International Grantmaking: Best Practices for Responsible and Effective Grantmaking
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Transcript of International Grantmaking: Best Practices for Responsible and Effective Grantmaking
International Grantmaking: Best Practices for Responsible and Effective Grantmaking
Natalie Silver, Co-Director of JFN Philanthropic Services 212.726.0177 ext 207
Eve Rodsky, Co-Director of JFN Philanthropic Services 212.726.0177 ext 223
October 6th, 2009
Agenda
The Complex Environment for International Giving US Federal Tax Law New Rules and Regulations
Top Three Ways of Giving Internationally Giving Intermediaries Equivalency Determination Expenditure Responsibility
Best Practices and Recommendations
JFN: Give to Israel Overview Benefits Process Fees
The Complex Environment for International Giving
In recent years, the environment for making gifts internationally has become more complex and challenging with new regulations requiring in-depth due diligence of foreign charities.
U.S. Federal tax law requires that:– Individuals cannot get a tax deduction on gifts made directly to
foreign charities. – Foundations and their managers are subject to penalty taxes on
grants to foreign charities and such grants will not count towards the foundation’s five per cent payout if the foundation is not undertaking appropriate due diligence or using an intermediary to do so.
– Donor Advised Funds and their managers are subject to penalty taxes on gifts to foreign charities if the DAF is not undertaking appropriate due diligence or using an intermediary to do so.
The Complex Environment for International Giving
New Rules and Regulations– USA Patriot Act increases existing criminal penalties for knowingly or
intentionally providing material support or resources for terrorism.– Executive Order 13224 requires international giving intermediaries to
check the principals of every group funded against the relevant prohibited persons lists.
– US Department of the Treasury: Anti-Terrorist Financing Guidelines provide additional recommendations on compliance.
– Pension Protection Act of 2006 requires that one of two due diligence procedures are followed: Determining that the non-US grantee is the equivalent of a US
public charity through an “equivalency determination” or Undertaking “expenditure responsibility.”
Top 3 Ways of Giving Internationally: Intermediaries – US 501(c)(3)s
“Friends of” organizations – Established in the US as a 501(c)(3) to raise funds for a specific
overseas organization.– Typically for larger institutions, such as museums, universities and
hospitals. “Re-granting” Intermediaries
– A 501(c)(3) that raises funds in the US and re-grants them internationally.
– Federal tax law requires that US public charities maintain legal ownership of, and control and discretion over the use of, any contributed funds that will be re-granted to an overseas charitable organization.
– Requires that the public charity have a due diligence procedure and approval process for each grant made.
Top 3 Ways of Giving Internationally: Equivalency Determination
Applies to private foundations and donor advised funds. Method of making a grant directly to a non-US organization by making a
“good faith determination” as to whether the organization is a 501(c)(3) equivalent.
Requires:– Collecting extensive information and documentation from the
organization about its origins, activities and finances through an affidavit;
– Financial information that must be current as of the most recent fiscal year;
– Updating documentation on a regular basis. No “magic list” of organizations. Cannot rely on another foundation’s equivalency determination.
– The Repository Project of COF, InterAction, Foundation Center and Independent Sector seeks to address this issue.
Top 3 Ways of Giving Internationally: Expenditure Responsibility
Applies to private foundations and donor advised funds. Method of making a grant directly to a non-U.S. organization
by ensuring that the funds are used for charitable purposes. Requires:
– conducting a pre-grant inquiry into the organization and its planned use of the grant funds;
– entering into a written grant agreement with the organization prior to disbursing the grant funds;
– obtaining annual reports from the organization until the grant funds are fully expended; and
– annually reporting the grant to the IRS until the grant funds are fully expended.
Israel has specific laws governing the operations of charitable organizations.
Additional Due Diligence: Terrorism Concerns Anti-Terrorist Financing Guidelines contain steps that US
organizations should take prior to making a grant to a foreign charitable organization, including:– Conducting a “reasonable search of public information” to
determine if the foreign organization is suspected of activity relating to terrorism; and
– Ensuring that the foreign organization and its trustees, directors, officers or other key employees do not appear on the Specially Designated Nationals (SDN) List maintained by the Treasury Department.
Practical concerns– Check SDN list for organization and its board members.– Include anti-terrorism language in grant agreement.
Best Practices & Recommendations
Know your intermediary– Make sure not a “conduit” or donor will face penalties– Ask about due diligence process (equivalency
determination or expenditure responsibility, plus terrorism)
– Transparency around fees (any hidden fees?)– Consider using intermediary who ensures compliance
with US legal and regulatory requirements Know your grantee
– Due diligence process (equivalency determination or expenditure responsibility, plus terrorism)
– Post-grant monitoring to ensure funds are being used as intended
JFN: Give to Israel – Overview
Offers a complete mechanism that facilitates the making of grants to charitable organizations in Israel.
Available to foundations, donor advised funds and individual funders Two Programs:
– standard program for making grants to qualified Israeli charitable organizations
– custom program with add-on services designed to help you meet your philanthropic goals
The Process:– You identify the charitable organizations and programs in Israel you
want to support– You make a tax-deductible gift to JFN and recommend where you
want your charitable contribution to go – JFN facilitates the gift and handles all the details to ensure your gift
is being used as you intended
Give to Israel – Benefits One-stop-shop for all qualified Israeli charitable organizations
– Open to all charitable organizations in Israel Quick turnaround time on grants
– Approximately 2 to 3 weeks, depending on when information is received from Israeli organization
Transparency of fees and process– JFN tells you exactly what you’re paying for
Personalized service– JFN has staff available to answer your questions
Understanding of the Israeli nonprofit landscape– JFN established an Israel office in 2008 and has staff with experience
working with charitable organizations in Israel Expertise navigating complex US regulatory environment
– JFN ensures gifts in compliance with current laws and guidelines and monitors changing regulatory landscape for international grantmaking
Rigorous due diligence process– JFN uses expenditure responsibility for a more flexible and expedient
due diligence process that is less onerous on the nonprofit– JFN complies with the Anti-Terrorist Financing Guidelines
Give to Israel – The Process
Give to Israel Standard Program:– Donor makes a grant recommendation using JFN’s donor form and
releases funds to JFN– JFN conducts a pre-grant due diligence inquiry into the organization
to determine its eligibility and its planned use of the grant funds– Grant is approved by JFN directors– JFN enters into a written grant agreement with the organization
prior to disbursing the grant funds and grant funds are disbursed– Donor receives donor letter with confirmation of the grant– JFN staff monitor grant’s progress by obtaining annual reports
from the organization until the grant funds are fully expended
Give to Israel – Custom Program
For funders interested in developing a grantmaking program for Israel
In addition to services provided in the standard program, custom programs include add-on services such as:– Developing customized program strategies– Conducting research on potential organizations and
projects in Israel– Soliciting and reviewing grant proposals– Monitoring and evaluating grantee organizations and
projects– Providing regular progress reports to donors
Give to Israel – Fees
Fees support the direct costs associated with the grant, including all grant preparation and due diligence, grant administration, monitoring and reporting
Standard program– Fees are assessed based on the size of the grant as follows:
• $250 for grants $1,000 - $9,999• $500 for grants $10,000 - $24,999• $750 for grants $25,000 - $74,999• $1,000 for grants $75,000 - $99,999• $1,500 for grants $100,000 - $499,999• $1,750 for grants $500,000 - $999,999• $2,000 for grants $1,000,000 and over
– A 10% discount is provided to JFN members Custom program
– Fees are based on the scope of the work, including the size and volume of grants to be made
JFN Philanthropic Services: About Us
Design and implement customized philanthropic strategies and giving programs
Create training programs for funders and foundation professionals new to the field
Advise on foundation governance, legal compliance and international gifts
Prepare family members to carry out philanthropic legacy
Our Expertise Our Team
Our DifferentiatorsOur Clients
Team of senior advisors with advanced degrees in law, nonprofit management and rabbinical studies
Extensive experience in philanthropy and the nonprofit sector
Knowledge base on wide array of program areas, both secular and Jewish – Secular: arts, education, environment, human rights, medical research, social services, youth – Jewish: Jewish education, Jewish identity, Jewish outreach, Israel
Nonprofit organization whose fees are designed solely to cover costs
Philanthropic advisory group with nonprofit attorneys on staff Unique leverage and networking opportunities for grantmaking through membership base
Medical research and prize philanthropy expertise
Provide advisory services to over 75 clients annually
Currently oversee grantmaking and administration for 10 clients
Distribute approximately $40 million to nonprofit organizations each year
Distribute approximately $16 million internationally annually