In his book American Government and Politics, Jay M. Shafritz defines a grant as "a gift that entails certain obligations on the part of the grantee and expectations on the part of the grantor". The operative word in this definition is 'obligations'. Along with every "free" federal grant, there are responsibilities to fulfill and obligations to meet.

Federal grants are generally awarded to organizations to support major projects that are deemed beneficial to a particular community. Neighbourhood street paving projects, state-wide programs to retrain displaced workers and regional water conservation programs are all projects that would be considered to receive federal grants. The money is given to help the group realize a specific goal and in return, the organization is obligated to fulfill that goal.

Organizations that receive federal grants are required to adhere to strict oversight performance standards. Detailed accounting of project expenditures must be submitted, and audits are performed at least once a year. Further, when a federal grant is received by an organization, every last cent must be spent on the project. Any remaining funds must be returned to the Treasure Department. Program goals as indicated in the federal grant application must be carried out exactly as specified, and any changes to the project are subject to approval by the federal government. All project phases must be completed upon deadline, and the entire project must be successfully completed.

Organizations that fail to comply with these requirements will result in penalties instated to the grantee. Penalties for federal grants non-compliance can be in the form or economic sanctions. If theft of improper use of grant funds is proven, the grantee could face jail time.

Most beneficiaries of federal grants are cities, states, colleges, universities, federal agencies and research organizations. It takes a certain degree of expertise to successfully apply for federal grants, so individuals will usually not qualify. As a matter of fact, groups that actively seek federal grants will often employ staff members just to facilitate the applications and administer the grants.

With federal funding cutbacks and intense competition, seeking federal grants can take a lot of time and money with no guarantee of success. It takes a lot of legwork on the part of the applicants to attain a federal grant, and those who receive them are required to fulfill some serious obligations.

Nothing is free in life, even "free" federal grants.