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Charities End Dialogue With Treasury Over Guidelines that Stifle Effective Global Grantmaking

The Council on Foundations and more than 70 foundations, charities, advocacy organizations, nonprofit associations, and legal advisers are calling an end to a seven-year effort to revise the confusing and misleading Treasury Department Anti-Terrorist Financing Guidelines for U.S.-based charities.

The Council-convened Treasury Guidelines Working Group cited government unwillingness to make any substantive changes to its approach—or to recognize the important role of global philanthropy in increasing national security through funding to address poverty, inequality, disease, and other pressing needs—as the explanation for the decision.

In its final letter to Treasury, the working group highlighted the department’s own acknowledgement that a vast majority of the 1.8 million U.S. charities “face little or no terrorist financing risk.” In fact, the number of U.S. charities that have been implicated in any such activities is minuscule when compared globally.

“These guidelines serve as a significant deterrent to the important work of philanthropy here in America and around the world,” said Janne Gallagher, general counsel for the Council on Foundations. “U.S. global philanthropic efforts play a key role in strengthening ties with current and potential allies that ultimately protect and defend national security.”

U.S. charities and foundations have long-established due-diligence procedures to minimize the risk that grants or operations will be diverted to any improper use. The current Treasury Guidelines, first issued in 2002, are counterproductive because they impose excessively burdensome and impractical barriers to global relationships and grantmaking, the working group said. It also believes the guidelines create confusion about legal requirements and make wrong assumptions about charitable activity targeting particular regions or religious groups.

Members of the working group met with Treasury officials repeatedly over the years to voice their concerns and offer alternatives that would be much more effective in reducing risk. The working group’s recommendations have resulted in little change by Treasury in its fundamental approach. The group determined it can no longer support or participate in Treasury's attempts to impose current or future versions of the guidelines on the charitable sector.

The working group developed the Principles of International Charity (http:// www.usig.org/PDFs/Principles_Final.pdf) for international charitable activities. The principles are intended to be part of a growing number of sector-produced resources to help charities operate more effectively abroad.

Unlike the guidelines, the principles recognize the variety of ways that charities can incorporate them into their operations. The principles also recognize that fiscal responsibility is fundamental to international charitable work. This includes determining in advance of payment that a potential recipient will use the grant for the intended purpose. The principles also establish the importance of protecting grants from diversion to noncharitable purposes through written grant agreements, ongoing monitoring, and corrective action if misuse occurs.

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The Council on Foundations (www.cof.org), formed in 1949, is a nonprofit membership association of grantmaking foundations and corporations. Members of the Council include more than 1,750 independent, operating, community, public, and company-sponsored foundations, and corporate giving programs in the United States and abroad. The Council’s mission is to provide the opportunity, leadership, and tools needed by philanthropic organizations to expand, enhance, and sustain their ability to advance the common good.