Electronic Signatures: The Last Hurdle to Paperless Grantmaking

Before I type another word, I need to make this disclaimer – I am not a lawyer, and before you start accepting or using electronic signatures in your organization’s forms, you must consult with an attorney.  Electronic signatures, like handwritten ones, come in many forms; for a legal definition, see the Electronic Signatures Act (Public Law No: 106-229).  Some organizations accept documents that have been signed, scanned, and submitted as attachments to an email.  Others allow the simple click of a button, and still others request that a name be typed into a text box in an online form.  Over time, using and accepting electronic signatures will save you time and money, however, the first important step is to take the time to develop your policies and forms with legal guidance to ensure the migration to electronic signatures goes smoothly.  An attorney will be able to guide you through the intricacies of your local laws and the requirements for implementing electronic signatures. 

As grantmakers continue to explore ways to streamline their processes and effectively measure impact, the move to online systems is a natural evolution.  One stumbling block in the movement to online grantmaking has been the inability to verify that the appropriate people within grantee organizations have reviewed and approved their proposals prior to submission and maintain a secure environment for electronically signing legally binding documents.  Contrary to these concerns, electronic signatures can be used in a tailored manner to give funders the assurance that they require. 

As mentioned above, legal counsel will be able to better explain to your organization what is needed to accept electronic signatures, but here are two best practices that were found.  First, whatever form you are working with needs to be assigned to an individual, and there must be a way to authenticate the applicant’s identity.  Many online application systems use a portal that requires applicants to create an account (or use their email address) and a password.  This establishes an authentication credential for subsequent log-ins. 

Second, it is important to make clear that the electronic signature certifies both that all information is accurate, and that the signatory acknowledges it as the equivalent to his/her handwritten signature.  In particular it must be emphasized that, should the applicant receive a grant, the grant notification letter, whether signed and countersigned electronically or in ink, is a legally binding contract.

Many grantmakers require that some or all documents be signed by someone holding a particular position in the applicant’s/grantee’s organization (such as the board chair or CEO).  If your organization has such a requirement, it must be spelled out in any forms you ask the grantee to submit; and you should consider sending the forms to both the required signatory and the project contact.

There are often different comfort levels with electronic signatures within grantmaking organizations.  For example, at one large foundation, the president’s signature is automatically inserted (as a gif file) when he approves a grant. This saves paper, and more importantly, the president’s time. The key is that the foundation’s system is secure so that only the president has access to his account.  However, at the same time, the foundation doesn’t accept electronic countersignatures on grant documents as they aren’t able to verify that their grantees maintain the same levels of control over electronic signature usage.

Here at The Energy Foundation we use “I approve” buttons for all internal approvals, since the accounts are secure, but issue hard copies of grant agreements with the signatory’s “wet” signature.  While the foundation will accept an electronic copy of a “wet” signature to release payment, it still requires a signed hard copy for the files.

The time, money, and paper saved can be significant.  For example, imagine that the standard grant application is ten pages long, attachments are another 20, board write-ups are five, and the grant agreement is another five.  If you receive 100 grant applications (and approve all of them) and require prospective grantees to submit two copies of everything, you are creating 8,000 pieces of paper (not to mention some very thick grant files).  Migrating to a paperless (or even partially electronic) system saves paper, decreases the time it takes to circulate information (especially for foundations with multiple offices), and can reduce the time it takes to share documents with your grantees (emailed grant agreements arrive in minutes; snail mail takes days).

Switching to electronic signatures offers increased freedom to grantmakers to do everything from expediting their processes to accepting online applications and collecting grant agreements.  The process of going paperless will take time, and it is crucial to create buy-in from all staff and (for larger foundations) departments involved in the process.  Consulting with legal counsel will also help protect your organization.  Even though the process may seem cumbersome while you are going through it, your hard work will pay off and the end result will be worthwhile.