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The ‘Fine Print’ of a Grant Agreement

February 07, 2014

(Steven Green is the director of grants management and administration for the Jim Joseph Foundation, which seeks to foster compelling, effective Jewish learning experiences for young Jews in the United States. In his previous post, he looked at how the budget review process can be used to strengthen a foundation-grantee partnership.)

Headshot_steven_greenOn one of my first days in 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 he or she plans 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 price that is firmly fixed in his or her mind. The terms of the sale, including the financing, closing costs, documentation fee, and timing, may not figure into the customer's mindset, even though they greatly influence the overall cost of the vehicle.

How does this example, you're probably wondering, relate to a grantmaking foundation and a grantee that both want to achieve positive outcomes? Think of it this way: 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 that include 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 altered. But the benchmarks of the grant 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); and
  • projected dates and payment amounts.

Fundamentally, the foundation and grantee must reach a shared understanding on numerous items in order to agree on the terms and conditions of a grant award and payments. This understanding includes steps and a timeline for grant implementation; funds needed to support the implementation steps; monitoring activities; evaluation (and the expense associated with it); and 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, our due diligence around 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 a grant. At the same time, we realize that the realities associated with the typical nonprofit budget necessitate that we remain open throughout the grant period to adjusting the timing of scheduled grant payments. One step the Jim Joseph Foundation proactively takes is to pay for certain aspects of a grant's implementation prospectively, thereby providing the grantee with "cash-in-hand" to help meet its short-term obligations.

When in discussion with a grantee to finalize a grant's terms, we always make sure to communicate our respect for the grantee doing the actual work, while noting that we expect reporting from the grantee on a regular basis. In addition, we are explicit about our intention to make grant payments based on performance as stipulated in the terms and conditions of the grant. Clear, continuous communication and shared understanding are critical to a successful grant and positive outcomes.

I have experienced both sides of the funder/grantee equation. When I was a grantseeker, closing a major gift or grant was the ne plus ultra, the capstone of all our hard work. I worked with my team to cultivate a passionate and caring board of directors and a circle of supporters, spent hours mining the sites of GuideStar and the Foundation Center for information on individual and foundation giving, and participated in community outreach and fundraising events on an almost-daily basis. Now, working for a grantmaking foundation, I am more keenly aware of the importance of clarifying the terms of a grant agreement once a commitment is made.

Whether you realize it or not, the fine print deeply influences an organization's activities, outcomes, and even its organizational well-being. As a grant is spent, funder and grantee can and should be in ongoing communication with each other about goals, benchmarks, and course corrections as needed. While the dollar amount of the grant often receives the most attention, both parties will find themselves in a better position to succeed by focusing on every component of a grant agreement.

-- Steven Green

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