May 24, 2023

The Fundamentals of International Grantmaking from a Donor-Advised Fund

Author National Philanthropic Trust

In 2022, National Philanthropic Trust experienced a 56% increase in international grantmaking, with over 2,000 grants recommended to organizations across 89 countries totaling approximately $1.04B. This comes as no surprise, as NPT’s donors have demonstrated time and again that they are active, engaged and motivated philanthropists, regardless of where a cause originates.

Philanthropy can be an excellent way to engage with global issues — but for the uninitiated, navigating the process of international grantmaking with a donor-advised fund (DAF) may be daunting. NPT’s team of philanthropic experts has developed a helpful list of frequently asked questions regarding the basics of international grantmaking.

FAQs:

How can I support international causes?

There are three effective ways of supporting international causes with grants from your donor-advised fund account. At NPT, donors may recommend grants:

  • To U.S.-based charities with a global mission
  • To intermediary charities (U.S.-based nonprofits that fund overseas charities)
  • Directly to a charitable organization outside the U.S. with additional due diligence

How can NPT help with international grantmaking?

For over 20 years, NPT has provided international grantmaking support for donors. Grants to organizations based abroad require additional due diligence to determine their eligibility to receive a grant. While our team handles the work to qualify entities abroad, donors have more time to focus on their global charitable vision.

What kind of due diligence is conducted for international grantmaking?

International grants are international financial transactions, which carry with them certain legal requirements. All funds granted internationally must be used for charitable purposes. Granting internationally from a donor-advised fund requires validation through one of two processes facilitated by NPT’s grants and legal teams: Equivalency Determination and/or Expenditure Responsibility.

What defines an Equivalency Determination or an Expenditure Responsibility?

An Equivalency Determination (ED) is a good faith determination by a qualified tax practitioner concluding that a particular international organization is the legal equivalent of a U.S. public charity.

Expenditure Responsibility (ER) is a process by which the grant provider takes responsibility that the grant will be used for legitimate charitable purposes. This type of due diligence includes an analysis of the organization’s incorporating documents and financials, submission by the grantee of a budget for the use of the grant funds, memorialization of a specific, trackable charitable purpose, as well as an OFAC screening of all principals and board members. In addition, pursuant to the ER process, the grantee must provide annual reports to NPT describing the use of the grant funds until they have been spent entirely.

Who conducts the validation process?

Conducting the validation process depends on the type of due diligence required. NPT will regularly conduct verification for Expenditure Responsibility, while Equivalency Determination is conducted by NGOsource, an expert in the field of international giving and a trusted NPT partner.

Is there any information about the international organization that I need to present to NPT?

Donors will need to supply the organization name, email and contact information (name, email, title) for 1-2 people at the organization to NPT, who will then submit them to NGOsource if necessary.

How long does the Equivalency Determination usually take?

The processing time for international non-governmental organizations (NGOs) that have a current Equivalency Determination completed via NGOSource is approximately 4-6 weeks. For organizations that have not previously completed ED, the process takes about ten weeks on average, depending on the responsiveness of the organization in question. If you wish to expedite this process, a one-time fee can shorten the processing time to around 4 weeks.

Once the organization is approved, is there a limit on how many grants I can recommend to them?

If approved, the international organization’s status typically remains valid for around 12-18 months, during which time a donor can recommend as many grants as they would like to that organization.

Are there fees connected to international grantmaking?

Yes, additional fees may apply depending on the specific situation. For example, there is a fee to validate an international organization or for wire transfers for grants recommended during the Equivalency Determination validation process. Expenditure Responsibility grants have fees for each international grant. For specifics on international grantmaking fees, our Donor Relations team is here to help at npt@nptrust.org.

For donors interested in reviewing their grantmaking strategies, NPT is ready to help you help others. Contact us at (888) 878-7900 or npt@nptrust.org with any questions. Whether your philanthropic interests lie here or abroad, NPT’s team of philanthropic experts are here to assist you throughout your charitable giving journey.

About the Author

Mike Boyce is Senior Grants Manager at National Philanthropic Trust and has over seven years of experience in DAF grantmaking and due diligence, providing quality service to donors and advisors as they explore their philanthropic interests. Mr. Boyce is responsible for the oversight and administration of NPT’s grantmaking team and procedures to ensure compliance and timely processing of grants to provide charities with financial support.