By University charter, all gifts, grants, and contracts require formal approval by the Board of Regents. The Director of Research Development is the authorized agent for accepting grants and contracts on behalf of the University, while the Director of Development is the authorized agent for accepting gifts.
The terms grant and gift are not defined in the Board policy statements and the distinction is not always a clear one, but they are usually defined in terms of deliverables. Gifts are normally given without expectation of return. Grants and contracts, on the other hand, involve a quid pro quo: some service is rendered in exchange for the money. The Society of Research Administrators (SRA) provides these definitions:
GIFT. Gifts and bequests are awards given with few or no conditions specified. Gifts may be provided to establish an endowment or to provide direct support for existing programs. Frequently, gifts are used to support developing programs for which no other funding is available. The unique flexibility, or lack of restrictions, makes gifts attractive sources of support.
GRANT. A grant is a financial assistance award to an organization in the name of a principal investigator to assist the organization in the conduct of research or other program as specified in an approved proposal.
An additional distinction has to do with the taxability of the transaction. As a general rule, both grants and gifts are deductible as charitable contributions or business expenses, but any profits made as a result of the transaction are taxable. As an example, corporations that make "gifts" from which they derive some benefit but report this money as gifts to the IRS may get into trouble in an IRS audit since the benefit is taxable and must be so declared. The situation is similar with educational institutions that perform paid services to business and industry since all services rendered must be directly related to their instructional mission or be regarded as taxable.
According to the University of Michigan's Division of Research Development and Administration:
"A GIFT is defined as any money from private sources, whether solicited or not, for which the donor does not retain any reversionary interest or cannot be expected to receive any material, unique, or preferential benefit from the act of donating funds. This definition follows guidelines established by the Internal Revenue Service as well as practices of other universities and nonprofit organizations."
"A GRANT is an award of funds by a sponsor to achieve some general or specific purpose. The relationship between a sponsor and a grant recipient has not explicitly been defined by law. However, while a grant is not as exacting in its provisions, it should be treated with the same respect as a contract. A grant generally is construed to allow greater discretion than a contract in the conduct of the research and to provide less specificity in the definition of the intended outcome of the research."
Like a contract, a grant is a legal document, but, as suggested above, grants are more open-ended than contracts. Grants are the customary means of funding research, testing, and prototyping; for this reason, they are discovery-oriented rather than outcome-oriented. In the case of grant-funded scientific research, for example, the outcome of a scientific experiment cannot be guaranteed, and a negative result is no less desirable than a positive one. Contracts, on the other hand, require the delivery of specific goods and services according to an agreed-upon deadline.