Gifts vs. Grants
Classification as Gift or Grant
MBL Policy Statement
Gifts and grants awarded to the MBL are voluntary support from external sources. The MBL must manage all funds received in accordance with applicable federal, state, and local laws, and with the specific terms and conditions of any gift, grant or contract. MBL’s approval, negotiation and agreement processes and mechanisms, accounting, budget practices, oversight, and compliance practices differ depending on whether funds received are categorized as a gift or as a sponsored award. It is, therefore, essential that categorization of external funding received be undertaken with utmost care and with a sound understanding of the various considerations (outlined below) that drive the determination of funding type. This policy is intended to facilitate the appropriate classification of gifts vs. sponsored awards and to ensure that external funding directed to the MBL receives the proper compliance review, administrative oversight, and monitoring.
If the fundamental concept of gift or grant is not evident, then the Director, Research Administration and Operations, the Finance Director and the Development Officer will conduct a joint review. While no single indicator is determinative, the primary criteria used in classifying the award are the maintenance of regulatory compliance and the sponsor’s stated intention.
|Scope of work is defined||Acceptable||Yes|
|Award terms and conditions placed on publication, IP, and royalty sharing||No||Acceptable|
|Return of unexpended funds||No||Acceptable|
|Financial reporting||Acceptable within reason**||Yes|
|Technical (project) reporting||Acceptable within reason**||Yes|
|Period of performance||Acceptable||Yes|
* If a gift made for a restricted purpose has not been spent according to the donor’s restrictions, a donor may have grounds to rescind and recoup the gifted funds.
** Reporting requested by donors of restricted gifts is normally in the aggregate, although detailed reports are sometimes requested; in both cases this reporting is solely intended to assure proper gift stewardship.
Gifts typically carry no reciprocal obligations between donor and recipient and are often unrelated (or only indirectly related) to the business interests or mission of the donor. A gift may be an unrestricted donation to the MBL, or a donation whose uses may be restricted for a general purpose (i.e. “restricted gift”). Within the restrictions set by the terms of a gift agreement, the specific ways in which funds are used and the methods of implementing the intent of the donor are left to the discretion of the MBL. When restricted or unrestricted gifts are received, the MBL has broad latitude in how to use the gift funds and the MBL (rather than the donor) chooses which institutional members may participate in the activities supported by the gift. A gift typically has no time limit. The gift donor may require that funds be used to support the work of a specific scientist or staff member. However, this individual retains broad discretion as to how the funds are expended to meet the donor’s original intention or general aim for the gift. Although it is not unusual for a donor to expect a report on the general use of gifted funds (for example, a list of activities or projects that have been supported by a gift) or even a report on line-item expenses, a donor may not recoup gift funds. If a gift made for a restricted purpose has not been spent according to the donor’s restrictions, however, a donor may have legal grounds to rescind and recoup the gifted funds.
Sponsored awards (grants and contracts) are an exchange of funds for a specified purpose often related directly to the business interests or mission of the sponsor. This agreement requires a specified scope of work or research plan, detailed budget, specified time period, and a requirement for the return of unexpended funds (with the exception of fixed-price contracts). The agreement typically identifies an MBL principal investigator (PI), project goals and objectives, research methodologies or project design, timeline, and an expectation that project outcomes and/or deliverables are shared with the sponsor. Sponsors expect the MBL to be fully accountable for assuring that the program or research is conducted with financial, ethical and scientific integrity and in compliance with all applicable federal and state laws and regulations. In a sponsored award the MBL is responsible for reporting on progress and results to the sponsor at intervals or milestones identified in the agreement. Sponsors usually stipulate as part of the terms and conditions of an award that they have discretion to examine, even on a line-item basis, award expenditures, and to disallow and demand repayment of any funds deemed by the sponsor to have been unallowable or not related to the intended project as agreed. If the funded project or research is not pursued, or deliverables attained, sponsors of grants and contracts may reserve the right to recoup all or some of the sponsored award from the recipient.
Sources: FASB ASC 958-605; NACUBO FARM (¶403.3); Harvard U. OSP