D.10. Reporting Requirements of the Grantee Organization

(1) Section 4945(h)(2) provides that the grantor private foundation, in exercising

expenditure responsibility, must receive reports from the grantee organization on the use of the grant. The reports, in accordance with Treas. Reg. 53.4945-5(c)(1), must show:

a. How the funds are used in compliance with the terms of the grant, and

b. The progress made by the grantee in fulfilling the purposes of the grant.

(2) These reports must be submitted at the end of the grantee organization’s annual

accounting period during which the first grant is received and all subsequent accounting periods until the grant funds are expended in full or the grant is otherwise terminated. After all the grant funds are spent, a final summary report must be submitted to the grantor.

(3) An exception to the annual reporting requirement is if a grant is made to another

private foundation exempt under Section 501(a) and is used by that grantee private foundation for endowment, capital equipment, or other capital purposes. The grantee private foundation must make reports on the use of principal and income during the year of the grant and the two immediately succeeding taxable years. If at any time thereafter it becomes reasonably apparent to the grantor private foundation that the principal, income or the equipment purchased therefrom has not been used for any purpose other than those permitted under 4945(d), such grantor private foundation may then allow further grantee reports to be discontinued. See Treas. Reg. 53.4945-5(c)(2).

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(4) The grantor private foundation need not independently verify the reports

submitted by the grantee organization unless it has reason to doubt the accuracy or reliability of the reports. See Treas. Reg. 53.4945-5(c)(1).