Expenditure Responsibility FAQs

Through Expenditure Responsibility, a grantmaker conducts a pre-grant inquiry and maintains ongoing oversight to ensure that charitable funds are used solely for the purposes for which they were granted when making grants to organizations that are not recognized U.S. public charities (including many non-U.S. organizations). Expenditure Responsibility is a required procedure for U.S. private foundations in these circumstances. Internal Revenue Code §4945(h) and Treasury Regulation §53.4945-5 set out the core requirements, including written grant terms, grantee reporting, and the foundation’s recordkeeping and reporting obligations. 

The Internal Revenue Service provides authoritative guidance on Expenditure Responsibility requirements for U.S. private foundations, including pre-grant inquiry, grantee commitments, reporting obligations, and IRS disclosure.

No. Expenditure Responsibility PLUS is provided on a per-grant basis, with fees calibrated to the size of the grant and the resultant scope of required compliance and oversight. This approach allows U.S. private foundations and DAFs to apply Expenditure Responsibility proportionately, and ensures costs align with the risk and regulatory demands of each grant.

Paragon’s Expenditure Responsibility PLUS service brings together all required Expenditure Responsibility procedures and the practical administrative steps needed to carry them out efficiently. Paragon conducts the pre-grant inquiry, coordinates grant agreements containing required Expenditure Responsibility provisions, and manages grantee reporting through final expenditure, while also handling anti-terrorist financing screening, review of applicable foreign country requirements, verification of wire transfer information, and confirmation of receipt of funds.

By integrating these steps into a single, structured process, ER PLUS supports consistent execution of Expenditure Responsibility requirements and helps grantmakers maintain complete, well-organized records throughout the grant cycle.

The Expenditure Responsibility pre-grant inquiry typically takes about two weeks from the date all required documents are received from the grantee. Overall timing may vary depending on the grantee’s responsiveness and the completeness of the materials provided.

During the Expenditure Responsibility pre-grant inquiry, the grantee is asked to provide organizational, governance, and financial documentation sufficient to assess whether grant funds are reasonably likely to be used solely for the purposes of the grant. This typically includes legal registration and governing documents, information on leadership and management, financial records relevant to the proposed grant, and details necessary to evaluate project feasibility and internal controls.

Depending on the grant, the inquiry may also address special circumstances such as re-granting, scholarships or prizes, capital expenditures, or aid to individuals, and includes required anti-terrorist financing screening and verification of any applicable foreign country requirements. All information collected is reviewed and compiled into a documented Pre-Grant Inquiry package to support the grantmaker’s expenditure-responsibility compliance.

This resource from Adler & Colvin outlines the key legal and practical considerations for U.S. grantmakers deciding whether to make an international grant through Expenditure Responsibility (ER) or Equivalency Determination (ED): Equivalency or Expenditure Responsibility? A Guide in Plain English.