Debunking A Myth How U.S. Foundations Can Directly Give Overseas

Many foundations believe that it is difficult for a foundation in the U.S. to make direct grants to organizations overseas. We interviewed Ken Tsunoda of NGOsource, a project of the Council on Foundations and TechSoup Global, to help us debunk this myth. Ken shares:

United States-based grantmaking foundations can directly make charitable grants to overseas organizations in one of three ways: (1) if the international organization is a U.S. public charity or foreign government; (2) if it qualifies as the equivalent of a U.S. public charity by virtue of an equivalency determination (ED); or (3) if the foundation exercises expenditure responsibility (ER).

An ED requires a good faith determination that a potential grantee is organized and operated like a U.S. public charity or a foreign government. If the overseas grantee is found to be equivalent, the grantmaker may lessen reporting requirements and restrictions on the use of grant funds by that grantee. 

Grantmakers exercise ER when grantee organizations are not exclusively charitable, when they are unable to provide the information required to complete an ED analysis, or when the ED analysis concludes the organization is not equivalent. The ER rules require specific forms of oversight and monitoring before, during, and sometimes even after the grant period to ensure that the funds are used exclusively for the intended charitable purposes of the grant.

U.S. foundations that want to establish long-term funding relationships with their grantees, help build a grantee’s organizational capacity beyond specific project goals, or want more flexibility in the disbursement of grant funds (for example, for capital equipment or general operating support) tend to prefer ED over ER.