FUNDING GRANTS TO FOREIGN ORGANIZATIONS
Regulators look carefully at situations where a contribution is given to a domestic tax exempt organization, is receipted by that organization, and is then passed on as a grant to an organization in another country. These situations are closely monitored because contributions to a foreign organization are not tax deductible on the taxpayer’s domestic tax return if the U.S charity is acting as a conduit of funds for foreign recipients. However, if the domestic charity makes a foreign grant in furtherance of its tax-exempt purposes and retains control and discretion of the grant money, regulators are not likely to challenge the deductibility of contributions that funded the grant.
As a US- based organization affiliated with international entities, sometimes there are conflicts in operational methods due to national country regulations like those mentioned above. It is the responsibility of the Board of Directors to ensure all funds received by the organization are used in accordance with the organization’s exempt purposes. This is accomplished by an established Joint Ministry Agreements (JMA) with regional fellowships (NGOs) or by receiving regular reports (project and financial) from entities or individuals receiving funds from SWH.
SWH has established a formal process for funds transferred to other fellowships and SWH ministries outside the United States. At all times, SWH retains control and discretion over use of all contributions received and that are granted to another fellowship or SWH ministry.
Indications of control and discretion include the following:
- Foreign organizations requesting grants have submitted a Partnership Application and have been approved by SWH.
- SWH and the foreign organization have an executed Joint Ministry Partnership Agreement.
- SWH has approved grants only after reviewing the grant request in detail.
Periodic audit or accounting of the recipient’s financial statements are provided to SWH
- In some cases, SWH staff members perform field observations of the program being funded by the grant.
- SWH can refuse grants requested by a national fellowship.
- SWH retains the right to cancel the grant and receive a refund of unused monies.
- Grant funds include funds from general contributions to the organization, not just donations for a specific project.
- Other indications of control and discretion are summarized in the “Accounting and Financial Reporting Guide for Christian Ministries” published by the
- Evangelical Joint Accounting Committee. Additional information is available in IRS publication No. 526, Charitable Contributions.
Definition
Generally, a joint venture is considered an undertaking for business or tax-exempt purposes by two or more organizations. These arrangements usually have: (1) an express or implied agreement; (2) a common purpose that the group intends to carry out; (3) shared profits or losses; (4) each member’s equal voice in controlling the project. This policy is designed to include arrangements that fit in this definition as well as those that are similar in nature or effect as detailed in the application section below.
Application
This policy applies to all joint ventures or similar arrangements (or a “venture or arrangement”). For this policy, the terms mean any joint ownership or contractual arrangement, either express or implied, through which there is an agreement to jointly undertake a specific business enterprise, investment, or exempt-purpose activity without regard to: (1) whether the organization controls the venture or arrangement, (2) the legal structure of the venture or arrangement, (3) whether the venture or arrangement is taxed or tax-exempt as a partnership or as an association or corporation for federal income tax purposes, or (4) whether the activity produces a profit or loss.
Approval
All joint ventures or arrangements must be approved by the Board of Directors.
Minimum Requirements for All Ventures
All ventures and arrangements must meet all the following requirements. The Board may add requirements for specific ventures at its discretion. The purpose for involvement in the venture must be described in detail, including all associated use of ministry resources whether directly part of the venture, or not, and the projected ministry and/or financial benefits to the organization. For joint ventures with anticipated ministry benefits, the description shall include describing the relationship of the joint venture activities to existing ministry activities and the organization’s goals.
A written agreement with other parties associated in the venture shall include the following elements:
- The organization will exercise control over the venture or arrangement, or the agreement will provide sufficient control to ensure that it furthers the tax-exempt purpose of the organization.
- The venture or arrangement will give priority to the tax-exempt purposes of the arrangement over maximizing profits for the other participant(s).
- The venture or arrangement shall not engage in activities that would jeopardize the organization’s exemption from taxation (such as political intervention or substantial lobbying).
- All contracts entered into with the organization shall be on terms that are arm’s length or more favorable to the organization.
- Any arrangements with or payments to directors, officers or employees of the organization must be reported to and specifically approved for each person by the Board of Directors.
- All accounting practices, budget requirements, and fiscal responsibilities are to be in accordance with corporate requirements and guidelines as directed by the licensed financial.
- All terms and agreements relating to the venture are in a written agreement signed by all the parties to the venture or arrangement.
Funds transfer policy
A Funds Advance Request for Projects will be proposed by the Field Director for each ministry. An Administrator will review each request.
Projects and/or expenses that have been included in the ministry’s annual budget are more readily available to be distributed. However, if a project or expense has not been pre-approved or exceeds the amount of the annual budget, additional information must be provided prior to consideration of providing funds. Contact the Administrator for further details.
Upon authorization from the Administrator, the business office will remit payment according to approved instructions. Ministry requests for advance or reimbursement that fall within IRS guidelines will be considered and reimbursed.
Funds transfer procedure
A completed Funds Advance Request Form should be submitted only once a month. Each request must include an explanation of the ministry purpose or activity (how the funds will be used) and complete description of anticipated expenses. Details need to be specific, and include the following; What will the funds be used for? Who will receive funds and why? (include names/position of those receiving funds)
Upon approval of each request, funds will be processed according to arrangements made between the Partner and the Business Office. Every effort will be made to accommodate the ministry’s need.
*Provision of any financial assistance is dependent solely on the availability of funds raised for by ministries for projects under the direction of SWH.