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Business and Financial Policies and Procedures

11.2 Distinctions Among Gifts, Grants and Contracts

Policy Statement

University funds used to carry out the primary missions of teaching, research, instruction, and public service include financial support from outside entities. Such outside financial support must be clearly identified as gifts, or as funding for sponsored project activities, in order to ensure appropriate management of the funds and compliance with any terms and conditions. Proper funds administration is dependent on recognizing the distinctions among gifts, grants, and contracts.

General Definitions


A gift is a voluntary contribution made to the University, for which the contributor receives no bargained-for benefit, and requires nothing in exchange beyond an assurance that the intent of the contribution will be honored.  Some corporations and foundations refer to unrestricted gifts as "grants"; however, the University considers a contribution for which minimal donor restrictions specify how the funding must be spent or administered, to be a gift.

Even if the donor outlines, in a letter or agreement with the University, general restrictions on how the funding is to be used, the contribution is considered a gift so long as the donor receives no consideration. Campus units are encouraged to provide stewardship reports to donors, indicating how gift funds are spent, and may also supply, upon donor request, reports that summarize how the funds were used.  Donor gifts with restrictions are used at the full discretion of the recipient for the purposes defined by the gift fund. Unused funds are not returned to the donor. Gifts are administered through the University of Illinois Foundation.

If a donor requests a letter to be used with an unrestricted research gift, it is suggested that the sample unrestricted gift letter attached below be provided for use.

Unrestricted Gift Letter

Sponsored Project Activities, Agreements, and Documents

Funds for sponsored project activities (research instruction, public service, and other types of sponsored activities as outlined in 16.1.5 Sponsored Projects Administration Urbana-Champaign Supplement) are processed as either a "grant" or a "contract," and are solicited and accepted to enhance the teaching, research, and public service missions of the University.

How the University defines and uses these funds is based on a written agreement with the sponsor, relevant laws, the General Rules of the University, and various guidelines, such as those from the National Association of College and University Business Officers (NACUBO).

Sponsored agreements primarily take the form of Grants or Contracts. Sponsored project activities documents will consist of one or more of the following items:

  • Proposal (typically) submitted in a sponsor-required format.
  • Scholarly terms or a Statement of Work, to define a line of scholarly or scientific inquiry (defined scope or objective).
  • Formal deliverables such as periodic progress reports and/or performance objectives (reporting requirements), and their respective scheduled delivery dates.
  • Specified terms regarding fiduciary responsibility or payment contingencies.
  • Specified terms regarding disposition of property upon conclusion of the project.


A grant is an award of funds by a sponsor, to achieve some general or specific purpose. A grant generally provides greater discretion than a contract in the conduct of the sponsored project activity, and provides less specificity in the intended outcome of the activity. When properly accepted in writing by the University, a grant agreement is considered legally enforceable.

Federal agencies award financial assistance in the form of grants or cooperative agreements when the principal purpose of the award is to accomplish a specified public purpose (Federal Assistance Program) of support or stimulation authorized by federal law. Grants are also awarded by state agencies, local governments, foundations, associations, corporations, and other private entities.

Grants differ from gifts in that they entail specific reporting requirements, and differ from contracts in that they do not typically involve specific deliverables. Some corporations and foundations may refer to unrestricted gifts as "grants," but the specific requirements outlined in the agreement determine whether the University distinguishes the funding to be a gift or a grant (see above). Corporate or foundation "grants" that are deemed philanthropic in intent and meet the criteria for a gift, as outlined within this policy, are processed as gifts.


In general, a contract, (or procurement contract as known by federal case law), is an agreement between two or more parties that creates a legal obligation to do or not to do something.  For a contract to be binding, the terms must be clear, there must be something of value given to the party making the promise, the parties must agree, and each must be competent to enter into the arrangement. In the context of sponsored projects, a contract defines specific rights and obligations of the contracting parties with regard to matters such as research results and deliverables, publication rights, inventions, public dissemination of results, and liability.

In projects sponsored by federal or state agencies, contracts have a distinct meaning, to be distinguishable from grants. While grants and cooperative agreements are legal mechanisms used to transfer financial assistance to support a program, contracts are used to procure goods and services for the direct benefit of the government agency. So, for instance, when the University receives a federal contract, it is obligated to provide goods or services for the direct benefit of the government.

Distinctions Between Gifts and Sponsored Activities

The following chart outlines some of the differences between gifts and sponsored activities. If it is not entirely clear whether money received is a gift, or is in support of a sponsored project (for example, a grant), the appropriate campus sponsored programs office will review the documentation in accordance with 11.1 University Gifts.





Initiation of Activity

Donor and/or University propose gift funding opportunities

Sponsor and/or Principal Investigator (PI), propose funding opportunities, or PI responds to a Request for Proposal (RFP.).

Sponsor and/or Principal Investigator (PI) propose funding opportunities, or PI responds to a Request for Proposal (RFP.)

Terms, Conditions and Restrictions

Funds are charitable in nature and intent. The donor receives no or nominal goods or services in exchange for the funding provided.

Funds may be philanthropic or for the public good, as defined under Federal Assistance Programs.

Sponsor pays compensation on a fixed-price or cost- reimbursement basis in exchange for University's performance of the statement of work.

Gift may be unrestricted or donor may restrict gift for a specific program area or purpose, e.g. library, research, scholarships, etc.  Unexpended funds are not returned to the donor.

Project may or may not be directly related to the grantor or recipient's mission.  Sponsor may request opportunity to review publications/data to ensure its confidential or proprietary information is not disclosed.

The parties agree on project details, direction and control of the sponsored project activity.

Required University Performance in Exchange for Funds

None, other than an assurance gifts will be and have been used in accordance with donor intent; donor may request periodic expenditure reporting to insure compliance with donor intent.



General understanding that funds will be and have been used in accordance with grant terms; expenditure progress reports may be required periodically.

Detailed scope of work and accounting of contract activity generally provided to sponsor throughout project.

Intellectual Property Rights

Not applicable.

University retains patents, copyrights, advance and exclusive knowledge of outcomes.

University retains ownership of IP arising from the project. Sponsor may negotiate rights to patents, copyrights, advance and exclusive knowledge of outcomes.

Facilities and Administrative (F & A) Costs/Indirect Cost Rate (ICR)

Generally, no F & A/ICR costs are paid.

Sponsor may pay F & A/ICR to the university in accordance with the campus specific federally negotiated rate, sponsor guidelines or as approved by the Vice Chancellor for Research.

Sponsor may pay F & A/ICR to the university in accordance with the campus specific federally negotiated rate, sponsor guidelines or as approved by the Vice Chancellor for Research.


Donors include individuals, corporations, foundations, and other organizations (e.g. donor advised funds.)

Sponsors typically include not-for-profits (e.g. family or private foundations), corporations, corporate foundations, federal, state, and local government agencies, associations.

Sponsors typically include corporations, federal, state, and local government agencies, and associations.  Sponsors rarely, but may, include not-for-profits (e.g. private foundations) or corporate foundations.

Reporting / Stewardship

Often requires only general stewardship and communication as a courtesy to the donor, providing assurance that gifts were used in accordance with the terms of the donor's intent.

General reports required regarding expenditure summary in compliance with sponsor's intent.

Technical progress reports and detailed expenditure reports are generally required.

Tax receipt provided by UIF

No tax receipt is provided.

No tax receipt is provided.

Donor may request or require prior approval before being recognized as a source of funds.

Sponsor may request or require prior approval before being recognized as a source of funds.

Sponsor may request or require prior approval before being recognized as a source of funds.

For additional information or assistance, contact your campus Gift Processing and Stewardship Services Office (gifts) or campus OBFS Grants and Contracts office (grants or contracts). You may also consult the Grants & Sponsored Projects "Who To Ask" page

Who To Ask



Coordinator of Gift Processing and Stewardship Services
2513 University Hall, MC-102
601 South Morgan Street
Chicago, IL 60607-7125


Office of Research  Services
310 AOB, MC-672
1737 W. Polk
Chicago, IL 60612-7227    


Grants and Contracts Office
809 S Marshfield Building MC-551
Chicago, IL 60612-7206



Executive Policy Advisor
One University Plaza, PAC591
Springfield, IL 62703-5407


Grants and Contracts Accounting
BSB 105
University of Illinois at Springfield
One University Plaza, MS BSB98
Springfield, IL 62703-5407



Gift Administration Office
Harker Hall, MC-386
1305 W. Green Street
Urbana, IL 61801-2945


Office of Sponsored Programs
1901 South First Street, Suite A MC-685
Champaign, IL 61820-7406


Grants and Contracts Office, Post-Award
1901 S First St, Suite A, MC-685
Champaign, IL 61820-7406
Phone: 217-333-2186
Fax: 217-244-4757

Last Updated: March 2, 2020 | Approved: Senior Associate Vice President for Business and Finance | Effective: November 2009

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