The granting private foundation must require reports on the use of the funds, compliance with the terms of the grant, and the progress made by the grantee toward achieving the purposes for which the grant was made. The grantee must make an annual accounting of the funds at the end of its accounting period and must make a final report on all expenditures made from the funds in addition to the progress made toward the goals of the grant.
Reliance on information supplied by grantee. A private foundation, exercising expenditure responsibility with respect to its grants, may rely on adequate records or other sufficient evidence supplied by the grantee organization showing the information that the grantor must submit to the IRS.
Grantee's failure to make reports. A failure to make the required reports by the grantee will result in the grant being treated as a taxable expenditure by the grantor unless the grantor:
- Awarded the grant according to the expenditure responsibility requirements,
- Complied with all the reporting requirements ,
- Made a reasonable effort to get the required reports, and
- Withholds all future payments on this grant and on any other grant to the same grantee until the report is provided.