After four months with no word from the FBI about whether KinderUSA was being investigated, the board resumed fund-raising. But board chair Dr. Laila Al-Marayati worries for her donors, who want to support charity but fear being caught up in a terrorism investigation. "Charities are in the position of being guilty until proven innocent," she says. "Our donors are afraid. They don't know what to do." (The FBI would not confirm or deny an ongoing KinderUSA investigation when contacted by BusinessWeek.)

To bring donors back, charities are employing new measures to prove that their work is legitimate. KinderUSA has gained a reputation among Islamic charities for good governance and transparency and posts audited financials on its Web site. But such measures did little to prevent a formal inquiry, and Al-Marayati remains frustrated by how little she knows about the inquiry's status.

Such situations have led Muslim-American leaders from more than 20 Islamic charities to unite to find a solution. Last March they launched an umbrella organization called The National Council of American Muslim Nonprofits that will offer a seal of approval to charities that meet their criteria, which are still being developed. The council is working closely with the Treasury Dept. to ensure rigorous standards that will offer some protection to donors and charities.

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Posted by Jennifer Lowe, 11:52:25 AM