grant-agreement

# Grant Agreement

Drafts enforceable U.S. grant agreements transferring funds with conditions, protecting grantor oversight while giving grantees clear operational parameters.

## Prerequisites

Gather before drafting:

1. **Grantor** — legal name, state of formation, EIN, entity type (private foundation / corporate / public charity / government), signatory + authority source
2. **Grantee** — legal name, DBA, jurisdiction, EIN, tax classification (501(c)(3) / governmental / fiscal sponsor / foreign org), signatory
3. **Grant terms** — amount, currency, disbursement type (lump sum / installment / milestone), grant period dates
4. **Project scope** — purpose, objectives, deliverables, timeline, geographic scope, itemized budget
5. **Special flags** — private foundation (triggers IRC § 4945); foreign grantee (equivalency determination or expenditure responsibility); government pass-through funds (2 CFR Part 200)

## Quick Start

1. Collect prerequisites and identify special flags
2. Draft sections 1–10 below, scaling reporting/audit to grant size
3. If grantor is a private foundation → include expenditure responsibility agreement (Exhibit D)
4. If foreign grantee → add equivalency determination or expenditure responsibility election + OFAC screening
5. Attach exhibits and circulate for review

## Output Structure

### 1. Parties & Recitals

**Grantor block:** Legal name, formation state, address, EIN, entity type, authorized representative + title + authority source.

**Grantee block:** Legal name, DBA, jurisdiction, EIN, tax status (cite determination letter date), address. Fiscal sponsor → identify all three parties with explicit obligations. Foreign org → note equivalency or expenditure responsibility election.

**Recitals:** Establish: (a) grantor's exempt purpose or CSR rationale; (b) grantee qualifications; (c) selection process; (d) relationship is a grant — not loan, contract, JV, or service exchange; (e) legal authority (board approval, payout compliance).

### 2. Grant Amount & Payment

| Element | Terms |
|---|---|
| Total amount | Numerals and words; specify currency |
| Disbursement | Lump sum / installments / milestone tranches |
| Conditions per payment | Reports approved, deliverables met, compliance confirmed, matching funds evidenced |
| Budget modification | ≤10% line-item variance: grantee discretion; >10% or category change: prior written approval |
| Unexpended funds | Return within [30] days of term end or carry-forward with written approval |

### 3. Permitted & Prohibited Uses

**Permitted:**
- Direct costs: salaries (grant-allocated FTE %), equipment, supplies, travel, consultants
- Indirect/overhead: [specify % or fixed cap]
- Subgrants: prior written approval required; key terms must flow down

**Prohibited:**
- Political campaign activity (IRC § 501(c)(3) absolute bar)
- Lobbying beyond permissible limits (track against § 501(h) election)
- Private benefit or inurement to insiders
- Capital campaigns or endowment (unless expressly authorized)
- Activities jeopardizing either party's exempt status

### 4. Conditions & Ongoing Obligations

**Pre-disbursement checklist:**
- Current IRS determination letter or equivalent
- Certificate of good standing
- Itemized budget with narrative justification
- Work plan with milestones
- Insurance evidence (GL + D&O with minimum limits)
- Executed conflict-of-interest policy
- Board resolution authorizing grant acceptance
- Expenditure responsibility agreement (private foundation grantors — IRC § 4945(d)(4))

**Ongoing covenants:**
- Segregated accounting for grant funds
- GAAP-compliant records; retain [3–7] years post-term
- Maintain licenses, permits, accreditations for funded activities
- Comply with all applicable law
- Maintain insurance; name grantor as additional insured where appropriate
- Acknowledge grantor per recognition guidelines (acknowledgment ≠ endorsement)
- Prior written approval for: key personnel changes, scope modifications, subgranting, budget reallocations above threshold

### 5. Reporting & Monitoring

| Report | Frequency | Due | Content |
|---|---|---|---|
| Financial | Quarterly/semi-annual | [X] days post-period | Expenditures by category, cumulative totals, variance narrative (>10%), compliance certification |
| Programmatic | Same | Same | Activities, progress vs. objectives, challenges, outcomes, plan modifications |
| Final | Once | [30–90] days post-term | Full reconciliation, outcomes vs. objectives, lessons learned, sustainability plan, IP inventory |
| Audit | Annual (if required) | [120–180] days post-FY | CPA audit per GAAS; triggered if grant > [$50k–$100k] or org revenue > [$750k] |

**Monitoring rights:** Site visits ([X] days' notice; no notice if fraud suspected), on-demand book/record inspection, payment suspension for reporting delinquency.

### 6. Intellectual Property & Confidentiality

- IP ownership: grantee-owned / grantor-owned / joint / public domain — specify
- If grantee retains: grantor gets royalty-free license for specified purposes
- Mutual confidentiality; survives termination

### 7. Termination

**For cause** ([15–30]-day cure unless incurable):

| Incurable (immediate) | Curable (with cure period) |
|---|---|
| Fraud or intentional fund misuse | Reporting delinquency |
| Criminal conviction of key personnel | Insurance lapse |
| Loss of 501(c)(3) or required status | Budget overrun without approval |
| Bankruptcy or dissolution | Key personnel departure without notice |
| OFAC/sanctions violation | Minor scope deviation |

**Automatic triggers:** Bankruptcy, dissolution, loss of exempt status, prohibited change of control.

**For convenience:** [30]-day written notice; grantee retains properly expended funds.

**Post-termination:** Return unexpended funds within [30] days + final accounting. For-cause → grantor may demand return of all funds. Surviving provisions: record retention, audit cooperation, confidentiality, IP, indemnification.

**Grant-funded assets:** Specify disposition — return to grantor / transfer to designated nonprofit / grantee retains for charitable use.

### 8. Standard Provisions

| Provision | Terms |
|---|---|
| Governing law | [Grantor's state]; no conflict-of-laws |
| Venue | [County/District], [State] — exclusive |
| Disputes | Negotiation [30 days] → Mediation (shared cost) → Litigation or AAA Arbitration |
| Indemnification | Grantee indemnifies grantor for third-party claims from grantee's acts/omissions |
| Assignment | Grantee: prohibited without consent. Grantor: may assign to successor |
| Relationship | Independent parties; no partnership, JV, agency, or employment |
| Amendment | Written, signed by both parties |
| Integration | Entire agreement; supersedes prior negotiations |
| Severability / Waiver | Standard; waiver must be written |
| Counterparts / Notices | E-signatures valid; certified mail / courier / confirmed email |

### 9. Exhibits

- **A** — Project Description, Objectives & Deliverables
- **B** — Approved Budget by Category
- **C** — Reporting Templates
- **D** — Expenditure Responsibility Agreement (private foundations only)
- **E** — Insurance Requirements

### 10. Signature Blocks

Each party: entity name, signatory name, title, execution date, authority reference.

## Pitfalls & Checks

- **IRC § 4945 (private foundations):** Expenditure responsibility mandatory if grantee is not a U.S. public charity — requires pre-grant inquiry, written agreement, and IRS reporting
- **Foreign grantees:** Must elect expenditure responsibility or obtain equivalency determination; screen against OFAC/sanctions lists
- **Government pass-through:** 2 CFR Part 200 Uniform Guidance applies; include required award terms [VERIFY with agency]
- **Lobbying:** Cannot fund lobbying without tracking; § 501(h) election sets permissible limits
- **Single Audit threshold:** $750,000 federal expenditures annually [VERIFY — subject to regulatory update]
- **Proportionality:** Scale reporting/audit to grant size; full audit on small grants deters qualified grantees
- **State registration:** Some states require charitable solicitation registration for grant-funded activities; advise grantee to confirm