That’s an important distinction. The defining characteristic of a gift is that control over its use passes to the recipient the minute the transfer is made. While some donors may restrict a gift to a general purpose — scholarships for example — decisions over the deployment of the funds within that restriction rest entirely with the recipient.

Furthermore, the donor receives nothing in return, as is clearly stated in standard gift receipts.

The opposite is true with grants. A grant is an exchange transaction in which each party receives a “benefit.” The grantor maintains an element of control throughout the life of the grant, and sometimes thereafter.
The terms of the grant are spelled out in a grant agreement or contract that is signed by both parties, and the grantee is obligated to fulfill those terms or risk forfeiting the funds.

The terms typically include performance of the project procedures described in the grant proposal, accomplishment of enumerated outcomes, reporting on a specified schedule and adherence to accepted accounting standards … including maintenance of separate accounts for the grant funds.

What does the grantor get in return? While not a tangible benefit, the grantor’s agenda is promoted. To be successful in obtaining a grant, an applicant must address the funder’s agenda, and create a partnership in which the grantee conducts programs or projects that are mutually beneficial.

Government grants especially fit this model, although it is also true of many large foundations. Government grants essentially are elements of policy control – the government agency promotes its policy initiatives by using funds to enable the grantee to conduct programs consistent with that agenda.

In the case of corporate grants, the expectation is that the company does get some tangible return – if nothing more than good will in the community; but, more on that in a future blog on corporate funding.

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Have a question about starting or expanding your grants program? Email me at Andrew@GrantServices.com..