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Repository
of Equivalency Determination (ED)
Information on Non-U.S. Based NGOs
TechSoup
Global Selected as the Repository Host Organization
Media Release - November 6, 2008
The
Council on
Foundations, Foundation Center,
Independent Sector,
InterAction,
and a collaboration of other key organizations and international
grantmakers have been working together since early 2007 to
create a centralized Repository of information that could assist
U.S. grantmakers to determine if a non-U.S. based NGO is
equivalent to a U.S. public charity.
Information Age Associates has
been engaged to manage the project.
Equivalency
determination (ED) of U.S. charity status is one of the two
options provided for under IRS rules that enable U.S grantmakers
to make direct grants to non-U.S. based NGOs. Obtaining
information to meet the ED rule is both time-consuming and
expensive. Currently, each grantmaker collects this information
individually, thus duplicating the process which in many cases
has already been carried out by other grantmakers. This is done
at considerable time and expense since NGOs are asked to provide
variations of the same information over and over to multiple
potential U.S. donors.
This has
occurred because IRS regulations currently prohibit grantmakers
from using another organization’s “good faith determination”
and, to date there has been no broad-based agreement on
standards or a process. As a result, we are now:
1) seeking all of the necessary rulings from the IRS to
establish a centralized Repository of NGO information that would
enable international grantmakers to share and rely on EDs that
are conducted by the Repository, and
2) selecting and supporting
an organization to establish and manage the Repository on a long
term basis.
This would streamline the ED
process so that more resources can be dedicated to helping NGOs
rather than on administrative expenses.
Who has been selected as the Repository host organization?
TechSoup Global,
has been selected as the host organization with two supporting
legal partners:
-
Caplin & Drysdale
for government relations and the development of equivalency
determination (ED) operational procedures
-
Adler & Colvin
for ED escalations as needed
The TechSoup Global Network’s
nonprofit mission has been to help social benefit organizations
and charities outside the U.S. and Canada obtain donations of
essential technology products, information and services. To
accomplish this, 35 U.S. corporate grantmakers have engaged the
TechSoup Global Network to provide services to verify the legal
charitable status of NGOs worldwide in their own country. As the
Repository host organization, TechSoup Global will now expand
their current vetting process for all types of U.S. grantmakers
to include equivalency determination that meets IRS regulations.
Who selected the Repository host organization and how was this
accomplished?
The Council on
Foundations made the final selection of the host organization
based on the recommendation of the NGO Repository Review Panel
which included selected members of project Exploratory Committee
as shown below.
Members of the
Review Panel were carefully chosen to include international
funders plus leading philanthropic organizations and
associations representing grantmakers and NGOs. Panel members
included lawyers, grants managers, and foundation officers with
experience and expertise in international nonprofit law, IRS
regulations, and the equivalency determination (ED) process. The
panel also enlisted the support of IT specialists to evaluate
information systems and development capabilities.
Exploratory Committee
and Review Panel members
- Bill
& Melinda Gates Foundation
- BP Foundation
- Carnegie Corporation of New York
- Charles Stewart Mott Foundation
- Council on Foundations*
- Foundation Center*
-
GE Foundation
- Grants Managers Network
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- William and Flora Hewlett Foundation
- W.K. Kellogg Foundation
- Independent Sector*
- InterAction
- Rockefeller Brothers Fund
- Rockefeller Foundation
-
Adler & Colvin
-
United Way of America
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* = Original collaborating partner
organizations
Exploratory Committee members that opted not to serve
on the
proposal Review Panel are shown in italics above
The
recommendation was made following a very rigorous six-month
proposal submission and review process. Three proposals were
received in response to a
Request for
Proposal from
primary host organizations that included a total of ten
supporting partners. Two finalists were identified and the
Review Panel then conducted site visits and meetings with each
finalist’s team members that would be directly responsible for
establishing, managing and operating the Repository. Existing
operational and prototype systems were evaluated as well as
contracts with partner organizations.
Why was TechSoup Global selected as the Repository host
organization?
TechSoup Global
was identified as being the most qualified among a very strong
field of finalist host and partner organizations. TechSoup
Global has the demonstrated expertise and all of the necessary
experience to establish the Repository and meet the specialized
development, operational, managerial, and global support
requirements cited in the
Request for
Proposal. Their
particular strengths to serve as the Repository host
organization include:
Fit and
Strategic Direction
-
The NGO Repository is closely
aligned with TechSoup Global's core mission, strategic goals and
direction of serving NGOs worldwide. Providing equivalency
determination services is complementary to their current service
offering and would be of significant benefit to international
grantmakers, NGOs, and TechSoup’s global partners.
-
Well known and respected by NGOs
worldwide. TechSoup Global has guided NGOs through eligibility
processing and to date has verified the legal charitable status
of more than 120,000 organizations of which 16,500 are non-U.S.
NGOs.
Global
Reach
-
An established network of global
partners since 2005 that have been specifically selected to
support NGOs and assist them to gather required information and
documents for philanthropic vetting purposes. Significant
investment is made in training the staff of global partners.
-
TechSoup Global and their in-country
contracted network partners currently support NGOs in 21
countries and are on track to serve 40 countries by the end of
2009 and 60 countries by 2012.
Staff
Experience
-
Highly qualified integrated team of
managers, staff and network partners who have worked together
very closely and effectively for many years.
-
Demonstrated expertise and
coordination working as a team to vet NGOs and process more than
US$1 billion worth of in-kind donations by major U.S. corporate
grantmakers.
-
TechSoup Global will be expanding
their internal staff to include full time legal counsel with
expertise in international nonprofit law and IRS regulations.
-
A client services manager focuses on
improving processes. A full time trainer, along with dedicated
quality-process resources, is responsible for system
effectiveness and reliability, and ensures that U.S. staff is
knowledgeable about all vetting requirements, operations
procedures, and the use of information systems.
Customer
Support
-
Customer service call centers
provide eligibility support services (e.g., explaining
eligibility rules, documentation requirements, processes, and
schedules) to 35,000 client organizations annually, serving over
50,000 call interactions and over 50,000 email interactions.
-
Currently in the process of opening
a Warsaw Poland support operation to provide extended hours of
assistance to partners worldwide.
-
The Onyx Customer Relationship
Management (CRM) system is fully integrated into the centralized
database and tracks the up-to-date status of every request,
review and approval step, activities, and stores images of all
required documents.
-
Provides regular reports to donor
partners, similar to what will be made available to
international grantmakers about the status of equivalency
determination.
Repository Operations and Information Systems
-
Existing workflow, processes, and
systems that are similar to requirements for equivalency
determination and can be leveraged and extended to address the
NGO Repository’s requirements.
-
Web sites with localized content
offer extensive support for NGOs, including step-by-step
instructions, help files, FAQs, how to submit documents using
fax-to-file capability, status reporting, and automated e-mail
updates at key points of interaction.
-
TechSoup Global’s management team
has extensive internal technical expertise developing
large-scale rules based Web applications using state of the art
technology to support complex workflows.
-
A distributed software architecture
allows in-country partners to modify and run the system locally
(and in local languages) while connecting to a central system
that has been operational for five years.
-
Demonstrated expertise integrating
the core system with multiple third party applications including
grants management systems and large-scale databases.
-
Use of clustered systems for
redundancy that are hosted in an enterprise class datacenter
with automated failover and 24x7 support.
Business
Model and Sustainability
-
Developed and implemented a proven
financially sustainable revenue generating business model for
TechSoup Global’s current operation. TechSoup Global was awarded the
grand
prize in the 2003 Yale School of Management, Goldman Sachs
Foundation, and the Pew Charitable Trusts Business Plan
Competition for Nonprofit Organizations.
-
Potential for significant joint
development for future systems enhancements that could lower the
Repository costs.
-
Commitment to explore the potential
uses of the data for other appropriate philanthropic purposes.
This could be leveraged to benefit stakeholders by reducing the
costs to support and maintain the Repository, increasing
programmatic efficiencies, reducing fees to grantmakers, and
providing additional value-added synergies for both
international grantmakers and NGOs.
Who
submitted proposals?
The Review
Panel received three proposals representing a combination of 10
different host and supporting partner organizations. These teams
had significant experience and expertise in international
nonprofit law, IRS regulations, vetting NGOs, and maintaining
databases of information about nonprofit organizations.
The
Council on Foundations and the Review Panel have respected the
confidentiality of the organizations that submitted proposals
and have only announced the names of the selected host
organization and their supporting partners.
What
happens next?
- The Council on Foundations will
now enter into a multi-year contract with TechSoup Global to
establish and maintain the Repository. This will include a
detailed project plan and timeline, deliverables and a service
level agreement.
- A Repository Board will be
selected and convened to provide ongoing oversight of the
Repository’s development and operation.
- A funding consortium will be
established to provide the financial support for Repository
development through an initial startup phase and until such time
the operation is self-sustaining.
- The Council on Foundations,
Foundation Center, Independent Sector, InterAction, TechSoup
Global, Repository Board, Information Age Associates, and legal
counsel will work together to gain the necessary IRS approval
for the Repository operations.
- We will continue to refine the
business plan and determine an appropriate fee structure.
- As the Repository moves closer
to an operational phase, we will expand our outreach to inform
the charitable sector of the availability of this new resource.
How will we seek approval from the
IRS?
On September
12, 2007 we met with officials of the IRS Exempt Organizations
Division to discuss the Centralized Repository Project. We
explored operational and legal issues related to establishing a
centralized Repository of information on foreign
non-governmental organizations.
The IRS
representatives raised no objections to the project and
indicated a willingness to review a more detailed plan for the
Repository at the appropriate time. They also noted that they
had envisioned creating just such a Repository when Revenue
Procedure 92-94 was issued 15 years ago to describe how a
grantmaker might craft an affidavit to establish equivalency for
a foreign grantee. IRS officials indicated that, should the
agency approve the Repository, grantmakers could rely on the
equivalency determination information stored there. The
officials also said they would consider various means of
communicating that fact to grantmakers.
The following
organizations will now work together to seek all of the
necessary rulings from the IRS to enable the Repository’s
operation:
-
Council on Foundations, Foundation
Center, Independent Sector, InterAction
-
Caplin & Drysdale - Marc Owens*
(Counsel on Foundations’ outside legal counsel)
-
TechSoup Global and outside legal
counsel
-
Information Age Associates
*
Marc Owens
served as the Director of the Exempt Organizations Division of the
Internal Revenue Service for ten years.
Will the development of the
Repository have to wait until after the IRS approves it?
No. We will
start the detailed planning phase at the same time that we begin
the process of seeking approval from the IRS. We have been
encouraged to do this by a consortium of major international
funders who are willing to provide the necessary financial
support. This will
enable the Repository to hopefully begin operations soon after
we receive the necessary approval from the IRS.
The first phase of the initiative was funded by a
$50,000 grant from the GE Foundation. In addition to receiving
continuing support from the
GE Foundation, the second phase of the
project has been funded by the W.K. Kellogg Foundation,
F.B. Heron Foundation and the
Firelight Foundation.
We are now establishing a funding consortium to provide all of
the necessary support for the 2009 startup and
development phase of the project. Please contact Martin Schneiderman at
 ,
609 924 6936 if you are interested in joining
this consortium.
When will the Repository become
operational?
Our current
best estimate is that, subject to IRS approval, it will become
operational in 2010.
We are working diligently to expedite this process in response
to the high expressed demand for Repository services by
international grantmakers.
During 2006 surveys of U.S. international
grantmakers, non-U.S. NGOs and international giving service
providers were conducted to identify current attitudes, practices
and concerns about international grantmaking and the potential
benefits of a centralized repository. We received 79 survey responses from
U.S.-based international grantmakers, 56 non-U.S. NGOs, and 8
U.S.-based international giving service providers.
In general, the survey results indicate a high level of support for
the idea of creating a centralized repository that would provide a
more efficient system for assessing equivalency determination.
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86% of grantmakers and 75% of
service providers report that “The availability of a centralized
repository of vetted non-U.S. based NGO information would be
a significant benefit to U.S. philanthropy.”
-
76% of grantmakers and 74% of
service providers would favor establishing a centralized
repository of non-U.S. based NGO information.
-
87% of NGOs, 79% of grantmakers and
75% of service providers agree that “The existence of a
centralized repository would streamline the process of NGOs
becoming eligible to receive grants.”
-
98% of NGOs report that “We
would submit key information about our organization and
officers to a central repository and keep it up-to-date.”
-
86% of NGOs report that “We
would prefer to submit our NGO information to a centralized
repository rather than to each grantmaking organization
individually.”
-
77% of grantmakers agree that “An
IRS letter ruling that would approve the centralized repository
would be a key factor in our decision to become a member.”
Naturally, that support is
tempered with many questions about the workability, reliability and
sustainability of such a centralized repository.
Click the links below for a copy of
the feasibility study's December 2006 report, the detailed survey
results, and recommendations.
NGO Repository Feasibility Study - Findings and Recommendations
Appendix A - International Grantmaker Detailed Survey Results
Appendix B - NGO Leader Detailed Survey Results
Appendix C - Service Provider Detailed Survey Results
To view
this report you'll need the free
Adobe Acrobat Reader.
As part of our work on this project, the Foundation Center has
created an interactive map showing more than 20,000 grants totaling
over $5 billion awarded to more than 9,000 non-U.S. recipients. The
map is available at
http://fconline.foundationcenter.org/maps.The map
includes a sample of the grants awarded between 2003-2008 by more
than 600 larger independent, corporate, or community foundations and
grantmaking public charities.
 The
vast majority of grants included in this sample are over $10,000.
While this sample includes only a portion of the direct cross-border
grants made during this period, it provides a picture of giving to
non-U.S. recipients. Included are grants reported to the Foundation
Center by the foundations themselves or captured from public
records.
We are very interested in getting your feedback on this report's
findings, recommendations
and next steps so that we can continue to make
informed decisions.
 Click
here
to
share your
comments and feedback.
If you provide your contact information we'll then
keep
you updated
on the project's progress.
For more information contact:
Martin Schneiderman
Project Director
Information Age Associates
47 Murray Place
Princeton, NJ 08540 USA
Tel: 609 924 6936
Fax: 609 924 6993
E-mail:
Web:
www.iaa.com
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