What is a Grant?
Grants are gifts from funders to recipients, made in order to accomplish a specific goal. If the goal is accomplished as promised and agreed to in the grant contract, then the funds do not need to be paid back. If the funds are misused, or the stated goal is not accomplished, then there is a risk that the funds will need to be returned - especially if the funds are from the government.
So does this sound like free money? ;-) Well, it's technically not a loan; no interest is charged, and no repayment required, if used appropriately. Considering that most of the work that nonprofits do is not glamorous in nature, that means the grant funds are usually being awarded in order to accomplish some serious project. Grants also usually come with tight timelines and restricted activities that the funds can be used for. For example, if Foundation X funds Nonprofit Y to rescue 25 homeless kittens this winter, then Nonprofit Y can't just decide to use that grant money instead to rescue 15 dogs in the spring. Both are commendable projects; but Nonprofit Y will need to use some other source of funding for the dogs; and the grant from Foundation X will need to be used for the kittens.
Grants typically come with strict accounting and reporting requirements. As long as the funds were used as agreed (for the specific purpose, in the specific amount of time), and reported by the deadline; then the project is considered a success, and nothing is due back to the funder - all is good in the world! In any other case, there would need to be timely and consistent communication with the funder, in order to make any changes to the originally agreed upon project; or risk losing it.
Similar to the customer-vendor relationship, the recipient-funder transaction is specific. There is beauty in the notion of well-intentioned philanthropy, and much good is accomplished in the world thanks to the great funding vehicle of grants. From science, to social services, and environmental conservation, grants are the backbone of a large portion of nonprofit organization's budgets. Hard-won, and carefully spent, they are not quite "free-money" - more like gifts with golden strings attached.
