Expenditure Responsibility FAQs

Through ER, 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). ER 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 ER requirements for U.S. private foundations, including pre-grant inquiry, grantee commitments, reporting obligations, and IRS disclosure.

No. ER 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 ER proportionately, and ensures costs align with the risk and regulatory demands of each grant.

The ER PLUS service brings together all required ER procedures and the practical administrative steps needed to carry them out efficiently. Paragon conducts the pre-grant inquiry, coordinates grant agreements containing required ER 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 ER requirements and helps grantmakers maintain complete, well-organized records throughout the grant cycle.

The ER 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 ER 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 ER compliance.

Which approach fits a particular grant is a legal question for your counsel. Adler & Colvin publishes a plain-English overview: Equivalency or Expenditure Responsibility? A Guide in Plain English.