Rules and Regulations (and Why)
Different rules and regulations will apply to how a grant is completed, based on what type of fund is awarding the grant. However, there are some basic rules that apply to every grant processed at the Quad Cities Community Foundation.
In its simplest form, a grant request must be made for a charitable purpose as defined by the IRS. A charitable purpose includes the relief of poverty, the advancement of education or religion, the promotion of health, governmental or municipal purposes, and other purposes beneficial to your community. Organizations set up and operated exclusively for charitable purposes, and which serve a public rather than a private interest, are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code and are eligible recipients of tax-deductible charitable contributions.
Additionally, these grants must be made to benefit a qualified charitable class. These charitable classes are large enough that providing aid to members of the class benefits the community as a whole, and cannot limit its assistance to specific individuals, such as persons from one family injured in a particular fire, or a benefit to assist one person being treated for cancer.
Each grant directive must include a purpose for the funds to be used, and if no purpose is listed then the funds will go to support the mission of the intended organization, i.e. general purposes.
Expenditure Responsibility and Grants to Non-501(c)(3) Organizations
As long as a grant is for a charitable purpose, it can be made to a non-501(c)(3) organization. When the Community Foundation makes a grant to an organization that does not have 501(c)(3) tax status, we incur expenditure responsibility, meaning we must receive detailed documentation of how the funds were spent for the intended charitable purpose.When a foundation makes a grant to an organization that is not classified by the IRS as a 501(c)(3), it is required by law to ensure that the funds are spent for charitable purposes and not for private gain or political activities.
The Community Foundation requires organizations receiving such grants to complete an Expenditure Responsibility Agreement prior to receiving any grant funding. In this agreement, the organization agrees to fully report back to the Community Foundation how the funds they received were spent. This report is usually to be completed within one calendar year of receiving the grant.
In order for the Community Foundation to complete a grant to a non 501(c)(3), a minimum grant amount of $1,000 is enforced. This minimum is due to the additional time the Community Foundation must spend to confirm the IRS status of the organization, review the final report, and remain in direct contact with the organization if additional reporting is required.
Avoiding Donor Benefit
Specifically for donor-advised funds, grants must avoid donor benefit. This means they may not result in any receiving or exchanging of goods or services with the grantee. This includes tickets, memberships and meals, or any preferential treatment. Grants from donor-advised funds also cannot be made to satisfy any or all of a pledge made directly by an individual. There are legal ramifications for the donor-advisor, as well as for the Community Foundation, if grants are distributed for donor benefit. Individuals who benefit from a grant must pay a tax equal to 125 percent of the amount of the benefit, and the foundation staff member who approves the grant must pay a tax equal to 10 percent of the benefit.
Once a grant is fully processed, payments are created and disbursed. A grant letter with the payment is sent directly to the organization. This ensures that the funds are delivered to the organization in a timely manner, and that any additional donor benefit is avoided. If requested, grant presentation ceremonies may take place for the funds the affiliate advisory board makes decisions on, and all grant payments will be sent to a representative of the committee. See Announcing Your Grants for more information.
Community Foundation Roles and Procedures
The Quad Cities Community Foundation staff is responsible for tracking all grant directives. A grant directive is a document that states the following: the organization the grant is directed toward, the fund that grant will be coming from, the purpose of the grant, and the amount from the fund to distribute. A directive can come in a number of different ways: an email from a fund holder, committee minutes, hand written note, etc. A directive must come from the listed fund advisor, and should be written or typed so it can be filed for reference.
Staff is also responsible for verifying the charitable status of each requested organization, along with the purpose of the grant. This due diligence is required for each and every request the Community Foundation receives, and confirms all grantmaking standards are met and the donor intent is followed. Once the due diligence procedure is completed, Community Foundation staff will process the grant request. This includes creating a grant letter with standard language and creating a grant payment, either a physical check or ACH transfer.
The Grant Processing Flowchart shows all the steps that take place once a grant directive is received.
Iowa County Endowments
The County Endowment Fund is a state-funded program intended to encourage philanthropy in Iowa by providing financial assistance to foundations around the state. The money for the program comes from the state's gaming tax revenues each year. The only county areas that are not eligible to receive County Endowment Funds are those counties that have a state-licensed gambling facility located within the county. Approximately .8 percent of the state's gaming tax revenues are allocated to support the County Endowment Fund Program.
Twenty five percent of the funds received from the program are kept in a permanent endowment fund for the benefit of charitable organization within a county. The remaining 75 percent of the funds are to be distributed as grants for charitable purposes, according to the law. No more that 5 percent of the available funding should be used for "philanthropic promotion" by an affiliate. This might include items like administrative purposes, board education, or outreach. If an affiliate does want to use funds for those purposes, they are to fill out an application and go through the grantmaking process so there is accurate documentation regarding the proposed uses of the funds. This also ensures all funding requests are considered equally.
Online Grants System Resources
Affiliates with application-based grant processes accept applications through the online grants system managed by the Quad Cities Community Foundation. Community Foundation staff is responsible for creating the online application process in Foundant based on what the affiliate advisory committee would like to see.
Staff provides committee members resources to share with potential applicants, as well as information on how to view and review applications online. In addition, Community Foundation staff provides technical support for applicants when they need assistance learning to use the online grants system and any applications that may need additional follow-up. When the application deadline arrives, staff will review all applications and assign all qualified applications to committee members to evaluate, and send out a spreadsheet of the applications to the committee’s main contact.
Once all applications are received, members of the affiliate grants committee review them and decide who will be funded. Decisions are returned to the Community Foundation, and staff will issue the grants.
Listed below are additional tools to help you successfully run your grant program, as well as the link to our website page for Grantseeker Resources.
The Affiliate Grant Application Process document shows a full timeline of an affiliate grant cycle, including Community Foundation and affiliate responsibilities for creating and carrying out an affiliate application-based grant program.
The Process Checklist shows everything that Community Foundation and affiliates should complete to set up a grant application process.
The Prep Packet for Process Set-Up is a document you can complete to collect all needed information for your grant application process.