Best Practices for Agreement Terms for Capital Grants
Does anyone have language they are willing to share with respect to any limitations in your grant agreement when making a grant for an investment in real estate or other assets? Do you place a restriction on the grantee's ability to sell the asset purchased or invested in? If so, is there a time limit on that restriction, or a process for making an exception where it would be best for all involved for the grantee to sell the asset and reinvest the funds in their mission or the underlying purpose for which the grant was given? Any other insights into this issue?
We fund $100,000 grants that are often for capital projects - and we recently had a grantee ask us (while the performance of the grant was in process - we have up to a 2-year performance window) if they were permitted to convey title to some of the assets purchased with our grant to a third party. To my knowledge this is either the first time something like this has happened (or maybe just the first time someone has asked permission). Our contract form doesn't currently have any language addressing this (either permitting or not permitting it).
We are a public charity (giving circle), not a private foundation, and there doesn't seem to be any IRS concern that we have to ensure that assets purchased with our grant funding remain in non-profit hands. And from what I can tell, even private foundations don't have any increased IRS requirements so long as their donations are to public charities (all our grants are). I'd also like to know if that is the same understanding others have. I think we still want to consider putting some restrictions in our agreement, but it is good to know that we don't also have to abide by a set of IRS requirements on the issue - so we can tailor the solution to our specific organizational concerns.
Thanks in advance for any thoughts, input or guidance anyone has.
Jen Bligh - Impact San Antonio