4 Ways Grantmakers Can Streamline Reporting
Foreign organizations are able to receive tax-effective charitable funding from the US if 1) the US grantor is able to make a good faith determination that the foreign organization is the equivalent of a US 501(c)(3) public charity (the grantor conducts an Equivalency Determination or ED), or 2) the grantor can establish that the funds are used solely for the charitable purposes for which they were made (the grantor conducts Expenditure Responsibility or ER). When conducting ER, the IRS requires the grantor and beneficiary to enter into a written agreement. Among others, this agreement must require the submission of full and complete annual reports on the manner in which funds are spent and the progress made in accomplishing the purposes of the grant. If this requirement is not met, the grantor cannot transfer further funding until the report has been submitted and approved.
Grantors working in the cross-border space often deal with a large number of grants, grantees, and ultimately grant reports. Last year, CAF America sent 1,343 grantee report requests to unique grant recipients in 83 countries. Even with a dedicated staff member that supports the grantees with this process, we do not expect to receive 1,343 fully-compliant grantee reports on the first try. Collecting these reports can become difficult—many international grantors have to contend with language barriers, high turnover rates at nonprofits, and limited staff capacities. While it is ultimately the recipient charity’s responsibility to submit an accurate report, grantors often go above and beyond what is legally required of them to collect these reports. The possible delays caused by the temporary suspension of grants to an organization that has not yet complied with their reporting requirements can be frustrating for donors that are interested in making repeat gifts. Needless to say, the availability of repeat gifts ultimately means a more sustainable future for the recipient organization. So how can we, the grantors, improve this process?
With an ever-growing list of grantees, we’ve had to examine our reporting practices to see what works, what doesn’t, how can we best facilitate the process for our grantees, and what is practical for our team. We are excited to share our lessons learned and hope these tips help you to get ahead of potential roadblocks in your grantmaking.
- Speak their language. We committed to making our Grant Eligibility Application and our Grant Agreement available in several languages (and add additional languages as the need arises). It is imperative that grantees have a clear and thorough understanding of the grant’s parameters and their own obligations, and sometimes, Google Translate just won’t do the trick. To make the process a bit less onerous on the grantees, we accept grantee reports in multiple languages, resulting in more accurate and useful data collection. We love hearing about our grantees’ successes, and the more detail we receive in reports, the better. Allowing grantees to tell their story in their own language paints a fuller picture.
- Make your reporting tools accessible. We came a long way. We’ve progressed from sending reports via post, to email, to now using an online platform. Sending and receiving reports in the mail can be a lengthy and expensive process, and some reports are bound to be lost in the long transit across continents. Sending report templates by email required grantees to have access to a printer and scanner for signatory purposes, but these items can be few and far between in remote areas. We don’t want anyone to drive 20 miles to scan us a piece of paper—and we’re sure they don’t want to either! Our model has changed along with the technology, and we have now upgraded to an online grantee reporting platform that requires only an internet connection. Grantee reporting requirements can vary widely among grantors. This can be confusing and intimidating for grantees that are new to receiving international funding. In the past, we’ve found that many of our grantees fail to submit reports because they simply aren’t sure what they are supposed to be reporting on. Using our online portal, grantees can log in, access their previously approved grant application, and complete their grantee report all in one place. We also provide a detailed “How To Guide” for accessing and submitting the grant report, ensuring that someone with minimal computer skills can fulfill the reporting requirements.
- Automate your follow-up. Our grantees are busy! We appreciate that our beneficiaries often have limited staff capacity and demanding schedules. There are numerous deadlines to meet on a weekly basis, and submitting a grantee report can be just one of many competing priorities. We leverage our technology to send automated reminders to grantees that have upcoming reporting due dates. This requires very little effort on our end but makes a big difference for our grantees’ compliance. After sending a reminder notice, we consistently see an influx of reports.
- Donors as a lifeline. When a grantee fails to submit a grant report, don’t give up! We will typically first send two email notices, then call the head office, and finally, send a letter by post. If all of these efforts are unsuccessful, we sometimes turn to our donors. Gifts which our donors make using our Donor Advised Funds, Donor Advised Gifts, or by contributing to a Friends Fund are often deeply personal, and in some instances, donors have a close relationship with their chosen charity. If a donor provides an alternate contact or encourages the charity to comply, it can be tremendously helpful. When charities have a familiar face or name to associate with our reporting request, they are more likely to prioritize submitting the report. It also helps when grantees learn that further funding from a particular donor is available but contingent upon the submission of a grant report. Contact with a donor gives charities an incentive to report.
Making grants with Expenditure Responsibility allows for a great level of flexibility as foreign organizations that do not qualify as equivalent of a US 501(c)(3) public charity can become eligible to receive foreign funding in support of their charitable projects. However, using ER as the primary mechanism for giving means that grantors also have committed to dedicating a lot of administrative time and talent to make everything run smoothly. In our experience, the results are well worth it. Donors and grantors can rest assured that the funds were used as intended, and grantors are able to gather rich grantmaking data to better understand the achieved impact. Expenditure Responsibility creates a feedback loop that makes our relationships stronger, our grantmaking more transparent, and our work more rewarding. We hope these 4 tips help you to strengthen your reporting process, build relationships with your grantees, and increase your impact as well!