Grants and government funding

What should we do before applying for grants or funding?

There are a number of checks that it can be good for your organisation to do make before applying for a grant or funding.

Organisation's internal requirements

Your organisation should check its constituent documents (constitution or rules) to see if they contain any requirements about 'funding sources'. If there are clauses that prohibit your organisation from receiving funds from outside bodies (or it is not consistent with your organisation's objects or purposes to do so), your organisation will need to comply with its rules. Alternatively your organisation will need to make a change to its constitution / rules before applying for grants or funding from external sources. For more information about making changes to constituent documents, see When Things Change > Changes to Constitution.

Grant-maker requirements

Your organisation is also advised to research the bodies to which it might apply to seek funding. Many have particular rules about the kind of organisations they will give money to.

For example, most philanthropic organisations and many government organisations will only give grants and funds to community organisations that are incorporated. For more information on incorporation, see our Getting Started > Incorporation page.

Another example is that certain philanthropic organisations have a (legal) requirement that they can only give grants or funding to organisations that have deductible gift recipient (DGR) tax status. If your organisation wants to apply for grants from these bodies, it will need to apply to the ATO to see whether it is eligible for this status first. For more information on DGR requirements see Getting Started > Tax Issues > DGR.

Grant amount and conditions

In general, before applying for a grant or funding, your organisation should read the conditions of the grant and be sure that it can comply with them. It is common for grants to have a series of conditions attached to them.  These conditions may involve things like:

• how your organisation is to receive and spend the grant money;
• how often your organisation must report to the grant-making organisation;
• what kind of information your organisation must provide to the grant-making organisation in its reports; and
• whether your organisation is required to prepare audited accounts (which can be costly, especially if these are not currently obtained by your organisation).

While receiving a grant is good news, it is important to check conditions attached to any grant. Because conditions are important we have included further information about them in the next section. Your organisation may wish to seek legal or accounting advice on the financial and other possible implications that receipt of a grant (particularly a large grant) will have for your organisation.

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What legal issues arise if the grant or funding is tied to conditions?

If the grant or funding has a set of conditions attached to it (sometimes called a 'funding agreement' or 'grant agreement'), it is important to take steps to make sure it is in your organisation's best interests to accept the grant. This is because, in most cases, when you receive grant moneys your organisation will be considered to be in a contract with the grant-maker. The grant conditions will be the terms of that contract and your organisation will be under a legal obligation to comply with them

Read and understand the conditions

It is important for your organisation to read the conditions.  While it might be that the funding agreement is a standard form agreement, there may still be requirements in the conditions your organisation can't comply with. As they say, read the fine print! 

After reading the conditions (and specifically any obligations placed on your organisation), make sure that your organisation understands them. If there are any conditions that you do not understand, it is important that you seek external advice. Taking this step might prevent problems in the future which may arise if the condition was misunderstood or misinterpreted.

Agreeing to the conditions

After your organisation has read and understood the conditions, the Committee or Board of your organisation then needs to decide whether the organisation should agree to them. Though it may seem important for your organisation to receive the funding, there are several reasons why your organisation may not want to agree to all the conditions without further negotiation, including:

• the conditions are inconsistent with your organisation's goals, purposes, values or objectives;
• the conditions are too administratively onerous;
• the conditions are too restrictive in terms of how you spend your money; and/or
• the obligations under the conditions continue too far into the future.

The funding agreements may also require you to comply with a piece of legislation, regulation or guide outside of the agreement itself. In this situation, your organisation will need to read, understand and comply with that legislation, regulation or guide. For example, an agreement with a government agency may require your organisation to comply with federal or state privacy laws. In this case, you must comply with the privacy legislation as it forms part of your contract with the government agency.

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What happens after we get the grant or funding?

It is easy to lose sight of the obligations tied to the funding when your organisation is busy utilising the funding to further your its goals. 

However, it is important to keep the conditions of the funding in mind. The funding agreement is considered a contract. That means that your organisation needs to comply with the conditions under the contract for as long as the contract is in force. It is a good idea to periodically review the conditions to make sure that your organisation is complying with them.

In general, your agreement (contract) with the grant-making organisation will end when you finish doing the project or activities for which the grant was given, or in some other manner allowed by the agreement. Your organisation may be required to provide the grant-making organisation with a final report (sometimes known as an acquittal or release report).

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What happens if we don't comply with grant or funding conditions?

Failure to comply with these conditions may be considered a 'breach' of the contract. Your community organisation may be required to repay the grant or funding.

Common failures to comply with a grant agreement include:

• not using the funds as directed;
• not returning surplus funds;
• not reporting back to the grant-maker as required; and
• not complying with any additional material outside of the contract itself (for example, other Acts or regulations).

Failure to comply may also damage your reputation with grant-makers and make it difficult for your organisation to get other grants or funding.

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Where and how should we apply for grants and funding?

There are many sites available to assist community organisations to find out what various government grants are available, and to help you with applications. We have included links to some in our Related Resources section below.

It is worth noting that a decision by a government department or government agency in relation to whether a grant or funding should be given to an organisation could be an 'administrative decision'. Certain, limited appeal rights attach to administrative decisions. If you are unhappy with the outcome of a government grant or funding applications process, you should contact the government department or agency to ask about your review rights, and / or seek legal advice.

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Do we have to pay GST on the grant or the funding?

This is a difficult area and whether you are required to pay GST will depend on circumstances including:

• whether your organisation is registered or required to be registered for GST purposes; and
• whether there are specific conditions attached to the grant or funding amount (do you owe obligations to the grant-maker so that your organisation will be considered to be making a ‘supply’ to the grant-maker).

For more information on the GST treatment of grants money, refer to the GST section of the ATO's Fundraising Guide (see link in our Related Resources section below). The guide provides case studies on when you may and may not have to pay GST on a grant. To find out more about whether your organisation needs to register for GST and GST concessions see Getting Started > Tax Issues > GST.

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Do we have to pay income tax on the grant or funding?

Generally, unless the organisation is exempt from paying income tax, an organisation will be required to pay income tax on grants or funding received. To find out more about income tax exemptions, see our information on income tax exemptions at Getting Started > Tax Issues > Income Tax.

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Related Resources

Related Links - Grants and philanthropy information

Related links - Australian Tax Office (ATO) resources

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