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Overview of State Grants


Grants are financial assistance paid or services furnished by a state agency via a third party to an eligible recipient instead of acquiring by professional or technical contract, purchase, lease, or barter property or services for the direct benefit or use of the granting agency.

Grants always involve three parties: the state agency with authority to make the grant, the outside entity that will administer the grant or deliver the service, and the final recipient of the service.

Grant Agreements

A grant agreement is a class of contract which provides the transfer of cash or something of value to a recipient to support a public purpose authorized by law. Grant agreements are different from other contracts in many key ways.

Authority to Give Grants

State agencies do not have general or automatic grant making authority. The authority for grants must be specifically stated in the statutes and is generally directly related to the appropriations that fund them.  Some agencies, such as Trade and Economic Development, have long-term programs that authorize grants and loans. Most other situations are appropriation specific.

Grants Management Policies 

The Department of Administration’s Office of Grants Management (OGM) is charged by Minnesota Statutes 16B.97 to standardize, streamline, and improve state grant-making practices. A tool used to accomplish this mission are 13 comprehensive grants management policies that apply to all Executive Branch agencies, boards, commissions, councils, authorities, and task forces.  

To review all current grants policies visit our Policies, Statutes and Forms page. More information about our office can be found on the About page.

Public Notice and Requests for Proposals

As a general principle, grants distributed by an agency should be done in a fair and equitable manner, which is usually done through some form of public notice.  Each state agency may differ in how it notifies the public and solicits requests for proposals (RFP), but the agency should have a defined process that ensures a fair and equitable distribution. Per Grants Management Policy 08-03, competitive grant opportunities shall be publicized as broadly as possible and at a minimum, must be posted on the granting agency’s website.

Minnesota Statutes 15.994 requires state agencies with Internet sites to provide information on grants available through the agency and are encouraged to provide a link to the grant application under Minnesota Statutes 16E.20. In addition, state agencies are encouraged to develop systems for electronic grant application submission.

Examples of appropriate public notice:

  • If the legislation does not specify who the grantee is, the process should be open, fair and as competitive as practical in making the awards. This would include such actions as issuing an RFP and placing a notice on the agency’s website. Agencies should also consider additional methods to reach potential applicants including, but not limited to: US mail, electronic mail, targeted newspapers and the State Register.
  • If the legislation specifies specific organizations or groups, such as metropolitan counties, notification should be directly sent to all eligible organizations or groups, such as of the counties in the metro area.

The RFP should contain the following:

  • State the legislative authority for the grant.
  • State any specific requirements from the state legislation or federal pass-through.
  • Clearly identify the objectives and work product of the grant.
  • Clearly state the grant selection/evaluation criteria.
  • Request a report from the grantee on other grants it has received from other state agencies.  This way the evaluation panel may obtain information on the past performance of the applicant.  Be prepared to verify information received from the grantees, such as verifying matching funds claimed by the grantee.
  • Indicate to whom the applications should be submitted.
  • State the application deadline.

If you have any questions about public notice, ask your Agency Contract Coordinator, the Office of Grants Management, or Assistant Attorney General.

Conflict of Interest

Be aware that the statutory provisions for conflict of interest apply to everyone involved in the grant award process; including state and nonstate employees.  Relevant statutes are Minnesota Statutes 10A.07, 15.054, 15.43, 16C.04, 43A.38, 471.87.

Grants Management Policy 08-01, the Conflict of Interest Policy for State Grant-Making, addresses potential conflicts of interest in the grant award process. This policy also applies to organizations that are current state grantees or grant applicants. Grants Management Policy 08-01 includes procedures to avoid both individual and organizational conflicts of interest. 

The following are some definitions created by the commissioner of Administration related to conflicts of interest:

  • Actual conflict of interest: An “actual conflict of interest” occurs when a decision or action would be compromised without taking appropriate action to eliminate the conflict. If an employee has an outside interest that conflicts with her/his public responsibilities to the extent that her/his public responsibilities or decisions are influenced to the detriment of the public or the benefit of the employee or her/his personal interest, that is an actual conflict of interest.  Such action may include an employee receiving a direct or indirect financial benefit as a result of using the public position and/or influence; or the outside influence could be so prevalent that the public decision is influenced or dictated by an employee’s outside interest.
  • Potential conflict of interest: A “potential conflict of interest” is a situation in which an employee has outside, private influence and/or interests that could influence public decisions, actions or responsibilities. This differs from an actual conflict of interest in that actions have yet to occur where the outside influence and/or interests of the employee affect or dictate public decisions, actions or responsibilities.
  • Perceived conflict of interest: A perceived conflict of interest is any situation in which a reasonable third party would conclude that a grant reviewer has an outside influence and/or interest that conflicts with his/her public duties or responsibilities.

There are a number of guidelines on the issue of conflict of interest in Minnesota statutes. Additionally, most state agencies have agency specific statutes, rules and policies. This section does not attempt to cover all of these, but focuses on the major statutory standards and on some of the obligations and responsibilities that flow from them. For questions as to whether or not something is a conflict of interest, contact your agency's ethics officer.

The message delivered by the statutes listed above is clear and simple:

  • Each state employee or grant reviewer, as an individual, is responsible for NOT putting himself/herself and his/her state agency in a position where a conflict of interest might exist or could give the appearance of existing.
  • Any activity, influence or input related to any part of the acquisition process IS covered by these standards – from getting the idea to approving the payment, and everything in between.
  • When anyone in a position of responsibility in a state agency becomes aware of a potential conflict of interest, THAT PERSON MUST ACT to remove the state employee from ANY involvement with the acquisition in question. 

Use of Grant Agreements

Grants Management Policy 08-04 states that Minnesota state agencies must use a written grant agreement for all grants made by the agency. It is essential to write clear duties and expectations of the grantee into the grant contract. Careful drafting ensures that the parties to the contract have achieved an understanding and have mutually agreed on the terms of the grant agreement, such as duties, quality of performance, time of performance, and terms of payment. Careful drafting avoids future disputes, which are costly and waste valuable resources.  

An ambiguous grant agreement may result in failure to obtain the services the agency assumed were contained in the contract. Agencies may find it difficult to require grantees to perform duties that are not clearly and specifically stated. Ambiguous grant agreements lead to amendments that are used to clarify items that should have been in the original contract. The written grant agreement is generally the only thing that counts in a dispute over whether the grantee has fulfilled his promises.  

In a legal action, any ambiguity will be interpreted against the party in the more powerful position; in most cases the agency, so a provision that can be interpreted against the agency most likely will be. Don't take for granted that something you and the grantee have discussed and verbally agreed upon will happen. If it is not written in the grant agreement, it is not enforceable.

Suggestions for clear drafting

First and foremost you must answer who, what, when, where, and how much. Answering these questions with specific detail is a great start to grant agreement drafting. Thinking through the following list of issues will help you get the most from your grantee.

  • Does the agency have statutory authority to enter into the grant? 
  • List precisely what you want to get from the grantee such as, the qualifications of the person(s) performing the work, the work, the time of performance, and the final product.
  • Specifically identify how grant payments will be made to the grantee.
  • Determine how you know when you got what you wanted; determine how you will enforce the provisions of the grant agreement.
  • Specify grantee's duties simply and in plain English.
  • Don't rely on the grantee’s proposal as the list of duties. It is usually unspecific, is not drafted in legally enforceable language. It may contain language that is extraneous, conflicts with your goals, or is contrary to state law.
  • Incorporate all attachments to the contract properly.
  • Label attachments in the order they are mentioned in the contract; that is, the first attachment mentioned should be Attachment A, the second, Attachment B, etc.
  • Attachments must actually be attached to each copy of the grant agreement. Lengthy and cumbersome attachments may be incorporated by reference without being attached to the agreement if the grant agreement specifically identifies those items in such a manner that they can be unambiguously identified and there is location specifically identified and accessible to the grantor and grantee.
  • All numerical computations are accurate.
  • Every blank in the agreement is filled in.
  • All instructions are deleted from the grant agreement form.
  • The grant agreement is properly paginated.
  • The grant agreement is consistent with the limits and purposes of the appropriation from which payments are to be made.

Sample Grant Agreement

Sample Grant Agreements are available on the Policies, Statutes and Forms page. Since each grant is unique, the sample forms may have to be modified. Agencies are strongly encouraged to contact us and their Assistant Attorney General to review any modifications to these forms.

Grant Payments

Grants Management Policy 08-08 requires that state agencies specify the method and schedule of payments for each grant in the grant agreement. Reimbursement is the preferred method for making grant payments. Although they are not preferred, advance payments on grants may be allowed in certain situations. Advance payments on grants shall be negotiated between the state agency and grantee on a case by case basis. Please review Grants Management Policy 08-08 for additional information.

When entering the grants into the State wide Integrated Financial Tools (SWIFT) system agencies should follow Minnesota Management and Budget’s guidance for properly coding grant payments to the correct expenditure object code and the correct accounting period. Don’t forget that the prompt payment statute, Minnesota Statutes Section 16A.124, subdivision 3, applies to grants.


Any amendments to the terms of the grant agreement must be made according to a fully executed amendment. A memo to the grantee indicating changes is not legally binding and is not sufficient to make the changes. Please see Grants Management Policy 08-12 for additional information on grant amendments. 

It is very important that the amendment is in place before the grant agreement expires. This will avoid any liability that may occur for not having an agreement in force when the grantee is working. Grant agreements may only be amended within the scope of the original grant. An amendment must be clearly identified and written, and properly executed any time the grantee and agency agree to a change in any provision of the grant agreement. All amendments must be clearly numbered and must be approved in the same manner as the original grant agreement. The amendment should indicate why the original agreement was changed. You need to detail in the amendment WHY the amendment is necessary. All grant agreement amendments should be drafted using the format of the sample amendment, available on the Policies, Statutes and Forms page.

Monitoring Performance

It is the responsibility of the granting authority to monitor its grantees’ performance. Grants Management Policy 08-10 states that agencies must conduct at least one monitoring visit per grant period on all state grants over $50,000 and at least annual monitoring visits on grants over $250,000. In addition, agencies must conduct a financial reconciliation of grantees’ expenditures on grants over $50,000. 

Agencies typically utilize a combination of monitoring techniques to effectively monitor their grantees.  The following are various examples of how an agency may monitor performance. 

  • Obtain and review third party certifications indicating that the work is satisfactorily completed (by an inspector).
  • Perform site visits using a fiscal/program management checklist as a tool to ensure the grantee’s contract compliance.
  • Attend grantee board meetings.
  • Conduct telephone interviews with grantee program staff and document desk monitoring findings on a checklist or write a report.
  • Interview or conduct focus groups with grantee service recipients or community members.
  • Review any independent auditor/public accountant reports of the grantee’s activities.
  • Obtain and thoroughly examine all payment documentation submitted for reimbursement and the documentation that evidences that the grantee obtained any required match funds.
  • Documentation from monitoring visits must be kept in the grant file. 

Procedures Checklist

This checklist may serve as a guide as you move through the approval process.  

  • Identify grant-making statutory authority and determine a mechanism for ensuring that a fair and equitable means of spending the grant funds has been identified by the agency and approved by agency head.  
  • Follow Admin's Office of Grants Management and agency grant making guidelines and identify grantees. Public notice of the grant is strongly recommended.
  • Select grantees based on criteria listed in RFP or review and approve workplan and budget submitted by legislatively-mandated grantees.
  • Write a grant agreement using Admin's Office of Grants Management and agency guidelines and the appropriate grant agreement form and applicable terms and conditions.
  • Encumber funds.
  • Obtain grantee’s and state’s signatures.
  • Notify grantee and send a copy of  grant agreement to grantee.
  • Monitor grantee’s progress and compliance with grant requirements as required by Admin's Office of Grants Management and agency guidelines.
  • Store information gathered during progress and compliance activities in the grant file. 
  • Complete grantee performance evaluation at end of grant and store in grant file.

This complete grants overview is available for download as a Word document by clicking here.