CAF America Connections Blog

4 Ways Grantmakers Can Streamline Reporting

September 9, 2019

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.

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!

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