A recent news article exposed a former Drexel University professor of spending over $189,000 of federal grant funds at local strip clubs and sports bars over a 10-year period. This professor didn’t just misuse funds of one federal grant, but a total of eight separate grants from the Department of Energy, the National Science Foundation and the Navy. These research focused grants should have funded activities revolving around technology advancements for public benefit, but instead were misused. The University is now required to pay the funds back to the granting agencies.
This is the classic case of how not to use your grant funding. As we identify potential grant opportunities for clients, it is important to highlight how the grant funds can be used as they are awarded. Each and every grant program spells out exactly how funding is to be used in their open solicitation, notice of funding, or other similar guidelines (yes we know these are boring to read, but they are a must).
Grant awards typically fall into one of several categories, detailed below:
Reimbursement – Grant-related activities must be paid in full by the awardee prior to receiving any grant dollars. This allows the awarding agency to review all expenses and ensure that money is being spent properly. This can be troublesome for some grantees that do not have available funds to front all project costs, but does reduce the risk of misuse.
Partial Payment – Some grant programs will pace award payments throughout the grant period. For example, awardees will be given 25% upfront to begin work, 50% at the halfway point, and 25% upon project completion. Each grant program will be unique and percentages will vary. The final payment might also be a reimbursement, which ensures that the awardee has actually carried out the project before they receive their final funding.
Upfront Payments – Though these programs are rare, some grants will allow recipients to receive all their funding upfront in one lump sum. Fewer programs offer this payment structure, specifically due to the problems that arise as detailed above.
Granting agencies can protect themselves from the misuse of funds through required reporting. Each grant program will have their own specific requirements, with some requesting little details and other programs asking for incredibly detailed data about all aspects of the project. Prosperity always reviews the reporting requirements with our clients to ensure they are aware of what to expect even before they apply for the grant.