The following information is guidance on defining and distinguishing between sponsored project funding and gifts.
Both sponsored project and research gift funded activities are externally supported, with funds typically provided in response to a request or proposal. The Office of Contracts and Grants is responsible for administering all sponsored projects activity on campus, with the exception of gifts, which are administered by Institutional Advancement. Classification and processing of these awards is sometimes complex and requires the exercise of informed judgment, particularly in the many cases where the nature of an award is not immediately clear. The following discussion is intended to provide guidance on defining and distinguishing between sponsored projects and gifts.
Sponsored programs are defined as those activities, sponsored in whole or in part, by sources external to the University for which there is an expectation (implied or specifically stated) on the part of the sponsor for performance, deliverable or outcome. Sponsored projects enhance and expand the educational opportunities available to undergraduate and graduate students at the University, permit research, scholarly inquiry, and the development of new knowledge, contribute to the academic achievement and stature of the institution, and assist the University in fulfilling its responsibilities to the state and the nation. Sponsored programs are awarded through various mechanisms: grants, contracts, and cooperative agreements, and/or other legally binding means of transfer. The University may receive sponsored project funding for any of the key areas of its mission, i.e., research, instruction, or public service.
A research gift is defined as a flexible, irrevocable award of money, equipment, or other property of value given to the University by a donor who wishes to support the research of a faculty member or group of faculty members, but who expects nothing of significant value in return, other than the recognition and disposition of the gift in accordance with the donor’s wishes. There are few or no conditions specified, there is no commitment of direct project personnel effort to accomplish the research, and no responsibility to provide the donor a product, service, technical or scientific report or intellectual property rights.
It is important to properly identify the differences between sponsored project funds and research gifts so that the funds are administered in accordance with University procedures. All funds provided by U.S. Government agencies, at either the federal, state, or local level, in support of UH activities, are treated as sponsored project funding. Government funds are not treated as gifts. Funding from voluntary health organizations or associations, such as the American Cancer Society or American Heart Association are also treated as sponsored projects. In cases where funding is being provided by corporations, foundations or other non- government sources, the distinction between research gifts and sponsored projects will be made based on the nature of the proposal, statement of work, and/or the terms of the agreement, taking into consideration the intent of the sponsor. UH has developed guidance for making this distinction and this document, titled University of Houston Guidelines for Gifts, Grants and Contracts, is attached at the end of this document. The definitions in this document are based primarily on guidelines developed by the Governmental Accounting Standards Board, The National Council of University Research Administrators and the National Association of College and University Business Officers. In those cases where there is a question as to whether an activity for which external funding is sought constitutes a sponsored activity or a gift, the Office of Contracts and Grants and the Office of University Advancement will work in concert to determine what procedures should apply.
The following information further clarifies definitions relating to sponsored activities:
Grants are a type of financial assistance awarded to an organization for the conduct of research or other program as specified in an approved proposal. The proposal typically defines a scope of work or performance. The sponsor makes an award, which may be based upon a competitive review, and establishes terms and conditions for performance. These terms may be generally stated, as in many federal awards, or may specifically describe allowable and unallowable activities and/or costs. Unless prohibited by sponsor regulations, performance under grant awards may be modified to adjust to project conditions. Such modifications may be approved internally by the University or may require sponsor authorization.
A contract is a legally binding arrangement or performance agreement for carrying out a specific service or procuring a product that entails specific obligations for both sponsor and recipient. Contracts are a more restrictive mechanism than are grants, and may specify penalties for non-performance. A fixed cost or fee for service agreement is one in which one party pays the other party a predetermined price regardless of actual costs for services rendered. A cost-reimbursement agreement is one in which the sponsor pays for the full costs incurred in the conduct of the work up to an agreed-upon amount, and for which invoices containing backup information of costs incurred are generally required. Contracts may be awarded for research assessment, specific work performance, instruction, training, and/or similar activities. Generally contracts will define specific details of the legal relationship between the participating entities and will incorporate the description and cost of the work to be performed either as a legally binding attachment or embedded in the contract document. A purchase order may be a form of contract.
A cooperative agreement is an award similar to a grant, but in which the sponsor’s staff may be actively involved in proposal preparation, and anticipates having substantial involvement in research activities once the award has been made.
Non-teaching consulting services
Faculty members may consult by addressing the technical and professional needs of communities, groups, agencies, businesses and other entities outside the University. These arrangements are governed by UHS Board of Regents Policy 49.02. Consulting services defined by this policy are not sponsored programs unless the faculty member is using UH facilities to conduct the project and/or the University is the direct recipient of funds and is liable for the conduct of the activity performed by the University employee. In this instance, it is essential that these contracts be managed as sponsored programs, in that they involve coordination of faculty time and effort reporting, and determination of appropriate overload policy interpretation.
Training, workshops, non-credit teaching functions
Proposals for conducting training/workshops/non-credit teaching functions are considered to be “sponsored programs” if they meet any of the criteria stated in the University of Houston Guidelines for Gifts, Grants and Contracts. In addition to these criteria, these activities are considered “sponsored programs” if:
- The sponsor provides a single payment in support of a collective activity (as opposed to fees charged to individuals to participate in such events)
- The sponsor is a federal or state entity
- The sponsor awards indirect/administrative costs as a part of the budget
- The activities are specifically academic in nature, as opposed to provision of auxiliary services.
- Matching funds are either required or promised
- Faculty time is devoted to the activity.
An internship is an externally supported opportunity for an individual (student or faculty member) to engage in an extended learning activity. If the University is the recipient of internship funds, and the funding mechanism contains specific details concerning the obligation of the institution and/or the intern, the activity is treated as a sponsored program and must be internally approved and submitted by OCG.
Misrepresenting the true nature of sponsored funding can create serious financial and legal liabilities for the University and individual faculty and staff. The classification of funding as a gift does not alter the legal risks and accountability associated with research, nor does it alter the treatment of research for cost accounting purposes. If they apply to a particular project, research compliance issues such as human subjects, animal research, radiation, safety, etc. are not deleted by classifying the award funds as a gift. In addition, University conflict of interest rules apply regardless of whether research is funded by a gift or a grant. The gift classification may not be used to bypass the conflict of interest review process, the need to comply with regulatory issues, or the obligation to pay indirect cost. It is for this reason that awards with these compliance issues are treated as sponsored projects.
Normally a gift transaction gives no opportunity to obtain indemnification from the provider of the funds for liability that UH might incur in performing the research. It also gives no opportunity to clarify key issues regarding the allocation of rights, and there is no opportunity to limit risks arising from alleged “side agreements” and informal understandings. Normally a true gift transaction would not result in the donor’s acquisition of any intellectual property rights. Gift transactions should be closely scrutinized to ensure that the institution’s rights are not limited and that there is no limitation on the institution’s publication rights.
The classification of sponsored projects and gifts has implications for UH’s F&A base. In general, a true gift transaction would not impact the organized research base by virtue of the gift arrangement. If, however, the agreement is not a gift but is sponsored activity, then the MTDC must be accounted for under the appropriate F&A base. Gift funds used for research and related activities will impact either the instructional or organized research F&A base. Departmental research is considered part of the instruction function. University research is combined with sponsored research under the function of organized research. A pattern of “hiding” true organized research under gift accounts could give rise to an allegation of financial misconduct or a charge of a lack of consistency in allocating costs incurred for the same purpose.
Proper classification and processing of external funds assures the University’s ability to comply with any terms specified by the sponsor or donor, meet reporting requirements, properly recover its costs, both direct and indirect, and facilitate acceptable levels of accountability and stewardship for these funds.
UH Guidelines for Gifts, Grants and Contracts
Vice Chancellor/Vice President for Research, Vice Chancellor/Vice President University Advancement, Office of Contracts and Grants, Office of Corporate and Foundation Relations, Office of Advancement Services
These guidelines were developed at the direction of, and have been approved by the Vice Chancellor/Vice President for Research, the Vice Chancellor/Vice President for University Advancement, the Office of Contracts and Grants (OCG), the Office of Corporate and Foundation Relations (CFR), and the Office of Advancement Services (OAS). They clarify the nature of any project receiving external support (including research, scholarly work, training, workshops, and services) that has defined performance requirements (hereinafter referred to as Sponsored Projects). For purposes of these guidelines, a gift is the voluntary provision of external support by a donor to the University, without any requirement for receipt of any economic or other tangible benefit in return.
Proper classification and processing of external funds (i.e., gifts, grants, and contracts) assures the University's ability to comply with any terms specified by the sponsor/donor, meet reporting requirements, properly recover its costs – both direct and indirect – and facilitate acceptable levels of accountability and stewardship for these funds. Classification and processing of these awards is sometimes complex and requires the exercise of informed judgment, particularly in the many cases where the nature of an award is not immediately clear.
The University defines a sponsored project to be any externally funded research, training, public service, or scholarly activity that has a defined scope of work or set of objectives, which provides a basis for sponsor expectations. Sponsored projects enhance and expand the educational opportunities available to undergraduate and graduate students at the University, permit research, scholarly inquiry, and the development of new knowledge, contribute to the academic achievement and stature of the institution, and assist the University in fulfilling its responsibilities to the state and the nation.
The following list of characteristics is provided as a means of further clarifying how external funds from non-governmental entities will be classified and processed at the University of Houston. The existence of one factor alone may not be determinative of whether projects should be channeled through OCG or CFR. Multiple factors should be considered in order to decide whether a sponsored project exists and therefore would be processed through OCG according to procedures set forth by that office.
All sponsored projects – proposals, contracts, or grants, regardless of funding source – must be processed through the Office of Contracts and Grants in order to assure compliance with University of Houston policies and sponsor requirements. Activities generally considered to be sponsored projects may include any or all of the following characteristics:
- Sponsor requires specific deliverables (e.g., final technical or narrative report, evaluation, technical assistance, training). This does not include minimal requirements generally related to required donor pledge payments and the University's commitment to effectuate the donor's intent (i.e., stewardship).
- Sponsor generally, although not always, requires return of unexpended funds.
- Award designates a sponsor employee (agent) as project technical monitor, as opposed to designating a contact person to improve communications.
- Award contains intellectual property rights provisions and/or technology transfer.
- Award restricts or monitors publications or use of results.
- Award payments are contingent upon programmatic or fiscal reporting (e.g., specific milestones, invoices).
- Award includes "boilerplate" terms and conditions imposed by the project sponsor or negotiated with the sponsor by the University.
- Award requires protection of sponsor and confidential information.
- Award contains an itemized budget, which requires sponsor approval to modify and/or that is subject to the provisions of federal cost accounting standards.
- Request for funding will be used to fulfill a matching or cost sharing commitment on another sponsored project or requires a matching, cost sharing or other financial commitment from the University.
- The project is linked to other sponsored research projects or contracts being conducted by faculty/researchers.
- Project involves the use of human subjects, vertebrate animals, radioisotopes on humans, radioactive materials, recombinant DNA, human body substances, etiologic agents or proprietary materials.
- Project involves foreign collaborators or is subject to Export Control policies.
Gifts, Research Gifts and Unrestricted Private Grants
Gifts, research gifts and unrestricted private grants must be processed by the Donor and Alumni Records Department in the Office Advancement Services in order to comply with Gift Acceptance and Disposition Policy at the University of Houston. Activities supported by a donor that are generally not considered sponsored projects may include the following characteristics:
- Gift supports an unrestricted purpose or such activities as endowments (e.g., endowed chairs, professorships), capital projects (e.g., construction or renovation, equipment), or general research support.
- Gift contains only minimal requirements, generally relating to required donor pledge payments and the University's commitment to effectuate the donor's intent (i.e., stewardship).
- Gift requires only minimal reporting to the donor in the form of a general statement of how funds were used. Such confirmation may not be a technical or a formal financial report of any detail. However, if publications result, copies may be shared. In addition, confirmation of proper utilization of funds would be allowed such as in a "stewardship report" or “annual endowment report.” For example, if a company provided funds to help students build a solar-powered vehicle for a national student competition, the PI could report back how the students did in the competition, but not be required to provide detailed technical information including raw data.
- Gifts are generally irrevocable.
- Unrestricted grants are awards not identified by the sponsors as specifically being a gift or charitable contribution; however, these awards have no strings attached - no statement of work, no deliverables such as technical reports, no intellectual property (IP) terms, etc.
- Research gifts may specify a purpose, but do not require specific deliverables and do not exhibit other aforementioned characteristics of a sponsored project. For proper stewardship of these awards, a separate restricted cost center should be established to deposit and manage these funds.
The following offices will work together to determine a project's classification when it includes characteristics that, taken alone, will not necessarily determine a project's classification:
- The Office of Contracts and Grants
- The Office of Advancement Services
- The Corporate and Foundation Relations and Executive Gifts