I have a piece of good news. There is an exciting effort underway to reshape the international grantmaking process. Secretary of State Hillary Clinton stole the show earlier this week with an announcement at the Clinton Global Initiative for U.S. foundations making international grants.
Under existing rules, if a foundation wants to make a cross-border grant to a foreign-based organization it generally uses one of two legally permitted methods: equivalency determination (ED) or expenditure responsibility (ER).
The current announcement relates more to the former. Equivalency determination is a process in which a U.S. grantmaker evaluates whether an intended foreign grantee is the equivalent of U.S. charity. Right now this process requires significant work by the grantee and the grantmaker. It is particularly inefficient, redundant and costly because any foundation that wants to make a grant to a foreign-based organization must go through this process individually.
Let’s pretend. The Delekta Family Foundation wants to make a $5,000 grant directly to a Cambodian health organization that already receives funding from foundations like Gates, Rockefeller, and Ford. Even though those foundations have individually determined that the Cambodian health organization is equivalent to a US charity, the Delekta Family Foundation has to repeat the same exact process. Even if 50 U.S. foundations were already making grants to this Cambodian organization, the Delekta Family Foundation would still have to repeat the process for a 51st time.
Moreover, the Cambodian health organization has to respond to 51 requests, gather materials 51 times, fill out 51 different forms that 51 different lawyers have prepared, probably only in English. It’s a long, timely and expensive process that many grantmakers, especially smaller ones that also give domestically, often give up on because they decide the process isn’t worth the hassle.
Why can’t we just have one quality ED done annually for everyone to use? Secretary Clinton announced yesterday that the Treasury and State Departments, and the IRS have taken a step toward making this possible. The first step broadens the range of organizations that can do this work. It also sets the stage for ED repositories that foundations could use like a library. This is a significant step toward reducing the burden on funders and grantees – and increasing the impact of international giving.
You can hear Secretary Clinton make the announcement here: http://bcove.me/zwz8aq69