USAID Kicks Associates & Takes Names

The USAID Partner Vetting Program wants specifics on who is receiving aid using their funds, but just in the West Bank and Gaza—for now.  The proposal highlights the curious variability in the expectations of transparency—one organization advocating for vetting doesn't turn up in databases of registered nonprofit organizations. 

Organizations that receive grants from USAID (the federal agency responsible for international aid) are strongly opposing a proposed new procedure and database to collect and retain personal information on individuals working for grantee organizations and subcontractors.  The stated goal was to implement an executive order prohibiting dealings with individuals designated as terrorists as well as a specific Congressional requirement that no USAID funds go to any organization in the West Bank & Gaza that "advocates, plans, sponsors, engages in, or has engaged in, terrorist activity."

Both the Chronicle of Philanthropy Chronicle of Philanthropy (Ian Wilhelm) and the Washington Post Washington Post (Walter Pincus) covered the story when USAID partially backed down on the proposal, putting the partner vetting system on hold worldwide but implementing it on a pilot basis in the West Bank & Gaza.  The USAID lapses in screening procedures in the West Bank & Gaza were the subject of a critical report from the Government Accountability Office last year.

Much of the opposition to the plan was coordinated by InterAction (EIN 13-3287064 Form 990), which represents 165 US-based NGOs involved in international relief & development, who understandably are concerned about the collection of data, and the indication that USAID would not disclose whether any individuals passed or failed screening, making it difficult to identify and challenge incorrect information in the database. 

A couple of things that I found noteworthy about this proposal:

Inconsistency with other transparency requirements.  Because it was driven by executive orders and language in Congressional appropriations, there is a lack of continuity with other transparency requirements and exemptions for charities.  One of the more striking example is that of Catholic Relief Services, one of the larger recipients of USAID funding, but which is entirely exempt from filing a Form 990 because it is deemed a church group.  (Its total US government grants amounted to $204 million in the year ended September 30, 2006 according to the organization's annual report.)  CRS has a staff of 29 nationals and one expatriate in five offices in the West Bank, Gaza, and Jerusalem and is involved with USAID projects there. 

Lack of transparency of vetting advocates.  The Chronicle of Philanthropy article quoted Rachel Ehrenfeld, director of a group called the American Center for Democracy, in favor of the partner vetting program.  The article identified the group as a right-leaning think tank.  However, I was unable to find the organization in Guidestar or any of the other sources I use to track down nonprofit organizations.  The organization's web site notes that "contributions are fully tax deductible," which is a broad claim that I think few charities are willing to make any more (because, among other things, contributions are only deductible for individual who itemize).  And then it provides this oddly worded statement:

The American Center for Democracy was organized to raise,     receive and maintain a fund or funds of property, both tangible and intangible, or both, and to distribute and     administer the fund or funds, including any income or interest generated there from exclusively for charitable,     religious, scientific, literary or educational purposes, either directly or by contributions to organizations     that qualify as exempt organizations under Section 501(c)(3) of the Internal Revenue Code and Regulations issued     pursuant thereto, as they now exist or as they may hereafter be amended.

As I read that, the American Center for Democracy doesn't claim to be a 501(c)(3) organization, it just raises funds for them.  It seems to me that kind of fundraising activity requires registration, either as a charity or as fundraising counsel, in many of the states in the US, including New York where the organization is located (of course, I'm not a lawyer or law enforcement official, but that's how I read the law).  Certainly if the contributions are to be deductible, the organization needs to be a registered 501(c)(3).  I wonder whether the organization has found some legal exception to the various state and federal registration requirements, or whether it is just not paying any attention to them (or It's possible that it doesn't raise the $5,000 a year that would require it to register). 

Regardless, I find it notable that the organization making the biggest push to get the USAID to require vetting by aid organizations appears not to have gone through the process of registration for itself.   

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