Contractual Requirements for Grantees
Tax-exempt Status Changes and IRS Form 990
A grantee must notify the North Carolina Arts Council of any changes in its tax-exempt status with the Internal Revenue Service under Section 501(c)(3). It must also file the IRS Form 990 or 990-N annually.
The Arts Council and all of its grantees are contractually committed to abide by federal regulations which bar discrimination on the basis of race, color, national origin, disability, age, or sex and which require accessibility for persons with disabilities.
Grantees are required to conduct their operations in compliance with Title VI of the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, the Americans With Disabilities Act of 1990, the Age Discrimination Act of 1975 and, where applicable, Title IX of the Education Amendments of 1972. Grant recipients must also be in compliance with the Fair Labor Standards Act, which provides for minimum compensation to employees.
All Arts Council grantees must ensure that people with disabilities have access to both the location and content of all funded programs.
In cases where a grantee is using a fiscal agent, the fiscal agent, as well as the grantee organization, is fiscally and legally responsible for all grant requirements.
A copy of the letter from the IRS stating that the application for tax-exempt status has been received or a copy of the application submitted to the IRS is required with the ARTS Grants Online (AGO) application support materials.
When the grant is awarded, the fiscal agent and grantee sign the grant agreement agreeing to all its terms. The fiscal agent receives the grant payment directly from the Arts Council. It is strongly recommended that the fiscal agent handle the accounting for the grant by receiving all income and paying all expenses for the project. It is allowable to charge the grantee for this service or have the cost included in the budget as a grant expense. The fiscal agent can transfer the grant payments to the grantee who would then handle the grant expenditures, but the fiscal agent would still be responsible for these expenditures.
The fiscal agent and the grantee sign the final report certifying its accuracy. The fiscal agent is liable for the repayment of any grant funds not spent or misspent. The fiscal agent should be aware that receiving these additional grant dollars may increase its audit obligations to the Arts Council and the Office of State Budget & Management .
Management of Grant Funds
Grant recipients are sent a grant agreement and copies of regulations, which must be agreed to as part of the grant agreement. Grantees must manage any funds received in accordance with federal regulations for administrative requirements and applicable cost principles. (Applicants with concerns about their ability to fulfill governmental regulations may, prior to applying for funds, contact the Grants Office for referral to locations where the complete requirements can be obtained.)
The grant agreement specifies the grant amount and any special stipulations. Grant funds will not be available to the grant recipient until the grant agreement is signed and returned to the Arts Council.
Payment of state grant funds is made upon receipt of the signed grant agreement, and any necessary budget revision, and any other required forms, and according to the state payment schedule in place at the time. Payment of federal grant funds is made upon written request for funds that will be spent within 45 days or for reimbursement.
Download a federal cash request form »
Any payment is contingent upon the Arts Council's receipt and approval of all prior grant reports, including the Office of State Budget and Management’s NCGrants.gov report due to the Arts Council by the grantee. Neither grant funds nor their matching funds can be used to match another Arts Council grant. Grantees must have any matching funds in their possession before spending the grant funds.
The grant recipient is obligated to maintain complete and accurate records of all activities connected with the grant, and these financial records must be available to state and federal officials for audit. The records are to be kept for five years from the date of submission of the final report or, if an audit is begun, for three years from the date when the audit is resolved, whichever is later. Also, the grantee must adhere to standard administrative and accounting practices.
After funds have been awarded, the grantee must submit a written request and obtain approval before any substantial changes in the grant project can be made. This includes changes in any budget line that vary by more than 10 percent of the total budget for the whole project. Funds may be spent only on the activities specified in the grant application or approved in a budget revision. Any grant money remaining unspent at the end of the grant period must be refunded.
By April 1 of the grant project period, the grantee must inform the staff if it will not be able to spend all of the grant funds. Refunds should be returned to the Arts Council as soon as possible and no later than May 31 of the grant project period. If unspent grant funds are returned after this deadline and are reverted to the state budget office, the grantee will not be eligible to receive grant funds for the next fiscal year.
At the end of the grant period, the grantee must submit a complete and accurate final report on the Arts Council's ARTS Grants Online report form describing the grant project, giving an accurate account of how grant and matching funds were spent.
The report will include any specific reporting requirements described in the guidelines for each grant category. It will also include Project Descriptors and Individuals Benefiting for national report statistics. For further information call the Grants Office, (919) 807-6514 or (919) 807-6515.
Non-government organizations are required to submit the Office of State Budget and Management’s report in NCGrants.gov in addition to the Arts Council’s final report.
Report Violations and Consequences
A late final report is a violation of the North Carolina Arts Council Grant Agreement. A report is late when it is received after the report due date shown on the Grant Award. Violations are taken into consideration when an organization applies for future grants. Funding may be denied based on reporting practices.
An extension of the report due date may be requested in exceptional circumstances. Requests for final reporting extensions must be made in writing before the report due date. Grants can be extended only until July 31.
If a report is filed late, payment of the next year's grant awards will be on a reimbursement basis, with no more than two payments. No funds will be paid until all previous reports due have been received and approved.
Any reports more than five weeks delinquent (not received or incomplete) are turned over to the Attorney General's office for collection. If a grantee's grant agreement must be turned over to the Attorney General's Office for collection, the grantee will not be eligible for current or future grant funds for one fiscal year. Grantees must pay any collection agency costs involved in the North Carolina Arts Council's obtaining a final report or grant refund.
Office of State Budget and Management
A grantee is subject to the requirements of General Statute 143C-6-23, "Use of State Funds by Non-State Entities," and the rules for enforcing it, which are found in the North Carolina Administrative Code, Title 09, Chapter 03, Subchapter 3M for the "Uniform Administration of State Grants." These requirements can be found in detail on the Office of State Budget and Management’s Web site, NCGrants.gov.
If the grantee receives funds from the State of North Carolina, including state or federal funds, from any source including the North Carolina Arts Council grant, then the grantee must file the appropriate online forms required by the Office of State Budget and Management at NCGrants.gov.
If the grantee receives less than $25,000, it must submit the online forms required under Level 1 Reporting. If the grantee receives at least $25,000 but less than $500,000, it must submit the online forms required under Level 2 Reporting. If the grantee receives $500,000 or more, it must submit the online forms and the "Yellow Book" audit required under Level 3 Reporting.
A grantee that receives less than $500,000 in state funds within any fiscal year of the grantee is not required to have an audit performed. However, the Arts Council encourages all organizations to have basic financial statements for each fiscal year prepared in accordance with generally accepted accounting principles. These basic financial statements should be audited in conformity with generally accepted auditing standards on a regular basis. All financial records, including the financial records of any subgrantees, must be furnished to the Office of State Budget and Management, if requested, to provide full accountability for the use and expenditure of state funds.
All subgrantees are responsible for the same expenditure, reporting, and compliance procedures as the grantee and for such procedures required by the grantee. They are to file the reports required by the Office of State Budget and Management with the grantee, the agency that awarded them their grant funds.
For More Information: