Give Anywhere Safely

CAF America’s approach to beneficiary due diligence

Charities Aid Foundation America (CAF America) works with philanthropists looking to support charitable organizations around the world by providing the infrastructure necessary for high-quality, regulatory-compliant grantmaking and maintaining a worldwide network of high-quality, fully vetted charity partners.

Challenges in International Philanthropy

CAF America has solutions for working under the strictest charity laws in the world


Why it’s challenging for donors: Since the Overseas NGO Management Law went into effect in 2017, there are now two ways to support Chinese charities: (1) through a US intermediary with an office in China, or (2) through a US intermediary that uses Temporary Activity Licenses.

How CAF America helps: To best serve our donors and allow for flexibility in planning, CAF America undertakes the responsibility of applying for Temporary Activity Licenses with our Chinese partner NGOs to facilitate giving to organizations in China. Under this model, donors can initiate the application process for a Temporary Activity License anytime throughout the year whereas giving through an office requires donors to plan their charitable gifts by December 31 of each year to be approved for the next year.


Why it’s challenging for donors: Local regulations require local organizations to obtain approval for fundraising abroad and receiving foreign funding. Obtaining the necessary permits may take several months to a year (in some cases).

How CAF America helps: CAF America works closely with organizations in Egypt to ensure that our grantees can comply with the local requirements and are able to continue fulfilling their mission.

European Union

Why it’s challenging for donors: On May 25, 2018, the EU Global Data Protection Regulation (GDPR) went into effect imposing a series of requirements related to the use and storage of personal data. EU privacy laws can have far-reaching impacts outside of Europe and there is no safe harbor covering charitable work or nonprofits.

How CAF America helps: CAF America is committed to regulatory-compliant cross-border giving. We sign a Model Contract with each EU grantee ensuring that we protect the personal data they share, thus complying with GDPR.


Why it’s challenging for donors: India’s Foreign Contribution Regulation Act (FCRA) governs which Indian organizations may receive foreign charitable funding. It has been increasingly difficult to register and maintain FCRA status. This resulted in a 40% decline in foreign funding between 2015 and 2018. On September 28, 2020, India passed several new FCRA amendments including a prohibition on the re-granting of foreign funding to other local nonprofits. US donors can no longer rely on Indian nonprofit intermediaries validated via Equivalency Determination or Expenditure Responsibility to manage local due diligence and grantmaking.

How CAF America helps: CAF America is an expert on FCRA. The majority of our grantmaking into India has always gone to direct beneficiaries in the country, and not through an intermediary. We work closely with our Indian partners and the CAF office in New Delhi to ensure that each of our grantees is registered under FCRA and is in compliance with annual reporting requirements, thus we enable our donors to continue advising gifts to India.


Why it’s challenging for donors: Anti-money laundering legislation requires organizations in Mexico to submit extensive information on donations they receive over MXN 107,000. Sensitive information from donors is required, such as copies of passports.

How CAF America helps: CAF America, as the grantor, undertakes the responsibility of compliance with these onerous requirements in relation to the grants advised by our donors to organizations in Mexico.

CAF America’s Framework for Grantee Due Diligence

Guided by CAF America’s 3Rs of International Grantmaking—regulatory compliance, risk mitigation, and reputation protection—our services ensure safe and effective international giving.

Taking a Risk-Based Approach
CAF America takes a risk-based approach to charity validation and grantmaking. This allows us to manage risks rather than avoiding them altogether, and leads to more flexible, innovative, and ultimately accessible grantmaking. Our team leans on our 30+ years of experience to evaluate each of our grantees individually and determine how we can approve their support.

Support for Grassroots Organizations
Our Board of Directors and Staff strongly feel that it is important and necessary to support local, grassroots organizations where possible, and in many of cases, these types of organizations are either not registered as charities in their countries or cannot fulfill all documentation requirements, such as having audited financial statements. Our review process will flag these differences as potential risk indicators and will work with both the donor and the grantee to mitigate those risks through a variety of tools, but we do not immediately dismiss them as viable grantees when these types of indicators are identified.

Enhanced Expenditure Responsibility
CAF America’s Enhanced Expenditure Responsibility service provides unparalleled assurance that your gifts are used for their intended purposes. We go above and beyond the IRS requirements of Expenditure Responsibility (ER), which is one of two tools the IRS provides for cross-border giving. ER enables US grantmakers to grant funds to charitable projects or organizations not recognized as 501(c)(3) public charities.

CAF America’s Global Charity Database

Once a charitable organization becomes eligible with CAF America, it is added to the CAF America Global Charity Database. The beneficiary in question can then receive grants from CAF America at the recommendation of any CAF America donor during its eligibility period. Eligibility with CAF America lasts for three years for UK, Australian, and Canadian charitable organizations and up to two years for charitable organizations from all other countries.

If an organization’s eligibility expires, it must renew its status in order to receive future grants. The CAF America renewal process is shorter and organizations are only required to submit an updated Grant Eligibility Application (GEA), a copy of updated financials, current board of trustees/directors, and any new or updated governing documents.

Expenditure Responsibility & Equivalency Determination

The IRS has designated two tools for US foundations to use when substantiating the charitable purpose of grants made to support non-US charities and charitable activities.

Expenditure Responsibility (ER)

Expenditure Responsibility involves CAF America funding a specific charitable project that our grantee is delivering, one that we can determine is in line with the IRS definition of ‘charitable purpose’.

ER can be used to fund:

  • Specific charitable projects
  • Charitable projects of for-profit entities

ER cannot be used to fund:

  • Purchases of capital assets, construction, or general support
  • Organizational Endowments
  • Regranting (sending funds to a further beneficiary), in most cases

Equivalency Determination (ED)

Equivalency Determination involves CAF America making a good faith determination that the entire grantee organization is governed in a way that would otherwise be considered as equivalent to a US Public Charity under Sections 501(c)(3) and 509(a) of the Tax Code. Any grants made under an ED can be considered unrestricted, although CAF America may choose to enter into a grant agreement for accountability purposes. IRS Revenue Procedure 92-94 provides a specific procedure for making this determination, including a list detailing information that must be obtained from the foreign charitable organizations.

While both have advantages and disadvantages, CAF America can help determine which is most appropriate based on the specific grant (or grants) under consideration.



Requires Proof of Registration (or other country-specific documentation)

Yes Yes

Requires review of Governing Documents

Yes Yes

Requires list of Board Members and Senior Staff

Yes Yes

Requires submission of audited financial statement

Yes Yes

Requires demonstrated public support of your organization

No Yes

Can use grant funds to purchase capital assets

No Yes

Can use grant funds to add to endowments

No Yes

Can fund charitable work of for-profit entities

Yes No

Requires segregated accounting for grant funds

Yes No

Requires annual reports for the lifetime of the grant

Yes No

Review Time from the submission of the eligibility application

4–6 weeks

6–8 weeks

Eligibility period

1–3 years

1–2 years

Fees payable to CAF America




Enhanced Expenditure Responsibility

CAF America makes grants to charitable organizations pursuant to an in-house expenditure responsibility review process. Foreign charitable organizations that are currently not registered with CAF America must first complete our Grant Eligibility Application (GEA). Once CAF America receives a completed, signed GEA and all required supporting documentation, we initiate a three-tiered review process. The review process typically takes between 4–6 weeks.

Although our exact process is proprietary, some of the enhanced features of CAF America’s Enhanced Expenditure Responsibility method include:

1) Making a “pre-grant inquiry”: CAF America requires all foreign charitable organizations applying for eligibility to complete a Grant Eligibility Application (GEA). In addition to completing the GEA, applicants must submit select supporting documents for the review; the table at right lists the typical documents requested.

After the Grant Eligibility Application has been submitted and the beneficiary has been approved, CAF America proceeds with the final two steps of Expenditure Responsibility:

2) Executing a written grant agreement: Grantees must enter into a grant agreement with CAF America containing specific terms that limit and restrict how grant funds may be spent and monitored, and sets forth the specific circumstances under which grant funds must be returned. The terms of the CAF America grant agreement are based upon those required of private foundation expenditure responsibility grant agreements.

3) Grantee reporting: Grantees must submit an annual report on all grant expenditures. In addition, the grantee must report on compliance with the grant agreement terms, progress towards achieving the grant purpose, and any changes to the information submitted on their GEA. The annual report is due at the end of the grantee’s fiscal year.

Supporting Documents Required for CAF America’s Review Process

Document Needed

How CAF America Uses Them

  • Organizational test: Are the purposes for which the organization
    was organized all considered charitable under section 501(c)(3)?
  • Board election process, quorum and power structure
  • Confirmation of non-profit status
  • Review board remuneration policies
  • Confirm dissolution clause
  • Review Auditor Opinion for any identified issues
  • Income: Is it diverse, sustainable, and supporting their operations?
  • Expenditures: Do they seem reasonable based on their operations?
  • Evaluation of surplus or deficit, and seeking needed explanations
  • Each board member’s name and the organization’s name is run through Thompson Reuters World Check, a database of 400+ watch lists that includes all of the required US lists, such as OFAC and SDN.
  • On a bi-weekly basis after the organization is eligible and throughout the duration of their eligibility, we run the organization name and all board member names through Lexis Nexis Bridger. This database includes all of the required lists under US law. A list of these databases can be given upon request.

Equivalency Determination at CAF America

Grantees undergoing Equivalency Determination must submit:

  • An ED Affidavit: Required to collect relevant information for our review
  • Copies of the charter, bylaws, and other documents that govern the organization, in English with certified translations
  • Proof of registration as a nonprofit organization
  • List of current board members
  • Most recent audited financial statements.
  • A Grant Eligibility Application

Passing the Public Support Test

To qualify for an Equivalency Determination, foreign grantees must be able to demonstrate public support—meaning that 33% of their contributions over the last five years came from 17 or more donors, with no single donor accounting for more than 2% of the calculated total. This is a complicated calculation and CAF America provides the tools for grantees to do the math. However, many foreign charities do not have public support—or do not have five years of audited financial statements—which makes this test often the most difficult one to pass. Some exceptions to the 33% rule are possible, but only after much closer scrutiny.

Validity of an Equivalency Determination

Once an Equivalency Determination is approved, it lasts until the expiration of the audited financial statements used to complete the review.

Note: Not all charities can pass an Equivalency Determination review, as the process is much more intensive than ER. CAF America defaults to ER unless the projects being funded require an ED.

Equivalency Determination Certificates

ED reviews can be used in two different ways:

  • CAF America can use the determination to substantiate our own grants, or
  • CAF America can issue an ED Certificate to a third party donor, who can use it to substantiate their own grantmaking activity.

ED Is Not a License to Give

While Equivalency Determination Certificates offer a compelling snapshot of an organization’s charitable status, there are ongoing compliance concerns that grantmakers should be aware of after grants are made that require additional oversight and compliance. CAF America strongly recommends that all grants made with an Equivalency Determination Certificate are accompanied by ongoing monitoring for compliance concerns, such as our regular watchlist screening, to ensure that all risks are appropriately managed

Custom Due Diligence

Over the 30+ years CAF America has been making grants to foreign nonprofits, we have built substantial expertise in evaluating grantees for compliance with a wide variety of funder criteria. We invite any donors or clients to co-create a merged due diligence procedure that can minimize the administrative burden on our grantees.

In addition to the creation of merged applications, CAF America’s team can apply customized tests to the information we collect to provide partners with the reporting and analysis to support their impact-oriented programs.

Types of analysis we can deploy include:

Financial Health: Beyond the minimum requirements of our standard vetting protocol, what is a picture of the organization’s financial health? What kinds of assets do they own and how does that influence their ability to sustain themselves?

Programs: Are the programs you are interested in supporting strong and aligned with your intended outcome? How has staff support for those programs grown or varied over time? What other sources of funding keep those programs going, and how sustainable are they?

DEI or Cultural Values: Does the organization have a diverse board of directors and senior leadership? Are they women- or minority led? Do they have policies around Diversity, Equity, and Inclusion that align with your values?