Grants vs. Expenses

Defining Grants

As a sponsored Initiative of Open Collective Foundation, you may distribute grant funds in order to further your work. Examples of grants include:

  • A scholarship or fellowship grant to be used by the individual for study at an educational institution

  • A cash prize or award recognizing an individual's past accomplishment in a particular field

  • A payment to an impoverished individual for food, clothing, housing, transportation, or other necessities

  • A fellowship grant that enables an individual to achieve a specific objective, produce a report or other similar product, or improve or enhance a literary, artistic, musical, scientific, teaching, or other similar capacity, skill, or talent

Grants further your mission indirectly. Rather than carrying out work yourself, or contracting someone to carry out work at your initiative's direction, grant recipients are expected to independently carry out work which supports your own charitable purpose - and therefore supports the charitable purpose of Open Collective Foundation. The results of grantees' work remain their property, whereas the work of a contractor, for example, would usually be the property of the initiative.

Grants vs. Expenses

Grants are not payments for a normal expense, like a good or service. Instead, they are financial gifts from your Initiative to another entity or person that are meant to be used to further your mission.

In contrast to a grant, which primarily benefits the recipient, an expense payment generally benefits the payer organization. Such payments include salaries and wages paid to employees of the organization, and payments made to independents contractors, vendors, and consultants who provide services to the organization.

Let's use software development as an example. Initiatives can provide grants (sometimes called awards or fellowships) to individuals or groups so that they can:

  • Spend a summer learning how to code

  • Work on a software project for a period of time to improve their coding skills

  • Complete a piece of software they they are building

In many cases, a grant is given because the grantor is sympathetic to and supports the work of the grantee, not because the grantor is expecting any sort of financial benefit in return.

In contrast, an expense payment would be used to:

  • Pay summer interns to work on an initiative

  • Take on entry-level work for an initiative

  • Hire developers to develop software for your initiative

Open Collective Foundation automatically provides contractors with the proper tax documentation for expenses paid out through the platform.

The Bottom Line

The following are not grant payments:

  • Payments to independent contractors

  • Salaries, wages, or compensation

  • Payment for goods or services

If a payment furthers your charitable purpose and directly benefits an individual (or their project or organization), it is likely a grant. A payment to an individual who is providing services to or for the benefit of your initiative is likely an expense payment.

~

For more information on submitting a grant/expense: