improve your chances of receiving funds the next time around.

What happens if I am successful in applying for a grant?

You will receive a grant award notification stating the duration of the award, the dollar amount, and a program contact. You may also receive a set of attachments that outline basic requirements that you must follow.

What can my organization do to ensure we correctly follow the Federal and State regulations that apply to our grant?

First and foremost, you should be sure that you use grant funds only for the intended purposes of the grant program. Simply being a diligent steward of Federal funds will go a long way in making sure your project remains in good standing with the awarding Federal or State agency. In addition, you should be sure to familiarize yourself with the guidance documents, regulations, and requirements specifically associated with the program under which you were awarded a grant.

Which guidance documents and regulations apply to my grant project?

Program Regulations. Program regulations typically will be identified in the Federal Register notice announcing the grant competition or in the larger grant application package. Each program has a set of regulations that govern how grants projects are to be implemented by grantees. Some programs may have very detailed guidance concerning allowable and unallowable costs, spending caps on specific budget categories, and staffing requirements. For example, a program might require a project director to work fulltime on the project. But other programs may have few program-specific regulations.

Agency Guidance Documents. Most Federal agencies have issued guidance documents that apply to both their discretionary and formula grant programs. These documents may not be very useful to you while you are researching funding opportunities or applying for a grant program. However, they are extremely helpful for grantees seeking daily administrative guidance. If you are awarded a grant, the awarding agency will either provide you with a hard copy of this document or with electronic access to the document.

OMB Circulars. The Office of Management and Budget issues documents that are called “circulars.” These circulars are essentially letters of instruction that allow the Federal government to address public questions or concerns that apply to all Federal agencies. Of greatest interest to grantees are the OMB circulars that apply to cost principles. These circulars provide guidance on specific allowable and unallowable expenditures for a grantee, based on the type of organizational entity it is. The circular that applies to all nonprofits, including faith-based and community organizations, is OMB Circular A-122. If, after reviewing the program regulations and the agency guidance documents, a grantee still has a question about whether a given expenditure is allowable, it should refer to OMB Circular A-122.

Although nonprofits should follow the rules in OMB Circular A-122, they may sometimes administer a grant in partnership with organizations that are not nonprofits. The rules that apply to other types of organizations are reflected in the following documents:

State and Local Governments and Federally Recognizeed Tribal Governments OMB Circular A-87, Colleges and Universities (also called "institutions of higher education" or "IHEs") OMB Circular A-21, Hospitals 45 Code of Federal Regulations (CFR) 74, For-profits 48 CFR 31. You can access the most up to date version of the circulars by going to this web address:

What if I have trouble understanding the regulations? Is there a staff person that can assist me?

Yes. Each grantee has a contact person in the awarding agency that is assigned to provide technical assistance. This contact person will help clarify regulations, explain procedures, and approve certain changes to the grant project upon request. In general, your program contact will work with you to make sure your project achieves its goals and objectives. If you have a discretionary grant, your point of contact will be at the awarding Federal agency. If you have a formula grant project, your point of contact will be at the awarding State or local agency. Remember – if you are ever in doubt about a course of action concerning your grant, communicate with your program contact immediately.

What are some of the legal obligations that come along with a Federal grant?

Financial Reporting Requirements. To make sure that grant funds are used properly, organizations that receive Federal funds must file regular financial status reports. These forms should not take long to fill out, but they are important. The basic financial report form is a one-page document called Standard Form 269. Many agencies have adapted this form to suit their own programs. You can find a copy of Standard Form 269 at

Cost-sharing/Matching. These are two terms that often are used interchangeably with one another. Certain programs have a requirement that grant applicants pledge that they will contribute a certain level of financial support to the project once they are awarded grants and become grantees. The amount of financial support varies from program to program, and not all grant programs have cost-sharing or matching requirements. Whether cost-sharing or matching requirements apply to a particular program will be noted in the grant notice that announces a grant competition for that program.

Depending upon the particular program, a grantee’s cost-share or match may be made in cash, in an in-kind contribution (such as facilities, equipment and supplies), or in staff time. For example, a program may require a 50% match from its grantees. That means that, if a grantee receives a $100,000 award, it will have to bring to the project an additional $50,000 in either cash or some type of in-kind contribution.

Record-keeping. Your organization will be required to maintain financial and programmatic records for your project for up to three years following the project’s conclusion. For example, if you received a grant for a three-year project period that began on October 1, 2003 and ended on September 30, 2006, you would be required to maintain all of the records regarding that grant until September 30, 2009.

Performance Reporting. Typically, all grantees will be required to submit to the awarding agency both periodic (usually annually) and final performance reports that detail the project’s accomplishments, as well as any shortcomings. The awarding agency provides instructions as to the format and the degree of detail that needs to be included in these reports. For grant projects funded for only one year, only a single report may be required. Along with performance reports, some programs require grantees to participate in national evaluation surveys. Such surveys provide information on the national need for and the impact of this particular grant program.

Audit. All faith-based and community groups that receive Federal funds are subject to basic audit requirements. These audits are intended only to examine the Federally-funded parts of an organization’s operations and are not designed to identify unrelated problems. The audits are necessary to make sure that Federal dollars have been spent properly on legitimate costs. It is therefore extremely important for grant recipients to keep accurate records of all transactions conducted with Federal funds.

Most organizations are not audited by the government itself, although the Federal government has the right to audit any program that receives public money at any time. For example, organizations that spend less than $500,000 a year in Federal funds are generally asked only to perform a “self-audit.” For organizations that spend a total of $500,000 or more in Federal funds (calculated based on awards from all Federal programs)—an audit by a private, independent outside legal or accounting firm is required. More information on audits may be found on the Office of Management and Budget’s website The OMB Circular A-133 explains the Single Audit Act requirements for grantees receiving $500,000 or more in Federal funds.

What are some of the common problems found by auditors?

Typically, the problems (or “audit exceptions”) that auditors identify are a result of a grantee’s poor recordkeeping or of the grantee’s failure to understand the types of activities or items that may be purchased using grant funds.

Although it is very important for the grantee to spend grant funds only on permissible grant expenses, it is equally important that the grantee document the way in which they have spent Federal funds. Poor documentation can result in an otherwise successful grantee being unable to demonstrate the effectiveness of its project.

A few tips for maintaining good records include:

Document the time and effort of staff working on the grant. Clearly specify the amount of time (100%, 75%, 50%, and so on) that staff spends on the grant project and make sure that time commitment is reflected in their job descriptions. Staff should complete time and attendance forms on at least a monthly basis. If a person who works on the grant project is not paid with grant funds – either because that person is a volunteer or that person’s time is a part of a match or in-kind contribution – that fact should also be documented. Sometimes time and attendance forms can be supported with additional documentation, such as project activity listings (e.g., tutoring sessions and group meetings).

Maintain an up-to-date inventory that lists all office equipment, supplies, and furniture. Each phone, computer, copier, fax machine, printer, desk, cabinet, and chair purchased by the project or provided by the grantee as in-kind contribution should be placed on such a list. Copies of purchase orders or bills of sale with specific per unit prices should be kept for each item. For common office supplies (such as paper, pens, staples and so on), auditors will not want you to account for each paperclip or staple. Rather, they will look to see if you have receipts for purchasing such items in bulk.

Avoid the term “miscellaneous.” Having a budget category such as “miscellaneous equipment” or “miscellaneous supplies” usually raises more questions than it answers. The larger the dollar amount associated with the line item “miscellaneous,” the more closely auditors are likely to scrutinize the budget category. If you must have a “miscellaneous” line item in your budget, be sure and provide specific examples of items that are grouped together in this category.

Justify travel expenses. Travel may be an allowable expense and may even be a mandatory activity under certain grant programs. But you must ensure that the travel is necessary for the project’s success, that grant funds are used to pay only for the travel of essential staff, and that expenses are accurately documented. Be sure and review the travel guidelines in the applicable OMB Circulars.

Is there an easy test to determine if I have an audit exception?

A good way to determine if a grant expenditure might be an audit problem or “audit exception” is to ask this question:

Is the item or activity in my budget allowable, allocable, and reasonable for my project?

Allowable means that the type of expenditure is either specifically permitted or not specifically prohibited by regulation. Allocable means that the expenditure is chargeable to the grant and that it is necessary for the project’s success. Reasonable means that the item does not cost more than is necessary for the project’s success. It could be allowable and allocable for a grantee to purchase computers for project staff. However, it would not be reasonable to spend $8,000 on a computer when a $2,000 computer would perform all of the necessary tasks just as well.

Please note – the extent to which an item is allowable, allocable, and reasonable may vary depending on the program. Some grant programs may require that a grantee hire fulltime staff, whereas other programs may prohibit the use of grants funds for salaries. If you are unsure of requirements, you should communicate with your program contact immediately. The program contact’s job is to help you and your projects succeed.

After my grant project has ended, may my organization keep items we purchased with grant funds?

This depends on the nature of the program and the type and cost of the items in question. In many cases, grantees are allowed to keep the items they purchase after the grant is over so that they may continue running the project without Federal funds and because it simply would not be cost effective for the government to remove the items from one grantee and give them to others. There are instances, however, when the government will take title to items, such as research equipment, from a former grantee and provide the items to a new grantee that will be completing the grant project. Grantees should check the specific terms and conditions of their grant and if they have any questions, they should check with the Federal program contact person.

What are indirect costs?

Indirect costs, which are sometimes called “administrative costs” or “overhead,” are costs that are not easily assignable to a particular project or unit within an organization. They benefit the organization as a whole, but do not benefit any project in particular. For example, an organization may run several projects based in a large office space in a building. What percentage of the costs for the heat, the light, the water, and the facility fees should be allocated to each project? That figure can be difficult to determine, and for large organizations, it may not be cost effective to pin the number down with specificity.

The government recognizes indirect costs as a legitimate expenditure and has established a budget category for organizations to list their overhead costs. In order for an organization to request funds to cover their indirect costs, however, they would need to establish an “indirect cost rate” with a Federal agency. By establishing an indirect cost rate, the organization is able to pay a certain percentage of its indirect costs with Federal funds. Certain grant programs place a cap on the amount of indirect costs an organization may receive.

Although having an indirect cost rate is something that may benefit your organization long-term, especially if it will be administering multiple grant projects, it is not something that an organization must have in order to receive a Federal grant. If you are a small organization or you only have one grant project it should be fairly easy to calculate the direct costs that are associated with your projects. Applicants should remember that unless they have an established indirect cost rate agreement with a Federal agency, they are not eligible to request indirect costs for their grant proposals, unless the terms of the grant explicitly state that recovery is allowed.

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