What Conditions Must a Grantee Meet Under the Endowment Challenge Grant Program?

34 C.F.R. Part ..., Subpart E
in effectEffective: 2024-07-01

34 C.F.R. § 628.40 What are the restrictions on the amount of an endowment challenge grant?

(a) To receive an endowment challenge grant, an institution must raise at least $25,000 in matching funds and qualify for at least a $50,000 grant under paragraph (c) of this section. (b) If an institution obtains at least $25,000 in matching funds and raises all the nongovernmental funds it proposed to raise in its application, the institution may receive a grant equal to twice the amount of matching funds it raises up to— (1) $500,000 in any fiscal year in which the amount appropriated for the Endowment Challenge Grant Program is less than $15,000,000; (2) $1,000,000 in any fiscal year in which the amount appropriated for the Endowment Challenge Grant Program equals or exceeds $15,000,000 but is less than $25,000,000; or (3) $1,500,000 in any fiscal year in which the amount appropriated for the Endowment Challenge Grant Program equals or exceeds $25,000,000. (c) If an institution does not raise all the nongovernmental funds it proposes to raise in its application, the Secretary reduces the institution's grant by multiplying the grant amount requested by the following fraction:

34 C.F.R. § 628.41 What are the obligations of an institution that the Secretary selects to receive an endowment challenge grant?

(a) An institution that the Secretary selects to receive an endowment challenge grant shall— (1) Enter into an agreement with the Secretary to administer the endowment challenge grant; (2) Establish an endowment fund independent of any other endowment fund established by or for that institution; (3) Deposit its matching funds in the endowment fund established under this part; (4) Upon receipt, immediately deposit the grant funds into the endowment fund established under this part; and (5) Within fifteen working days after receiving the grant funds, invest the endowment fund corpus. (b) Before the Secretary disburses grant funds and not later than a date established by the Secretary through a notice in the Federal Register (which date may not be later than the earlier of the last day of availability of appropriations or eighteen months after an institution has been notified that it has been selected to receive a grant), an institution shall— (1) Match, with cash or low-risk securities, the endowment challenge grant funds to be received under this part; (2) Certify to the Secretary— (i) The source, kind and amount of the eligible matching funds; (ii) That the matching funds are eligible under paragraph (b)(1) of this section and § 628.42; and (3) Have a certified public accountant or other licensed public accountant, who is not an employee of the institution, certify that the data contained in the application is accurate. (c)(1) For the purpose of paragraph (b)(1) of this section, “cash” may include cash on hand, certificates of deposit and money market funds; and (2) A negotiable security, to be considered as part of the institution's match— (i) Must be low-risk as required in § 628.43; and (ii) Must be assessed at its market value as of the end of the trading day on the date the institution deposits the security into the endowment fund established under this part.

34 C.F.R. § 628.42 What may a grantee not use to match an endowment challenge grant?

To match an endowment challenge grant, a grantee may not use— (a) A pledge of funds or securities; (b) Deferred gifts such as a charitable remainder annuity trust or unitrust; (c) Any Federal funds; (d) Any borrowed funds; or (e) The corpus or income of an endowment fund or quasi-endowment fund existing at the closing date established by the Secretary for submission of eligibility requests under the Endowment Challenge Grant Program. This includes the corpus or income of an endowment or quasi-endowment fund established by a foundation if the foundation is tax-exempt and was established for the purpose of raising money for the institution.

34 C.F.R. § 628.43 What investment standards shall a grantee follow?

(a) A grantee shall invest, for the duration of the grant period, the endowment fund established under this part in savings accounts or in low-risk securities in which a regulated insurance company may invest under the law of the State in which the institution is located. (b) When investing the endowment fund, the grantee shall exercise the judgment and care, under the circumstances, that a person of prudence, discretion and intelligence would exercise in the management of his or her own financial affairs. (c) An institution may invest its endowment fund in savings accounts permitted under paragraph (a) of this section such as— (1) A federally insured bank savings account; (2) A comparable interest bearing account offered by a bank; or (3) A money market fund. (d) An institution may invest its endowment fund in low-risk securities permitted under paragraph (a) of this section such as— (1) Certificates of deposit; (2) Mutual funds; (3) Stocks; or (4) Bonds. (e) An institution may not invest its endowment fund in real estate.

34 C.F.R. § 628.44 When and for what purposes may a grantee use the endowment fund corpus?

(a)(1) During the grant period, a grantee may not withdraw or spend any part of the endowment fund corpus. (2) If, during the grant period, a grantee withdraws or spends all or part of the endowment fund corpus, it must repay to the Secretary an amount equal of 50 percent of the amount withdrawn or spent plus the income earned on that amount. (b) At the end of the grant period, the institution may use the endowment fund corpus for any educational purpose.

34 C.F.R. § 628.45 How much endowment fund income may a grantee use and for what purposes?

(a) During the endowment challenge grant period, a grantee— (1) May withdraw and spend up to 50 percent of the total aggregate endowment fund income earned prior to the date of expenditure; (2) May spend the endowment fund income for— (i) Costs necessary to operate the institution, including general operating and maintenance costs; (ii) Costs to administer and manage the endowment fund; and (iii) Costs associated with buying and selling securities, such as stockbroker commissions and fees to “load” mutual funds; (3) May not use endowment fund income for— (i) A school or department of divinity or any religious worship or sectarian activity; (ii) An activity that is inconsistent with a State plan for desegregation applicable to the grantee; or (iii) An activity that is inconsistent with a State plan applicable to the grantee; and (4) May not withdraw or spend the remaining 50 percent of the endowment fund income. (b) Notwithstanding paragraph (a)(1) of this section, the Secretary may permit a grantee that requests to spend more than 50 percent of the total aggregate endowment fund income to do so if the grantee demonstrates that the expenditure is necessary because of— (1) A financial emergency such as a pending insolvency or temporary liquidity problem; (2) A situation threatening the existence of the institution such as destruction due to a natural disaster or arson; or (3) Another unusual occurrence or demanding circumstance, such as a judgment against the institution for which the institution would be liable. (c) If, during the grant period, a grantee spends more endowment fund income or uses it for purposes other than permitted under paragraphs (a) or (b) of this section, it shall repay to the Secretary an amount equal to 50 percent of the amount improperly spent. (d) At the end of the grant period, the institution may use all of the endowment fund income for any educational purpose.

34 C.F.R. § 628.46 How shall a grantee calculate the amount of endowment fund income that it may withdraw and spend?

A grantee shall calculate the amount of endowment fund income that it may withdraw and spend at a particular time as follows: (a) On each date that the grantee plans a withdrawal of income, it must— (1) Determine the value of endowment fund income by subtracting the endowment fund corpus from the current total value of the endowment fund on that date; and (2) Calculate the amount of endowment fund income previously withdrawn from the endowment fund. (b) If the value of endowment fund income in the endowment fund exceeds the aggregate amount of previously withdrawn endowment fund income, the grantee may withdraw and spend up to 50 percent of that excess fund income.

34 C.F.R. § 628.47 What shall a grantee record and report?

A grantee shall— (a) Keep records of— (1) The source, kind and amount of matching funds; (2) The type and amount of investments of the endowment fund; (3) The amount of endowment fund income; and (4) The amount and purpose of expenditures of endowment fund income; (b) Retain each year's records for a minimum of five years after the grant period ends; (c) Allow the Secretary access to information that the Secretary judges necessary to audit or examine the records required in paragraph (a) of this section; (d) Carry out the audit required in 2 CFR part 200, subpart F; (e) Comply with the reporting requirements in 2 CFR 200.512; and (f) Submit reports on a timely basis that are requested by the Secretary.

34 C.F.R. § 628.48 What happens if a grantee fails to administer the endowment challenge grant in accordance with applicable regulations?

(a) The Secretary may, after giving the grantee notice and an opportunity for a hearing, terminate an endowment challenge grant if the grantee— (1) Withdraws or spends any part of the endowment fund corpus in violation of § 628.44(a)(1); (2) Spends any portion of the endowment fund income not permitted to be spent in § 628.45; (3) Fails to invest the endowment fund in accordance with the investment standards set forth in § 628.43; or (4) Fails to meet the requirements in § 628.41. (b) If the Secretary terminates a grant under paragraph (a) of this section, the grantee must return to the Secretary an amount equal to the sum of the original endowment challenge grant or grants plus the income earned on that sum.

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