There are two mechanisms for U.S.-based foundations to make grants abroad: equivalency determination (ED) and expenditure responsibility (ER).
These procedures must be followed by private foundations and grants from donor-advised funds (DAFs). Other types of funders often utilize aspects of ER or ED in their due diligence practices to protect themselves and their grantees, though they are not legally required to follow ED or ER procedures.
What are Equivalency Determination and Expenditure Responsibility?
Equivalency determination and expenditure responsibility are two distinct processes that are the predominant tools for foundations to assess or vet foreign charitable organizations.
- ED looks at the potential grantee itself and asks the question: would this organization qualify as a U.S. 501c3 public charity?
- ER is less concerned about the grantee organization itself and rather seeks to confirm: is the organization equipped to fulfill this activity and will the grant funds be used for exclusively charitable efforts?
When to Choose?
There are specific circumstances when only ER is an option, such as the grantee not meeting the requirements of public charity status (e.g., it’s a social enterprise). There are other circumstances when ED is a much better option. Council members can access our guide Equivalency Determination or Expenditure Responsibility to learn more about when to choose.
Important Notes
- Public charity grantmakers who are making an international grant not from a DAF are not legally required to use ED or ER.
- Grants from corporate entities do not need to follow ED or ER. However, corporate foundations structured as private foundations, must follow ED or ER.
- ED and ER are both effective tools to better understand potential grantees but funders should also ensure they are in compliance with other legal regimes such as local laws and OFAC sanctions, and are not funding terrorism.
Additional Resources
- Sample Foreign Grant Expenditure Responsibility Letter (Members-only resource)
- What is Expenditure Responsibility? (Members-only resource)
- Equivalency Determination or Expenditure Responsibility? (Members-only resource)
- Expenditure Responsibility: Step by Step (Free for Council Members, otherwise $199)
- NGOsource | Equivalency Determination Guide
- Paragon Philanthropy | Expenditure Responsibility FAQ
