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Private Foundation Expenditure Responsibility Checklist

Written by: Mark B Weinberg

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Posted about 3 years ago. 3 helpful votes, 0 comments

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NO GRANTS MAY BE MADE TO GROUPS ENGAGED IN TERRORIST ACTIVITY OR ITS SUPPORT

This is not a requirement unique to Private Foundations, but a reminder that such grants would violate the USA Patriot Act and so each grantor foundation must take reasonable steps to avoid making them.

IF THE GRANTEE IS A § 501(c)(3) PUBLIC CHARITY (i.e., described in 509(a)(1), (2) or (3), NO FURTHER MEASURES NEED BE TAKEN.

All grants to public charities (as that term is defined in sections 501(a)(1), (2) and (3) of the Internal Revenue Code of 1986) are free from the Expenditure Responsibility requirements of section 4945(d)(4). However, if the Foundation confers a grant upon a public charity but earmarks that grant to a secondary or subgrantee that is not a public charity, or if the Foundation has reason to know that its grantee will be providing the grant funds to such a subgrantee without exercising expenditure responsibility over that subgrantee, the Foundation should exercise expenditure responsibility, even though the initial grantee is a public charity.

IF THE GRANTEE IS NOT A §501(c)(3) PUBLIC CHARITY - Seven Steps to Follow

The Foundation, in addition to its normal pre-grant inquiries and grant documentation, must do the following: ____(a) FOR EACH YEAR OF SUCH A GRANT, THE FOUNDATION MUST OBTAIN FROM THE GRANTEE A REPORT THAT describes the use of the funds, compliance with the terms of the grant, and the grantee's progress toward achieving the grant purposes.

990PF Submissions

____(b) FOR EACH SUCH GRANT THE FOLLOWING EXPENDITURE RESPONSIBILITY REPORT MUST BE COMPLETED AND SUBMITTED WITH THE 990PF: ____(1) The name and address of the grantee. ____(2) The date and amount of the grant. ____(3) The purpose of the grant. ____(4) The amounts expended by the grantee (based upon the most recent report received from the grantee, as described above in section 2(a)). ____(5) Whether, to the knowledge of the Foundation, the grantee has diverted any portion of the funds (or the income therefrom in the case of an endowment grant) from the purpose of the grant. If so, what actions have been taken to recover grant funds and what has been the result of those actions. ____(6) The dates of any reports received from the grantee.

MOST IMPORTANTLY

(7) In the event there is reason to doubt the accuracy or reliability of the grantee reports submitted under section 2(a) above, and only in such event, the Foundation must verify the grantee's reports and must include in the foundation's records the date and results of the verification of the grantee's reports.

(c) MAINTAIN AS PART OF THE PERMANENT RECORD FOR EACH EXPENDITURE RESPONSIBILITY GRANT THE FOLLOWING:

____(1) A copy of the agreement covering each " expenditure responsibility" grant made during the taxable year. ____(2) A copy of each report, required as described above as item 2(a), received during the taxable year from each grantee on any "expenditure responsibility" grant. ____(3) A copy of each report made by the foundation's personnel or independent auditors of any audits or other investigations made during the taxable year with respect to any "expenditure responsibility" grant.