The grant evaluation process determines if a project or idea worked, or is working. Most funding agencies require an evaluation, while all give the process major importance.
Think of an evaluation as a blueprint throughout the project which will keep you focused on your desired outcomes. Specifically, the evaluation should determine if the methods specified were used and if the identified need was met.
An evaluation does this by describing clearly and specifically how evaluative data will be collected at every stage of data gathering and indicates how you will analyze the data, how it will be used for improvement, and how the results will be disseminated. It also facilitates feedback from your customers and other members of the community.
A successful evaluation with activities that are well reported increases your chance for future funding and provides data for future projects.