From the Professional Staff

The “Fine Print” of A Grant Agreement

By Steven Green on January 31st, 2014

On one of my first days of Negotiations class at Goizueta Business School, Professor Earl Hill explained that the negotiation of terms was often more important than bargaining for price.  Often, a car buyer will invest a multitude of hours doing research on the exact make, model, and even color of the vehicle to purchase.  After visiting multiple dealerships, comparing Blue Book prices and even figuring out the appropriate trade-in value of an old vehicle, the buyer will enter the dealership ready to pay a firmly fixed price. The terms, including the financing, closing costs, documentation fee, and even timing of the sale, may not even enter into the consumer’s mindset, even though they greatly influence the overall expense incurred.

How does this example, you are probably wondering, relate to a grantmaking foundation and a grantee that both want to achieve positive outcomes? The “fine print” matters—and can be the difference between success and failure.

One way the Jim Joseph Foundation tries to ensure grantee success is by sending draft grant agreements to grantees with explicit terms and conditions for grant payments. In the grant agreement, the goals of the grant itself are established by the Foundation and, once established, are not to be altered.  But the benchmarks of the grant, however, are determined by the grantee. Only after the agreement has been reviewed and expectations are understood is the document finalized. The requested deliverables in the agreement generally include:

  • Status update on the organization and program being funded
  • Progress on stated objectives and measures of success that were previously submitted
  • Annual or biannual budget reports and financial information (depending on the organization)
  • Projected dates and payment amounts

Fundamentally, the Foundation and grantee must reach a shared understanding on numerous items in order to agree upon terms and conditions of the grant award and payments. This understanding includes: steps and timeline for grant implementation; funds needed to support these implementation steps; monitoring activities; evaluation, and the expense associated with it; among other items.

The wording, timing, and even the breakdown of payments are “on the table” for discussion.  Wording can be a problem beyond semantics and nuance and can be objectionable if not addressed beforehand.  Timing can be an issue if grant reports and budgets are required and the organization lacks the means internally to prepare budget reports on a scheduled and timely basis; an alternative is to move these requirements to a subsequent payment to accommodate the grantee’s internal reporting and budget cycle.

The most pressing concern for a grantee invariably arises around cash flow.  Ideally, the Foundation’s due diligence on an organization’s proposed plans for implementation of the grant—and subsequent approval of those plans—indicates that the organization will be able to responsibly manage the grant funding. At the same time, the Foundation realizes that the realities organizations often confront with tight budgets necessitates that the Foundation remain open throughout any grant period to adjust the timing of scheduled grant payments. One step the Foundation proactively takes is to pay for certain aspects of a grant’s implementation prospectively on anticipated grant expenses to provide the grantee “cash-in-hand” to meet its financial obligations.

In the funder/grantee conversation to finalize a grant’s terms, the Foundation communicates its respect for the grantee doing the work of grant implementation, while noting that the Foundation does expect regular reporting to the Foundation.  We are explicit about making grant payments based on performance as stipulated in the grant payment terms and conditions. Clear, continuous communication and shared understanding are critical to a successful grant period and, subsequently, positive outcomes.

I have experienced both sides of this funder/grantee equation. When I was a grant seeker, the closing of a major gift was the coup de grâce, the capstone of the annual campaign, and ultimately an endgame. I worked with my team to cultivate a passionate and caring Board of Directors and cadre of supporters, spent hours mining the pages of GuideStar and Foundation Center for information on individual and foundation giving, and participated in community outreach and events on a daily basis.  Now, working for a grantmaking foundation, I am more keenly aware of the importance of clarifying terms of a grant agreement once a grant commitment is made.

This fine print deeply influences organizations’ activities, outcomes, and even their organizational well-being.  As a grant develops, both funder and grantee can and should be in ongoing communication with each other monitoring goals and benchmarks and making adjustments as necessary.  While the grant dollar amount often receives the bulk of attention, both parties will be better positioned to succeed by focusing on all components of a grant agreement.

 

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The Jim Joseph Foundation invests in promising Jewish education grant initiatives. We partner with effective organizations that seek to inspire young people to discover the joy of living vibrant Jewish lives.