Many employers have matching programs for charitable contributions. Under such policies, the employer donates dollars equal to each employee donation to any 501(c)(3) organization. This is American capitalism at work; this is precisely and exactly what Andrew Carnegie advocated in his epochal book The Gospel Of Wealth in 1889. But, business life is riskier 125 years after Carnegie’s encouragement of corporate philanthropy.

When employees have given to a variety of charities, corporate headquarters should feel proud. Yet, many of the names of those charities are less than familiar. There is no reason to second guess why one employee chose to support the Holy Land Foundation or another gave to the Global Relief Foundation … until January when you see that they have been accused of being fundraisers for Hamas in the United States, under investigation by the US Government.

There are a myriad of federal laws that can impact these contributions. Under the Anti-Terrorist Act, it is a federal crime under to “knowingly provide material support or resources to a foreign terrorist organization.” 18 U.S.C. § 2339B(a)(1).  The Foreign Corrupt Practices Act prohibits bribing of foreign officials — leading to the obvious question of what constitutes a bribe, when facilitating payments must be made to get supplies through combat zones. The federal criminal code also prohibits money laundering, which can be implicated when providing funds, and receiving services, from organizations that could be using the proceeds of illegal activities to fund their operations.

Thankfully there are some things that can be done to protect your organization:

  • Material support of foreign terrorist organizations requires actual knowledge that the organization is funding a foreign terrorist organization. Boim v. Holy Land Foundation for Relief & Development 549 F.3d 685, 693 (7th Cir. 2008). But, a pure heart alone may not suffice: “Money is fungible, and ‘[w]hen foreign terrorist organizations … raise funds, they highlight the civilian and humanitarian ends to which such moneys could be put.’ But “there is reason to believe that foreign terrorist organizations do not maintain legitimate financial firewalls between those funds raised for civil, nonviolent activities, and those ultimately used to support violent, terrorist operations.’” Holder v. Humanitarian Law Project, 561 U.S. 1, 29 (2010)(citations omitted).
  • Your money, your rules. It is both necessary and proper to verify that this is indeed a tax exempt charity. Thus, there is little burden in going one step beyond that in the due diligence process before releasing the check:

Has your organization been declared a nonprofit by the federal government?

Does your agency follow U.S. Department of the Treasury Anti-Terrorist Financing guidelines?

  • Frameworks help. Recent history of groups like the Central Asian Institute of Greg Mortenson’s Three Cups of Tea fame illustrates that it’s not always clear how charitable donations are used. Precisely, why educating employees may be a necessary part of a viable corporate matching program. Educated employees would know to check Charity Navigator or other sources to vet a potential charity and would quickly see that Charity Navigator has posted a “donor advisory” on this entity.  Sources such as Charity Navigator can be effective tools for excluding charities (like the Central Asia Institute), but should not be used for inclusion as many smaller – but perfectly legitimate — charities that do great work, like Big City Mountaineers (a group providing wilderness mentoring activities for urban, at-risk youth), are not covered by these tools.
  • Segmentation is also feasible. It is completely acceptable for an organization to focus its charitable giving on a certain area to have the most impact: e.g., schools. This can be done by limiting the program to that category or simply by altering the match: e.g., $1 for $1 to schools but $.50 for $1 to any other charity. Likewise, it is perfectly acceptable to have policies that prioritize groups that provide help in communities you do business in. The key it to define, communicate, and administer that policy coherently.

This time of year especially the urge to altruism runs high. But, Andrew Carnegie’s famous encouragement of such charity came with a prescient caution to any individual of means “to consider all surplus revenues … simply as trust funds, which he is strictly bound as a matter of duty, to administer in the manner which in his judgment is best calculated to produce the most beneficial results for the community.” It is Carnegie’s call for “judgment” that still rings true.