Intermediaries can Shield Corporate Philanthropists from Costly Missteps

You may have seen the recent Chronicle of Philanthropy article discussing Al-Furqan Foundation Welfare Trust, an NGO that was recently sanctioned by the U.S. Treasury Department and Saudi officials. According to reports, this organization was providing support to terrorist groups such as Al Qaeda and the Taliban under the cover of aid work.

While this situation is very rare, it does highlight one of the inherent risks in philanthropy, to which corporate philanthropists are particularly sensitive. Corporate funders want to be sure that their philanthropic investments are allocated in a legally compliant and fiscally responsible way to organizations that are transparent and authentic in their mission and programs. However, understanding the complex regulatory and legal landscape surrounding international philanthropy can be very challenging. For instance, laws such as the Foreign Corrupt Practices Act (FCPA), the Patriot Act, and Executive Order 1322* require specialized tax and legal knowledge. If a company makes even a slight misstep, it could be subject to stiff penalties and consequences from the Internal Revenue Service (IRS). Furthermore, its reputation could suffer with shareholders, customers and employees alike.

One of the most common and effective solutions to mitigating the aforementioned risks and limiting liability is partnering with an expert intermediary organization, such as Silicon Valley Community Foundation. SVCF connects U.S.-based philanthropists, including nearly 100 leading corporations, to charitable projects or organizations outside the U.S. The greatest benefits of utilizing an intermediary such as SVCF are:

  • SVCF bears the liabilities of the due diligence (as we technically own the asset being granted out),
  • The donor or corporation will typically receive an upfront tax deduction when utilizing a donor advised fund at SVCF, as opposed to receiving a deduction after due diligence has been conducted and the payment is released to the recipient organization, and
  • SVCF is a subject matter expert in international philanthropy and conducts thorough and compliant vetting through the equivalency determination and expenditure responsibility processes.

In general, when SVCF is vetting international organizations or projects, we are requiring that they:

  • Have a written charitable donations policy,
  • Have pre-determined annual budgets,
  • Publically disclose foreign charitable recipients,
  • Provide historical and ongoing documentation,
  • Prohibit compensation of NGO board members,
  • Have all individuals associated with the grant attest that they are not representatives of the foreign government and that the funds will not be used in violation of the FCPA,
  • Enter into a written agreement with all involved parties certifying that the funds will only be spent for a charitable purpose, and
  • Provide a financial and program/project summary report detailing how the funds were spent during the grant period

Silicon Valley Community Foundation is an expert international grantmaker and, in fact, is one of the largest international grantmakers by volume of grants in the United States. With a team dedicated to the vetting of international organizations and a keen understanding of corporate philanthropy, we are well positioned to serve as a trusted partner in this capacity. Like the donors and companies we work with, we’re inspired by the power of philanthropy to be a force for good in our world. That’s why we work diligently to ensure that philanthropic capital is provided to organizations that are compliant with IRS guidelines and do not pose a risk to our organization or our donors.

To learn more about working with SVCF, contact donate@siliconvalleycf.org

* http://www.treasury.gov/resource-center/sanctions/Programs/Documents/terror.pdf