By Ken Nopar, VP-Senior Philanthropic Advisor

Grants to International Affairs organizations have increased in recent years. $27.44 billion, or 5% of all charitable giving, went to these charities in 2021. These amounts vary from year to year, often depending upon various crises in the world. Many donors have recommended grants this year to support Ukraine relief and aid efforts, while in the first half of 2020 during the onset of the Covid pandemic, donors with donor advised fund (DAF) accounts increased their international grants by 34%.

Many AEF donors are not aware that they can make international grants from their DAF accounts, though this has been changing in recent years and the volume has been increasing.  Some send grants in response to a natural disaster or health emergency abroad, others give back to support the countries from which they or their families came, and others see the impacts of poverty, limited access to healthcare, or poor educational facilities or resources when they travel overseas.

Additionally, some AEF donors are temporarily based overseas and do not receive a tax deduction for directly supporting local charities there, so they recommend grants to these organizations from their AEF DAF since they already received a tax deduction for donating to the fund. Other donors who live in the U.S. recommend grants to overseas charities where their children, friends, or siblings work, volunteer, or support.

Some AEF donors provide one-time support and others make grants to the same organizations on an ongoing basis. While the vast majority of donors recommend many grants to US charities and may occasionally make international grants, others make a number of overseas grants.

The IRS allows donors to make tax-deductible contributions to U.S.- based charities that conduct charitable activities in foreign countries. It does not, however, allow donors to take deductions for direct contributions to foreign charities, though donations to U.S. based “friends-of” groups of these foreign charities that comply with IRS guidelines are usually eligible.  AEF frequently sends grants to such “friends-of” charities.

When AEF donors recommend grants directly to charities in other countries from their AEF DAF accounts, there are some additional steps involved.  For years, AEF has partnered with Charities Aid Foundation of America (CAF) to facilitate these grants, as CAF America has been a global leader in international grantmaking since 1992. CAF America undergoes a thorough process to vet foreign charities and conduct expenditure responsibility and equivalency determination to verify that the donors’ grants will be used for the intended purpose and that the foreign charity is the equivalent of a U.S. based charity.

If the charity has been recently vetted by CAF America, there would not be a vetting fee, but if it has not, there would be a nominal fee of $400 for all the work that is necessary. AEF simply pulls this vetting fee, along with a small percentage fee for each grant made through CAF America from the AEF donor’s DAF account.  AEF grants to US-based charities or “friends of” organizations do not incur any additional fees.

If AEF donors want to provide support to a particular country, but are not aware of any specific organizations there, AEF can provide access to the CAF America’s database so donors can see which charities have been pre-vetted.

Because vetting international charities can take additional weeks or even months as CAF America has to often wait to receive the necessary information from the charities, AEF recommends that its donors make these grants in advance. Here are some tips that can help AEF and CAF America process the grants in a timely manner:

  • Donors should include accurate and complete contact information (an email address is very important!) on the AEF grant recommendation – including a specific contact person at the foreign charity if known.
  • If appropriate or possible, donors should inform the charity that they have recommended a grant and that they should expect communication from CAF America regarding the vetting process.
  • Due to the fees involved, donors usually recommend direct foreign grants typically far in excess of AEF’s normal $250 minimum, and if a donor intends to send grants multiple times during a year to a charity, they should reduce the frequency of the grants since this will increase the efficiency and may reduce the costs.

Events over the past few years have demonstrated that the world has become smaller and that events in one area or country can impact the rest of the world. The interest in international grantmaking is likely to  continue and grow.

At American Endowment Foundation, we look forward to discussing you and your clients’ needs and determine if a donor advised fund is your best choice for international gifts. Contact us or call 1-888-660-4508.