By Keisha Taylor
Giving overseas can be tedious and costly given the complexity of a vast and diverse global civil society sector. Charities, NPOs, NGOs, community-based organisations, foundations, and associations all work for social benefit, but are called and categorised differently depending on country. This can create complications for funders and donors wanting to give. Knowledge of the regulatory framework, the inner workings of the NGO, how best the NGO will be able to put resources to use, and even what help is needed to build capacity is often lacking.
This is why the announcement on 24 September that the U.S. Department of the Treasury and the IRS have recommended a significant change in the process for determining whether a foreign nongovernmental organization (NGO) meets U.S. standards for charitable giving is indeed an important one. Rules regarding the process of evaluating whether a non-U.S. NGO is equivalent to a U.S. public non-profit have not changed for 20 years. In “Reliance Standards for Making Good Faith Determinations,” published in the Federal Register, Treasury and the IRS proposed regulations to lessen the administrative and financial burdens for U.S. grantmakers to engage in international philanthropy.
The U.S. recently joined the International Aid Transparency Initiative (IATI) to help make global development finance more open, shareable, standardized, and transparent. Similarly the proposed regulations also take us another step closer to building better and more streamlined grantmaking standards for NGOs worldwide. This can help to increase the effectiveness of cross-border philanthropy.
The U.S. has a long history of institutional philanthropy, —both corporations, government, and the American people have donated billions to causes not only in the U.S., but also overseas. A look at the National Trust’s Chronological history of Philanthropy in America, shows that as far back as 1601, a Statute of Charitable Uses, enacted by Parliament became the cornerstone of Anglo-American law of philanthropy. The recent announcement by Secretary of State Hillary Clinton about the Treasury and IRS rule changes is a milestone for global grantmaking.
Secretary Clinton Delivers Remarks at the Global Philanthropy Working Group Launch
Today the U.S. gives the most in Overseas Development Aid (ODA). While this refers to government as donor, thousands of corporations and millions of citizens have also provided money and resources overseas. However, in today’s recession stricken world, the way aid is given is being turned on its head. While the United States continues to be the largest donor by volume with net ODA flows of 30.7 US billion in 2011 (this represented a fall of -0.9% in real terms from 2010).
Governments, corporations, and citizens want to know more about the institutions they want to give to, and wish to avoid waste and corruption in foreign aid. The quantity and quality of NGO aid is not always held to account. While no two NGOs are the same, knowing more about the NGOs that receive overseas aid and its equivalence to U.S. NGOs will be a big help for accountability efforts.
Secretary Clinton noted in her remarks that the regulatory changes clear the way for the establishment of organizations that can serve as repositories for equivalency determinations. The Council of Foundations and TechSoup Global have been working together to create such a repository, called NGOsource, which they hope to launch as soon as possible. Today the equivalency determination (ED) process differs from grantmaker to grantmaker, is very costly (each ED can cost between $5,000 to $10,000) and if done improperly, may lead to inconsistent and subjective findings. NGOsource will make it easier and more affordable to evaluate whether a non-U.S. organisation is equivalent to a U.S. public charity through a centralized, streamlined, and standardized ED process.
Rebecca Masisak, co-CEO of TechSoup Global has said “Secretary Clinton’s announcement and the IRS guidance support a shared cross-sector vision of ways to reduce redundancy and lower costs and are a welcome signal from the government to grantmakers and their grantees.”
While Sheila Warren, director of NGOsource for TechSoup Global and an attorney with expertise on tax-exempt law said “The IRS guidance is an encouraging building block for the development of an equivalency determination repository that will enable private foundations to identify and grant to overseas NGOs with greater confidence and ease.”
This will undoubtedly take us one step closer to more effective cross-border philanthropy. This is especially important in today’s data-driven world where more transparent, reliable, and streamlined processes are needed to make it easier to realise social benefit globally.
You can read the entire press release on the announcement here.
Hear from experts about this issue at two upcoming events. On 4 October, the D.C. Bar will host a panel discussion in-person and via webinar. On 5 October, experts — including Sheila Warren, director of NGOsource for TechSoup Global — will discuss the rule change in a conference call briefing.
You can also receive updates about regulatory decisions affecting international grantmaking and about NGOsource by signing up online at www.ngosource.org/subscribe.