Principles and Procedures for Release of Frozen Funds for Charitable Purposes

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Proposed to Dept. of the Treasury Jan. 15, 2008

Council on Foundations, Grantmakers Without Borders, Muslim Advocates, Muslim Public Affairs Council, OMB Watch

 

Principles

  • The specific license process already in place in Treasury regulations is the best procedural starting point.  A specific license applicant seeking to get funds released should provide a list of more than one organization that can deliver the program in their place.
  • Standard for release of funds: to be consistent with the intent of the donors, determined by reviewing fundraising materials in a two year period before the designation, or by using publicly available information.
  • Funds should not be released without the consent of the designated group unless the group has become defunct and no contact persons can be located.  
  • The process should be simple.

Procedures:

Two types of procedure are needed: 

  1. Existing board of directors submits a specific license application
  2. Process where board cannot be found and/or the organization is defunct

1. Existing Board

  • Designated organization files a specific license application under existing Treasury regulations 
  • License application should identify existing providers that have services to match the intent of donors, in terms of type of service, target populations, locations, etc.
  1. Assistance projects for critical food, health, or welfare aid that is distributed from Palestinian Authority-run facilities such as schools, hospitals and clinics.
  2. In-kind donation of medicines, medical supplies and medical devices to hospitals, clinics or other health care facilities owned or operated by the Ministry of Health.
  3. Donated medical services in the West Bank and Gaza involving the Ministry of Health.
  4. Goods and services related to disease eradication.
  5. Dealings with universities and other educational institutions in the West Bank and Gaza.
  6. Goods and services relating to education, including teaching, in the West Bank and Gaza.
  7. Provision to and receipt from the Palestinian Authority of informational materials.
  8. Small-scale water projects in the West Bank and Gaza, for the benefit of municipalities not controlled by a Hamas mayor and/or a Hamas majority in the municipal council.

Treasury indicates that favorable treatment is more likely if the application meets these conditions:

  1. a compelling case exists that there is no practical means to achieve the desired humanitarian goal outside of the proposed transactions with the Palestinian Authority;
  2. the activities are designed to benefit directly persons in the West Bank and Gaza under circumstances in which, notwithstanding the practical need to involve the Palestinian Authority, the activities will not be subject to the control of the Palestinian Authority other than for routine administrative approvals;
  3. the activities will not provide any significant material benefit, including technical advisory assistance, to the Palestinian Authority.

The U.S. Government also will look favorably on those projects and activities that provide humanitarian goods or services, and activities that will stimulate private-sector commerce.

2. Defunct Board/Group

  • Treasury issues regulations incorporating the cy press doctrine, with limitations requiring funds be used for a purpose consistent with intent of donors
  • After time for all appeals has run, or appeals have been lost Treasury attempts to contact a representative of the designated organization (i.e. 60-90 days). 
  • The nonprofit sector can assist in attempts to locate contacts, for both charities based in the U.S. and those based abroad. 
  • If no contact can be found, a notice is published in the geographic area of the organization's last known address announcing that action will be taken to distribute funds according to the intent of the donors. In the case of a foreign charity, efforts to find a contact could be made through the applicable government, and/or published in a newspaper in that country.
  • If there is no response Treasury would proceed according to the new cy press regulations.

 General Issues

  • OFAC should include information on the status of frozen charitable funds in its annual report to Congress, including the success or failure of its efforts to release funds to charitable programs.

The administrative costs of these efforts should be born by OFA