Policy RA04 GIFTS, GRANTS AND CONTRACTS (THE FUNDING MATRIX)

Policy Steward:  Vice President for Research, and the Corporate Controller

Contents:

  • Purpose
  • Background
  • Definitions
  • Further Information
  • Cross References

  • PURPOSE:

    This policy clarifies the distinctions among Gifts, Grants, and Contracts from private sources. It was developed at the direction of the University Cost Savings Task Force and approved by the University Research Council, the Senate Committee on Research, the University Park Council of Academic Deans, and the Administrative Committee on Research. It has been revised at the direction of the Vice President for Research and the Senior Vice President for Development and Alumni Relations.

    BACKGROUND:

    The University is required by the IRS to possess proper documentation for any income it books. This requirement is true for all gifts, grants, and contracts, as well as deposits into Miscellaneous General Research accounts or their equivalent. In order to appropriately classify its income, University Financial Officers, Development Officers, and Research Administrators must complete a questionnaire to determine and document the type of financial assistance being provided by sponsors or donors to support sponsored programs. (See: http://www.research.psu.edu/osp/gift-questionnaire.)

    DEFINITIONS:

    Stewardship Report states how funds were used, and may include a general financial report, a brief summary of how the funding was used, and/or the impact of the gift. A stewardship report may not be a detailed technical report. However, if publications result, copies of such publications may be shared with the donor. In addition, confirmation of proper utilization of funds is allowed. For example, if a company provided funds to help students build a solar-powered vehicle for a national student competition, the Principal Investigator (PI) could provide the donor with a report informing how the students did in the competition, but not be required to provide detailed technical information including raw data.

    Facilities and administrative ("F&A") costs are those expenses that are essential to the conduct of sponsored institutional activities but which cannot be readily attributed and directly charged to specific individual projects.  F&A costs are more fully defined in University Policy RA30 Facilities & Administrative (F&A) Costs.

    Financial Assistance is money provided to support a public purpose, e.g., health related research. Financial Assistance includes Gifts, Charitable Grants, Unrestricted Grants, and Restricted Grants, as defined below. Financial assistance is distinguished from Procurements, which involve payment for a specific product or service, e.g., drug testing for a pharmaceutical company.

    Quid Pro Quo is a situation where goods and/or services (i.e., a “deliverable”) are provided at least in part as consideration for funding. Acknowledgements and Stewardship Reports are not considered deliverables.

    Charitable Contribution is Financial Assistance in the form of a Gift, Charitable Grant, or Unrestricted Grant, as defined below. It is important to look at both the intent of the donor/grantor and the other requirements of the grant to determine whether it qualifies as a Gift, Charitable Grant, or Unrestricted Grant. Faculty members should work with their units' Development Office in securing charitable contributions and to help establish the intent of the donor/grantor.

    Gifts, Charitable Grants, and Unrestricted Grants are Financial Assistance donated or otherwise made to support the operations or other activities undertaken by the University where the donor/grantor may direct the general purpose of the funds but the actual expenditure of funds is not controlled by the donor/grantor and where there is no Quid Pro Quo. In other words, the intent of the donor is philanthropic.

    Restricted Grants and Contracts are contractually binding arrangements which establish a Quid Pro Quo relationship or where the grantor controls the expenditure of the funds.

    A Gift is a Charitable Contribution from an individual, a for-profit organization, or a non-profit organization. To qualify as a Gift, the Financial Assistance must be accompanied by a letter clearly identifying it as a Gift or Donation. Gifts can be targeted to a specific area (e.g., Ceramic Science), but there can be no obligation to submit detailed technical or financial reports beyond a Stewardship Report, nor can there be any contractual terms and conditions. The University will assess 0% F&A on Gifts. Donors frequently use the terms "gift" and "grant" interchangeably to describe the donation of funds; however, the terminology used by the donor or sponsor should not determine the University's categorization of the funds on The Funding Matrix (below).

    A Charitable Grant is a Charitable Contribution from an individual, a for-profit organization, or a non-profit organization that may specify limited terms and conditions. For example, if the terms and conditions serve to direct the gift to areas of a particular purpose, such as scholarships, programs, infrastructure, or general research support of interest to the donor, the grant may be classified as a charitable grant. The grantor may not provide oversight of the expenditure of donated funds. The grantor may receive a gift receipt, a gift acknowledgement, and/or a Stewardship Report.   Some indications that the award is not a charitable grant and should be classified as a restricted grant or sponsored research include: studies are to be conducted on substances/products/processes, etc., in which the grantor has a financial interest; the grantor hopes to gain economic benefits as a result of the activity to be conducted; the grantor expects to receive a technical report; or the grantor participates in determining the work to be performed or services to be provided on the project.  Establishing the donor’s intent will usually answer the question as to the proper classification.

    If the grantor is a domestic organization and has published guidelines (or otherwise verifiable written policy) prohibiting or limiting the recovery of F&A costs on charitable contributions, the University may accept the lesser rate or amount, if it considers the program desirable for University participation (as evidenced by the approval of the College/Unit on the appropriate Internal Approval Form), without requiring central approval.  With published guidelines limiting recovery of F&A, the University will accept the reduced F&A rate.  In the absence of published guidelines, the University will assess F&A at 15% of Total Costs on domestic organizations, unless an alternate rate is approved by the Vice President for Research or the Corporate Controller, in consultation with the Senior Vice President for Development and Alumni Relations when appropriate. These funds will not be used in calculating research incentive funds (unless the F&A is greater than 15%), and the 15% rate does not support unemployment coverage.  If the grantor is foreign, a lower F&A rate will not be accepted (unless a formal waiver is approved in accordance with RA30).  It should be noted that if the grantor is a for-profit entity and the Charitable Grant is closely tied to a pre-existing or simultaneously awarded sponsored activity, it will be evaluated on its specific merits to determine if full F&A should be assessed.

    An Unrestricted Grant is a Charitable Contribution much like a Gift, except it is not accompanied by a letter identifying it as such. Typically, when the University receives money without any terms and conditions, and the money is clearly intended as Financial Assistance (as opposed to a Procurement), the Financial Assistance will be identified as an Unrestricted Grant. Such grants are assessed F&A at 15% Total Costs. These funds will not be used in calculating research incentive funds, and the 15% rate does not support unemployment coverage.

    A Restricted Grant is a form of Financial Assistance provided by a for-profit organization or a non-profit organization1 where the sponsor expects detailed technical reports. In addition to the detailed technical report, the agreement underlying the Restricted Grant may contain other specific terms and conditions, including financial reporting requirements. Restricted Grants are normally assessed full F&A, unless exceptions identified in Policy RA30 apply.

    A Contract is a form of Procurement provided by a for-profit organization or a non-profit organization1. Contracts can come in many forms (e.g., Sponsored Research Agreements, Service Agreements, Purchase Orders). Contracts supported with federal flow-through funds are assessed full F&A, unless federal funding restrictions apply. Contracts funded by industrial Internal Research and Development (IRAD) funds are assessed full F&A plus 5%.

    An Industry Membership Agreement may take the form of a Restricted Grant or a Contract. In either case, F&A is assessed at 15% Total Costs. These funds will not be used in calculating research incentive funds, and the 15% rate does not support unemployment coverage. See RAG05 for more detail regarding Industry Memberships programs.

    The Funding Matrix - The matrix below is intended to identify typical terms and conditions associated with different varieties of private Financial Assistance and Procurements. The Vice President for Research or the Corporate Controller, in consultation with the Senior Vice President for Development and Alumni Relations when appropriate, may approve exceptions under special circumstances. Columns in yellow are associated with Financial Assistance. The column in green is associated with Procurements.

     
      GIFT CHARITABLE
    GRANT
    UNRESTRICTED
    GRANT
    RESTRICTED GRANT CONTRACT
    Intellectual Property Terms None (PSU owns) None (PSU Owns) None (PSU Owns) PSU Owns with License Option to Sponsor PSU may assign ownership of IP to sponsor with concurrence of all project personnel
    Publication Terms None (PSU retains full publication rights). Donor may request acknowledgment of support. None (PSU retains full publication rights). Donor may request acknowledgment of support and advance copies of publications. None (PSU retains full publication rights). Donor may request acknowledgment of support. PSU retains full publication rights. Sponsor may request acknowledgment of support and advance copies of publications. PSU retains full publication rights. Sponsor may request acknowledgment of support and advance copies of publications.2
    Scope of Work None (PI Conducts “Departmental Research” per UG, Appendix III) Defined by PI in proposal None (PI Conducts “Departmental Research” per UG, Appendix III) Defined by PI in proposal Detailed scope of work defined by the PI and/or the sponsor
    Maximum Deliverable Acknowledgment and Stewardship Report Acknowledgment and Stewardship Report Acknowledgment and Stewardship Report Detailed technical report Detailed technical report and other deliverables (e.g., software, manuals)
    Typical Payment Mechanism Advance payment Advance payment or payment schedule Advance Payment Cost-based invoicing or fixed payment schedule Cost-based invoicing or fixed payment schedule
    Documentation Letter from Donor identifying funding as gift or charitable contribution Grant agreement stipulating payment, and other terms and conditions Company letter stating financial support Grant agreement stipulating payment, reporting, and other terms and conditions Formal contract stipulating payment, reporting, IP rights, confidentiality, and liability terms
    Funding Restriction None None $100,000 per company per PI per year None None
    F&A None See definition of Charitable Grant above for details. 15% of Total Costs Full F&A unless RA30 exceptions apply Full F&A plus 5% (except federal flow-through, which is assessed at full)

    1 -In some rare instances, a Restricted Grant or Contract may be provided by an individual; however, approval by the Vice President for Research or the Corporate Controller in consultation with the Senior Vice President for Development and Alumni Relations is required prior to accepting such Financial Assistance or Procurement, respectively.

    2 -Sponsor may request removal of any Confidential Information provided to Penn State. Sponsor may also request short publication delays for patent protection purposes. Additional restrictions may apply when performing work subject to classification or export control restrictions.

    FURTHER INFORMATION:

    For questions, additional detail, or to request changes to this policy, please contact the Office of the Vice President for Research or the Office of the Corporate Controller.

    CROSS REFERENCES:

    RA30 - Facilities and Administrative (F&A) Costs

    RAG05 - Establishing Consortias, Institutes and Centers (Formerly RAG18)


    Effective Date: February 26, 2016
    Date Approved: February 22, 2016
    Date Published: February 26, 2016

    Most recent changes:

    Revision History (and effective dates):

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