Philanthropy is designed to make the world a better place, but the angel is in the details. 

The relationship between donors and organizations, whether it’s a major medical institution or a small local nonprofit, are never adversarial …until they are. One of the best ways to ensure satisfaction is to clarify expectations and build a tight and clearly written agreement around a grant. 

There’s no central data-base tracking litigation between grant makers and grant receivers, but common knowledge is that lawsuits are few and far between. Even so, consequences for poorly-thought-through grant agreements can be pernicious and include family or community infighting, reputational disparagement, and disillusionment with the art and science of giving. 

Many donors and tax advisors focus on minimum annual distributions and look to move money fast but there are multiple ways to meet distribution requirements. Structured agreements are a blueprint for the future that help both donors and grantees navigate expectations. 

Using a corporate contract template for grants can be both off-putting and insufficient. But, yes, there needs to be a set of standard clauses like terms, termination, arbitration, and indemnification (which is typically mutual) but there’s much more needed. 

Here are three scenarios (there are many more) about what can go wrong: 

1. A donor family funds a lab at a university that costs $1 million. It’s a meaningful donation for the family and they visit it periodically and talk about it with pride. The director who led the lab retires and a new director comes in with different needs and purposes. Within five years of the gift the lab is gone, and the family name has been removed – and they found out when they brought their granddaughter to see it. No one ever called them. 
2. A couple funded a new engineering center at a day school their daughter attended. They wanted to give back to the school that supported their child and made a $3 million dollar donation on the recommendation of the Head of School. After five years there isn’t a plan or budget, and the center isn’t built. Funding paid in full has been generating interest that is not designated to the project. 
3. Through their foundation, a family funds a new program at a cost of $500 thousand dollars, designed to educate at-risk youth over a ten-year period in the community where they built their business. After three years the organization moves the program to another site because it was not sustainable where it was. The family wants their money back. 

Engaging clients in building a detailed outline that includes: 

• The client’s understanding and goals for the near- and long-term expectations
• The organization’s goals and capacity to carry out the grant
• Terms that describe the triggers for distribution meaning time and accomplishments in advance of future payments 
• Metrics for evaluating the grant
• Details about communications expectations both internally and publicly 
• Contingency specifications, especially in the case of capital projects, that might include right of first refusal 

Consider developing a plain language template for private foundation clients that can be adjusted to meet the criteria and expectations, in terms of time, funding distributions, and short- and long-term expectations of the investment, and to support your clients in finding their better angels.