Jill Warren Lucas
The generosity of Americans has long supported worthy international causes, but many donors in the post-9/11 era are increasingly leery of making financial commitments to overseas agencies.
“International philanthropy is very complicated,” says Marty Martin, a Raleigh attorney whose practice focuses on providing legal and training services related to nonprofit and tax-exempt organizations. Having a reliable resource help you through the process is the best way to ensure that you are not unwittingly aiding a terrorist group or other ineligible cause.
“Donor money is the life blood of many of these groups,” says Martin, who participated in a podcast on Nov. 29 to launch NGOAmerica, a new online service. “Americans are very generous about international aid; think about Haiti. But it’s also a time and opportunity where donors could very easily be misguided in how their funds will be used.”
The vast majority of global nonprofits aren’t fronts for despots, but some lack the capacity to sustain their charitable enterprise at rigorous501(c)(3) standards, he notes. Without such proof, a U.S. donor cannot be assured that a gift will qualify as an exemption for tax-filing purposes.
Until recently, establishing that an international organization is a bona fide charity through an equivalency determination has been a complicated and costly process handled by legal counsel for either the grantor or the grantee. In 2009, the IRS Advisory Committee for Tax Exempt and Government Entities (ACT) issued a Report of Recommendations. Last September, the Department of the Treasury through the IRS proposed expanding who can do equivalency determinations to include CPAs and authorized enrolled agents. Martin, who currently serves on ACT, says the proposal is still open to public comment through Dec. 24.
Additionally, organizations like Charities Aid Foundation of America (CAFAmerica) have developed resources to help potential donors investigate the transparency of an agency’s operations, and its track record for improving the self-sufficiency of the community it serves, before making a financial commitment.
CAFAmerica is behind NGOAmerica, an online, fee-based suite of services designed to help donors find an international nonprofit that is both a good fit for their charitable interests and will provide proof of tax-exempt status. The service also helps to minimize costs for securing an equivalency determination, which currently averages about $10,000 in legal fees.
U.S. Secretary of State Hillary Clinton has spoken in favor of efforts to streamline the process of acquiring an equivalency determination, which she described as “one of the biggest obstacles” that legitimate aid agencies face.
“This change will clear the way for foundations to set up organizations that can serve as repositories of this determination, meaning this would only need to be done one time,” Clinton stated in September at the launch of the Department of State’s Global Philanthropy Working Group. She added that Treasury and State will work together with organizations “to try to create such a clearinghouse of information that would then be accepted as reliable.”
Martin says a $100 giver should be just as concerned about accountability as a $100,000 donor in terms of ensuring a recipient’s credibility. “The impact may have more consequence, in terms of tax liability, for the larger gift,” he says, “but it’s important for everyone to think carefully about how they participate in foreign philanthropy.”
Another service that aims to increase global aid transparency is AidData Center for Development Policy, which is headquartered at the College of William & Mary in Williamsburg, Va. While it is essential for donors to feel confident about a nonprofit’s mission and outcomes, a lack of reports should not automatically be viewed as a red flag, says Christian Peratsakis, a project manager at AidData.
“We often think that it’s intended negligence to not provide information, and with some respects, that is the case,” Peratsakis says. “There’s still a lot of work to be done, but I don’t think it’s necessarily that black and white. It’s kind of a function of the international development industry. Up until recently, it was a question of both political will and capacity to find this information.”
AidData and similar organizations work to fill in gaps by collecting evidence of an agency’s success or shortfalls in serving its community. “There is a growing realization that we need to do more in tracking the information already available,” Peratsakis says. “As donors become more active, the push for open data from agencies and governments will continue. In the meantime, it’s advisable for donors to work with an agent they trust.”
Individual contributors and corporate sponsors seeking a risk-free approach in helping international communities can work with services like GlobalGiving, which creates
ways for donors to support vetted grassroots charities financially and through hands-on volunteering. Since 2002, it has raised more than $75 million from nearly 300,000 donors who have supported almost 6,900 projects.
GlobalGiving makes it as easy to find a right-fit cause as it is to shop online for a new coffee maker. By using its Find a Project link, prospective donors can make selections through a variety of topics areas and more than 100 countries using one simple direction: “Choose the one that means the most to you.”
A new service that aims to connect organizations, nonprofits and individuals interested in serving the greater good is Philanthropegie. The free online portal is supported entirely by volunteer efforts. Its data is not as robust, but it likewise aims to help users to find philanthropic resources throughout the world.
A more established resource is Charity Navigator, which provides free charity ratings and best practice guidance. Its reports use a four-star rating system to define a nonprofit’s financial status, as well as its accountability and transparency, from both current and historical perspectives.
Being better informed about the operational stability and success of international charities will help to “expand and enhance the impact of American philanthropy operating overseas,” Martin says.
“Donors have begun to think of themselves more as investors. They are looking for a return on their donation that was not so much of a clear-cut focus 10, 20 years ago. They realize that issues occurring halfway around the world affect us on Main Street America today,” he says. “We can’t solve every problem, but you can tackle small things and hope that the ripple effect continues.”