Frequently Asked Questions

Overview

General FAQs
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Can Mott Foundation grant funds be used for lobbying activities?

No. Mott Foundation grant funds may not be used for lobbying expenditures (see the Lobbying Guidelines); however, other foundations may allow their funds to be used for lobbying activities. We recommend grantees contact their other donors regarding their lobbying procedures and requirements.

Can the Mott Foundation make a grant to organizations other than Section 501(c)(3) public charities (and their foreign equivalents), units of governments, international organizations designated by executive order or exempt operating foundations?

Yes. However, the Foundation will be required to exercise expenditure responsibility. In addition to all the expenditure-responsibility rules, there are a few other restrictions that apply solely to grants to private foundations and to foreign private foundation equivalents.

What is expenditure responsibility?

Expenditure responsibility is the U.S. federally mandated procedure that a private foundation must follow for any grant made to an organization that is not an IRS-recognized public charity. Grants to the following types of organizations require expenditure responsibility:

  1. Tax exempt organizations not classified under Section 501(c)(3)
  2. Nonfunctionally Integrated Type III supporting organizations classified under Section 509(a)(3)
  3. Private non-operating foundations
  4. Private operating foundations
  5. For-profit companies
  6. New public charities that have not obtained Section 501(c)(3) status from the Internal Revenue Service
  7. Organizations formed outside of the United States
    (Certain grants may be made to such entities outside the United States without the need for expenditure responsibility if the Foundation completes a procedure called “equivalency determination.”)

Except for units of foreign governments, virtually all potential grantees organized outside the United States are not public charities recognized by the IRS. Although it is possible for them to obtain such recognition, few have done so. Thus, it is only natural that exercising expenditure responsibility plays a significant role in making grants to non-U.S. organizations.

Private foundations have two choices when making grants to foreign organizations:

  1. Determine that the non-U.S. grantee is the “equivalent” of a U.S. public charity; or
  2. Exercise expenditure responsibility. (The five basic steps of expenditure responsibility are discussed below.)

An “equivalency determination” can be accomplished by obtaining a written opinion of legal counsel or by Foundation staff making a reasonable determination of equivalency based on submission of an affidavit and other documents from the potential grantee. (See the Affidavits page.)

Expenditure responsibility has five basic steps:

  1. Pre-grant inquiry. The Foundation must make a reasonable investigation of the grantee to make sure that the grantee is capable of performing the charitable activity that is to be funded.
  2. Written agreement. The grantee must sign a written agreement with the Foundation that specifically sets out what charitable activities are to be accomplished with the funds to be granted. The agreement must also contain certain limitations (such as prohibiting the use of any of the funds for lobbying).
  3. Separate account. Unless the grantee is another private foundation or private foundation equivalent, the grantee must establish a separate account for the funds. Charitable dollars cannot be commingled with noncharitable funds.
  4. Regular reports. The grantee must provide regular status reports (narrative and financial) on the expenditure of the funds and the progress made in fulfilling the charitable purpose for which the funds are granted.
  5. Report to IRS on the tax return. When filing the Form 990-PF tax return for any year in which a payment for an expenditure-responsibility grant is made, the foundation must indicate that expenditure responsibility payments were made and must add a schedule to the form with a brief description of each grant indicating the grantee, the amount, the charitable purpose and the current status of the grant.

Does the Mott Foundation make grants to individuals?

No, the Mott Foundation does not make grants to individuals. Also, for any grants involving regranting, the Mott Foundation restricts the grantee from regranting to individuals.

Does the Mott Foundation support indirect costs of a project, and if so, what is the upper limit to such costs as a budget item?

Yes, the Mott Foundation does support indirect costs. However, indirect cost percentages are up to the discretion of the program officer. Indirect costs may not exceed the appropriate level based on project-specific direct costs. Indirect costs typically include rent/occupancy, administration costs, equipment and overhead. Other costs such as supplies, printing and communications may be either direct or indirect, depending on the project.

If, during the grant period, the project spins off and establishes itself as a separate legal entity or transfers to a different organization, can the original grantee transfer the unexpended funds to the new organization?

No. The unexpended funds must be refunded to the Foundation. The new organization is required to submit a proposal to the Foundation.

What types of organizational documents must be submitted by a prospective foreign grantee?

Prospective foreign grantees must submit:

  1. The organization’s founding documents (such as articles of incorporation, bylaws, deed, trust agreement, memorandum of association, tax classification or certification from appropriate authorities). All documents must be written or accurately translated into English.
  2. The registration of the organization with government authorities when registration is required by country or local law.
  3. An affidavit (in compliance with Rev. Proc. 92-94) and public support and major donor support schedules (see Affidavits).
  4. A copy of the organization’s most recent financial statements (audited financials are preferred but not required).
  5. A list of the organization’s governing board and key employees.
  6. An annual report or brief description of the organization’s history, goals, mission, experience and track record.
  7. Additional information if the project includes activity to be conducted in the United States.

How does the grantee request a no-cost extension of the grant period?

A request letter signed by an authorized representative of the organization, which includes the reason for the grant extension and the extension date, may be submitted to the Foundation any time during the grant period but before the end of the grant. If the grantee is a university, an authorized representative of the Office of Sponsored Research or Grants and Contracts must sign the request letter. Extension requests are not automatic and must be approved by the Foundation. Repeated requests for extension may be denied.

Under a project support grant, is an organization allowed to carry over funds to the grant renewal?

No. Undisbursed project funds must be refunded to the Mott Foundation as provided in the grant agreement.

Does the Mott Foundation make grants to network/partnership/consortium organizations?

Yes. However, one organization, the Mott grantee, must be programmatically and fiscally responsible for the entire project. Consulting contracts or regranting agreements between the network/partnership/consortium organizations is required.

Can Mott Foundation grants funds be used to meet donor-matching requirements?

Yes. In fact, the Foundation encourages its grantees to seek matching gifts as a way to diversify the grantee organization’s funding sources. This method of fundraising is typically referred to as Leverage. Leverage occurs when a small amount of money is given with the express purpose of attracting larger funding from other sources or of providing the organization with the tools it needs to raise other kinds of funds. Sometimes also known as the “multiplier effect.”

Lobbying Guidelines
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Mott Foundation funds may not be used for lobbying activities. In general, lobbying consists of communications — either to a legislator or to the general public — intended to influence specific legislation.

What is lobbying?

The income tax regulations divide lobbying into two categories of communications — direct and grassroots.

Direct Lobbying

Direct lobbying is defined as any attempt to influence legislation through communications with:

  1. Any member or staff of a legislative body; or
  2. Any government official or employee (other than a member or employee of a legislative body) who may participate in formulating legislation, but only if the principal purpose of the communication is to influence legislation.

Direct lobbying also includes attempts to influence the general public on a measure that is the subject of a ballot initiative, referendum or similar process; in that case, the general public is deemed to be the “legislator.”

To be considered direct lobbying, a communication must:

  1. Refer to specific legislation; and
  2. Reflect a view on the legislation.

The term “specific legislation” includes both legislation that already has been introduced and specific legislative proposals that your organization either supports or opposes, even if no actual legislation has been introduced. For a ballot proposal or referendum that will be submitted to the voters, a proposal becomes specific legislation as soon as the first petition is circulated among voters in order to gather the signatures necessary to put the measure on the ballot.

Examples of direct lobbying include:

  1. Meeting with legislators or their staff to discuss specific legislation.
  2. Drafting or negotiating the terms of a bill.
  3. Discussing potential contents of legislation with legislators or staff.
  4. Meeting with officials of the executive branch to influence testimony on a legislative proposal.
  5. Urging a Presidential or gubernatorial veto.

Grassroots Lobbying

Grassroots lobbying is an attempt to influence legislation by influencing public opinion.

To be considered grassroots lobbying, a communication must:

  1. Refer to specific legislation;
  2. Reflect a view on the legislation; and
  3. Encourage the recipient to take action with respect to such legislation — that is, it includes a “call to action.”

A “call to action” communication includes any one or more of the following:

  1. The communication states that the recipient should contact (1) a member or employee of a legislative body, or (2) any other government official or employee who may participate in the formulation of legislation, if the principal purpose of the contact is lobbying (direct call to action).
  2. The communication states the address, telephone number or similar information of a legislator or an employee of a legislative body.
  3. The communication provides a petition, tear-off postcard or similar material for the recipient to communicate with any such individual (direct call to action).
  4. The communication specifically identifies one or more legislators who will vote on the legislation as (1) opposing the organization’s view with respect to the legislation, (2) being undecided with respect to the legislation, (3) being the recipient’s representative in the legislature, or (4) being a member of the legislative committee or subcommittee that will consider the legislation. However, merely naming the main sponsors of the legislation for purposes of identifying the legislation does not constitute encouraging the recipient to take action (indirect call to action).

Examples of grassroots lobbying include:

  1. An action alert urging recipients to contact their legislators about a pending bill.
  2. Attending a coalition meeting to help plan a grassroots lobbying communication addressing a pending bill.

Lobbying Exceptions

The following are exceptions to lobbying and are not considered lobbying activities under the income tax regulations. Therefore, Mott Foundation grant funds may be used for the following:

  1. Nonpartisan Analysis, Study or Research. The communication must be nonpartisan — contain a “sufficiently full and fair exposition of the pertinent facts to enable the recipient to form an independent opinion or conclusion.” The communication must also be widely distributed (not only to persons interested in one side of the issue). Finally, the communication may not include a “direct call to action.”
  2. Technical Advice or Assistance must be made to a government body, committee, or subdivision of either. The communication must be in response to a written request by such body. The communication must be made available to every member of the body. Opinions are acceptable as long as specifically requested by the body or related to materials requested by the body
  3. Organization Self-Defense is a communication with a legislative body or an individual legislator. It must be regarding one of four areas: existence of the organization; powers and duties of the organization; tax-exempt status of the organization; or deductibility of contributions to the organization. By contrast, a communication supporting the organization’s programs or mission generally will not qualify as self-defense.
  4. Examination of Broad Social Issues is a communication regarding a general subject, which may also be the subject of specific legislation. The communication cannot address the merits of a specific legislative proposal. It also cannot involve a direct call to action.

Affidavits FAQs
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What is an affidavit?

In order for the Mott Foundation, or any other United States private foundation, to make a grant to a non-U.S. charitable organization, certain rules and procedures must be followed. We must determine that the organization would qualify as a section 501(c)(3) tax exempt organization (that is, a public charity or private foundation) in the United States. We make this equivalency determination based on a document, which we refer to as the “affidavit packet.”

An affidavit is a legal term that refers to a sworn statement that has legal standing before official agencies. The affidavit packet must be completed and signed by an authorized representative of your organization. The affidavit and all attachments or supporting documentation must be in English.

The affidavit packet explains the organizational structure, charitable purpose or activities, governing documents, and other information. The organization must be organized and operated for charitable or other exempt purposes only, meaning that you are not a for-profit organization.

The affidavit packet also contains two financial forms. These forms will indicate whether or not your organization qualifies as a public charity according to the “public support test” of the U.S. Internal Revenue Service (IRS), the U.S. government department that has oversight over nonprofit organizations. The public support schedule lists the types and sources of actual financial support over the most recent four-year period. The major donor support helps the Foundation calculate what portion of your support is from “public” sources, as defined by the IRS.

Please read the instructions contained in the affidavit packet carefully. It is very important that organizations provide all the information requested in the affidavit, and all the financial figures requested on the financial forms. Missing or incomplete information hinders the processing of grant requests. If organizations have any questions or problems they are asked to refer to their program officer.

It is essential that you attach English language copies of your founding charter, statutes, bylaws, deed, memorandum of association or other documents that your organization uses to govern itself.

The Mott Foundation may also need an English translation of the statute governing dissolution of nonprofit organizations from the country in which an organization is located. Organizations are asked to check with their program officer to see if the Foundation already has the statute on file. If we do not, organizations may be asked to provide it.

Must the public support and major donor support schedules be denominated in U.S. dollars?

No. The two financial schedules may be denominated in your country’s currency.

Should the public support and major donor support schedules be prepared on the cash- or accrual-basis of accounting?

The schedules should be prepared on the cash-basis of accounting. [Note: If your organization’s financial statements are prepared on the cash-basis, then line 7e of the public support schedule should agree with the total income per your financial statements.]

Should the total of column e of the major donor support schedule agree with line 7e (total received) of the public support schedule?

No, not necessarily. Since the major donor support schedule only includes those organizations or individuals whose contributions for the four years exceed the 2 percent figure (as explained on line 8 of the public support schedule), it is likely that the total of column e on the major donor schedule will be less than line 1e of the public support schedule.

Can you provide additional examples or descriptions of the KEY column (types of funding support) on the major donor support schedule?

It has been our experience that the KEY(s) most often used are:

  • (key 3) Governmental agencies or organizations — an embassy, USAID, a United Nations organization, the World Bank, European Union, government-supported universities, etc.
  • (key 4) Private foundations — grantmakers like the Mott Foundation, the Ford Foundation, the Open Society Institute, the John D. and Catherine T. MacArthur Foundation and others.
  • (key 5) Publicly supported organizations and other public charities — the Red Cross, United Way organizations, many churches, schools or medical institutions, EastWest Institute, European Foundation Centre, Friends of the Earth, Nelson Mandela Children’s Funds and many others.

Budgets FAQs
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Does the Mott Foundation prefer a specific budget format?

Yes. Budget line items must be presented by object classification (i.e. salaries, consultants, rent/occupancy, travel, printing, etc.) rather than functional classification (i.e. program services and supporting activities or Phase I, Phase II, etc.). The grantee must disclose the estimated number of full-time equivalents included in the amounts budgeted for salaries. A list of all funding sources for the project during the grant period is also required. As a general rule, grant periods and organizational budgets for general purposes support should follow the grantee’s fiscal year.

Does the Mott Foundation accept budget modifications after the start of a project?

Yes. Budget modifications for substantial or major changes are acceptable with the prior written approval of the Foundation.

Are in-kind contributions allowable as a budgeted line item?

No. In-kind contributions should be excluded from the budget. However, in-kind contributions should be disclosed in a narrative attachment to the budget.

Will a project budget that exceeds 50 percent of the organization’s total institutional budget be accepted?

Approval of a project budget that exceeds 50 percent of the organization’s total institutional budget will be handled on a case-by-case basis. However, program staff may discuss with the grantee whether the Foundation should be making a general purposes rather than a project support grant.

Reports FAQs
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Related Link: Grantee Reporting

Does the Mott Foundation require specific reports?

The Mott Foundation requires periodic narrative and financial reports.

The “Reports”section of the grant agreement (commitment letter) outlines the reporting requirements. For general purposes grants, the narrative report must include a summary of the organization’s major activities during the reporting period. The grantee must also submit the organization’s financial statements that include the reporting period.

For project support grants, the narrative report must include a summary of what was accomplished by the expenditure of funds, including a description of progress made toward achieving the goals of the project. A financial report showing the approved budget, expenditures against each line item since the start of the grant, and balances remaining for each line item or overrun variances that exceed both $1,000 and 10 percent of the budgeted line item amount is also required. Standard reporting forms for project support grants are attached to the grant agreement. The grantee must report against the approved budget submitted with the proposal (which may be greater than the amount of the Mott Foundation grant). If the approved budget covers multiple years, the grantee must report against the cumulative amount for the total period. The report must also include a summary of all funding received for the project (listed by source, amount and grant period).

What happens if the grantee fails to submit the required narrative and financial reports?

The Foundation will send delinquency/overdue notices to the grantee. If continued attempts by the Foundation to receive the required reports fail, the Foundation will close the grant as unsatisfactory. All payments will be suspended and the organization will no longer be eligible to receive grants from the Foundation.

What happens if an interim report from the grantee is late?

If an interim report is late, the next payment on the grant will be delayed until the interim report has been received and approved.

What happens if the grantee fails to provide a required report or refund to the Foundation?

The Foundation may close the grant as unsatisfactory. All payments may be suspended and the organization may no longer be eligible to receive grants from the Foundation.

If the Foundation is required to exercise expenditure responsibility, with respect to the grant, are there any special reporting considerations?

Yes. The Foundation requires the grantee to submit narrative and financial reports based on the grantee’s fiscal year-end. The Foundation may also require other periodic reports as it deems necessary.

USA PATRIOT Act FAQs
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Why does the Mott Foundation require all organizations re-granting with Mott funds to check the terrorism watch lists?

If our funds are re-granted to a listed organization, Mott faces potential penalties, including revocation of tax-exempt status and the freezing of our assets. There is also the potential for criminal and civil penalties. In addition, Mott managers may face possible penalties.

What penalties does an organization re-granting with Mott funds face if it provides support to a listed individual or organization?

An organization faces the possibility of its assets being frozen and the revocation of its tax-exempt status. There is also the potential for criminal and civil penalties. In addition, organization managers may face possible penalties. *

What is Executive Order 13224?

Executive Order 13224, signed by President George W. Bush in September 2001, authorizes the Executive Branch to block the property of, and prohibits transactions with, persons who commit, threaten to commit, or support terrorism.

What is the USA Patriot Act?

The USA PATRIOT Act, passed by Congress and signed into law by the President in October 2001, imposed or enhanced civil and criminal penalties for knowingly or intentionally aiding terrorists.

What is U.N. Security Council Resolution 1373?

U.N. Security Council Resolution 1373, adopted at the end of September 2001, declares that all states (or nations) shall prohibit their nationals or any persons and entities within their territories from making any funds available for terrorism. In the broad wording of Resolution 1373, financial assets, economic resources, or financial or other related services shall not be made available, directly or indirectly, for the benefit of persons who commit, attempt to commit, facilitate, or participate in the commission of terrorist acts. Further, funds shall not be made available to entities owned or controlled, directly or indirectly, by such persons and to persons and entities acting on behalf of, or at the direction of, such persons.

To whom do these laws apply?

All U.S. citizens and permanent resident aliens, entities and organizations located in or out of the United States (including any subsidiary or foreign offices overseas) must comply with the USA PATRIOT Act, Executive Order 13224, and Office of Foreign Assets Control regulations. Further, U.N. Security Council Resolution 1373 and other resolutions have the force of international law binding on all member states.

What is the Office of Foreign Assets Control (OFAC)?

The Office of Foreign Assets Control (OFAC) is a division of the U.S. Department of Treasury. It helps enforce sanctions against terrorist organizations, drug traffickers, money launderers, and non-cooperative foreign countries.

What is the OFAC SDN list?

The OFAC specially designated nationals and blocked persons (SDN) list is the U.S. government list of individuals and organizations identified as terrorists or otherwise associated with terrorism, drug trafficking, and money laundering.

Are there other terrorism watch lists?

Yes. The European Union, the United Nations, and other governments and/or governmental bodies also maintain lists of individuals and organizations identified as terrorists or otherwise associated with terrorism. The Terrorist Exclusion list is the U.S. Department of State’s list of organizations identified as terrorists or otherwise associated with terrorism for immigration purposes.

How will an organization be able to identify which individual or organization has been identified by OFAC or TEL as a terrorist or otherwise associated with terrorism?

OFAC information is available electronically directly from OFAC. OFAC indicates that its listings are partial and using its lists alone does not ensure compliance with the laws. The OFAC and TEL lists/links are identified in the Resources and Software section of this kit. Also, there are a number of third party vendors available to assist in this list checking process. See the Resources and Software section for a list of vendors.

What types of payments should be checked against the terrorism watch lists?

All payments to sub-grantees should be checked. See Step 1 in “What re-granting organizations need to do” section. *

Do the laws define “material support”?

Yes. The Antiterrorism and Effective Death Penalty Act defines “material support” as “currency or monetary instruments of financial securities, financial services, lodging, training, expert advice or assistance, safe houses, false documentation or identification, communications, equipment, facilities, weapons, lethal substances, explosives, personnel transportation and other physical assets, except medicine or religious materials.” This is an exceptionally broad range of assistance. *

How often should the terrorism watch lists be checked?

Check the official terrorism watch lists prior to each payment processing. *

What should an organization do if it has a hit or match?

Any “hit” should be reviewed and documented as either a false positive or true positive. Any match (true positive) should likewise be reviewed and documented. For a match, a hold should be placed on the pending transaction with the individual/organization, program staff or other appropriate personnel should be contacted to notify the “matched” individual/organization and seek clarification. (See Steps 3 and 4 in “What re-granting organizations need to do” section.) *

Do OFAC and TEL compliance require more than checking lists?

There is no easy answer to this question. Even if the organization checks all the lists, this may not be seen as complying with the law. These lists do not identify affiliated members of the organization. However, list checking is an important step in an organization’s overall due diligence plan. *

Should an organization amend its grant agreement to comply with the laws?

We recommend that any grant agreement include prohibitions against violence or terrorist activities and re-granting. *

What should an organization do if a sub-grantee name appears on one of the terrorism watch lists after the grant has been approved and after the funds have been expended?

Assuming the sub-grantee name is a 100 percent match for which clarification cannot be obtained, the grantmaker should request a refund of the entire grant amount, should notify us immediately, and should refrain from providing any future support to the sub-grantee. See Step 4 in “What re-granting organizations need to do” section. *


* We strongly recommend that organizations re-granting with Mott funds contact their legal counsel to learn more about the implications for the organizations.