Although many NGOs have experienced declining US funding levels in recent years, reduced aid does not mean reduced exposure under the rules. This is because no minimum funding amount must be met before the Policy will apply. Instead, the Policy looks to whether any US funding is received, however small. Accordingly, even a minor US funded stream can bring with it compliance obligations. These can apply across a broader part of an organisation’s activities than charities might first expect.
In addition, an Irish charity with no direct US funding may still be affected by the Policy. This could arise where the charity has a relationship or partnership with a US funded entity that falls within the scope of the Policy. For this reason, it is important for charities to understand the reach and potential impact of the Policy. An awareness of its ambit is key.
What is the Policy?
The Mexico City Policy, also known as the Global Gag Rule, is a US foreign assistance directive. It has been introduced, withdrawn and reintroduced over time, depending on the governing US administration. In the past, it prohibited certain US funding from being made available to foreign NGOs. This prohibition applied where organisations provided, promoted or advised on abortion. Interestingly, it applied even where those activities were funded entirely from non-US sources.
What has changed?
The latest iteration of the rules was introduced earlier this year by the Trump administration. It is referred to as the "Promoting Human Flourishing in Foreign Assistance" (PHFFA) Policy. It significantly extends the scope of its predecessor, with challenging compliance requirements and consequent funding impact. This new version broadens the scope of restricted activities on its radar. Importantly, it casts its net over a wider range of organisations than those directly carrying out the restricted services or activities.
In particular:
- The
restrictions now extend over and above abortion advocacy/care to restrict funding to a foreign organisation promoting:
- Diversity, Equity and Inclusion (DEI) initiatives, or
- Gender-affirming care and programmes - targeting gender identity, non-binary and transgender services.
- The ‘partner’ trigger means that the Policy is not solely applicable to direct activities of a compliant international charity but may also capture:
- Partnerships, collaborations or indirect relationships with directly affected organisations. This aspect of the Policy creates downstream restrictions, meaning that a funded charity could lose funding if it partners/collaborates with another organisation that itself carries on the restricted activities.
- The remit of the Policy and its funding scope has expanded, extending conditions to a much wider range of or almost all global health assistance, including emergency humanitarian funding.
How might this affect Irish charities?
1. Exposure through funding and delivery structures
Irish charities may be affected where they:
- Receive direct US Government funding
- Participate in arrangements involving US funded entities
- Assume a delivery partner role, or
- Continue to collaborate, on an ongoing basis, with organisations that fall within scope.
Even indirect connections may bring an organisation within the ambit of the Policy.
2. Risk of funding loss and clawback
Non-compliance may result in the withdrawal or clawback of funding already received, with obvious adverse implications for the continuity of programmes, projects and financial forecasts.
3. Increased compliance
Charities will be expected to:
- Interpret the broad and evolving Policy framework and conduct a US funding audit
- Carefully and comprehensively track partnerships and relationships
- Undertake enhanced due diligence on partners, collaborators and counterparties, and
- Ensure appropriate risk management and requisite compliance certifications are in place.
4. Governance considerations
Charity trustees should be aware that the Policy may:
- Require difficult decisions where tensions arise between programme alignment and the values of the charity and its charitable purpose
- Adversely affect valuable partnerships
- Require a pivot into alternative funding strategies in the event of a loss or clawback of US funding, and
- Require enhanced risk management and compliance controls.
Conclusion
The expanded Mexico City Policy could greatly impact Irish charities engaged in international work. In particular, this may create challenges for organisations with a dependence on US funding or with complex partnership/collaboration models. Endeavouring to comply with its terms will require charities to:
- Refrain from any involvement in abortion advocacy, DEI initiatives or gender affirming activities, or
- Due to the fear of involvement ‘by association’, force charities to break away from valuable partners and programmes.
Given the wide scope of its current application, charity trustees should take positive steps to assess how their charity may be affected by the Policy. They should also strengthen diligence and compliance frameworks and internal policies to best manage any risks. Despite the attractiveness of potential US funding, the difficult decision of ‘walking away’ may in some instances need to be made by the charity trustees. For Irish charity boards, the key governance question is not simply whether funding is available but whether accepting the funding is in the best interests of the charity and remains consistent with the charity’s purpose and values.
If you would like to discuss how this development may affect your organisation, please contact a member of our Charity and Not-for-Profit team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
