Many times when I talk with small businesses, they don’t fully understand the difference between a Federal Grant and a Federal Contract. It is important for a small business to completely understand if their government funds are coming from a grant or a contract. The terms and conditions surrounding each have somewhat unique requirements that may have implications on how the business handles the award and, in particular, the accounting related to that award.
The Government defines the difference in fairly easy to understand terms (for the government) at the grants.gov website:
A Grant is an award of financial assistance, the principal purpose of which is to transfer a thing of value from a federal agency to a recipient to carry out a public purpose of support or stimulation authorized by a law of the United States (see 31 U.S.C. 6101(3)). A grant is distinguished from a contract, which is used to acquire property or services for the federal government’s direct benefit or use.