Expenditure Responsibility PLUS
Available in both standard and higher-risk service levels.
Expenditure Responsibility (ER) enables U.S. private foundations and donor-advised funds to make compliant grants to non-501(c)(3) recipients through structured oversight. It requires a Pre-Grant Inquiry, a written grant agreement specifying charitable purposes and prohibited uses, ongoing grantee reporting until funds are expended, and grantor reporting to the IRS, preventing taxable expenditures.
- Regulatory compliance: Satisfies IRS requirements through mandatory inquiry, agreement terms, grantee reporting, and IRS disclosure.
- Broad accessibility: Available when an Equivalency Determination (ED) isn’t feasible, covering foreign organizations without IRS recognition and domestic non-501(c)(3) entities.
- Project accountability: Ensures grant-specific tracking through binding agreements and monitoring reports, with required grantor oversight.
Compliance support
The ER PLUS Service
Paragon’s Expenditure Responsibility PLUS (ER PLUS) service delivers a complete, end-to-end framework to support compliant, well-documented cross-border grantmaking under U.S. ER rules. Designed for funders seeking both procedural rigor and practical protection, ER PLUS combines all required IRS steps with enhanced risk-screening and verification safeguards to help clients protect charitable assets, reduce exposure to fraud or diversion, and maintain clear, complete records from start to finish:
Core ER procedures
The ER procedures
- Pre-Grant Inquiry (see steps below)
- Report collection and review (see steps below).
Paragon implements these procedures but does not draw legal conclusions or provide legal advice.
Additional safeguards
PLUS services deliver a targeted set of safeguards, including anti-terrorist financing screening, facilitation of grant agreement signatures, verbal verification of wire details, and a review of basic foreign country requirements. By combining these steps into one service, PLUS supports consistent oversight, reduces the risk of fraud or diversion, and helps keep the grant file complete and well organized.
Before the grant
ER Pre-Grant Inquiry
Paragon’s vetting team conducts a structured Pre-Grant Inquiry to evaluate whether a proposed grantee appears capable of using grant funds exclusively for the purposes of the grant, in line with IRS ER requirements. The process includes:
- Collect and review documentation: Obtain key organizational, governance, and financial documents from the grantee and assess their completeness, internal consistency, and alignment with the purpose of the grant.
- Assess organizational and financial integrity: Evaluate registration status, governance, management capacity, and indicators of financial health using Paragon’s standardized ER Pre-Grant Inquiry Summary form.
- Identify and manage special circumstances: Review for factors such as scholarships and prizes, aid to individuals, capital expenditures, endowments, or re-granting; flag any issues involving lobbying, electioneering, or potential donor control.
- Integrate compliance and risk checks: Confirm watchlist clearance through Paragon’s Anti-Terrorist Financing Screening (ATFS) and verify any relevant foreign-country requirements for receiving cross-border grants.
- Deliver ER Pre-Grant Inquiry Package: Provide the client with a complete package summarizing findings, supporting documentation, and Paragon’s assessment of whether the grantee is reasonably likely to use grant funds solely for the specified grant purposes.
Deliverable: ER Pre-Grant Inquiry Package
Paragon provides the client with a complete ER Pre-Grant Inquiry Package summarizing all documentation reviewed, findings, and factual assessments. The package includes the completed ER Pre-Grant Inquiry Summary Form, supporting organizational and financial materials, watchlist and country-requirements checks, and Paragon’s concise summary of findings on the grantee’s capacity, governance, and program alignment. This documentation enables the client to demonstrate compliance with IRS ER requirements and to make an informed determination about whether to proceed with the proposed grant. Paragon does not offer an opinion on whether a grant purpose is charitable under IRS rules; the package is assembled so the client can make that determination.
After the grant
ER Reporting
Paragon oversees the full ER reporting cycle, helping grantees submit clear, accurate, and complete reports on the use of grant funds. Using Paragon’s standardized Annual and Final Report templates, grantees document both narrative progress and detailed financial expenditures by cost category and cost detail. Paragon manages all communication with grantees, provides tailored instructions, and tracks deadlines to ensure timely submission. Upon receipt, Paragon reviews each report for completeness, verifies consistency with the approved grant purpose and budget, confirms that unspent balances and interest are reported, and requests clarifications as needed. Each report is evaluated for factual conformity with ER requirements under IRC §4945, helping clients keep complete, well-organized records for their IRS filings and internal compliance reviews. Paragon does not prepare or file the client’s tax returns or IRS reporting.
Deliverable: ER Reporting Package
Paragon provides the client with a consolidated ER Reporting Package containing the grantee’s submitted annual and/or final reports, supporting financial spreadsheets, correspondence and clarifications, and Paragon’s summary review memo confirming whether the reports meet factual ER standards. The package documents the grantee’s reported use of funds, confirms that all required financial and narrative elements were obtained, and keeps the client’s records complete for its IRS filings.
All ER services are administrative, risk-screening, and facilitative in nature. Paragon Philanthropy does not provide legal or tax advice.
PLUS Service Components
In addition to the core ER steps described above, Paragon’s ER PLUS service integrates a suite of targeted compliance safeguards designed to protect charitable assets, mitigate reputational and operational risk, and maintain clear, complete documentation throughout the grant cycle. Anti-Terrorist Financing Screening (ATFS) is part of every ER PLUS engagement. The other components are included in the service and applied as each grantmaker’s needs require.
Anti-Terrorist Financing Screening (ATFS)
Standard ER PLUS includes ATFS, Paragon’s baseline anti-terrorist financing screening service and Tier 1 of the Four-Tier Framework. Paragon manages all communications with the foreign grantee; collects and reviews core organizational documents; secures documentation of current legal registration status; and obtains either a certified list of persons with operational authority, board members, founders, beneficial owners, controlling entities and controlling individuals, and financial institutions, or formal confirmation that no changes have occurred. Paragon screens all relevant names and entities against U.S. and international sanctions and watchlists (including OFAC, UN, EU, UK, FBI, and Interpol), verifies any updates to banking relationships, conducts follow-up analysis on potential matches, and produces a written screening report with supporting documentation for the grant file. ER PLUS HR includes Paragon’s enhanced anti-terrorist financing screening service (ATFS-HR). The screening included in ER PLUS covers the first grant payment; screening for later payments is engaged separately.
Why
Anti-terrorist financing screening is essential for cross-border grantmaking because funders must ensure that charitable funds are not diverted to organizations or individuals associated with terrorism, money laundering, or other sanctioned activities. Risks may arise at any time due to changes in leadership, board composition, controlling entities, banking relationships, or registration status. Global watchlists (OFAC, UN, EU, UK, FBI, Interpol, and others) are continually updated. By verifying updates, confirming no changes, and re-screening the grantee before each disbursement, ATFS reduces the risk of inadvertent transfers to a sanctioned party and provides clear, documented support for due diligence and institutional accountability.
Grant Agreement Signatures and Communications
Facilitating signatures on the grant agreement by the grantee and client representatives via a secure e-signature platform. Facilitating communications between the grantee and client for any questions that may arise about the grant agreement. This process helps ensure that signatures are secure, time-stamped, and verifiable, creating a clear record for compliance and audit purposes. This service expressly excludes any legal review or analysis of the grant agreement. The grant agreement is prepared by the client. Paragon checks it for standard ER language but does not provide a legal review; final agreement language should be reviewed by the client’s legal counsel.
Why
A signed agreement allows the grantor to reaffirm protective language around the charitable use of funds, compliance with anti-terrorist financing and sanctions laws, and adherence to reporting obligations. By requiring grantee and client signatures for each installment, the agreement provides that funds are disbursed under updated terms, protecting the grantor against misuse, diversion, or reputational risk while aligning with compliance expectations.
Wire Information and Confirmation of Receipt
This service includes the following steps:
- Securing wire information via secure e-signature platform
- Verbal verification of wire details
- Confirming receipt of funds by the grantee
Paragon compiles these steps into a report, creating a clear record that the payment was authorized, transmitted, and received as intended.
Why
Reconfirming and verifying wire details prior to each payment helps prevent costly errors and fraud, such as misdirected or spoofed wires, and ensures funds are documented as received as intended. By securing wire instructions in writing, verbally confirming no changes, and obtaining confirmation of receipt from the grantee, the client reduces diversion risk and keeps a clear record of each payment for compliance reviews.
Basic Foreign Country Requirements Review
This is a three-step review: (i) check the ICNL Civic Freedom Monitor for the relevant country; (ii) review the Council on Foundations (COF) Country Note; and (iii) request that the grantee identify which requirements apply when receiving foreign funding. Because these rules can change between payments, the review reconfirms applicable obligations each time. Information is included only if published by ICNL or COF. For countries not covered by these sources, clients may request Paragon’s Enhanced Foreign Country Requirements Review (EFCR). This review is informational only and does not constitute legal advice.
Why
Many jurisdictions impose registration, reporting, or approval requirements on nonprofits receiving foreign funding, and in some cases on U.S. grantmakers as well. Because these rules can change quickly, reviewing them before each disbursement provides an important safeguard. Noncompliance may delay transfers, expose the grantee to penalties, or risk suspension of operations. By consulting authoritative sources (ICNL, COF) and confirming requirements with the grantee, this review provides current reference points on restrictions that may affect a grant’s legality or safety, helping protect both funder and grantee.
Documentation Provided
Over the course of each ER PLUS engagement, the client receives the following documentation for its grant file:
Due diligence and compliance
ER Pre-Grant Inquiry Package
The completed ER Pre-Grant Inquiry Summary Form, with the backing documents reviewed for the inquiry
ER Reporting Package
For each annual and final report, with Paragon’s summary review memo
ATFS Report
Anti-Terrorist Financing Screening (ATFS) report with screening logs and exhibits (standard service level)
ATFS-HR Report
Higher-Risk Anti-Terrorist Financing Screening (ATFS-HR) report, provided when the Higher-Risk service level is requested
ER PLUS HR
Foreign Country Requirements Summary
With supporting evidence
Grant execution
Grant Agreement E-Signatures
Secure e-signature facilitation of grant agreement signatures
Wire Verification Record
Wire instructions secured in writing, a record of the verbal verification of wire details, and confirmation of receipt
If requested
Higher-Risk Screening Option
For grants involving larger award amounts, higher-risk geographies, government-linked entities, or other elevated risk indicators, Paragon offers an enhanced service level: Expenditure Responsibility PLUS Higher-Risk (ER PLUS HR). This service integrates Paragon’s Higher-Risk Anti-Terrorist Financing Screening (ATFS-HR), a Tier 2 procedure within the Four-Tier Framework, into the standard ER PLUS process. ATFS-HR adds national sanctions screening via Dow Jones RiskCenter, adverse media searches covering terrorism, sanctions exposure, financial crime, corruption and misuse of funds, review of bank-issued account status documentation, and assessment of ownership, control, and government or political affiliations, alongside review of the grantee’s anti-terrorism and downstream-partner oversight policies.
Where ER PLUS sits in the Four-Tier Framework
Timeline and Delivery
Paragon aims to deliver ER projects efficiently while maintaining accuracy, documentation integrity, and adherence to established ER procedures consistent with IRS guidance. Upon receipt of all requested documentation and information from the grantee, ER projects are generally completed within two weeks, depending on project complexity and grantee responsiveness. Timelines may vary if translation, additional verification, or follow-up with the grantee is required. Paragon provides clients with status updates at each stage, from document collection through report delivery, to ensure transparency and predictable completion.
Rush Order Option
When a grant deadline requires it, clients may elect rush handling for an individual ER PLUS project. Rush handling accelerates the whole project, including collection of the grantee’s documentation, which is usually the longest stage. Paragon sets a firm deadline with the grantee at the outset, increases check-ins, offers video calls where language or capacity barriers exist, keeps the project at the top of its queue, and reviews it internally twice a week. Grantee responsiveness remains outside Paragon’s control, and rush availability depends on current workload and is limited during the holiday season.
Limitations
In assisting Client with ER steps, Paragon does not provide legal or tax advice. Paragon does not provide an opinion on whether any grant would be considered charitable, but only attests to the facts associated with the grantee and its anticipated and reported use of the grant funds, assembling a complete record so the client can make that determination. Paragon follows ER steps approved by the law firm, Silverstein & Pomerantz LLP (S&P). Paragon retains S&P for continued monitoring of Paragon’s standard ER procedures for compliance with ER under IRC §4945, 26 CFR § 53.4945-5, and any applicable IRS guidance.
Related
How the two approaches to grants for non-U.S. organizations compare.
Paragon’s Four-Tier Framework helps funders align vetting depth with risk.
“Paragon surpasses other providers I’ve seen with their level of due diligence and delivers much more than basic vetting. I have recommended Paragon to other grantmakers for their extensive service offerings, exceptional customer service, reasonable fees and timeliness. Working with Paragon, our foundation benefits from time and cost savings along with peace of mind.”
Colin Richardson
Director of Grants Administration
The San Francisco Foundation
Selected Clients
14 yearsServing global grantmakers
100+Countries, including higher-risk jurisdictions
3,000+Vetted nonprofits in the registry
The Rockefeller Foundation
Chicago Community Trust
Greater Houston Community Foundation
Zoetis Foundation
Greater Kansas City Community Foundation
Marin Community Foundation
Douglas B. Marshall, Jr. Family Foundation
Rodan + Fields Prescription for Change Foundation
Whittier Trust
Communities Foundation of Texas
