Research & Cost Accounting

Classification of external support

Rice University receives funding from a variety of external sources. External support may be awarded under a  variety of labels, including: grants, contracts, subcontracts, purchase orders, funded collaboration agreements, consortium agreements, consulting agreements, service agreements, task agreements, and other similar mechanisms. In addition, sponsoring entities, private foundations or donors may use the terms interchangeably in both conversation and in the donative instruments, contributing to the complexity.

These guidelines describes the standards used by Rice University for classifying external support as either a sponsored project or a gift, as well as identifying the appropriate administrative policies for accepting and processing external support. Proper classification of gifts and grants in the accounting records is crucial to ensure the University’s external financial statements are presented accurately and to ensure compliance with applicable laws, regulations, and University policies. These guidelines are established to help differentiate gifts from grants and to create consistency in the treatment of these funds.

Sponsored projects are externally-funded activities in which there is a formal written agreement (i.e., a grant, contract, subaward, or a cooperative agreement) between the University and the sponsor. A sponsored project is a transaction in which there is a specified statement of work with a related, reciprocal transfer of something of value. Sponsors may provide funding, equipment or other tangible items, such as goods or services, for research, training, education programs, analytical services or other rights or goods.

The following lists of characteristics are provided to clarify how external funds from nongovernmental entities will be classified and administered. The intentions of the sponsor must be taken into consideration. The existence of one factor alone may not be determinative. Multiple factors will be considered to decide whether an award is a sponsored project. Sponsored projects normally meet the following criteria:

• All monies originating from a governmental agency (federal, state, or local), aside from student aid, are considered sponsored projects.
• Sponsor requires specific deliverables (i.e., final technical report, evaluation, technical assistance, and training).
• Sponsor requires return of unexpended funds.
• Performance milestones and specified period of performance.
• Award contains an itemized budget, which requires sponsor approval to modify.
• Award contains intellectual property rights provisions.
• Request for funding requires cost sharing or other financial commitment from the University.
• Restrictions on publication of research results.
• Sponsor determines Facilities and Administrative rate.
• Withholding or refunding of the support if the project fails to meet performance requirements or project objectives, including certain research outcomes.
• Initial pricing, expenditures, financial reporting, and/or performance may be subject to external audit.

If an agreement includes terms relating to sponsor rights to licensing and intellectual property, this involves a reciprocal transfer of something of value to the sponsor, requiring the award to be treated as a sponsored project. Rights could include equipment, records, technical reports, theses, dissertations as well as intangible properties including rights to data, copyrights or inventions.

In some cases, external funds received may be, by the terms on which they are provided, in part a gift and in part a sponsored award. In that event, funds received may be allocated between gift and sponsored award, and the corpus of each portion treated differently and appropriately for management, accounting, compliance and oversight purposes.

Gifts are the voluntary contribution of external support by a donor to the University without any requirement of an economic or other tangible benefit in return beyond what any member of the public would receive. No commitment of resources or services is required other than the stated donor restrictions. A gift by definition is given without expectation of anything in return and has no expected time commitment. The primary beneficiary of a gift is the general public and not the donor.

Gifts may be either unrestricted or restricted. A restricted gift does not imply that the donor benefits from the gift nor is there an implied quid pro quo. Restrictions pertain to the permitted use of gift funds rather than providing a result to the donor. Gifts shall normally meet the following criteria:

• Award supports a specific purpose or such activities as research, endowments and capital projects.
• The primary beneficiary of the outcome from the funding will be the general public.
• The external support is irrevocable, providing the gift is used in accordance with any valid use restrictions accepted by the University.
• No goods, services or deliverables are offered to the donor or exchanged in receipt of external support.
• Detailed financial reporting or accounting for use of external support is not generally required, although it is acceptable for the donor to request utilization and impact information.

The table below provides additional guidance on the differences between the types of funding:

Final determination of the classification of external support as a sponsored project or gift is made by the University Controller in consultation with the Office of Sponsored Projects and Research Compliance and Assistant Vice President for Corporate and Foundation Relations.  

Reporting of external support

While some agreements may be issued by donors with restrictions that designate the funds as a grant, they may still be appropriate to be reported as a philanthropic gift by Rice University Corporate and Foundation Relations.