No, it isn't reasonable to expect undergraduates to do high quality research on their own. They are too inexperienced and need to learn a lot about process as well as the topic of the research as they do.
I think that funders recognize this and treat the funding as a kind of training, not a way to get the highest quality results.
But, to manage the students and assure that there is no misuse, someone, a professor probably, needs to keep involved with the students to assure that they keep on track.
Another problem with undergraduate research is that it is difficult to take on any open-ended questions since the time for the project is most likely very limited. This can be true even at the MS level. Doctoral research is intentionally open ended so that important questions can be asked and some definitive result obtained, though with less control over length of the project.
I'll note that in some situations in which a student gets some funds to join an existing research project in which papers have multiple authors, it might be possible for the student to make faster progress and (jointly) produce a higher quality product since there is probably more mentoring in such a situation.
But, don't expect much if you just give undergraduates money and don't keep involved in their work.