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FUNDRAISING OPTIONS FOR INTERNATIONAL NGOs LEGAL COUNSEL FOR PHILANTHROPY AND THE NONPROFIT SECTOR

FUNDRAISING OPTIONS FOR INTERNATIONAL NGOs

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FUNDRAISING OPTIONS FOR INTERNATIONAL NGOs

We are often asked by international charities how they can attract donations from US donors. While an individual donor may make donations to foreign charities at any time, if they wish to do so on a tax-advantaged basis the foreign charity must have 501(c)(3) tax-exempt status in the US. This article explains the options available to charities outside the US to begin accepting tax-advantaged donations from all types of donors including corporations, foundations and individual donors.

  1. Creation of a "friends" organization
  2. Working with a fiscal sponsor
  3. Working with a donor-advised intermediary
  4. Accepting grants from private foundations

  1. Creation of a "friends" organization - This option creates an independent, 501(c)(3) public charity in the US that can accept donations from US-based donors including individuals, private foundations and corporations. Grants would then be made from the “friends” organization to the foreign charity.

    • Organization must have an independent board of directors (can’t be controlled by the foreign NGO or other foreign entity)
    • Board of the “friends” organization must have discretion over grants made to foreign organization/program and cannot be constrained to make said grants
    • Pros: Typically, nearly 100% of donations received will be granted to the foreign entity/project; foundations can give freely to 501(c)(3) organizations without conducting expenditure responsibility/equivalency determination (see #4 below)
    • Cons: Startup costs, maintenance costs, and ongoing board management responsibilities

  2. Working with a fiscal sponsor - This option utilizes an existing 501(c)(3) public charity that can accept gifts on behalf of foreign NGO/project and then make grants to it.

    • Fiscal sponsor must have purposes that align with foreign NGO/project
    • Board of the “friends” organization must have discretion over grants made to foreign organization/program and cannot be constrained to make said grants
    • Pros: Circumnavigate process of applying for 501(c)(3) status; foundations can give freely to 501(c)(3) public charities without conducting expenditure responsibility/equivalency determination
    • Cons: Typically, fiscal sponsor charges an administrative fee of between 3-12% of donations received (depending upon services offered to foreign NGO/project); can be difficult to find fiscal sponsor and negotiate agreement

  3. Working with a donor-advised intermediary - This option utilizes an existing intermediary that can accept donations from US donors and make grants out to foreign NGOs/projects.

    • Foreign NGO/project must apply to be a project of the intermediary
    • Examples: Global Giving (www.globalgiving.org), CAF America ('CAFA') (www.cafamerica.org), King Baudouin Foundation US, (www.kbfus.org)
    • Pros: Circumnavigate process of applying for 501(c)(3) status; foundations can give freely to 501(c)(3) public charities without conducting expenditure responsibility/equivalency determination
    • Cons: Intermediaries also charge administrative fees of between 3-12% of donations received, and sometimes charge annual fee (in lieu of or in addition to administrative fees); can get lost among all of the sponsored projects of these intermediaries

  4. Accepting grants from private foundations (expenditure responsibility or equivalency determination) – This option allows private foundations to make grants directly to foreign NGOs/projects.

    • Foundations may make grants to foreign NGOs/projects pursuant to conducting expenditure responsibility or equivalency determination (refer to our article for more information)
    • Pros: Circumnavigate process of applying for 501(c)(3) status; Allows private foundations the ability to support projects that do not have 501(c)(3) status (eg. a project under the auspices of a for-profit; a foreign project)
    • Cons: Many foundations may not be aware of this possibility; Foundation must comply with IRS requirements for these types of grants including OFAC (Office of Foreign Assets Control) regulations; Does not allow for ongoing acceptance of tax-advantaged donations from other US donors

It is important to note that options 1-3 above presume that the foreign NGO/project is organized for a charitable, educational, scientific or religious purpose that meets the requirements to obtain 501(c)(3) status in the US.

If you have questions about these options for your NGO, please feel free to contact us to discuss your organization's needs.

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