You can have a strong project and still get rejected if your budget is wrong. Across Canadian grant programs, assessors spend a lot of time reviewing eligible vs ineligible costs because this is where many applications fail. Understanding how assessors think about costs can make the difference between approval and a quick “does not meet program requirements.”
Grant programs do not judge costs at random. They apply consistent rules tied to public accountability, risk, and program outcomes.
At a basic level, eligible costs are expenses a program agrees to share with you. Ineligible costs are anything the program will not reimburse, even if they are real business expenses.
Assessors usually apply four core tests.
Assessors ask one question first: Would this cost exist if the project did not exist?
Eligible costs usually include:
Ineligible costs often include:
For example, the NRC Industrial Research Assistance Program (IRAP) only supports costs that are clearly linked to eligible R&D activities, not day-to-day business operations.
Timing matters as much as purpose.
Most Canadian grants only allow costs:
Common ineligible timing issues:
Assessors will reject otherwise reasonable expenses if the dates do not align. This is a strict rule in federal programs like NRC IRAP.
Grant assessors are required to protect public funds. That means they evaluate whether a cost is reasonable.
They look for:
If you pay a consultant double the market rate without justification, that cost may be ruled ineligible or reduced, even if the activity itself is eligible.
If it cannot be proven, it is not eligible.
Eligible costs must have:
Ineligible costs often include:
Programs like NRC IRAP require detailed financial records and may audit claims after payment.
While every program is different, assessors see the same patterns again and again.
Tools like GrantHub’s eligibility matcher can help you filter programs by province and industry, including which cost categories each program accepts.
Some costs fall into a grey zone. Assessors then look at justification, not just labels.
They consider:
For example, software subscriptions may be eligible only for the months used during the project and only if they are essential to the work. Annual licenses for general use are often partially or fully ineligible.
Assuming normal business expenses are eligible
Rent, internet, and admin wages are usually ineligible unless a program explicitly allows overhead recovery.
Submitting rounded or estimated numbers
Assessors expect realistic, supportable figures. Vague estimates raise red flags.
Including costs before approval “just in case”
Pre-approval costs are one of the most common reasons for budget cuts or rejection.
Ignoring cost caps
Many programs cap wage rates or consultant fees. Anything above the cap is automatically ineligible.
Q: Are employee salaries always eligible costs?
Not always. Only the portion of time employees spend directly on the approved project is usually eligible. General management time is often excluded.
Q: Can I change my budget after approval?
Sometimes. Many programs allow budget reallocations, but only with written approval. Unapproved changes can make costs ineligible.
Q: Are equipment purchases eligible or only rentals?
It depends on the program. Some allow purchases if the equipment is primarily used for the project, while others only allow depreciation or rental costs.
Q: What happens if I accidentally claim an ineligible cost?
The cost is typically rejected and not reimbursed. In serious cases, repeated issues can delay payments or trigger audits.
Q: Do grants ever pay 100% of eligible costs?
Rarely. Most Canadian grants fund a percentage of eligible costs, requiring you to cover the rest.
Understanding how assessors judge eligible vs ineligible costs helps you build budgets that survive scrutiny. The next step is matching your project to programs with cost rules that fit your business. Check GrantHub for eligible programs that match your business profile and see which cost categories are accepted.
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