Distinguishing Between Gifts, Grants, & Contracts

Correct classification and processing of external funds (gifts, grants, and contracts) is essential for the accomplishment of mandatory fiscal and fiduciary management by Utah State University. To enhance coordination and to ensure consistent and proper treatment of funds, these policies and procedures have been developed and are intended to be used by all University faculty and administrators seeking external support.

Gifts, grants, and contracts are the principal forms of awards made by both governmental and private sources. The correct classification and processing of awards is sometimes complex and will require the exercise of informed judgment, particularly in cases where the nature of an award is not immediately clear. Rather than focusing on any single characteristic, each award must be considered in its totality.

To clarify the process of determining classification and assure greater consistency among the various colleges, schools, departments, centers and administrative units of the University, the following guidelines should be used to determine both the type of award and the University office responsible for administration. One individual factor from the table below should not be used to make a determination, but instead all factors need to be assessed to ensure the correct classification of funding.

Distinguishing Gifts vs. Grants Checklist

Gift vs. Sponsored Project Determination Chart

Factors to Consider	Gift	Sponsored Project
Source	Individuals Non-profit organizations Corporations Corporate foundations Other organizations Family/individual foundations	Federal, state, local government agencies Non-profit organizations Corporations Corporate foundations Foreign Government
Intent	Charitable intent No economic benefit or quid pro quo	Public good Economic benefit to sponsor
Purpose	Generally unrestricted No direct specific scientific inquiry May be restricted for a specific purpose (scholarship or professorship)	Sponsor specifies how funds should be used, as outlined in award documentation.
Persons Performing Funded Activities	Left to discretion of university or named individuals	Key personnel approved in proposal and changes must be pre-approved by sponsor
Scope of Work	Support may be intended for endowment, capital projects, or broad focus	Detailed scope of work or research focus required
Budget	No specific budget or non-detailed budget No prior approval required for variance from proposed budget	Detailed line-item budget Requires funding to be spent in accordance with proposed budget Requires prior approval for re-budgeting (in excess of established threshold) Fixed Price Cost for Deliverable
Indirect Costs	Not applicable	F&A follows university rate structure Rate may be limited by sponsor or voluntarily by Dean’s Waiver
Time Period	Generally, no time period associated with use of funds	Specific period of performance, funds cannot be spent outside of time period
Award Type	Donor letter, gift agreement	Notice of award, cost-reimbursable agreement, fixed-price agreement
Terms & Conditions	No terms and conditions for the disposition of tangible property No restrictions regarding publication, intellectual property, royalty sharing, etc.	Detailed financial reporting (line items, effort percentages, etc.) Terms and conditions for the disposition of tangible property Terms regarding publication, intellectual property, royalty sharing, etc.
Reporting	Funding is not contingent on deliverables  Stewardship and general fiscal accountability reported to funder, but not typically required General description of progress, few or no specific reporting guidelines	Deliverables required Required progress, annual, financial, closeout reporting Technical report requires details on scientific results and progress towards project objectives Future payments or support contingent on meeting reporting and deliverable requirements
Unused Funds	Funds are generally irrevocable by donor	Unused funding may need to be returned to sponsor Sponsor may terminate agreement or demand repayment if USU doesn’t meet its obligations
Management	USU Advancement	USU Sponsored Programs Kuali proposal required

Definitions & General Indicators of Sponsored Projects (Grants & Contracts)

A grant is defined as a voluntary transfer of money or property for the primary intent to carry out a public purpose of support or stimulation without direct benefit to the sponsor. The following are generally characteristics of grants:

1. The award contains terms on the use of funds, such as budgetary restrictions; states programmatic objectives to be achieved; defines responsible individuals and a period of performance; and details ownership rights.
2. Usually the result of submitting an outcome-driven proposal.
3. Programmatic and/or fiscal reports during the life of the project and at the end of the project are required.
4. May address intellectual property ownership and rights in data issues.
5. Contains language regarding the right to revoke an award or withhold funding.
6. Prior sponsor approval is required for significant programmatic and/or fiscal deviations.
7. Future commitment of resources to provide continued support of the project may be required by the University.

A contract is defined as the acquisition of property or services for the direct benefit of the sponsor on a quid pro quo basis. In general, the criteria for identifying a contract are the same as those for a grant except:

1. The award may be subject to more restrictive conditions outlined in a contractual instrument.
2. Financing may be on a cost reimbursement or fixed price basis.
3. The sponsor participates in determining the work to be performed or the services to be provided.
4. Intellectual property and rights in data are significant considerations.

Under the guidelines presented here, awards offered to the University for the performance of services such as testing or evaluating drugs for pharmaceutical companies would normally be classified as grants/contracts.

Definitions & General Indicators of Gifts/Philanthropy

A gift is defined as a voluntary transfer of money or property made as a charitable donation without expectation or receipt of an economic benefit. It may or may not be given for a specific purpose. The following are generally characteristics of gifts:

1. Contractual requirements are not imposed. However, objectives may be stated and use of funds may be restricted to a particular purpose, such as professorship, scholarship or research in a defined area.
2. Award is irrevocable.
3. A period of performance is not generally specified.
4. Formal financial accounting and technical reporting are not required and there is no requirement to return unexpended funds. However, stewardship reports documenting the utilization and/or impact of the gift may be requested.
5. Federal, state, local or foreign governmental support is not typically considered a gift. Cash, checks, and stock certificates offered to the University without a legally binding agreement or service requirement would normally be processed as gifts.

Licensing Agreements

A licensing agreement is a contract where one or more of the following conditions apply:

1. Consideration is received in exchange for an option or a license to University-owned intellectual property.
2. Option or license terms are negotiated for pre-existing University-owned intellectual property or for anticipated but not yet developed University-owned intellectual property.
3. The work to be performed is directed towards evaluating, improving or prototyping University- owned intellectual property.

Who Should I Contact?

The criteria listed here are applicable to all awards made available to the University. In some areas, however, there have been special difficulties with classification. When the determination is unclear, any of these offices may be contacted to determine the appropriate classification.

Indirect Costs

The funder or sponsor’s intent on paying or not paying indirect costs is not generally a determinative factor in the classification of a gift versus sponsored project.

Common Reasons for Classification Changes

Gift to Sponsored Project

1. Award letter includes more restrictive terms and conditions than appropriate for a gift, such as language regarding intellectual property rights or publication.
2. Proposal or application includes items or services that are essentially contract deliverables.
3. In addition to an award agreement, there are parallel agreements that need to be signed. For example, a data use agreement, memorandum of understanding, unfunded collaboration, etc.
4. The proposed project directly benefits funder (such as creating a program curriculum for the funder’s use or using the funder’s proprietary datasets or patented IP).

Sponsored Project to Gift

1. Award letter does not include standard sponsored project terms and conditions. (No restrictions on use of funds, no deliverables or reporting requirements.)
2. Award letter includes support for general research rather than a specific project or focus.

Signature Authority

Under USU Policy 5003, various offices have delegated signature authority to sign on behalf of Utah State University. University Advancement has delegated signature authority to sign agreements and contracts that fall under the gift/donation classification.

Sponsored Programs (SPO) has delegated signature authority to sign agreements related to sponsored programs and other documents such as material transfer agreements, non-disclosure agreements, data use agreements, and licensing agreements, etc. Any contracts, agreements, or award documents requiring signature that are linked to sponsored projects should be routed to SPO.

Purchasing & Contract Services has delegated signature authority for all other agreements that are not related to Advancement or Sponsored Programs.

SPO can provide a preliminary contract review to assess whether the agreement should be routed through Advancement, SPO, or Purchasing & Contract Services. Please reach out to the pre-award or post-award contact assigned to your unit for assistance.