Grant Funding Tips: Understanding and Avoiding Restricted Budget Items

May 27, 2024
min read

Securing grant funding is a dream come true for many organizations, whether it’s a non-governmental organization (NGO) or a startup. Grants provide essential financial support to bring innovative projects to life. However, it’s crucial to recognize that grant funding often comes with strings attached. While grant funds are indeed free and non-refundable, funders hold the power to dictate how these resources are allocated.

Failure to adhere to these guidelines could result in a rejected proposal or, even worse, jeopardize future funding opportunities. Understanding these restrictions is vital to ensure your proposal is successful and meets the criteria set by the funding body. In this blog post, we will explore the major restricted budget items that African organizations should steer clear of when applying for grants.


A. Outrightly Restricted Budget Items

1. Political Activities

Grant funding is strictly prohibited from being used for political campaigns, lobbying, or any other political activities. Imagine trying to secure funding for a youth empowerment program in Lagos, only to allocate a portion of the budget towards campaigning for a local politician. Such a move would undoubtedly raise red flags and result in an immediate rejection.

While government buy-in can be instrumental in ensuring the long-term sustainability of your project, joining a political party's campaign in hopes of garnering future support is a definite no-go. Focus on building government buy-in through project relevance and impact without political engagements.

2. Tuition Payments and Scholarships

Almost all grant opportunities explicitly prohibit the use of funds for tuition payments or the provision of scholarships. Whether it's covering the school fees for a team member or offering educational grants, these expenses are typically deemed ineligible. Funders prefer that grant money be directed towards project-specific activities that directly contribute to the project's goals rather than personal educational expenses.

For instance, if you are applying for a grant to establish a community-based healthcare initiative in rural Bariga, allocating funds for team members' tuition payments or scholarships would be a surefire way to jeopardize your proposal's chances of success.

3. Fundraising Activities

Budgeting for fundraising events or activities aimed at raising additional funds is strictly prohibited. Funders expect their contributions to be utilized solely for the proposed project, not as a means to generate more capital.

However, building partnerships and networks to sustain your project post-funding is allowed and encouraged. Imagine securing a grant to establish a sustainable agriculture program in Uganda, only to allocate a portion of the funds towards hosting a charity gala to raise money for future endeavors. Such a move would likely be met with swift rejection, as it deviates from the intended purpose of the grant.

4. Entertainment Expenses

Grant funding is not a blank check for entertainment or recreational activities. Including costs for attending concerts, hosting non-project-related gatherings, or any form of entertainment can lead to budget rejection.

Always ensure that all budgeted expenses are directly related to the project's objectives and activities. Picture yourself applying for a grant to support a community development initiative in Eleko town. While attending a local festival at Eleko Beach might seem like a harmless way to connect with the community, including the associated costs in your budget would raise eyebrows and potentially derail your proposal.

5. Prohibited Expenses

This category encompasses a wide range of items that are universally prohibited from being included in grant budgets. These may include expenses related to alcohol, tobacco, ammunition, or any other illegal or unethical purchases.

For instance, if you are proposing a project aimed at preserving traditional cultural practices in a remote village in Nigeria, where elders and oracles demand the use of certain substances like schnapps and “taba” during ceremonies, including these expenses would render your proposal impotent and significantly diminish your chances of success.

6. Cash Reserves and Surplus

Grant funding is intended to be utilized for the specific project at hand, not as a means to build cash reserves or create a surplus. Overestimating your budget to save some funds for future projects is typically frowned upon and can lead to serious consequences down the line. Funders have strict due diligence and reporting requirements, and such discrepancies can lead to severe consequences, including losing the grant and future funding opportunities.

Let’s say a newly established fintech startup, Organization A, is eligible for a $1,000,000 grant. If they go on a budget padding spree, inflating the exchange rate to an imaginary future rate and adding local items thinking the funders would not notice, the funding will be lost once discovered.

7. Debt Repayment

Grant funding cannot be used to repay debts or loans. Concealing debt repayments within your grant budget is ill-advised and could inflate the budget, reduce resources for project activities, and potentially lead to rejection if noticed. For example, a tech startup in Ogun used debt financing to gain traction before applying for a grant.

If the startup is chasing a grant to develop a new software solution, allocating a portion of the funds towards settling outstanding debts under a guise might be tempting. However, this could inflate the budget, reduce resources for project activities, come off as a breach of trust, and potentially lead to rejection if noticed.

8. Investments

Using grant funds for investments in stocks, bonds, cryptocurrencies, or other financial instruments is not viable. Investments can be volatile, and there is no guarantee of returns, which could directly impact the success of your project.

Imagine applying for a grant to establish a renewable energy program in rural Kano. 

While the idea of investing a portion of the funds in a promising cryptocurrency, with the intention of reinvesting the proceeds back into the project, might seem appealing, such a move is a gamble and could ruin the funding chance.

9. Unbudgeted Expenses

Expenses not included in the approved budget are not allowed. If unforeseen circumstances arise that require additional funding outside the original budget, you must communicate with the funder and get approval before proceeding.

If after securing funding for a women's empowerment initiative in northern Nigeria, bandits or terrorists invade your project site, you cannot simply reallocate funds from other budget lines to cover the associated new costs. Doing so without prior approval could be seen as a violation of the grant agreement and potentially compromise future funding opportunities.


B. Selective or Partially Restricted Items

1. Operational Expenses

Grant funding is often project-specific and may not be used to cover general operational expenses such as salaries, rent, and utilities of the organization. However, some funders may allow for a portion of the grant to be allocated toward these expenses if they are directly related to the proposed project. For example, PEPFAR grants typically do not support operational expenses, whereas other funding opportunities like Mastercard have more flexible guidelines.

2. Religious Activities

The use of grant funds for religious purposes, such as evangelism or promoting a specific religion, is generally prohibited. Most grants, including those from organizations like USAID, explicitly disallow such activities. However, there are limited faith-based grant-giving organizations that fund activities that promote faith-related projects, provided they do not engage in explicit proselytization.

3. Marketing and Advertising

Grant funding for non-profit organizations (NGOs) is often restricted from being used for marketing and advertising expenses, as these activities are typically categorized as profit-oriented. Only grants targeted at startups and entrepreneurial projects allow for the allocation of funds towards these purposes, as they are considered essential for business growth and sustainability. However, sensitization and awareness campaigns are allowed for NGOs.

4. Research and Development

Some grant opportunities specifically support research and development activities, while others prohibit the use of funds for these purposes. If a significant portion of the grant is allocated towards research, it could potentially overshadow the primary objectives of the project or render the research component ineffective due to insufficient resources. In most cases for USAID opportunities, research is often ruled out. It's essential to carefully review the guidelines and seek out dedicated research grants if your initiative has a substantial research component.

5. Travel Expenses

The eligibility for travel expenses often varies among grant opportunities. For instance, grants from the U.S. Embassy and Consulates in Nigeria do not support travel costs, while other funding sources like the Ambassador's Special Self-Help Program allow for the inclusion of travel-related expenses in the budget. Ensure you understand what is allowed or disallowed by your funder before you prepare your budget.



Understanding and adhering to budget restrictions is paramount for African organizations seeking financial support. Deliberately avoiding the pitfalls of prohibited expenses and carefully navigating the complexities of partially restricted items can increase your chances of securing valuable funding by creating a compelling and compliant budget that aligns with the funder’s expectations. 

Remember, every grant opportunity is unique, and it's crucial to thoroughly review the specific guidelines and requirements outlined in the Request for Proposal (RFP). If you are unsure of what the funders want, consult with experienced grant experts or seek guidance from funding agencies to guide you through the process.


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