U.S. nonprofit organizations have great legal flexibility in addressing a wide range of social needs and issues, both domestically and overseas. Under U.S. law, tax-exempt organizations are permitted to fund and deliver innovative services and cutting-edge programs around the globe, even to the extent of engaging in commercial and advocacy activities that further their mission. However, laws, cultures of giving, and nonprofit business environments differ drastically from country to country, often complicating the efforts of U.S nonprofits and foundations to work abroad. This seminar will examine legal and organizational factors involved in funding or running effective cross-border endeavors – such as schools and job training, relief, and literacy programs – and successfully partnering with NGO’s abroad. Among the topics to be addressed are: 1) The legal role of U.S. governing boards as stewards of the organization’s mission and funds abroad; 2) the importance of mutual understanding of roles, responsibilities, and lines of authority among the U.S. organization, foreign NGOs, and individuals involved; 3) The use of grant award letters, MOU’s, or other forms of joint venture agreements, as well as a schedule of reporting requirements, in clarifying expectations and measuring accomplishments; 4) Common on-the-ground pitfalls in program implementation, including currency control and money transfer issues, employee/independent contractor matters, ensuring program oversight, and homeland security compliance and concerns.

1. Legal and Governance Issues in Funding
and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
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Jeffrey M. Hurwit
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5. Legal and Governance Issues in Funding
and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
5

6. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Agenda
1. Introduction
2. Sector Information and Overview
3. Concept of Stewardship for U.S. Organizations Acting
Abroad
• Resulting governance, board responsibilities
4. Providing Funds Abroad
• Foundation grants to NGOs abroad
• Homeland Security
• U.S. “Friends” group distributions abroad
5. Conducting Activities Abroad
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7. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Who Gives?
In 2011, American donors gave $298 billion
Corporations, 5%
Foundations, 14%
Individuals, 81%
Source: Giving USA 2012
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8. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
International causes supported with foundation grants, to
domestic & foreign charities
Social Religion, 2% Science, 2%
Sciences, 2%
Human Rights, 3%
Arts, 3%
Public Affairs/Society
Benefit, 3%
Intl. Affairs, 4%
Gates Foundation, 30%
Education, 5%
Environment, 17% Health 39%
All Others, 9%
Intl. Development, 21%
Source: Foundation Center, International Grantmaking Update, 12/2010 (biennial publication)
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9. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
US foundation giving, internationally
US Foundations gave more than
$2 billion to non-US charities in 2010.
6,387 Recipients
8,968 Grants
471 Grantors
Source: Foundation Center 2012
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10. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Location of non-US grantees in 2010
Recipient Grantmaker
Country Amount Grant Count
Count Count
Switzerland $460,305,637 78 155 48
England $249,620,163 599 808 137
Haiti $201,250,293 39 170 108
China $118,019,838 417 723 49
South Africa $105,368,074 224 340 44
India $86,742,354 418 567 62
Canada $79,286,737 349 531 127
Kenya $65,114,359 131 177 34
Mexico $55,642,077 193 277 53
Brazil $49,397,090 167 232 36
Source: Foundation Center,
Cross-Border Giving, Sept. 2012
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11. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Traditional Organizational Structure of U.S. Nonprofit Organizations
Board of
Directors
Fundraising Budget and Nominating Other: Ad Hoc or
Committee Finance Committee Program
Committee Committees
-CEO-
Executive Director
(or President)
-COO- Asst. Director -COO- Asst. Director
Asst. Director -CFO-
Asst. Director Planning/ Asst. Director Human
Development Asst. Director
Operations Marketing PR/Community Resources
(or Vice Finance
(or Vice (or Vice Affairs (or Vice
President) (or Vice
President) President) (or Vice President)
President)
President)
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12. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Outline of Board Roles and Responsibilities
1. Legal/Fiduciary Role
A. General Responsibilities
• Governance
– Oversee
– Review/Evaluate/Monitor
• Leadership: In partnership with CEO and
management, guide mission, direction
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13. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Outline of Board Roles and Responsibilities (cont.)
1. Legal/Fiduciary Role (continued)
B. Specific Responsibilities
• Hire/support/evaluate/discharge CEO
• Review and approve annual budget
• Review and approve major organizational
decisions, commitments, and plans including
expenditures, loans, and leases
• Evaluate progress toward program and
financial goals
• Ensure the continuity of org. through devt.
and recruitment of executive staff
• Conduct affairs of the board including board
development, transition, and effectiveness
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14. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Outline of Board Roles and Responsibilities (cont.)
1. Legal/Fiduciary Role (continued)
C. Meeting Specific Responsibilities Through:
• Board Orientation
• Information Flow: Financial statements, reporting
regarding programs, operations, planning
• Each director's exercise of informed, independent
judgment
• Board meetings, agendas, minutes,
documentation
• Appropriate board organization & continuity
• Appropriate committee structure
• Protecting assets of organization
• Determination of board-executive staff
relationship; delegation of management authority
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15. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Outline of Board Roles and Responsibilities (cont.)
2. Supporting Functions
• Fundraising
• Planning
• Public and Community Relations
• Other specific and ad hoc duties and tasks as
needed
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16. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Grant Award Agreements
Standard Provisions
1. Grant Award
2. Term, Number of distributions
3. Use of Funds and/or Project Description
4. Reporting (Periodic, Final)
• Narrative: Accomplishments, progress toward grant
purposes
• Financial: Income, expenses, budget, remaining funds
5. Recordkeeping
• Record Maintenance
• Separate Fund
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17. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Grant Award Agreements (continued)
Standard Provisions
6. Prohibited Uses
• Regranting
• Legal Restrictions
• Lobbying
• Private Benefit
7. Compliance
• Child Protection
• Anti-Bribery
8. OFAC Compliance
• Office of Foreign Asset Control
• Under U.S. Treasury Department
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18. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Grant Award Agreement Provisions
Compliance with Office of Foreign Assets Control
OFAC Compliance. Grantee agrees that it will use the funds in
compliance with all applicable anti-terrorist financing, sanctions, and
asset control laws and regulations.
--- or ---
OFAC Compliance. Grantee verifies that neither the organization
itself, nor any of the organization’s directors/governors/trustees,
staff, or consultants appear on the U.S. Treasury’s Office of Foreign
Assets Control Specially Designated Nationals and Blocked Persons
List (“SDN List”); and that if such organization or personnel described
here should appear on the SDN List, the Grantee will promptly notify
Grantor and, subject to the Grantor’s further request, make
immediate repayment of the grant.
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19. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Risk Factors for Charities Disbursing Funds or Resources to Grantees
Low Risk Medium Risk High Risk
The grantee has explicit The grantee has general The grantee has general
charitable purposes and charitable purposes and charitable purposes and does not
discloses how funds are used discloses how funds are used disclose how funds are used.
with specificity. with specificity.
The charity and the grantee have The charity and the grantee have The charity and the grantee do
a written grant agreement that a written grant agreement with not have a written grant
contains effective safeguards. limited safeguards. agreement.
For example, provisions
addressing proper use of funds
by the grantee, delineation of
appropriate oversight, and
programmatic verification.
The grantee has an existing The grantee has existing The grantee has no prior history
relationship with the charity. relationships with other known with any charities.
charities but not with this
charity.
The grantee can provide The grantee’s references are The grantee can provide no
references from trusted sources. from sources with which the references or sources to
charity is unfamiliar. corroborate references provided.
Source: Office of Foreign Assets Control , U.S. Department of Treasury
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20. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Risk Factors for Charities Disbursing Funds or Resources to Grantees
(cont.)
Low Risk Medium Risk High Risk
The grantee has a history of The grantee is newly or The grantee has little or no
legitimate charitable activities. recently formed, but its history of legitimate charitable
leadership has a history of activities.
legitimate charitable activities.
Charity performs on-site Charity performs remote Charity performs no grantee
grantee due diligence through grantee due diligence through due diligence, or due diligence
regular audits and reporting. regular audits and reporting. is random and inconsistent.
Grantee provides Grantee provides Grantee provides no
documentation of the use of documentation of the use of documentation of use of funds.
funds in the form of video, funds. Documentation may only
receipts, photographs, include receipts and written
testimonies, and written records records.
Source: Office of Foreign Assets Control, U.S. Department of Treasury
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21. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Risk Factors for Charities Disbursing Funds or Resources to Grantees
(cont.)
Low Risk Medium Risk High Risk
The charity disburses funds in The charity authorizes grantee The charity disburses funds in
small increments as needed for discretion within specified one large payment to be
specific projects or limits. invested and spent over time or
expenditures. for unspecified projects
selected by the grantee.
Reliable banking systems or Reliable banking systems or The grantee does not use
other regulated financial other regulated financial regulated financial channels or
channels for transferring funds channels for transferring funds take steps to develop alternative
are available and used by the are not reasonably available for methods that the charity and
grantee, subjecting such the grantee’s relevant activity, grantee reasonably believe to
transfers to the safeguards of but the charity and the grantee be reliable, trustworthy, and
regulated financial systems agree on alternative methods protected against diversion.
consistent with international that they reasonably believe to
standards. be reliable, trustworthy, and
protected against diversion.
Source: Office of Foreign Assets Control, U.S. Department of Treasury
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22. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Risk Factors for Charities Disbursing Funds or Resources to Grantees
(cont.)
Low Risk Medium Risk High Risk
Detailed procedures and Detailed procedures and There exist no procedures or
processes for the suspension of processes for the suspension of processes for suspension of
grantee funds are included grantee funds are included grantee funds in the event there
within the written agreement within the written agreement is a breach of the written
and enforceable both in the but may not be enforceable at agreement.
United States and at the the grantee’s locale due to
grantee’s locale. instability or other issues.
The charity engages exclusively The charity engages in some The charity primarily engages
in charitable work in the U.S. or work in foreign in work in conflict zones or in
in foreign countries/regions countries/regions where countries/regions known to
where terrorist organizations terrorist organizations may be have a concentration of terrorist
are not known to be active. active. activity.
Source: Office of Foreign Assets Control, U.S. Department of Treasury
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23. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Distributing Funds Abroad Through:
1. Expenditure Responsibility
• Additional provisions in grant award letter
• Additional reporting on Form 990
2. Equivalency Determination
• Additional burden on grantee:
– Affidavits, detailed information
– Difficulty for non-English speakers
• Additional burden on grantor:
– Review and determination of equivalency
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24. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
The Relationship between U.S. “Friends” Groups and the
Organizations they Support
1. U.S. Legal Requirements
• U.S. supporting or “Friends” organization
must be independent of supported
organization
• Supported organization may not control U.S.
Friends organization or dictate its operations
• Majority of the board of directors of U.S.
Friends organization may not be comprised
of leaders or board of directors of supported
organization
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25. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
The Relationship between U.S. “Friends” Groups and the
Organizations they Support (cont.)
2. Prohibition Against:
Funds from U.S. simply flowing or passing
through to supported organization
3. U.S. Board Must:
Exercise stewardship in “granting” funds to
supported organization
25

26. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
The Relationship between U.S. “Friends” Groups and the
Organizations they Support (cont.)
4. Recommendation for Successful Relationship
between Organizations
• Maintain required legal separation while at
same time have close working relationship
• Ensure both organizations understand the
requirement of independence under U.S. law
• Develop an operating system by which:
– U.S. board approves distributions
– Supported organization expends funds as
mandated
– Supported organization reports on
expenditures, accomplishments to U.S.
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organization

27. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
U.S. Friends Organizations: Annual Work Cycle and Processes
Awards funds after
board approval
U.S. Friends of
the XYZ National Museum XYZ National Museum
Ongoing
Board of Directors Coordination* Governing Body
Provides reports
demonstrating use of funds
for approved purposes
• Raises funds • Plans for use of U.S.
• Conducts due diligence funds
• Approves distribution of • Coordinates plan with
* Coordinate planning,
funds U.S. Friends
objectives, expectations.
• Receives, reviews • Receives, expends U.S.
* Establish system of
narrative, financial reports funds
regular communications.
on expenditure of U.S. • Provides narrative,
funds, accomplishments financial reports on
• Begin cycle again expenditures of U.S.
funds, accomplishments
• Begin cycle again
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28. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Conducting Activities Abroad
Legal and Practical Issues
1. Legal, regulatory restrictions and requirements
2. Currency controls and money transfer issues
3. Program Oversight
• Ground support
4. Employee vs. Independent Contractor
5. Cultural Issues
• Authority, control
• Disposition of charitable assets
6. Affiliate, Chapter Agreements
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29. Legal and Governance Issues in Funding and Conducting Activities Abroad
Jeffrey M. Hurwit
December 12, 2012
Related Topics not under discussion today
• Bylaws
• Maintaining Tax Exemption
• Annual Filings and Reporting Requirements
• Liability
• Insurance
29

30. Thank you for listening!
Jeffrey Hurwit
Hurwit & Associates
1150 Walnut Street T: +1 617-630-6900
Newton, MA 02461 F: +1 617-928-3441
USA E: jhurwit@hurwitassociates.com
W: www.hurwitassociates.com
With special thanks to Kenneth Hoffman, consultant in International Fundraising and
Grantmaking, Lexington, Massachusetts, for providing the introductory slides on giving abroad.
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