In late May, the Treasury Inspector General for Tax Administration (TIGTA) published a report that claimed charities are a "significant source of alleged terrorist activities."  This report continued a pattern in which various officials at the Treasury Department have made similar statements about the charitable sector, despite continuing objections.

In response to the report, several charities, including OMB Watch, the American Civil Liberties Union, and Grantmakers Without Borders, sent a letter to Treasury Secretary Henry Paulson that calls upon Treasury to retract its overbroad allegations, saying, "Treasury needs to recognize that charities are part of the solution and not part of the problem."

The letter notes that Treasury has never provided information to support these claims.  An Annex to its 2006 anti-terrorist financing guidelines for charities was only able to note news reports about front groups based outside the U.S., or the fact that designated terrorist organizations control some areas affected by natural disasters, like Sri Lanka and Pakistan.

It is not surprising that Treasury does not come forward with more information, because the role of charities in terrorist activities and financing is very limited, especially in the U.S.  The role of charities pales in comparison to other sources of terrorist funding, such as Hawala transfers and remittances from the World Bank, which in 2002 combined to account for about $350 million, according the Council on Foreign Relations.

The problem goes beyond lack of proof. The letter from charities says Treasury does not respect the positive role we play in the world, saying, "Daily more than 1 million 501(c)(3) organizations provide charitable services within their communities and throughout the world. Many of these activities act as a counter balance to terrorist influences." It also notes several steps the nonprofit sector has taken to guard against diversion of funds to terrorism, including the 2005 publication of Principles of International Charity.

The media, members of Congress and others have just accepted Treasury's claims without question.  It is time for scrutiny of the department's approach to charities and anti-terrorism, so that the nation's counter terrorism resources are not wasted, and the good work of charities is not maligned or subject to unnecessary roadblocks.

The letter is available here. A fact sheet, "The Truth About Charities & Terrorist Financing," is available here.