To be classed as a donation or grant, a receipt of funds or assets must have been freely given, with no consequent obligation on the University to provide goods or services to the benefit of the donor.
Income is often described as a 'donation' when in reality, if you look a little deeper into where it has come from and why you may find that it is not. Therefore, in deciding whether income may be treated as donation income, Departments need:
- to identify whether the funded activity is research which needs to be processed through the Research Operations Office (ROO); and
- whether the funded activity creates a trading relationship with the funder.
What income should be processed through ROO?
It is not always easy to differentiate a donation from a research grant. As a general rule, a research grant will be for a specific piece of research activity e.g. to examine the relationship between shark migration and global warming, whereas a donation will be much more general e.g. to fund the research and other activities of Professor Plum.
Additionally a research grant:
- will typically have been subject to an application process or detailed proposal;
- may have been won competitively;
- is likely to have been subject to peer review or other vetting procedure to evaluate the research proposal;
- will have a specific definition of the research to be undertaken;
- is likely to specify rights and obligations in respect of intellectual property and publication;
- will normally require a report;
- is likely to have conditions specifying what kind of expenditure is allowed to be spent against the grant.
What makes income a trading activity?
Trading income is income earned by a department from either another university department or an external customer, for the provision of goods or services, or for the use of space or facilities. Therefore, for the income to be a donation it is important to ensure that a funder, or provider of a grant, receives nothing in return.
The provision of regular reports to the funder of how their donation is being invested/used does not in itself constitute a supply of services. Similarly, it is acceptable for the donor to be recognised for their gift e.g. a small plaque mounted on a wall, or a building named after them. However if the donor's logo is on constant display, or other benefits are received, then the income starts to move away from that of a donation and into the region of sponsorship/advertising.