Gifts, Grants and Contracts: What’s the difference and why does it matter?
When it comes to receiving financial support, organizations often rely on a mix of gifts, grants and contracts. Each type of funding serves a unique purpose and comes with specific requirements, so it’s essential to understand these differences to ensure funds are managed correctly.
A gift is a voluntary donation of money or assets given without expecting anything in return. Gifts are often provided to support a particular cause, program or project, but they can also be unrestricted, allowing the organization flexibility in how to use the funds.
A grant is financial support given for a specific project, purpose or area of work. Grants often come with a statement of work, which outlines the goals, timeline and activities that the receiving organization must follow to fulfill the terms of the grant. Grants are vital for funding specific initiatives, like research or program development. However, they come with specific expectations and reporting requirements. Organizations need to carefully track grant-related expenses and project outcomes to meet these requirements.
A contract is a formal, legally binding agreement in which an organization agrees to complete specific work or deliverables outlined in a written document. In contrast to gifts or grants, contracts are strictly managed and have little to no flexibility.
Understanding these distinctions helps organizations manage funding effectively and meet their obligations. By recognizing the type of funding received, organizations can better allocate resources, ensure compliance with funder expectations and ultimately achieve their goals more effectively.
Want to learn more?
- Watch this video tutorial.
- Read this 3D Memo.
- Review the Distinction between Gifts, Grants (Sponsored Projects) and Contracts chart.
- Review the contact information in the University Advancement page.