INSTITUTIONAL GRANTS
OVERVIEW OF GRANT TERMS AND CONDITIONS
INTRODUCTION
If a grant is approved, the grantee will receive a binding legal document outlining the terms and conditions of the grant, i.e., the “Grant Agreement.” Grantee organizations are required to comply with these terms. Grantees are welcome to inquire about any clause(s) that elicit(s) questions or concerns. Below are general descriptions of terms and conditions in the grant agreement. You can see a sample of the full agreement here.
STANDARD LANGUAGE IN ALL GRANT AGREEMENTS
TAX STATUS
Tinker Foundation generally funds public charities classified by the United States Internal Revenue Service (IRS) under Internal Revue Code 501(c)(3) as either a Section 509(a)(1) or 509(a)(2). In making a grant, the Foundation needs to determine whether an organization is tax exempt under Section 501(c)(3) of the Internal Revenue Code. If an organization’s exempt status is revoked or changed by the Internal Revenue Service, that organization is required to notify the Foundation immediately.
International charities (or non-501(c)(3) organizations) will be stipulated to follow the procedures for expenditure responsibility described below.
USE OF GRANT FUNDS
Charitable Purposes
All payments with respect to the grant will be used by the grantee only for purposes that are charitable within the meaning of Section 501(c)(3) of the U.S. Internal Revenue Code.
Approved Project Proposal and Budget
Grant funds may be used only in accordance with the project proposal and budget approved by the Foundation. Grant funds cannot be used as collateral, to offset other financial obligations (including interest payments on lines of credit, and securing or servicing debt), or to meet cash flow or general operating expenses that are unrelated to the purpose of the grant proposal as defined in the grant agreement letter.
GRANT PAYMENTS
If the grant will be paid in multiple installments, specified in the Foundation’s grant agreement, or as modified in subsequent correspondence, the following will be applicable. The payment of each installment is contingent upon (i) grantee’s progress towards achievement of the grant purpose as determined in our sole discretion, (ii) grantee’s compliance with the terms of this agreement, including without limitation timely submission of reports, and (iii) there having been no material changes in grantee’s operations, staffing, funding, structure or tax status that would adversely affect grantee’s ability to carry out or accomplish the grant purpose.
REPAYMENT OF FUNDS
Grantee will promptly repay any grant funds not used for the grant purpose or otherwise in accordance with this agreement.
RECORDKEEPING
Grantees are required to retain account records, detailing all receipts and expenditures, for a minimum of four years following submission of the final grant report. The Foundation reserves the right to conduct on- and offsite audits of records related to the use of grant funds. In cases where grantee spending is not consistent with the Foundation’s award, the Foundation reserves the right to request the return of awarded funds, disallow expenditures, or take other remedial actions.
MONITORING AND EVALUATION
Foundation may monitor and evaluate grant activities. This may include, for example, visits from Foundation personnel, discussing the project and its progress with grantee’s personnel, and reviewing financial and other records and materials connected with the activities financed by this grant. The grantee agrees to cooperate with the Foundation and to provide any information reasonably requested by the Foundation.
PROHIBITED ACTIVITIES
Direct/Indirect Lobbying, Propaganda, etc.
Grantees will not use any amounts distributed to grantee nor any income from the grant to carry on propaganda, direct or indirect lobbying, or otherwise to attempt to influence or to influence the outcome of any specific public election or to carry on, directly or indirectly, any partisan voter registration drive. Please see Overview of U.S. Lobbying and Political Campaigning Rules for Grantees for additional guidance on lobbying definitions.
Supporting Violence/Terrorism
Funds may not be used to support violence or terrorism-related activity. For a detailed list of restrictions on grant funds, grantees should refer to the grant agreement. Grantees are also expected to maintain controls to see that use of grant funds complies with the rules and guidance promulgated by the United States Office of Foreign Assets Control.
ACKNOWLEDGEMENT / USE OF NAME
Grantee will acknowledge the Foundation’s funding in an appropriate manner in all publications, press releases, talks, interviews, audio recordings, films/video, and other media and activities related to or resulting from grant-funded activities.
Any other use of the Foundation’s name or logo is subject to the prior written approval of the Foundation.
The Foundation may include information relating to the grant, including the name of grantee, on its website or in periodic public reports, press releases, or other public materials.
RIGHT TO DISCONTINUE FUNDING, RESCIND PAYMENTS, AND REQUIRE RETURN OF UNSPENT FUNDS
The Foundation reserves the right to modify or terminate the grant or to withhold future grant distributions at any time if it determines that grantee has failed to comply with any term of the agreement or is not able to carry out or accomplish the grant purpose. The Foundation may also modify or terminate the grant if it determines that continuing grant payments would expose the Foundation to liability or adverse tax consequences, or otherwise be inconsistent with the mission and values of the Foundation. In the event of termination in accordance with this section, the grantee must promptly return to the Foundation any unexpended grant funds.
NOTIFICATION
Notice of Significant Organizational or Project Changes
Grantees are expected to inform the Foundation promptly of any significant changes in project staffing, organizational leadership, scheduling, or budgeting, when such changes occur during the grant period. Grantees are also expected to inform the Foundation of notification by another significant funder that the funder is ceasing further funding.
Notice of Tax Status or Change
Grantees are expected to inform the Foundation promptly if there is any change in grantee’s status as a charitable organization under the laws of the grantee’s jurisdiction.
LICENSING
Unless otherwise noted in the grant agreement, the grantee organization retains all copyright interests to the work product created as a result of the grant. However, the grantee grants to the Foundation an irrevocable, non-exclusive, royalty-free license to use, reproduce and publicly display all publications, studies, research, and similar works provided by the grantee to the Foundation in connection with grant-funded activities (together, the “works”) solely for the Foundation’s charitable purposes (for example, to highlight the grantee’s grant-funded work on the Foundation’s website).
INDEMNIFICATION
Grantee organizations will be asked in the agreement to defend, indemnify and hold harmless the Tinker Foundation, its Directors, officers, employees, and agents.
A CLOSER LOOK AT U.S. IRS GUIDELINES FOR LOBBYING AND POLITICAL CAMPAIGNING
U.S. federal tax law prohibits 501(c)(3) private foundations, such as the Tinker Foundation (the “Foundation”) from conducting lobbying or political campaign activities within the meaning of the U.S. Internal Revenue Code (the “Code”), and the Foundation does not provide funding in support of such lobbying or political campaign activities.
The Foundation may provide support to organizations engaged in other public policy advocacy activities as permitted by law. The Foundation offers the following brief overview of the U.S. rules relating to lobbying and political campaign activities, but note, the rules are complex and technical, and grantees should consult legal counsel to ensure that their activities comply with federal tax laws.
WHAT IS EXPENDITURE RESPONSIBILITY?
Expenditure responsibility is the U.S. federally mandated procedure that a private foundation must follow for any grant made to an organization that is not an Internal Revenue Service (IRS)-recognized public charity. A failure to fulfill this obligation exposes the foundation and its management to potential tax penalties. Expenditure responsibility has five steps:
- Pre-grant inquiry. Before a grant is awarded, the Tinker Foundation will undertake a reasonable investigation of the grantee to ensure that the grantee can perform the charitable activity to be funded. We will collect several organizational documents related to an organization’s basic structure and capacity to track and manage grant funds. The information will help inform the required pre-grant inquiry.
- Written agreement. The grantee must sign a written agreement with the Foundation that sets out specific charitable activities to be accomplished with the funds granted. The agreement must also contain certain limitations, such as prohibiting the use of any of the funds for lobbying. See below for expenditure responsibility grant terms and conditions for specific limitations.
- Separate account. Unless the grantee is another private foundation or private foundation equivalent, the grantee must establish a separate account in its ledger for the funds. Charitable dollars cannot be commingled with noncharitable funds. There is no need for a separate bank account for the funds received from the Foundation. Recipients must exercise standard accounting/bookkeeping procedures to show expenditures, etc. of the funds, such as a separate chart of accounts.
- Regular reports. The grantee must provide regular status reports (narrative and financial) on the expenditure of the funds and the progress made toward fulfilling the charitable purpose for which the funds are granted. At a minimum, for expenditure responsibility grants, we must receive annual narrative and financial reports no later than two (2) months after the close of an organization’s accounting year. If we do not receive the reports when due, the IRS requires us to withhold all future payments (including funds associated with any other outstanding grant) until the reports are received.
- Report to IRS on the tax return. When filing our Form 990-PF tax return in any year in which a payment for an expenditure-responsibility grant is made, the Tinker Foundation will indicate that expenditure responsibility payments were made and must add a schedule to the form with a brief description of each grant indicating the grantee, the amount, the charitable purpose, and the current status of the grant.
EXPENDITURE RESPONSIBILITY SPECIFIC TERMS
The foundation’s grant agreement contains these additional terms and conditions required under U.S. law for expenditure responsibility grants. A sample of the complete agreement can be viewed here.
- Limitation on Use of Grant Funds: Grantees will not undertake any activity for purposes other than those specified in Section 170(c)(2)(B) of the Code (i.e., religious, charitable, scientific, literary or educational purposes, or the prevention of cruelty to children or animals) including an obligation to compensate the foundation for any funds not used for the stated purpose of the grant.
- Diversion of Grant Funds: If grant funds are used for any purposes other than charitable purpose agreed to in the grant agreement, the IRS considers it a “diversion” of grant funds, and the Foundation is required to take all reasonable and appropriate steps to ensure the recovery and restoration of the funds. We are prohibited from making further payments until we have received adequate assurances that no future diversions will occur.
- Segregated Bank Account: Each installment of the grant funds received by the grantee must be maintained in a separate fund dedicated to the charitable purposes described in this letter. Such a separate fund may be either: (1) a physically separate bank account restricted to the described charitable purposes, or (2) a separate bookkeeping account (limited to the described charitable purposes) maintained as part of your financial records.
- Re-Grants: Grantee will not use any amounts distributed to grantee nor any income therefrom to make any grant to an individual for travel, study, or other similar purposes except in compliance with the provisions of Section 4945(d)(3) of the Code or make any grant to any organization except in compliance with the provisions of Section 4945(d)(4) of the Code.
- Recordkeeping: Grantees are required to retain account records, detailing all receipts and expenditure, for a minimum of four (4) years following submission of the final grant report. The Foundation reserves the right to conduct on- and offsite audits of records related to the use of grant funds. In cases where grantee spending is not consistent with the Foundation’s award, the Foundation reserves the right to request the return of awarded funds, disallow expenditures, or take other remedial actions.
- Capital Expenditures: Your organization may not use expenditure responsibility grant funds for capital equipment purchases on any single tangible item that has a useful life of more than one year and a value equal to or greater than $5,000.
- Reporting: At a minimum, for expenditure responsibility grants we must receive annual narrative and financial reports no later than sixty (60) days after the close of your organization’s accounting year. The annual report must cover how grant funds were used, compliance with the grant agreement, the grantee’s progress towards grant purposes, and budget-to-actual comparison of grantee expenditures, as well as any other reporting requirements specified by the foundation in the grant agreement. The annual reports to the foundation should cover only your organization’s most recent fiscal year. The final report to the foundation should cover the entire term of the grant. The due dates for the annual and final expenditure responsibility reports will be documented in the grant agreement. If we do not receive the reports when due, the IRS requires us to withhold all future payments (including funds associated with any other outstanding grant) until the reports are received.
- Lobbying: Your organization may not use expenditure responsibility grant funds for lobbying as defined by the IRS. Please review the Overview of U.S. Lobbying and Political Campaigning Rules for Grantees.
- Return of Unspent Funds: You are required to return any unused funds at the end of the grant period.
- Interest Earned on Grant: For each reporting period, grantees should give an account of how they spent or allocated earned income on grant payments within the approved budget categories or provide a written explanation if no income was earned on awarded funds.