“You’re taking my money away from me!” the Project Director cried. He glared at me with contempt while I explained our institution’s position. A grant for which he was the PI had met all of its programmatic goals a few months early, and a progress report had been sent to the sponsor. Although satisfied with the work done, the sponsor did not want to alter the scope of work on the existing award. This meant our institution was preparing to close out the grant, ending the flow of money. The misconception espoused by the incensed Project Director – that grant funds belong to the individual awardee – endures at all levels of nonprofits and research institutions, and is regarded as common knowledge. Nothing, however, could be further from the truth.
My institution at the time was a large 501c3 research organization with over $100 million in grant revenue per year, and an award portfolio of almost $1 billion. Like most nonprofits and research institutions, we lived and died by our ability to procure grants and maintain a healthy sponsored projects portfolio. Participation in proposal development was mandatory for researchers, and the institution was constantly forecasting workload needs based on submitted, pending, awarded, and closing grants. The culture at my institution encouraged PIs to aim for large, multi-year grants with padded budgets, since these were the most likely to yield an automatic no-cost extension or two. Furthermore, most researchers could only maintain employment through their grant portfolios. Given this environment, it is easy to understand how this PI believed that the grants being awarded to him were his personally.
Accountability to the Donor
Unveiling the truth about grant awards is rather anti-climactic. In the simplest language, grants are non-repayable funds or products, disbursed by a sponsor to a recipient. Most awards support a specific project and require some level of compliance, evaluation, and reporting. Sponsors of all kinds have the money and desire to advance certain agendas, activities, or research areas, but do not have the internal resources to do so. Specifically, foundations and not-for-profit organizations award funds based on a recipient’s ability to further a mission or goal, as well as fulfilling the work outlined in a proposal submission. Although a PI or team submits the proposal, sponsoring organizations do not recognize individuals as entities that can or will share responsibility on the same level. Instead, that burden falls to the organization or institution to which those PIs and teams belong. Moreover, a single person cannot carry out the proposed work or research to the degree that an organization can.
The additional issue of tax liability is enough to dispel the erroneous notions of possession from most researchers. Institutions with the capacity to receive grants are either exempt from IRS tax liability, or they are large enough to absorb said tax liability. Excepting most scholarships, fellowships, and some disaster relief aid, if a grant is awarded and accepted by an individual, that person will be responsible for paying all the tax liabilities associated with it. I will never forget a meeting where I met a handful of faculty members who had been accepting grants awarded to them personally. The IRS had finally caught up with them and was demanding over $50,000 in back taxes, with the penalty for non-payment being time in prison. Had the institution accepted these awards, there would have been no tax liability at all.
Remember, grants are made to institutions, not individuals. Understanding why grants are awarded, and what the researcher’s role is in administering the award is vital for an organization’s ability to survive an Office of Management and Budget (OMB) audit. As Project Directors or PIs, you have been selected by your institution to act as the representative for the award. You have been made accountable for managing the programmatic requirements supplied by the sponsoring organization. While this is an awesome responsibility, it does not make the grant funding yours. Should there be an audit issue down the road, you may end up quite grateful for this fact.
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