Equivalency determination: is formal certification worth the cost?

But certification is neither a universal prerequisite nor a process a clinic can simply start on its own. A U.S. grantmaker or intermediary must request or initiate the determination, and the foreign organization must be able to show that it meets the relevant U.S. public-charity requirements.

That distinction matters when deciding what to do first. A clinic can organize its records, assess its funding mix and talk with prospective funders; whether to pursue an equivalency determination depends on a funder’s needs, the clinic’s legal and financial structure, and the likely cost of ongoing alternatives.

The mechanics of equivalency determination: ED vs. expenditure responsibility

When a U.S. private foundation considers a grant to a foreign organization, it generally needs a basis for treating the grant as compliant with U.S. rules. Two common routes are equivalency determination (ED) and expenditure responsibility (ER). They are not interchangeable administrative labels: each brings different work for the grantmaker and the grantee.

An ED is a determination, supported by legal analysis and organizational documents, that a foreign organization is equivalent to a U.S. public charity. It can allow a foundation to treat the grantee much like a domestic public charity for grantmaking purposes. It does not remove ordinary grant conditions or the need to account for funds. It can, however, avoid the additional grant-by-grant oversight associated with ER.

Under ER, the foundation accepts responsibility for the grant’s use and must follow the applicable oversight and reporting requirements. Depending on the grant, that can involve a written agreement, restrictions on use, reports from the grantee and records the foundation needs for its own compliance. The work is tied to the specific grant; it is not a blanket certification that automatically applies to the grantee’s other U.S. funders.

Neither option is automatically cheaper in every case. ED may reduce repetitive work if more than one funder can rely on a determination, but it takes documentation and legal review. ER may avoid the initial ED process, while creating continuing responsibilities for the grantmaker and reporting demands for the organization.

ED is not a certificate a clinic obtains in isolation. It is a funder-requested route to documenting eligibility—and its value depends on what comes next.

A Kenyan provider interested in U.S. funding can prepare for the conversation, but should not assume that it can independently file for ED or that a parent organization’s determination covers every affiliated facility. The U.S. grantmaker or an intermediary needs to be involved, and the right structure depends on the legal relationship between the entities.

Navigating the public support test: meeting the 33% threshold

For organizations seeking recognition as equivalent to a U.S. public charity, one central question is whether their sources of support satisfy the relevant public-support test. A commonly discussed benchmark is 33⅓ percent of support from qualifying public sources over the applicable measurement period. The calculation is technical: not every receipt that feels public or charitable will count in the same way, and the rules can treat different kinds of support differently.

That is why a Kenyan Catholic hospital should not start with a single headline percentage. It should start with a careful classification of revenue across the period being reviewed, supported by records that show who provided the funds, under what arrangement, and whether any donor or related entity has a controlling role.

The composition of a mission hospital’s income can be complicated. Patient fees, assistance from a religious sponsor, parish donations, grants from other charities and public reimbursements may all appear in the accounts, but they do not necessarily receive identical treatment under the test. Broad-based support and large contributions from a single source raise different questions. A legal reviewer familiar with the applicable rules should assess the actual figures rather than rely on a rough estimate.

Patient revenue deserves particular care. Fees linked to services are not automatically equivalent to donations, and the circumstances of payment matter. A hospital that charges patients on a sliding scale may have a different factual picture from one that treats fees as compulsory charges at the point of service. Keep the policies and accounting records that explain how fees are set, when they are waived, and how patient assistance is documented.

Related-party and sponsor support also needs scrutiny. A transfer from a religious body that supports the hospital may be important to the institution’s mission, but its treatment for the public-support calculation is not necessarily the same as that of many small donations from unrelated individuals. Parish giving may help show a broad base of support, but the organization should be able to substantiate donations and its solicitation practices.

Public payments require equally precise language. Kenya’s National Hospital Insurance Fund has been replaced by the Social Health Authority. A provider should therefore review current payment arrangements with the Social Health Authority and county governments, and confirm with counsel how each source is classified for the relevant U.S. test. It is not safe to assume that every reimbursement or county contract counts cleanly as public support simply because the money is connected to a public institution.

The practical exercise is to build a five-year picture that can withstand questions:

• Separate donations, grants, service income, government-related payments and sponsor transfers in the accounts rather than collapsing them into broad revenue categories.
• Identify significant donors and related organizations, and retain records that show the source and terms of substantial contributions.
• Keep patient-fee policies, waivers and assistance records alongside the financial statements.
• Ask the U.S. grantmaker or its intermediary which test, time period and documentation it expects to apply.
• Have a qualified adviser review borderline items before treating them as qualifying support.

This is not a judgment on whether a provider is public-serving in the everyday sense. A faith-based hospital can offer essential services to its surrounding community and still need to demonstrate its finances in the specific form required by U.S. grant rules. Conversely, a difficult calculation does not mean the organization is unsuitable for funding. It may mean that ER is the more workable route for a particular grant, or that the network needs a longer view of its funding mix.

The economics of certification: from legal fees to re-issuance

The case for ED is often presented as a simple comparison between an expensive legal opinion and a much cheaper re-issuance. That comparison can be useful, but it needs context. Costs depend on the provider, the complexity of the organization and the work required to assemble and review its records. A figure that applies to one determination should not be treated as a guaranteed price for every Kenyan clinic or network.

A U.S. grantmaker may use an intermediary that reviews foreign organizations and maintains records of completed determinations. Where an earlier determination can be relied upon, another grantmaker may be able to request re-issuance rather than commission a wholly new analysis. That can reduce the cost of repeated reviews, but only if the existing determination is relevant, current and applicable to the organization being funded.

The relevant comparison is not “ED costs X, ER costs nothing.” It is the total cost and effort on both sides. For a one-off, modest grant, the funder may decide that ER is more practical. For a network expecting to work with multiple U.S. foundations, an ED may justify its upfront work if prospective funders can use it and the organization can maintain the underlying documentation.

The grant’s size matters, but it is not the only factor. A maternity-wing project or diagnostic-equipment grant can involve reporting, procurement records and multiple stages of spending regardless of the route selected. ED may simplify the particular U.S. tax-compliance framework; it does not replace project budgets, safeguarding requirements, financial controls or the funder’s standard monitoring.

A clinic should ask a prospective funder three direct questions before making a cost decision: Does the funder require ED, or would it consider ER? Would an intermediary handle the determination? If another funder has already reviewed the network, can that determination be used or re-issued? Those answers can prevent an organization from paying for a process that a potential grantmaker does not need—or from starting too late because everyone assumed someone else would initiate it.

Operational efficiency: why ED can simplify long-term grant reporting

The strongest operational argument for ED is not that it eliminates accountability. It is that it may reduce the additional compliance work associated with expenditure responsibility. Under ER, a foundation must meet grant-specific obligations and gather information needed to demonstrate that funds were used for charitable purposes. The grantee may need to provide detailed reports and supporting documents beyond its ordinary project reporting.

That can be manageable for a single grant. It becomes more demanding when several funders require different schedules, formats and follow-up. A finance team already reconciling patient revenue, donor funds and county-related payments may struggle if U.S. grants add separate tracking systems that do not speak to one another. The issue is not only staff time: inconsistent records can make it harder to give funders a clear account of what was spent and why.

An ED may allow a grantmaker to avoid some of the additional ER process, but ordinary grant conditions remain. A network will still need sound financial controls, accurate budgets, procurement records and evidence that a project delivered what it promised. Where multiple facilities operate under a network, the organization should also be able to show how grant funds move between the central office and the particular hospital or dispensary.

There is no reliable basis for assuming that foundation officers generally use a particular database as a first-pass filter, or that listing in a repository is now a sector-wide requirement. A determination may make an organization easier for a funder to assess, and an intermediary’s records may make a prior review easier to locate. Whether a specific funder searches a repository or treats its use as important should be confirmed with that funder, not inferred as a universal practice.

For Kenyan health providers, a useful operational test is to map the reporting obligations already in place before accepting a new U.S. grant. Who records expenditure at facility level? Who checks it against the approved budget? Can the central finance team trace payments to receipts, payroll or procurement files? Who is responsible for answering a donor’s questions? If those responsibilities are unclear, ED alone will not fix them. It may make one part of the compliance relationship lighter, while the organization still needs to strengthen its grant-management systems.

Strategic timing: when to pursue certification for your health network

The first step is not to begin an application. It is to identify a U.S. grantmaker, fiscal intermediary or other qualified party that is considering support and ask whether it wants an ED. That party must initiate or request the determination. The prospective grantee can make the process easier by preparing its records, but should avoid treating certification as a stand-alone project with guaranteed demand.

Timing should follow the funding opportunity. If a U.S. foundation expects to consider a proposal, ask about its compliance route early enough to assemble governance, financial and program documents before the application or award decision. The time required varies; complex accounts, unclear relationships among affiliated entities or gaps in records can slow review. A network should not plan around a fixed processing window unless the specific provider has given one.

The organization also needs to check how long a determination can be relied upon and what updates or renewal work may be required. Those details can depend on the issuing process and changes in the grantee’s circumstances. A change in legal status, governance, financial structure or relationship with a parent organization may matter. Put responsibility for keeping the file current somewhere specific—usually with finance and governance staff working together—rather than assuming that an old determination will remain usable indefinitely.

For a rural dispensary, the question is not whether it should pursue ED independently as if it were applying for a personal credential. The question is whether a U.S. funder wants to support that dispensary directly, whether the dispensary is a separate legal entity, and whether the funder or intermediary believes a determination is appropriate. A larger Catholic health network may be the intended grantee, but its status does not automatically settle the treatment of every facility or affiliate. The parties should clarify which entity will receive and control the funds, and obtain legal advice where the structure is uncertain.

A network can prepare without presuming the outcome. Before a funder requests a determination, it can assemble:

• Current registration and governing documents for the proposed grantee, with a clear account of any parent, subsidiary or affiliated facilities.
• Financial statements and ledgers that distinguish donations, patient income, grants, sponsor support and public payments.
• Board and leadership information, including relevant affiliations and the organization’s decision-making structure.
• Policies for conflicts of interest, financial controls, procurement and the use of grant funds.
• A record of the services funded by public payments, including arrangements involving the Social Health Authority or county governments.
• A named contact who can coordinate requests between the funder, intermediary, finance team and program staff.

This preparation serves either route. If the funder requests ED, a coherent file can support the review. If it chooses ER, the same records help the organization meet grant conditions. And if the review identifies gaps in governance or revenue documentation, the network can address them before a larger funding opportunity depends on a rushed explanation.

For a Catholic health network with a documented public-support profile and credible prospects of grants from more than one U.S. private foundation, ED may be a worthwhile investment—provided a funder or intermediary is prepared to request it and the determination can be used by other prospective funders. For a small or recently established facility, ER may be more realistic while the organization strengthens its records and clarifies its funding structure. The decision should follow the actual grant opportunity, not an assumption that every clinic needs certification.

The cost of a determination is only part of the calculation. The more useful question is whether it will reduce repeated work for the network and its funders, and whether the organization can sustain the documentation behind it. In cross-border grant compliance, a prepared file is an asset either way; an ED is valuable when there is a real funding relationship for it to serve.