If I send a $25 check to the local animal shelter, that could be considered a “grant” from me, but we generally think of grants as coming from institutions—whether foundations, corporations, or government agencies. Webster’s defines the act of making a grant as “giving to a petitioner, often a subordinate or inferior, something sought that could be withheld.” This is contrasted with award, which refers to “the granting of something merited or earned.”

Historically, the word grant has been used in a wide variety of contexts, but in every instance, an exchange takes place. Not only does someone give away something of value, but the giver expects the recipient of the grant to do something in return. For example, when England’s King Charles made land grants to the American colonists, he expected them to settle and develop the land, in turn producing tax income for the Crown. And when Jack in Chapter 1 received an extra $100 spending money, his parents expected him to stay in school and study.

The roots of modern philanthropy build on the idea of an exchange. When your charity receives a grant, it promises to perform the actions described in the proposal. Many foundations will send you a contract along with the award letter that makes clear the obligations you incur by accepting the grant—usually stated simply as doing everything in your proposal. This is a very good reason to ensure your organization can actually do everything you say it will do in your proposal. Exaggerated claims or inflated (or deflated) budgets won’t help you in the end.

Today, governments recognize that the practice of philanthropy is good for everyone, and therefore give a privileged status to organizations formed for charitable purposes. In many countries, the United States included, governments exempt money given for charitable purposes from taxation.