Grantmaking Policy

Introduction

This grantmaking policy (“Policy”) enables fiscally hosted collectives (“Collectives”) under the umbrella of OpenCollective Foundation (“OCF”) to become grantmakers in their communities, a variation from traditional grantmaking where a foundation or other grantmaking institution makes a grant directly to a grantee.
Note: If the person you wish to fund can provide receipts before payment and/or is okay with getting an IRS Form 1099 for this income, they can submit normal expenses instead of going through this grant process.
If you wish to fund another OCF-hosted Collective or donate to another 501(c)(3) entity, you don't need to go through this grant process (contact us for details about what to do in those cases).
Grants, in the context of this Policy, mean financial gifts from a Collective hosted by OCF to an individual (the “Grantee”), which further the Collective’s mission and align with the overall mission of OCF.
We use the Open Collective platform to support both transparency and agency for grantmaking Collectives and their Grantees, as well as to support OCF’s role in compliance, reporting, and expenditure responsibility.
As a fiscal sponsor and 501(c)(3) nonprofit entity, OCF holds ultimate responsibility for compliance and IRS reporting for its fiscally hosted Collectives. The relevant IRS regulations and requirements concerning grants largely determine the details of this Policy.
Within these bounds, OCF aspires to ground its approach to grants in its core values of trust and transparency. Therefore, we seek to empower Collectives in their role as grantmakers, and center their expertise about and relationships with their communities and Grantees.

Table of Contents

Know Before You Go

The activities funded by grants must be in alignment with the IRS definition of charitable purposes. Grants under this Policy may only be given to individual Grantees, not to groups or incorporated entities.
Grants must also fit within one of the three categories described in this policy: Hardship, Award, or Study (see more detail about each one below):
  • Hardship: A payment to an individual as a result of a disaster or emergency hardship. Hardship grants may be made to ensure victims have basic necessities, such as food, clothing, housing, transportation, or other necessities.
  • Award: A cash prize or award recognizing an individual's past accomplishment in a particular field.
  • Study: A scholarship or fellowship grant for candidates for a degree at an eligible educational institution.
    • A scholarship is generally an amount paid to a student (whether an undergraduate or a graduate) to be used at an educational institution in pursuit of their studies.
    • A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.
Below are more details on what is allowed and what is required from Collective admins (“Admins”) and Grantees.

Intention: Non-Taxable Grants

This Policy is intended to enable grants that are not taxable as income to the Grantee, and therefore allowed grants are narrowly scoped to what the IRS has specified can be tax free (as detailed for each grant category below).
If a Collective wishes to fund activities outside this narrow scope, instead of giving a grant, the Collective may invite the payee to submit a regular invoice or reimbursement expense, understanding that receipts will be required or the payment may be considered their taxable income.
Please note: OCF does not offer individual tax advice, and all Grantees are advised to consult with their own accountants to confirm the taxability of any grant funds received.

Why is an IRS Form W-9 still requested?

As this Policy is designed to fit the IRS’s guidelines for non-taxable income, OCF does not issue an IRS Form 1099 to Grantees in relation to the grant funds they receive, as long as all requirements are adhered to. However, we collect an IRS Form W-9 from all Grantees at the time the parties enter into the Grant Agreement as a precaution only, for cases where grant funds are misused and OCF needs to reclassify related expenses and issue an IRS Form 1099 to the Grantee.

Grant Categories

Hardship Grants

Hardship grants which are made as a result of a disaster or emergency hardship are considered to be gifts and are excluded from the Grantee’s gross income for tax purposes (and allowed under this Policy). Grants for emergency hardship are to only be made to individuals who are financially needy or otherwise distressed.
IRS regulations define a person in need as one “who lacks the necessities of life, involving physical, mental, or emotional well-being, as a result of poverty or temporary distress”.
Examples include a person who is financially impoverished as a result of low income and lack of financial resources, a person who temporarily lacks food or shelter and the means to provide for it, a victim of a natural disaster or civil disaster, and a person who is temporarily not self-sufficient as a result of a sudden and severe personal or family crisis, such as a crime or violence.
Under this Policy, OCF will only approve Hardship grants to individuals who meet the relevant IRS definition.
For more details about Hardship Grants, see the IRS Publication on Disaster Relief, beginning on page 8.

Award Grants

Award grants do not need to be included in the Grantee's gross income for tax purposes (and are allowed under this Policy) if:
  1. 1.
    Such prize or award was made primarily in recognition of past achievements of the recipient in religious, charitable, scientific, educational, artistic, literary, or civic fields; and
  2. 2.
    The recipient was selected without any action on their part to enter the contest or proceedings; and
  3. 3.
    The recipient is not required to render substantial future services as a condition to receiving the prize or award.
For more details about Award Grants, see 26 CFR § 1.74-1 - Prizes and awards, specifically subsection (b).

Study Grants

A Study grant is tax free (and allowed under this Policy) only if the Grantee is:
  1. 1.
    A candidate for a degree;
  2. 2.
    At an eligible educational institution; and
  3. 3.
    Uses the grant funds for qualified education expenses.
To be considered a candidate for a degree, the Grantee must:
  1. 1.
    Attend a primary or secondary school or a pursue a degree at a college or university; or
  2. 2.
    Attend an educational institution that:
    • Provides a program acceptable for full credit toward a bachelor’s or higher degree or offers a program of training to prepare students for gainful employment in a recognized occupation; and
    • Is authorized under federal or state law to provide such a program and is accredited by a nationally recognized accreditation agency.
An eligible educational institution is one whose primary function is the presentation of formal instruction and that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it regularly carries on its educational activities.
Study grants may only be used for “qualified education expenses” which include expenses for tuition and fees required to enroll at or attend an eligible educational institution and course-related expenses (such as fees, books, supplies, and equipment required for the courses). Study grant funds may not be spent on room and board, travel, research, clerical help, or equipment and other expenses that aren't required for everyone enrolled in the course.
For more details about Study Grants, see IRS publication 970, beginning on page 5.

Single-Expense vs. Multi-Expense Grantmaking Programs

Single-Expense Grantmaking Programs may use a single Project (a feature of the Open Collective platform) for many single-expense grants, where the full grant amount is disbursed to the Grantee in a single expense.
Grants made as part of Multi-Expense Grantmaking Programs, where grant funds are disbursed over the course of two or more expenses on the platform, must have their own individual Project for recordkeeping purposes.
All Award grants are single-expense, whereas Study and Hardship grants can be either single-expense or multi-expense.

Documentation and Reporting Requirements

As described in detail below, OCF’s Policy requires:
  • Grantees to submit documentation (“Documentation”) for Hardship and Study grant expenses; and
  • Collective Admins to submit reports (“Reports”) for all grant categories.

Information we report to the IRS

OCF endeavors to minimize the amount of time and effort Grantees need to spend on reporting. However, we must report certain information about every grant to the IRS, which the grantmaking process is designed to gather.
To proceed with a grant, Collective Admins and Grantees must consent to OCF reporting the required information to the IRS. OCF is responsible for all reporting about grants to the IRS. Neither Grantees nor Collective Admins are required to submit grant reports to the IRS directly.
OCF will base its reporting to the IRS about the grant on the following:

Not Allowed Under This Policy

The following activities may not be funded through grants under this Policy:
  • Political lobbying, influencing legislation, influencing the outcome of elections, or voter registration drives.
  • International activities and payees outside the United States.
  • The purchase of goods or services for the benefit of the grantmaking Collective. For example, if a grantmaking Collective wishes to hire a contractor or intern to further its own purposes, they may not be paid via a grant. However, the Grantee may use grant funds to purchase goods and services to further the grant purposes.
  • Cash assistance payments. Grant expenses must be submitted by the Grantee and paid from OCF directly to the Grantee (see the Cash Assistance Policy).
  • Grants to for-profit companies, nonprofit corporations, other incorporated entities, or to unincorporated groups or associations. Grants under this Policy may be to individuals only.
The following types of grants are not covered under this Policy:
  • Grants to 501(c)(3) nonprofits—OCF is usually able to facilitate such donations, but they occur under a separate process from this Policy. Please reach out to the OCF team for assistance if you wish to make such a donation.
  • Grants to other Collectives hosted by OCF—simply make a contribution on the Open Collective platform to the recipient, selecting your Collective’s balance as the source of funds.
  • Taxable grants—types of grants that must be reported as the Grantee’s taxable income (see Taxes). Instead of giving a grant, the Collective may invite the payee to submit a regular invoice expense, understanding that the payment may be considered their taxable income.

The Grantmaking Process

The logistical process for grantmaking through OCF is as follows:
  1. 1.
    Submit a Grantmaking Program: If the grant is the first of its kind, the Collective submits a grantmaking program (“Grantmaking Program”). OCF staff review it and inform the Collective if it is approved.
  2. 2.
    Allocate funds: The Collective Admin allocates the grant funds to the appropriate Project (“Project”) for the grant, creating a new Project if required.
  3. 3.
    Submit Grant Proposal(s) for individual grants: The Collective follows the approved Grantmaking Program’s selection process to choose a Grantee and submits a grant proposal (“Grant Proposal”).
  4. 4.
    Sign the Grant Agreement: OCF staff review each Grant Proposal. If it is approved, they prepare and send a grant agreement (“Grant Agreement”) for e-signature by an OCF staff member, Collective Admin, and the Grantee.
  5. 5.
    Submit expenses and Documentation: The Grantee submits grant expense(s) in order to withdraw grant funds from the associated Project, providing any Documentation that may be required. Per the roles outlined in this Policy, the expense(s) are reviewed and processed.
  6. 6.
    Submit Reports: The Collective publishes all required Reports.
Each step of the grantmaking process is described in detail below.

Submit a Grantmaking Program

When a Collective chooses to begin distributing grants, the first step is to submit a Grantmaking Program through the Google Form (pdf with all questions here). The Grantmaking Program submission will be appended to the Grant Agreement.
Grantmaking Programs are made up of a series of grants of the same Category (i.e., Hardship, Award, or Study) with the same eligibility requirements and selection process for all grants made within the Program. Programs will also be either Single-Expense or Multi-Expense.
Collectives must use the selection process described in the Grantmaking Program submission for all Grantees. If the Collective wishes to change the process or criteria, they can reach out to OCF to update their Program, or start a new one. If the selection committee changes, the Collective must let OCF know. Collectives may have multiple Grantmaking Programs.
If a Collective has its own intake form for prospective Grantees, we recommend making sure that it gathers all of the information required to complete the OCF Grant Proposal form during the selection process.
See "Best practices for responsible grantmaking" for tips on equitable grantmaking - and let us know if you have suggested additions to that guide!
OCF staff will review the application and contact the Collective once it is approved or if they have any questions or concerns.

Allocate Funds

The Collective must allocate funds to a Project for the grant. A Project is a feature on the Open Collective platform for segregating funds within a Collectives overall budget.
If the grant is part of a Single-Expense Grantmaking Program, the grant funds can be allocated to the Program’s existing Project.
If the grant is part of a Multi-Expense Grantmaking Program, the Collective should create a new Project for the grant and then allocate funds.
If the Grantee will be receiving funds via PayPal and will be zeroing out the Project balance, Collective Admins should add a small amount to the budget in addition to the grant amount to accommodate PayPal fees.

Submit Grant Proposal(s)

A Grant Proposal form must be submitted by a Collective Admin for each individual Grantee (printable/downloadable version here). The Grant Proposal will be appended to the Grant Agreement.
For Multi-Expense grants, make sure to remove ?status=projectCreated from end of the URL when submitting it.

Sign the Grant Agreement

A ‘Grant Agreement’ is a legal contract that includes the terms by which OCF enables Collectives to make grants, and references the details submitted in the Grant Proposal Form. A Grant Agreement will be signed by OCF, the Grantee, and the Collective Admin at the outset of the grant.
Here is the current Grant Agreement template:
ocf_grantmaking_agreement_template.docx
18KB
Binary
If the Grant Proposal is approved, OCF staff will send a Grant Agreement to all parties for e-signature, typically within one week of submission, if not sooner.

Extension Amendments

In cases where a multi-expense grant has not been completed by the end of the timeframe specified, and the grant will proceed with an extension of time: OCF, the Collective, and the Grantee will enter into a signed amendment to the Grant Agreement evidencing the parties’ agreement to such extension. An Extension Update is also required to explain why the extension is necessary (see Submit Reports, below).

Submit Expenses and Documentation

Once all parties have signed the Grant Agreement, expenses may be submitted via the Grantee, either by their Collective or via an expense invitation from a Collective Admin. Grants without a fully-signed and properly completed Grant Agreement and required Documentation will not be processed.

Expenses

All grant payments to Grantees are made via grant expenses, which are submitted by the Grantee on the Open Collective platform using the “Request Grant” expense option. Invoice expenses and reimbursement expenses (the other expense types available on the platform) are not accepted for grant payments.
Only the Grantee may be paid from grant funds, as specified in the Grant Proposal and Grant Agreement, and expenses must be submitted using the Grantee’s Open Collective profile.
The Expense Roles are as follows:
  • The Grantee submits grant expenses and receives grant payments; and
  • The Collective Admin reviews and approves grant expenses; and
  • OCF reviews and pays valid grant expenses.
All grant expenses must include a description of what the payment is for and an amount, along with the Grantee’s payment information. Further Documentation, details, and evidence may be required depending on the grant purpose, as follows.

Documentation

Documentation meeting the below requirements should be attached to the expense or submitted via Expense Comment.
Required Documentation for Hardship Grants
By definition, someone receiving a Hardship grant is facing extenuating life circumstances and we understand they may not always be able to submit paperwork. We have to demonstrate to the IRS, however, that our policy makes a reasonable effort to gather all required evidence and reports.
In instances where receipts are not available at the time funds are sent to the Grantee, the Collective Admin should follow up with the Grantee about Documentation. Once all funds have been disbursed and all Documentation has been received, Projects can be archived.
We will work with Grantees and Collective Admins to adapt to situations on a case by case basis as needed.
  • If payments have already been made and grant funds will serve to reimburse the Grantee for these costs, receipts should be attached at the time of submission of the grant expense if they are available.
  • If funds are being requested in advance, receipts documenting the subsequent use of those funds should be attached to the relevant paid expense via Expense Comment as soon as they are available.
  • Especially in cases where receipts are not available, other available evidence should be attached to the expense, such as payable bill statements (e.g. utility, rent), photographs of items purchased, statements from the Grantee or Collective Admin about how funds were used, etc. These should also be attached via Expense Comment.
Required Documentation for Award Grants
  • No further documentation is required for Award grants, beyond that already contained in the Grant Proposal and Grant Agreement. See below for the Report requirements for Award grants.
Required Documentation for Study Grants
  • A document confirming the Grantee’s enrollment in a degree program at an eligible institution is required to be on file before any grant expenses are paid.
  • Each grant expense submitted should include line items listing a description and amount for each intended use of funds, e.g. tuition, books, etc.
  • If payments have already been made and grant funds will serve to reimburse the Grantee for these costs, receipts should be uploaded at the time of submission of the grant expense.
  • If funds are being requested in advance, receipts confirming use of funds in line with the expense details should be attached to the relevant expense as soon as they are available.

Submit Reports

Collective Admins must submit required Reports in the form of Expense Comments and Updates on the Open Collective platform (or facilitate Grantees to do so).
Expense Comments should be submitted for single-expense grants on the appropriate expense page. Expense Comments are always private.
Updates should be submitted for multi-expense grant Projects. Updates may be public (visible to anyone on the internet) or private (visible only to Admins of the Project and its parent Collective and Fiscal Host).
We welcome rich information about grant progress and outcomes, and encourage Collectives to use Updates as a tool for storytelling and communication about their activities, where appropriate. More Updates than the minimum required, and more information per Update, may be posted at the discretion of the Grantee and Collective Admin.
For multi-expense grants, Collective Admins must enable Updates for the Project (Project's Settings -> Profile Page -> set Updates to "Always Visible").

Required Reports

  • Single-Expense Final Report: For single-expense grants, an Expense Comment must be posted following the single disbursal of funds. The Comment must include, at minimum, confirmation that the Grantee has complied with the terms of the Grant Agreement and, for Hardship and Study grants, a narrative description of how the grant funds were specifically used in furtherance of the grant goals and purpose. If documentation for a Hardship grant will be provided in the future, the Expense Comment should indicate the timeframe within which documentation is expected.
  • Multi-Expense Final Report: For multi-expense grants, an Update must be posted following the last disbursal of funds. The Update must include, at minimum, confirmation that the Grantee has complied with the terms of the Grant Agreement and, for Hardship and Study grants, a narrative description of how the grant funds were specifically used in furtherance of the grant goals and purpose. If documentation for a Hardship grant will be provided in the future, the Update should indicate the timeframe within which documentation is expected.
  • Annual Report: If the timeframe of a grant spans more than 12 months, an Update must be posted at least once per year, with a narrative description of how the grant funds were specifically used in furtherance of the grant goals and purpose during the preceding year.
  • Annual Study Report: For Study Grants, a report verified by the educational institution of the Grantee’s courses and grades must also be submitted at least once per year. If the grant only involves a single payment, this Report will be provided only once.
  • Extension Report: If a grant is not completed by the end of the timeframe specified in the Grant Proposal, an Update must be posted to explain the status of the grant, state why an extension is required, confirm that the grant will still proceed, and specify a new date by which the grant is expected to be complete.
  • Cancellation Report: If a grant is canceled, an Update must be posted confirming the cancellation and describing how any grant funds paid out were specifically used in furtherance of grant goals and purpose (see also Returning Funds, below).

Grant Cleanup

Once all funds in a multi-expense Project are disbursed, or a single-expense Grantmaking Program comes to a close, the Project can be archived. Before doing so, Collective Admins must ensure that all required Documentation is uploaded and all required Reports have been submitted.

Returning Funds

At the conclusion of the grant, the Collective Admin shall return any funds remaining in the grant Project budget to the parent Collective’s budget.
If a grant is canceled before its intended purpose has been fulfilled, the Collective Admin shall return any funds remaining in the grant Project budget to the parent Collective’s budget, and the Grantee shall return any grant funds not spent on achieving the intended outcomes of the grant to OCF, which OCF will credit to the parent Collective’s budget.