"Breaking Ground" on the NGO Repository
Martin Schneiderman, President, Information Age Associates, and NGO Repository Manager, Council on Foundations
Please click here to take our 10-minute survey so that we can learn more about your interest in becoming a member of the NGO Repository and to help us develop a cost-effective fee structure.
Streamlining international grantmaking. As any grants manager who has been responsible for making direct grants to non-U.S.-based non-governmental organizations (NGOs) has experienced, equivalency determination (ED) is a complex, time-consuming, and expensive process. The required information is currently collected independently by each grantmaking organization, and NGOs are asked to provide variations of the same information over and over to multiple potential U.S. donors. That's because IRS Revenue Procedure 92-94 currently prohibits grantmakers from sharing this information.
Hundreds of international grantmakers and NGO leaders around the world have told us that "This makes no sense . . . we need find a better way!" and that's just what's been happening.
Finding a better way. In early 2007 the Council on Foundations, Foundation Center, Independent Sector, InterAction, and a broad-based collaboration including the Grants Managers Network and major international grantmakers began working together to design and establish a centralized NGO Repository of ED information. Grantmakers that have either already provided funding, made a commitment to join the funding consortium, or have invited and are currently processing proposals currently include:
The result will be a streamlined operation that, for the first time, will allow U.S. grantmakers who are NGO Repository members to share EDs and invest more money in grants and less in unnecessary administrative costs. This new system will be a welcome relief to both grantmakers and NGOs in these difficult economic times.
ED was chosen because it's an organizational certification vs. expenditure responsibility (ER) that's specific to an individual grant and has onerous multi-year reporting requirements. We also know that 79% of international grantmakers make either only ED grants or a combination of ED and ER.
Selecting the host organization. The first step in the project was to establish standards, develop consensus on the services that the repository would need to provide, and publish an RFP with detailed requirements. After a rigorous selection process, TechSoup Global, a 501(c)(3) public charity, was chosen as the repository's host organization, with its supporting legal partners, Caplin & Drysdale and Adler & Colvin, who have specialized expertise in international nonprofit law.
TechSoup Global (TSG) was identified as being particularly well-qualified to build and maintain the NGO Repository for these key reasons:
- Founded in 1987 as the CompuMentor Project, TechSoup Global currently helps more than 30 companies make product donations (totaling more than $250 million annually) to charities, public benefit organizations, and other NGOs worldwide
- TSG and its in-country contracted and trained network partners currently support NGOs in 23 countries, and new partners and affiliates are being added each month
- Well-known and respected worldwide, TSG 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
- TSG will be expanding its internal staff to include full-time legal counsel with expertise in international nonprofit law and IRS regulations
- TSG has 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
Getting the go-ahead from the IRS. Since we'll need approval from the IRS to operate the repository, we met with IRS Exempt Organization Division officials early on in the process. They advised us that "A repository was envisioned when Revenue Procedure 92-94 was created 15 years ago." They raised no objections to the establishment of a repository and indicated a willingness to review a more detailed plan. They also assured us that should the agency approve the repository, grantmakers could rely on the ED information stored there and that they would consider various means of communicating that fact to grantmakers.
In early March 2009 TechSoup Global filed a comprehensive private letter ruling request with the IRS that covers all aspects of the NGO Repository's ED review process, as well as how ED certificates can be issued and relied on by all NGO Repository member grantmakers. We're now looking forward to a response from the agency later this year.
When will it launch? System development has begun and the repository is on track to launch in early 2010 following approval from the IRS.
How will it work? When a repository member identifies an NGO with quality programs it wishes to support, it will first conduct basic ED eligibility screening using a set of key questions provided by the repository. The member will then refer the NGO to the repository to submit all of the required information in the specified formats. A dedicated ED review team will analyze and process the information. The following services will be provided by the repository to member grantmakers and their NGOs:
- Support to the NGOs in nearby time zones to answer questions and provide assistance so they can understand and complete their ED submission
- Development and maintenance of the NGO Repository Website in multiple languages
- Comprehensive list of FAQs plus examples and templates for NGOs to create their required documents
- Online branching ED questions (aka wizards) to simplify the process by filtering questions by organization type and country
- Online tools for NGOs to convert budgets from local currencies into $USD
- Comprehensive review of ED submissions per IRS regulations to determine equivalency
- Escalation to external legal counsel with expertise in international nonprofit law on an as-needed basis
- Grantmaker portal and e-mail updates showing the current status of ED processing
- Issuance of an IRS approved Repository Certificate for a successful ED
- Reminder service for NGOs to maintain their ED status
- Optional fee-based document translation referral services
- Repository integration with the major commercial grants management software and services
- Annual independent audit of the repository operation
Designing a smart system with an optimized workflow. If you've ever used software such as TurboTax, you understand the power of branching programs that use "wizards," making the process of complying with IRS regulations easier and optimizing your workflow. In that context, a wizard might ask if you own or rent your home and then only ask relevant questions. In the same way, a governmental entity would only be asked for relevant information and not be confused by public support questions. Another example might be that if the NGO is a charitable entity in country X, and we've captured in our systems that the laws in country X specify that upon dissolution assets must go to charitable purposes, then we can utilize intelligent edit checks to optimize and shorten the review process of the NGO to be consistent with that knowledge.
Providing a high level of NGO support. We've heard repeatedly about how hard it is to communicate with NGOs and try to explain the complex ED requirements to staff who are understandably unfamiliar with U.S. laws and government regulations. Consequently, providing a high level of support services to NGOs is recognized as being very important.
To address this issue, TSG will train selected members of its worldwide network of 23 capacity-building partners to answer NGO questions and provide multilingual support in many different countries and time zones. They will also translate help files and FAQs, and continue to expand their knowledge of local nonprofit laws.
In addition, our online systems will provide automated reminders and time-saving status updates, both for grantmakers and NGOs. This will help us to reduce turnaround times, lower communication barriers, and increase the completeness and accuracy of submissions before they even get to our review teams.
What will the online systems look like? We're still in the early stages of development, but here are some initial concepts of the user interface. We'll be working closely with a user group of grants managers and NGO leaders to review the prototype systems and to provide feedback along the way. Please contact ngorepository [at-sign] techsoupglobal [dot] org if you'd like to participate.
Will it save time? Yes, both for you and the NGOs you're supporting. Here's why:
- It will be much easier and faster for an NGO to submit an initial ED and keep its profile and financial information updated
- There will be single, shareable EDs for use by multiple grantmakers, and as the number of EDs in the repository grows, users will be able to find them immediately
- NGOs will need to answer fewer questions and provide fewer documents because of the repository staff's knowledge of nonprofit charity requirements in different countries and the system's intelligent design
Yes, you ask, but how much will it cost? Ah . . . the old chicken and the egg problem strikes again!
We've conducted research to determine the real total cost of processing EDs and have learned that this range is wide and varies based on the level of due diligence that is conducted. Many grantmakers are surprised to learn how expensive it really is to properly meet all of the IRS's specified regulatory requirements.
We're planning for the repository to have a sliding scale membership fee and a per ED processing fee that together will be less costly than what most grantmakers spend today. The cost to repository members will need to strike a balance between lower costs while achieving sustainability as reasonably quickly as possible. While the repository will rely on grants during the development and start-up phase, we must be responsible and charge appropriate fees to ensure sustainability on a long-term basis.
The challenge that we're facing in determining the cost is projecting membership and usage. The larger the number of repository members and the higher the volume of EDs processed, the more cost savings we can achieve and pass on to members in lower fees. So TechSoup Global is now conducting a survey to assess membership interest and usage. This will enable us to refine the business plan and develop the best possible fee structure.
Please help us to help you! So, we need your help now to project repository usage, to learn more about your particular needs, and to solicit your feedback on services so that we can meet the needs of as many international grantmakers as possible.
Please click here to take our 10-minute survey. TSG will send the summary results as soon as they're available.
Staying up-to-date on developments. We invite you to go to www.iaa.com/ngorepository.html for the most up-to-date information about the project and a comprehensive set of FAQs.
Please send your contact information to ngorepository [at-sign] techsoupglobal [dot] org, and we'll add you to our mailing list for periodic e-mail updates.
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