Your nonprofit receives a phone call, email, or letter claiming you’ve been awarded a free U.S. grant from the federal government. The catch? You must pay a processing fee before funds are released.
Pause. This is where two pieces of classic advice apply:
- If it seems too good to be true, it probably is.
- There’s no such thing as a free lunch.
According to the U.S. Department of Justice, FBI, and other agencies, scams involving fake government grants are growing—often targeting mission-driven nonprofits eager to secure new funding.
Five Ways to Spot a Grant Scam
- Did your nonprofit apply?
Government grants don’t arrive unannounced. If you didn’t apply, it’s not legitimate. - Is a fee required?
Real government grants do not require a processing or application fee. Charging one is the number one tactic scammers use to exploit nonprofits. - Is the grant for personal use?
Government grants to 501(c)(3)s must benefit the organization’s mission. If the funds are offered for school, rent, or individual needs, it’s probably not a legitimate nonprofit grant (unless that’s the nonprofit’s mission). - What agency is listed?
Be skeptical of fake-sounding agencies like the “Federal Grants Administration”—there’s no such entity. Check names against known .gov websites. - Were you asked for sensitive info?
If they request your nonprofit’s bank account or tax ID over the phone, demand a written proposal. You likely won’t hear from them again.
Who Offers Legitimate Grants to 501(c)(3)s?
Federal Sources:
Federal agencies post real grant opportunities at grants.gov. While most are project-specific, your organization may qualify if your work aligns with a federal agency’s mission.
Examples include:
- National Institutes of Health (NIH) or Department of Education: Funding research, health initiatives, or educational programs.
- Federal Emergency Management Agency (FEMA): Disaster relief and recovery grants.
- U.S. Department of Agriculture (USDA): Rural development and food insecurity initiatives.
State and Local Sources:
Many states and counties offer grants to encourage nonprofit services in their regions—especially in areas like health, workforce development, and community engagement.
How to Verify a Grant’s Legitimacy
- Check Official Sources: Confirm every opportunity on grants.gov or a legitimate .gov site.
- Contact Trusted Resources: Talk to your local nonprofit resource center, Community Foundation, or state association of nonprofits. They can help verify funding sources.
- Review Communication Methods: Federal and state agencies rarely use cold calls, DMs, or personal email accounts. Expect responses to applications—not unsolicited offers.
- Watch for Red Flags: Poor grammar, pressure to act quickly, or vague descriptions of funding use are common scam indicators.
Questions to Ask About a Legitimate Grant
If you’re awarded a grant, don’t skip the fine print:
- What is the grant’s purpose? Federal and state grants are rarely general operating funds. Make sure the grantor’s mission and your programming goals align.
- How much can be used for overhead? Some grants limit admin costs. Know the cap before budgeting.
- When will funds be released? Some grants are paid upfront, others by reimbursement or milestones. Plan accordingly.
- What reporting is required? Expect to submit detailed financials and performance outcomes. Keep organized records for audits or compliance checks.
Suspect a Scam?
- Report to the FTC at reportfraud.ftc.gov
- File a complaint at the FBI’s Internet Crime Complaint Center: www.ic3.gov
- Contact your state attorney general’s office
Key Takeaways for 501(c)(3)s
- If your nonprofit didn’t apply, and they ask for money—it’s a scam.
- Real government grants don’t require upfront fees.
- Always verify grant opportunities through official channels.
- When awarded a real grant, understand all conditions and maintain compliance.
For more great business advice check more posts from Tisha’s blog.
