I. Grant Inquiries and Declinations 3

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1 THE SUMMIT FOUNDATION Grants Management Procedures February 2012 Table of Contents I. Grant Inquiries and Declinations 3 II. Processing Grant Applications 3 Grant Application Guidelines Application Requirements Grant Renewals Proposal Processing and Due Diligence Grant Files III. Grant Approval 8 Decision Making Bodies for Grant Approval Grant Award Procedure Grant Increase IV. Disbursement of Grant Funds 9 New Grants Multi-Year Grants V. Changes in Grant Terms 10 Budget Revisions No-Cost Extensions Report Deadline Extensions VI. Grant Reporting 11 Notification of Reporting Deadlines Review and Approval of Grantee Reports VII. Closing Grants 12 VIII. Trustee-Generated Grants 12 IX. Founding Chairman & President Discretionary Grants 12 X. Grants to Sponsoring Organizations 13 XI. Grants to Organizations Lacking 501(c)3 Public Charity Status 13 International Groups Introduction Equivalency Determination Expenditure Responsibility XII. Grants Management Records Reconciliation 17

2 XIII. Attachments Sample Declination and Letter 2. Grant Application Guidelines 3. XXX 4. Proposal Review and Control Sheet 5. XXX 6. Guidestar Charity Check Form 7. Council on Foundations, Pension Protection Act of 2006: How Does it Affect Grantmaking? 8. Financial Due Diligence at a Glance 9. Sample Grant Approval Form 10. Sample Grants Review Committee Memo 11. Sample Grant Award Summary Form 12. Sample Award Letters and Terms of the Grant 13. Wire Transfer Request Form and Sample Wire Transfer Request Memo 14. Sample Grant Payment Transmittal Letter 15. Grant Reporting Guidelines 16. Sample Interim Payment Letter 17. Sample Grant Report Review and Approval Form 18. Trustee-Generated Grant Form & Sample Grant Award Letter 19. Sample Founding Chairman and President Discretionary Fund Grant Summary Form & Award Letter 20. Affidavit Packet 21. Affidavit Update Form 22. Pre-Grant Inquiry Form 23. Sample Grant Agreement for Expenditure Responsibility 24. Sample Expenditure Responsibility Award Letters for Each Program 25. Sample Expenditure Responsibility Report, attachment to Form 990PF 26. Schedule of Appropriations and Payments 27. Document Retention Schedule GLOSSARY OF TERMS AA AD CFO ED ER GA OM PO TSF Administrative Assistant Administrative Director Chief Financial Officer Executive Director Expenditure Responsibility Grants Administrator Office Manager Program Officer The Summit Foundation 2 N:\Foundation Grants\Grants Procedures

3 I. GRANT INQUIRIES AND DECLINATIONS The Summit Foundation (TSF) informs the public about its mission, history, funding priorities and application guidelines through a variety of channels: a website ( publications, grantmaker directories, and direct contact--including telephone and communication, conferences, personal interactions, and site visits. Full proposals may be submitted by invitation only. However, any grant seeker may submit a Letter of Inquiry. If an initial inquiry falls outside of the Board-approved grantmaking objectives and priorities, the Grants Administrator (GA) sends a declination or letter (See Attachment 1 for examples). This documentation is kept for one year and then destroyed. If an initial inquiry falls within the Board-approved program priorities, the responsible Program Officer (PO) may carry out further investigation. The PO should contact the organization within one week of the submission to communicate that the request is under review to determine if there is a fit. The PO can delegate the communication to the GA. If the PO determines that a fit with TSF s current interests exists, the inquiring party may be asked to submit a full proposal following TSF s Grant Application Guidelines (Attachment 2). If such a fit does not exist, the PO prepares a declination letter or requests the GA to do so. If a full proposal is requested but not funded, this documentation is treated according to the Document Retention Schedule for Grant Files (Attachment 27). II. PROCESSING GRANT APPLICATIONS Grant Application Guidelines TSF has standard guidelines for grant applications. However, due to the different nature and scope of our grantmaking programs, each program officer may adapt our guidelines to their program s particular needs. This should be done in coordination with the Executive Director (ED). The guidelines can be found electronically at N:\Foundation Grants\Grant Forms\Application Materials - TSF\Program Area Name\Application Guidelines TSF. (Attachment 2) Application Requirements A proposal must include all key elements before review may proceed. Required elements include: Proposal cover letter signed by an authorized officer of the applicant organization Grant Application Summary Sheet Executive Summary Proposal narrative and project budget Key staff bios List of board of directors with their affiliations 501(c)3 Determination Letter (for new applicants only) For foreign applicants lacking a 501(c)3 determination letter, proof of charitable status in their home country is required Applicant s organizational (operating) budget including projected sources of income

4 Applicant s two most recent years of audited financial statements Current year to date financials income statement and balance sheet All required documents, including financial documents, must be in English. However, extenuating circumstances will be evaluated and decisions made on a case by case basis regarding accepting materials in a foreign language. This should be coordinated with the ED and the Chief Financial Officer (CFO). If an organization is unable to provide certain financial information, the PO and CFO will determine, in consultation with the GA, what information must be submitted to perform the appropriate level of due diligence. Large Organizations. For large organizations (e.g., Smithsonian Institution or World Wildlife Fund), instead of itemizing all grants on the organization budget (page 4 of the application), the following information can be entered into the chart: -federal grants and contracts as one lump sum -top 5 private donors individually -other (so that the total in the chart at the bottom matches the total for Grants & Contracts at the top). Grant Renewals. In consultation with the GA, some of the above materials may be waived for grant renewals at the discretion of the PO, and with the CFO in regard to financial information, assuming that the information remains current and the organization is in good standing with the IRS. The GA is responsible for ensuring that each proposal is complete, and works with the PO to obtain missing documents. Proposal Processing Once the PO identifies the applications s/he will accept, the PO, GA, and CFO set mutually acceptable deadlines for review. The following section describes the due diligence timeframe, staff, and tasks involved in each component of the due diligence process: Agree on timetable (PO, CFO, GA) Staff meet to set timeframe and deadlines for application due date, completion of due diligence, submission of materials to decision-making body, review and approval meetings, and payment deadlines. The processing time from application deadline to review by the relevant decision-making body will take approximately 6 weeks, barring any special circumstances. This includes up to 4 weeks for financial and administrative/legal due diligence (note: additional time may be required for foreign applications) and up to 2 weeks for the PO to complete his/her review of the proposal and prepare and deliver staff assessments. The PO typically sends these materials to the decision-making body at least one week prior to its review meeting. The PO should copy the GA and CFO on staff assessments and related materials. 4

5 Invite proposals (PO) The PO or GA s the Application Guidelines TSF (Attachment 2) and communicates the proposal submission deadline to applicants. Proposal Review (PO) The PO reviews the proposal for fit with program objectives and desired impact/results, works with the applicant to make any necessary changes or request additional information. Draft proposals are often submitted before the final deadline. The PO may request revisions at this time and will typically continue the programmatic review throughout the due diligence process. Administrative& Legal Review (GA) The GA receives all required documentation and any optional materials sent with application and follows up with applicant on missing or incomplete documents. GA completes and monitors the Proposal Review and Control Sheet (Attachment 4), which indicates status of review process for each application, confirms the presence of required documents and indicates that all administrative and legal requirements are met, and informs the PO of any staff/trustee affiliations.. The GA creates a proposal file and a pending record in GIFTS, TSF s grants management software. For 501c3 applications, GA confirms IRS non-profit status 501c3 and 509a--using Charity Check ( A copy of the form is included in the file. (see example in Attachment 6) Compliance with the 2006 Pension Protection Act. If the Charity Check form for an applicant shows a 509a3 status, further investigation is required to determine the type of supporting organization (Type 1, 2, or 3), and if it is functionally integrated or not functionally integrated. See Attachment 7 for detailed instructions. If the applicant is a 509a3 Type 3 supporting organization that is not functionally integrated, then TSF must exercise expenditure responsibility in making this grant. In addition, for groups that are 509a3 Type 1, 2, or 3 Functionally Integrated, expenditure responsibility must be used if a disqualified person of TSF controls the supporting organization or a charity the supporting organization supports. This grant cannot be applied to TSF s qualifying distribution. See Section XI for expenditure responsibility procedures. For foreign applicants or those without 501c3 status, the GA ensures the presence of a complete and up-to-date Affidavit for Equivalency (Attachment 21), or required documentation for expenditure responsibility. (For procedures pertaining to applicants that are not 501c3 organizations, see Section XI.) For expenditure responsibility applicants, the GA completes a Pre-Grant Inquiry form which is reviewed and signed by PO (Attachment 22). Section XI provides a detailed description of procedures for expenditure responsibility grants. 5

6 For all applicants, the GA reviews the application budget and narrative for conformance with IRS regulations. The GA ensures that budget and other financial information is correct and complete and works with CFO in securing all necessary information. The GA checks the Terrorist Exclusion List (at and the list of Specially Designated Nationals compiled by the Treasury Department Office of Foreign Assets Control ( to ensure none of the applicant organizations, their board, or staff appear on these watch lists, in accordance with the Voluntary Guidelines issued by the U.S. Department of the Treasury. Compliance with Lobbying Restrictions. The following steps will be taken to ensure compliance with current rules and regulations regarding lobbying restrictions: include language in the proposal instructions advising applicants in advance that TSF does not provide funding for lobbying, political campaigns or individuals. include the approved budget in the grant agreement, which requires signature by an officer of the grantee organization. In the event that the grant applicant has indicated in their proposal and budget that lobbying is contemplated as part of their project, the approved budget should show clearly those line items and indicate what sources of funding, other than TSF, will cover in full that particular activity. include language in the grant agreement, which requires signature by an officer of the grantee organization, that confirms that: o TSF has not designated or earmarked any part of the grant funds for the carrying on of propaganda or attempting to influence legislation. o Use of any of the grant funds to influence the outcome of any specific public election of any candidate for public office or to carry on, directly or indirectly, any other activity that is prohibited to a public charity, is prohibited. (NOTE: expenditure responsibility grant agreements need not include the phrase about activities prohibited for a public charity, because, by definition, the grantee is not a public charity). Financial Review (CFO) CFO reviews the proposal, two prior years audited statements, interim year to date financial information [a balance sheet (or statement of financial position) and an income statement compared to budget (or statement of activities or statement of operations], organizational budget, and project budget to obtain an understanding of the applicant s operations, evaluate the financial health of the organization, and identify potential financial risks to TSF. 6

7 The financial review entails the following: o Review proposal for overall understanding of organization and project. o Review audited financial statements (most recent two years) to obtain an independent verification of the financial health of the organization at the historical balance sheet date. If control audits were performed, review for compliance. o Review interim current year to date financial information to identify any changes in the organization s financial health since the most recent audit. Compare year to date revenue and expense to budget to identify any changes in funding levels. Compare changes in assets and liabilities to most recent audited balance sheet. o Review organizational budget against list of income sources/donors. Determine whether budget appears reasonable based on historical financials & donor support in prior years. Determine organization s ability to adjust spending if budgeted revenue does not materialize. o Review project budget in conjunction with PO to determine whether expenses appear reasonable. Determine TSF s financial risk in project as well as in relation to applicant organization as a whole. The GA follows up directly with applicant for missing information. If financial questions arise, the CFO will first discuss concerns with the PO. Jointly they will decide who follows up with the applicant. The CFO prepares a memo to the file summarizing findings and recommendations, and also provides comments to the PO to be included in the grant recommendation to the relevant grant-approving body, if the CFO determines it is necessary. Due Diligence Sign-Off If due diligence determines that there are outstanding questions to resolve or there is missing information, the PO will disclose such concerns in writing to the relevant grantapproving body. Proposals that are moved forward for approval prior to the successful completion of due diligence are conditionally approved. For a more detailed explanation of why certain financial information is requested and how it is used, see Attachment 8 Financial Due Diligence at a Glance. Exceptions. For certain grants (e.g., less than $10,000 or emergency grants or those to very large organizations) the due diligence may be simplified, if requested by the PO and approved by the ED, and provided that the applicant is a 501(c)3 organization. However, regardless of grant size, all expenditure responsibility and equivalency determination grant applications should follow the complete due diligence above. Grant Files The GA is responsible for maintaining the TSF grant files, which include: Program Grant Files: The grant files are classified as either open (i.e., active) or closed. Open grant files are kept in alphabetical order by organization name. A grant is considered closed when the final report has been received, approved, and acknowledged. Closed 7

8 grants are filed according to fiscal year of the grant approval date and are retained according to the Document Retention Schedule Trustee-Generated Grant Files: Trustee files are organized in alphabetical order by the Trustee s last name, then first name, and are labeled with the Trustee s name and the fiscal year. These files can be found in a separate section in the Foundation program grant files. Declination Files: Declination materials (i.e., the request letter and declination letter/ ) are kept for one year. These materials are organized chronologically by month and by date, with the most recently dated letter at the front of the file. These files are maintained by the GA. Any printed letters are copied to the correspondence file and logged in the correspondence database. Full proposal declination files are retained according to the Document Retention Schedule. III. GRANT APPROVAL Once the due diligence is complete, the PO prepares a written recommendation for funding, to include information on staff/trustee affiliations, and submits it along with relevant materials to the appropriate grant-approving body, typically one week prior to the scheduled grants review meeting or conference call. Decisionmaking Bodies for Grant Approval Program Grants. In 2003, the Board of Trustees approved the following guidelines for levels of approval of program grants: 8 Grants of $25,000 or less are approved by the President under delegated authority from the Board of Trustees. Subsequently, the President delegated authority to the Executive Director to approve grants of $5,000 or less. The total of grants approved by the Executive Director shall not exceed $25,000 in any given year. Grants between $25,001 and $250,000 are approved by the appropriate Grants Review Committee (comprised of a sub-set of Trustees). Generally, the Grant Review Committees convene via conference call. Exceptionally, they convene in person or via . Grants of $250,001 or more are approved by the Board of Trustees, which generally meets twice a year (usually in May and November). Trustee-Generated Grants. Non-family Trustees have the delegated authority to approve discretionary grants to eligible U.S. organizations of their choice. Each non-family Board member may award up to $10,000 per year. All grant recipients must be a 501(c)3 public charity. For grant procedures, see Trustee-Generated Grants, Section VIII. Founding Chairman and Presidential Discretionary Grants. In 2007, the Board of Trustees approved an annual budget for the Founding Chairman and President Discretionary Fund of up to $200,000 per year. The purpose of this discretionary fund is to support projects that advance the Foundation s mission but may fall outside TSF s current programmatic priorities. No approval process is required other than the Founding Chairman and President Discretionary Fund Grant Summary Form signed by either the founding Chairman or President (see example in Attachment 19).

9 Grant Award Procedure Approval documentation. Once a grant is approved, the grant file is sent to the GA for final processing and payment. The GA prepares the Grant Approval Form (see example in Attachment 9), which is signed by the President. The original Grant Approval Form is placed in the grant file. For grant approvals by a Grants Review Committee, the GA prepares a Grants Review Committee Memo (see examples in Attachment 10) documenting the decision. The memo is signed by the President, and a copy is included in each grant file with the Grant Approval Form. The original Grants Review Committee Memo is filed in the Grants Review Committee Memos binder. For grants over $250,000, a copy of the Board meeting minutes documenting the grant approval is placed in the grant file with the Grant Approval Form. The GA completes a Grant Award Summary Form (see example in Attachment 11) detailing the grant terms, which the PO reviews. Award Letters and Terms of the Grant. The GA creates the Award Letter and Terms of the Grant using information from the Grant Award Summary Form and selects the appropriate template general support or project-specific for both the letter and contract. (see examples in Attachment 12). POs may insert additional language or conditions according to the type of grant and complexity of the project. The grant award letter and corresponding terms of the grant should be completed within five days of approval. Once the PO reviews and signs the Award Letter and reviews the Terms of the Grant, the GA sends both to the grantee, along with a copy of TSF s Grant Reporting Guidelines (Attachment 15). For grants to foreign organizations, the GA includes the wire transfer information form (Attachment 13) to collect up-to-date wire transfer instructions from the grantee. The GA provides a copy of the award letter to the AA for the correspondence file. The GA updates GIFTS at each stage of the grant review and approval process. IV. DISBURSEMENT OF GRANT FUNDS New Grants Grant payments are conditional upon receipt of the Terms of the Grant signed by an authorized officer of the grantee organization. To expedite grant payment, the grantee may fax or the signed Terms to the GA. Upon receipt of the signed Terms (and wire transfer information, if applicable), the GA submits a grant payment request to the CFO by forwarding a copy of the award letter and any special instructions, such as wire transfer information. The CFO prepares a check or a request for a wire transfer (Attachment 13), both signed by the ED or the Administrative Director (AD). The CFO forwards the check to the GA, who makes a copy for the grant file. For wire transfers, the CFO will inform the GA when the funds are sent. The GA provides a copy of the payment letter for the correspondence file and log. The GA mails the check and the Grant Payment Transmittal Letter (Attachment 14). For wire transfers, the GA s the grantee informing them of the Wire Transfer. 9

10 The GA places copies of the payment letter and check or wire transfer information in the corresponding grant file. In the event of a check payment for a foreign grant, the documents are generally sent via express mail. The GA updates GIFTS to show that the grant is paid and active. Multi-Year Grants Multi-year grants 1 are structured to allocate payments periodically as specified in the Terms of the Grant. Regardless of the payment schedule, follow-on payments are authorized only after an Interim Report is received and approved. After the PO approves the Interim Report, the PO or GA drafts an Interim Payment Letter (see examples in Attachment 16). Once this letter is signed by the PO or GA, a copy is forwarded to the CFO along with wire transfer instructions, as applicable. Interim payments are processed in a similar manner to that of new grant payments. V. CHANGES IN GRANT TERMS Budget Revisions During the grant period, if grantees find it necessary to re-allocate funds among line items in their project budget (by 10% or more of a line item, and by $5,000 or more for grants of $100,000 and above, OR by 10% or more of a line item, and by $1,000 or more for grants under $100,000), they must submit this request in writing at least 30 days prior to the project end date. Language to that effect is included in the standard Terms of the Grant and the financial reporting form. The PO or GA approves or declines the request. No-Cost Grant Period Extensions Should a grantee need to extend the grant period, they should send an to the PO, with a copy to the GA, at least 30 days before the original grant period ends. The request should include the revised deadline and the reason for the extension. The PO or GA should reply expediently, providing new reporting dates if applicable. The GA will file a copy of this correspondence in the grant file. Report Deadline Extension If the grantee requires more time to complete a report, they should a request for a deadline extension to the PO, with a copy to the GA, at least 30 days before the report is due. The PO or GA should reply expediently and the GA will file a copy of this correspondence in the grant file. The GA updates GIFTS to reflect any changes in terms and reporting deadlines. 1 In this context, we define a multi-year grant as one being approved for sequential grant periods. For instance, a three-year grant is a multi-year grant because it covers three consecutive grant periods, with periodic narrative and financial reports required to trigger each grant payment. On the other hand, a project whose scope or nature requires 14, 18 or more months to be completed would not necessarily be a multi-year grant if all reporting requirements fall within a single grant period. More accurately, these are multi-period grants. 10

11 VI. GRANT REPORTING POs establish the specific reporting requirements for each grant, which are included in the Terms of the Grant and Grant Award Summary Form. Final narrative and financial reports are generally required for all program grants. The report submission deadline is usually one month after the grant period ends but under unusual circumstances, or at the request of the grantee, reporting deadlines may vary. Interim reports are generally required only for multi-year grants, or for other circumstances as determined by the PO. The Grant Reporting Guidelines (Attachment 15) provide a detailed description of what is to be included in the report. In special cases as in emergency disaster relief grants, the PO may waive the reporting requirements. By law, Expenditure Responsibility grants must have final narrative and financial reports. For multi-year ER grants, annual interim reports must be submitted. Notification of Reporting Deadlines Thirty days before a grant report is due, the GA sends a reminder to the grantee, usually by and in coordination with the PO. Review and Approval of Grantee Reports Reports should be submitted electronically. Upon receipt, the GA updates the GIFTS record, completes and attaches the Grant Review and Approval Form (see example in Attachment 17), reviews the report for the presence of all required components, and highlights issues in need of attention, such as incorrect budget formats, unspent grant funds, and whether the expenses coincide with the approved budget. The GA forwards the report attached to the grant file to the PO within one week of receipt. The PO evaluates the report and either approves it or requests further action. The PO or GA then follows up with the grantee to inform them of the completion of grant requirements or to obtain additional information before closing out the grant. Interim Reports. Interim Reports for multi-year and/or multi-payment grants must be approved before any funds are released. Upon approval, the PO and GA prepare an acknowledgement and payment letter, which is signed by the PO or GA. The payment procedure is described in the previous section on disbursements of funds. The GA updates the GIFTS record and places copies of all documents in the grant file. Final Reports. The financial reports of all ER grants must be reviewed by the CFO. The PO may request the CFO to review the financial reports of non-er grants. The GA records the receipt of grantee reports in GIFTS. 11

12 VII. CLOSING GRANTS Once all requirements have been submitted and approved, the PO checks the Close this Grant box in the Grant Report Review and Approval Form (Attachment 17), and initials and dates the form. The PO or GA may the grantee regarding report approval and grant closeout. When a final report is not required, the PO may ask the GA to close the grant on his/her behalf, upon expiration of the grant period. In such instances, the GA will initial and date the above referenced form. The GA records the approval of the report in GIFTS (if applicable) and changes the grant status to Closed. Before placing the grant file in the closed files drawer, the PO examines the grant file and removes unnecessary or outdated materials. VIII. TRUSTEE-GENERATED GRANTS As per Section III, non-family Trustees may make grants to eligible U.S. charities of their choice for up to $10,000 per year. A Trustee submits a Trustee-Generated Grant Form (Attachment 18), along with a copy of the beneficiary organization s 501(c)3 IRS determination letter (for new grant recipients only). The GA prints a Charity Check report from Guidestar.org and prepares the Trustee-Generated Award Letter (Attachment 18), which the ED or AD signs. A copy of the signed letter is submitted to the CFO who then prepares a check or wire transfer request for signature by the ED. The letter (and check, if applicable) is sent to the beneficiary organization and a record is entered into GIFTS. Wire transfers are submitted by the CFO and the GA notifies the organization by , attaching the award letter. The GA s a scanned copy of the award letter to the Trustee. To ensure that grant processing is completed before the December holidays, the deadline for receipt of Trustee-Generated Grant forms is generally the end of November. The GA sends a final reminder in October. IX. Unless specifically requested by a Trustee, no grant reports are required for this type of grants, and the grant record can be marked Closed in GIFTS. FOUNDING CHAIRMAN & PRESIDENT DISCRETIONARY GRANTS The Founding Chairman or President submits a signed Grant Summary Form (Attachment 19) to the GA and may attach optional supporting material explaining the purpose of the grant. The GA prepares an Award Letter using the appropriate template (Attachment 19), which is signed by the ED. For grants to foreign organizations, the GA assures that all requirements for expenditure responsibility are met, as described in Section XI. The ED will review the application and complete and sign a Pre-Grant Inquiry. Payment procedures follow processes described in Section IV for program grants. The GA will ensure that the grant file is complete, the GIFTS record updated, and grant filed appropriately. 12

13 Reports or other requirements will be designated by the President or Chairman and are monitored by the GA. For expenditure responsibility grants, ED reviews the final reports. X. GRANTS TO SPONSORING ORGANIZATIONS In addition to the standard grant requirements detailed in Section II, the cover letter for the grant request should be on the sponsor s letterhead, be signed by an officer of the sponsoring organization, and contain language demonstrating the following: The requesting organization has agreed to serve as sponsor and to take responsibility for the programmatic and fiscal reporting to TSF for the work undertaken by this nonprofit The sponsor will have programmatic and fiscal control of the grant from TSF The sponsor s official approval of the sponsorship The sponsoring organization should provide a copy of the signed agreement between the sponsor and other organization as soon as it becomes available. XI. GRANTS TO ORGANIZATIONS LACKING 501(C)3 PUBLIC CHARITY STATUS Introduction This section describes grantmaking requirements for organizations lacking 501c3 status foreign organizations and domestic non-charitable organizations. Foreign charitable organizations. Private foundations such as TSF must ensure that grantmaking to foreign organizations fulfills two legal requirements: 1) That the grants are exclusively for charitable purposes as defined by the U.S. Internal Revenue Service (IRS); and 2) That the grants count toward the qualifying distribution for the purpose of meeting its annual distribution requirements. Federal regulations require that private foundations make charitable contributions to organizations that are one of the following: 501(c)3 public charities; Units of government--domestic or foreign; International organizations designated by executive order such as the International Red Cross Federation or the United Nations, and Exempt operating foundations. In many circumstances, foreign organizations have received 501(c)3 status from the IRS. For these applicants, TSF follows the procedures detailed in Sections I to VI. In the case of foreign non-profit organizations that do not have IRS 501(c)3 status, TSF must either make a determination that said organization is equivalent to a 501(c)3 organization or must exercise expenditure responsibility for the grant. (See Equivalency Determination or Expenditure Responsibility below for more details). 13

14 Domestic organizations without 501c3 status. TSF may elect to support charitable projects undertaken by domestic organizations without 501(c)3 status. Organizations that fall under this category include private foundations; for-profit businesses, such as consulting groups; organizations that may engage in activities that affect the outcomes of political elections or influence legislation; or those that are not organized and operated exclusively for charitable purposes, such as labor unions, chambers of commerce and professional associations. Grants to these organizations are allowed under federal regulation so long as the purpose of the grant is to support activities with a charitable purpose. In these cases, TSF must exercise expenditure responsibility. See the section below on Expenditure Responsibility for an explanation of the requirements and procedures. Equivalency Determination U.S. law permits private foundations to make grants to a non-501(c)3 foreign organization if a reasonable determination can be made that the applicant organization is the equivalent of a U.S. 501(c)3 public charity. Such organizations can be treated in the same manner as a public charity for grantmaking and reporting purposes. TSF must make a good faith effort in making an equivalency determination, which is defined in IRS Revenue Procedure as requiring the foreign organization to submit an Affidavit for Equivalency and the accompanying set of documentation (Attachment 20). It is advisable to have international applicants submit an application for equivalency determination if grant support is anticipated to occur over several years and if there is a reasonable expectation that the organization will pass the equivalency requirements. The PO makes the recommendation for an applicant to engage in an equivalency determination process and works with the GA to complete the evaluation. Equivalency Determination Requirements Affidavits for Equivalency must include the following: 1) Copies of the organization s charter, bylaws or other legal governing documents; which should include: a. A dissolution clause assuring that the organization s assets must go to another charitable organization with a similar purpose, should the grantee go out of business, and that the dissolution does not benefit personally any board member; b. Description of the organization s past and future activities; c. Statement that the charity is operated exclusively for specifically identifiable charitable purposes; d. Statement that either the laws and customs, or the organization s governing documents, do not permit any of its assets or income to benefit a private person; e. Statement that either the laws and customs, or the organization s governing documents do not permit noncharitable activities or lobbying except to an insubstantial extent; f. Statement that either the laws and customs, or the organization s governing documents, strictly prohibit any direct or indirect intervention in any political campaign; 14

15 2) Public Support Schedule used to determine whether or not the organization meets the IRS definition for a publicly supported charity. English Translations of Organizational Documents. The IRS requires that all documents for Equivalency Affidavits be translated into English. Official translations of articles of incorporation, bylaws and any other relevant organizational documents certifying the grantee s status as a public charity in their country must be provided. One official source of translations that meets the IRS requirements is a U.S. Consular office in the country of origin. Term Limits to the Affidavit. Affidavits must be currently qualified (IRS Revenue Procedure 92-94). An affidavit is considered currently qualified if it contains facts that are up-to-date, that is, it includes facts from the latest complete accounting year, or the affidavit is updated to reflect the grantee s current data. Public Support Test. TSF follows the recommendation that the public support test in one year preserves public charity status for one year. This means that a public support test performed in March 2011 will remain current through March Equivalency Determination Internal Procedures The GA oversees the equivalency determination process. Upon the recommendation of the PO, the GA sends an Affidavit Packet (Attachment 20) to an applicant, who completes and returns the Affidavit packet along with all required documentation. The GA reviews these materials to ensure that all requirements have been met and that all forms have been completed correctly. The CFO reviews the financial statements and the public support test, and evaluates the fiscal soundness of the applicant. Then the application is submitted to the ED for final review, and if the ED approves the Affidavit, the proposal and subsequent grantmaking procedures may be handled as if the organization has public charity status. The ED notifies the applicant in writing of the decision. Updating the Affidavit. Equivalent organizations must submit audited financial statements annually in order to keep their Affidavit up to date. The GA is responsible for following up with these grantees to obtain financial statements and to request equivalent organizations to submit an Affidavit for Repeat Application Form (Attachment 21), in which they inform us of any changes to their organizational documents (bylaws, articles of incorporation, etc.), and that they continue to qualify as the equivalent of a U.S. public charity. The principal officer of the grantee organization must sign this form. The CFO reviews and approves the financial statements. Every year, an equivalent organization submits an updated public support test. The GA sends the financial forms to the grantee organization. When it is returned the GA reviews for accuracy and completeness and then forwards forms to the CFO for verification of the public support test. The GA notifies the grantee of their status as currently qualified. Expenditure Responsibility Foreign organizations without a currently qualified equivalency determination with TSF are deemed organizations for which TSF must assume expenditure responsibility (ER). In 15

16 addition, TSF must exercise expenditure responsibility for grants made to US organizations without 501(c)3 public charity status. Expenditure Responsibility Requirements There are five basic requirements for exercising expenditure responsibility: 1. Pre-grant inquiry: TSF must make a reasonable investigation of the applicant to ensure that it is capable of performing the charitable activities to be funded. 2. Written agreement: The grantee must sign a written agreement with TSF that specifies the activities to be performed with the funds to be granted. TSF does not provide general support grants under ER. 3. Separate accounts: Charitable dollars cannot be commingled with noncharitable dollars. The grant funds must be indicated separately in their books of account. 4. Regular reports: The grantee must provide, minimally, annual progress reports on the expenditure of the funds and progress made in fulfilling the charitable purpose of the grant. 5. Report to the IRS on TSF s tax return: A report on ER grants is attached to the Form 990- PF tax return for each year in which a payment for an ER grant is made. Expenditure Responsibility Procedures POs complete the Expenditure Responsibility Pre-Grant Inquiry form to assess the suitability of an applicant s expenditure responsibility status (Attachment 22). If the applicant does not meet the standards set forth in these procedures, the PO will inform the applicant in writing. Proposals that move forward in the grant process then follow the steps outlined in Sections II and III for final review and approval. TSF does not fund capital costs (assets that have a useful life beyond the grant period) through expenditure responsibility grants. Once a grant is approved, the GA drafts a Grant Agreement for review and approval by the PO and signature by the ED. (see Attachment 23). The Expenditure Responsibility Award Letter instructs the grantee to sign the grant agreement (Attachment 24) and return the original to TSF. This may be done by fax so long as the original, signed agreement is returned to TSF. Upon the receipt of the faxed signed agreement, the GA can proceed to submit a payment request to the CFO as described in Section IV. Reporting Expenditure Responsibility Grants to the IRS. TSF reports all Expenditure Responsibility grants to the IRS annually on the Expenditure Responsibility Grants Report, which is attached to TSF s IRS Form 990PF. The GA prepares the report (see example in Attachment 25), which includes information on grants that closed, grants that were approved, and grants that remain open during that filing year. The GA forwards this report to the CFO. XII. GRANTS MANAGEMENT RECORDS RECONCILIATION GIFTS is a stand-alone database system. On a monthly basis, the CFO provides a report from TSF s accounting system to the GA. The GA reconciles the accounting report with the GIFTS report of grants paid that month and/or the Schedule of Appropriations and Payments (see Attachment 26). 16

17 The GA and CFO also complete an annual reconciliation after all payments have been paid or accrued for a fiscal year. XIII. ATTACHMENTS 1. Sample Declination and Letter 2. Grant Application Guidelines 3. XXX 4. Proposal Review and Control Sheet 5. XXX 6. Guidestar Charity Check Form 7. Council on Foundations, Pension Protection Act of 2006: How Does it Affect Grantmaking? 8. Financial Due Diligence at a Glance 9. Sample Grant Approval Form 10. Sample Grants Review Committee Memo 11. Sample Grant Award Summary Form 12. Sample Award Letters and Terms of the Grant 13. Wire Transfer Request Form and Sample Wire Transfer Request Memo 14. Sample Grant Payment Transmittal Letter 15. Grant Reporting Guidelines 16. Sample Interim Payment Letter 17. Sample Grant Report Review and Approval Form 18. Trustee-Generated Grant Form & Sample Grant Award Letter 19. Sample Founding Chairman and President Discretionary Fund Grant Summary Form & Award Letter 20. Affidavit Packet 21. Affidavit Update Form 22. Pre-Grant Inquiry Form 23. Sample Grant Agreement for Expenditure Responsibility 24. Sample Expenditure Responsibility Award Letters for Each Program 25. Sample Expenditure Responsibility Report, attachment to Form 990PF 26. Schedule of Appropriations and Payments 27. Document Retention Schedule 17