The Catholic University of America

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Voluntary Best Practices for U.S. Based Charities: Anti-Terrorist financing guidelines of the U.S Department of the Treausury

In November of 2002, the U.S Treasury Department's Executive Office for Terrorist Financing and Financial Crime issued Voluntary Best Practices for U.S. based charities. An updated version of the guidelines was issued on Sept. 29, 2006. These guidelines were drafted in response to concerns expressed by the Arab American and Muslim communities that saw a decline in charitable contributions in the aftermath of the Treasury Department's blocking actions against three of the communities' charities. The guidelines focus on financial controls and the vetting of potential foreign recipients. They provide for financial oversight high levels of disclosure and transparency.

In May of 2003 the IRS published Announcement 2003-29 on International Grant-making and International Activities by Domestic 501(c)(3) Organizations. This announcement sought input from the regulated community on "how new guidance might reduce the possibility of diversion of assets for non-charitable purposes while preserving the important role of charitable organizations world-wide."

For more background on this issue see the Response to Comments Submitted on the Draft December 2005 version of the Anti-Terrorist Financing Guidelines.

This issue is of interest to colleges and universities receiving grants as some foundations are adding standard grant clauses to address the above guidelines. An example is the Ford Foundation paragraph which states as follows: "By countersigning this grant letter, you agree that your organization will not promote or engage in violence, terrorism, bigotry or the destruction of any state, nor will it make sub-grants to any entity that engages in these activities."

Note that the Voluntary Best Practices (part IV) are limited to distributions of charitable funds to foreign recipient organizations. As these procedures do not apply to grants or payments to U.S. colleges or universities, some grantors may not require U.S. recipient organizations to agree to provisions like the Ford Foundation paragraph above. Other grantors may want all of their grant agreements, whether with U.S. organizations or otherwise, to contain the prohibition listed above.

Other Resources:

Council on Foundations

 

updated 3/12/13 CCR