U.S. Sourcing Guidelines for Prospective and Current Grantees

Theentitieswithin the Open Society Foundations (“OSF”) work collaboratively in their grant-making activities, each of them subject to the authority of their own governance structures. An entity mayfund grant proposals using its own resources, but, as part of such collaboration, may also recommend grant proposals for funding to other entities within OSF.

This guidance provides information about the rules that apply to grantees when the direct or indirect source of the funding is an entitywithin OSF that is based in the United States (“U.S.”).

A. What is U.S. Sourcing?

  • When a grant is “U.S. Sourced,” it means that this grant, or a portion of the grant,has been funded from one of OSF’s U.S. private foundations. U.S. Sourced funding may be provided either directly, by a U.S. private foundation within OSF making a grant to the grantee, or indirectly, by a non-U.S. entity within OSF making a grant to the grantee using funds received from one of OSF’s U.S. private foundations.
  • If a grant is U.S. Sourced, it and any of its subgrants are subject to the same rules that U.S. private foundations must follow. Grantees receiving U.S.Sourced grants must be aware of these rules.

B. What U.S. private foundation rules apply to grants that are U.S. Sourced?

  • U.S.Sourced grants must comply with the same grants to individuals, expenditure responsibility, and lobbyingrules that U.S. private foundations must follow.
  • The grants to individuals rulesapply whenever money is awarded to an individual for his or her benefit(e.g., providing funding to an individualfor travel to a conference or training). These awards cannot be funded with a U.S.Sourced grant. On the other hand, a grantee providing funding to an individual to perform a service for the granteefor the benefit of the grantee (e.g., a consultancy or an employee attending a conference or training on behalf of his or her employer) is not included in these rules, and thus can be funded with U.S.Sourced funds. The rules for grants to individuals and how to indicatesuch awardsin a budget are explained here:Grants to Individuals within Expenditure Responsibility Grants.
  • In addition to each OSF program’s standard grant making requirements,expenditure responsibility rulesrequire that the grantee separately account for U.S.Sourced funds in its bookkeeping and report annuallyto OSF until all grant funds are expended, including reporting the multi-year depreciation of capital equipment, if such items are more than U.S.$750 per item. Examples of capital equipment include cars, furniture, and buildings. The expenditure responsibility rules do not apply to service arrangements. These rules are explained in more detail here: Exercising Expenditure Responsibility when Re-GrantingU.S. Foundation Funds.
  • The “Lobbying” rulespreventany U.S.Sourced funds from being usedto support certain efforts to influence legislation, as defined in U.S. tax law. OSF foundations that are not U.S. private foundations may decide to make grants for lobbying activities, but may not fund such activities from U.S. Sourced funds. The lobbying rules are explained in more detail here:Lobbying - Brief Summary.
  • If a grantee currently has a valid “Equivalency Determination” from OSF, it is generally not subject to the expenditure responsibility or individual grants rules and is only subject to the lobbying rules for project support grants. Equivalency Determinationsare explained in more detail here:Equivalency Determination - Brief Summary.

C. How does U.S. Sourcing affectgrant narrative proposals?

  • Narrative proposals must still comply with the guidelines of the OSF program to which a grantee is applying for funding.
  • The narrative proposal should clearly indicate whether payments to individualsare for services the individuals will perform or if the payments are insteadprimarily for the benefit of the individual and thus are within thegrants to individuals rules.
  • The narrative proposal should clearly indicate which activities are lobbying and which activities are not lobbying,and avoid using vaguelanguage that could suggest lobbying, but may, in fact, not be lobbying. For example, using words or phrases like “lobbying,” “advocacy,” “talking to Parliament,” “calling on the government,” or “educating the public” without expanding on the activities associated with these phrases will always be questioned by OSF’s Grants Management in the grant review process, which will lengthen the review time of the grant.

D. How does U.S. Sourcing affect grant proposal budgets?

  • Grantee budgets must stillcomply with the budget guidelines of the OSF program to which a grantee is submitting its application. Additionally, grantees should prepare grant proposal budgets with sufficient detail to determine which activities may be supported by U.S. Sourced funding,per the applicable U.S. tax law rules referred to above.
  • Where appropriate, budgets must be “bifurcated” or split into two components – activities that can be funded with U.S.Sourced funds and activities that cannot be funded withU.S.Sourced funds.
  • Funding requests for activities that can be funded with U.S.Sourced funds should be labeled“U.S. Sourced Funding.”
  • Capital equipment line items U.S.$750 and less, service payments to individuals, and non-lobbying activity costs must be included in the “U.S. Sourced Funding”requested funds column of the bifurcated budget.
  • Funding requests for activities that cannot be funded with U.S.Sourced funds should be labeled “Non-U.S. SourcedFunding.”
  • Capital equipment line items over U.S.$750, grants to individuals, and lobbying activitycostsmust be included in the “Non-U.S. Sourced Funding” column of the bifurcated budget.
  • When an activity includesbothlobbying and non-lobbying, the administrative costs of that activity(e.g., salaries and overhead) should be bifurcated with a good faith estimateof the proportional lobbying and non-lobbying costs. This proportionate administrative cost breakdown applies onlyto activities including both lobbying and non-lobbying.
  • Please consider using thisBifurcated budget template.

E. How does U.S. Sourcing affect grantee reporting?

  • The grantee must submit reports that clearly distinguish between expenses charged to each of its OSF funding sources. Thereportsmust clearly explain how the granteeexpended the funds received from the respective sources and must comply with the reporting requirements of the OSF program that has recommended the project for funding. As explained in Section B above, reports detailing the use of U.S. Sourced funds must be submitted annually until all funds are fully expended.
  • The financial report detailing how the funds were expended must clearly identify the funding source the expenses are charged against following the form of the original bifurcated budget. If the grantee receives funding from different OSF funding sources under separate grant agreements, the grantee may provide an overall (or consolidated) financial report for a grant covering expenditures charged against all funding sources, including non-OSF sources, if applicable.
  • The narrative report must clearly track progress of activities described in the narrative proposal, distinguishing between lobbying and non-lobbying activities. If the grantee receives funding from different OSF funding sources under separate grant agreements, a grantee may, for the purposes of its reports submitted to the OSF funding entities,use the same narrative report describing the project activities if theycannot be reported in separate documents specific to each OSF funding entity.

If you have any questions about these Guidelines, please contact your program officer.

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