This guide is for non-U.S. nonprofit or charitiy organizations seeking funding from U.S. foundations and wanting to understand how equivalency determination can facilitate the grantmaking process.
Bottom line: An equivalency determination (ED) certificate can make your organization more attractive to U.S. foundations by demonstrating you meet U.S. public charity standards, reducing administrative burden for grantmakers.
What is equivalency determination?
Equivalency determination is a good faith determination that a foreign organization qualifies as the equivalent to a U.S. public charity. When a qualified provider (for example, NGOsource) certifies your organization through this process, U.S. grantmakers can fund you without requiring expenditure responsibility procedures or ongoing reporting requirements.
Why it matters to your organization
Having an ED certificate offers several advantages:
- Easier fundraising: U.S. foundations can make grants without additional administrative burdens or ongoing monitoring requirements
- Faster grant processing: EDs are valid for up to two years, eliminating repeated vetting for multiple grants
- Broader funding access: Private foundations and donor-advised funds must use either ED or expenditure responsibility for international grants
- Reduced reporting: No requirement for annual reports on grant expenditure
Who qualifies for equivalency determination
Your organization may qualify if you meet these criteria:
Organizational requirements
You must be organized exclusively for charitable, educational, or other 501(c)(3) exempt purposes and operated primarily for qualified exempt purposes. Your governing documents must ensure assets would be distributed to another nonprofit or government entity upon dissolution.
Public support test
You must demonstrate that at least one-third of your support comes from the general public over a five-year period. This includes:
- Contributions from government agencies
- Grants from other public charities
- Donations from individual donors
- Membership fees and gross receipts from mission-related activities
What you will need and how to prepare
The ED process requires comprehensive documentation. Start gathering these materials early, as translation and preparation can take significant time.
Essential documents
- Governing documents: Articles of incorporation, bylaws, and any amendments (must be translated to English)
- Financial records: Audited financial statements for the past five years, including detailed support schedules showing all revenue sources
- Board information: Complete list of directors and key employees with their roles and responsibilities
- Program descriptions: Detailed explanations of your activities, including how you carry them out, funding sources, and expenditure types
Financial preparation
Create a comprehensive support schedule covering the current year plus the four most recent completed years. This must include:
- All grants and contributions received
- Government funding and public support
- Membership fees and program service revenue
- Investment income and unrelated business income
- Any contributions from individual donors exceeding 2% of total support (these amounts above 2% don't count toward public support)
Key considerations
The ED process can be prohibitive for organizations in countries without well-defined charity sectors or those that cannot meet the public support requirements. Many organizations with legitimate charitable purposes incorporate as social enterprises in countries where nonprofit registration is difficult, which may complicate qualification.
If your organization cannot qualify for ED, expenditure responsibility remains available as an alternative pathway for U.S. foundation funding.