This is from a 2019 article from The New York Community Trust called Grants and Other Distributions from Donor-Advised Funds written by Jane Wilton
This is an excellent article summarizing grant making rules. Its focus is on Donor Advised Funds (DAFs), but since DAFs are 501(c)(3) charities, and follow the same rules, this is an excellent read for all Grant Making Organizations. My take-a-way, a clear explanation of Expenditure Responsibility that I can relay to clients.
Full Article HERE
WHAT IS EXPENDITURE RESPONSIBILITY?
Broadly speaking, “expenditure responsibility” is a formalized process for due diligence in grantmaking. It requires (1) advance collection and review of certain information about the grantee (known as a “pre-grant inquiry”), (2) a grant agreement containing certain IRS-mandated provisions (e.g., annual reporting to the funder, a requirement to maintain adequate books and records, a prohibition on use of the granted funds for political campaign activity, and a refunding obligation to the extent funds are not used as required), (3) reporting by the grantee to the sponsoring organization, and (4) reporting by the sponsoring organization to the IRS on Form 990 on the status of the grant and its use by the grantee organization.