“Numbers” by Grand Maitre

A new study reported that higher nonprofit overhead can lead to greater efficiency,  a direct contradiction to a common critique on the charitable sector.  Unfortunately, the actual details of the study aren’t impressive and leave me questioning the value of these surveys.  

Firstly, only 265 charities participated in the study. A small pool, indeed.

Secondly, even less profound is the difference between higher and lower overhead, a whopping 0.7% (11.5% vs. 10.8).

Are these the numbers that are going to persuade cynics that charities can invest in infrastructure?

More convincing than third-party studies are the internal measurements and financial narratives conducted by the organizations themselves.

Tizku Lemitzvot,

Shuey

EXPRESSDEPOSIT’s are a new feature to the site, offering 100 WORDS OR LESS on funding, finance, trends, and best practices relating to Israel’s global nonprofit sector.

1. Bylaws sometimes allow for board members to receive remuneration for attending meetings.  Payments of any amount, however, erase the status of “volunteer,” essentially, destroying what the organization was hoping to achieve when it recruited this individual.  
2. Additionally, a board member can potentially win contracts from the organization in which he serves. However, this person is then tasked with critiquing his own work, a near-impossibility.

Even with the best of intentions, losing objectivity weakens the board’s ability to accomplish its primary task of governance.

Tizku Lemitzvot,

Shuey

EXPRESSDEPOSIT’s are a new feature to the site, offering 100 WORDS OR LESS on funding, finance, trends, and best practices relating to Israel’s global nonprofit sector.

Photo courtesy of Huskyte77 (Flickr)

As always, you can stay up-to-date with these articles and more by following me on Twitter or subscribing to receive The Nonprofit Banker by email.

Tizku Lemitzvot,

Shuey
@nonprofitbanker

JEWISH & ISRAEL SECTORS

NonProfitBanker: New post >> Future Trends in Israel’s Nonprofit Sector: A Review of the Top Headlines in 2012 ow.ly/1RCQF9

NonProfitBanker: The authors of this eJPhil post on Jewish innovation shouldn’t worry too much about funding ow.ly/1RX3Ao I’m the 3rd comment

NP STRATEGY

Exciting. NAFund is using profitability-impact matrix to improve upon their already gr8 work ow.ly/1RQpQz // can you use it too?

5 Things That an Eventful 2012 Taught Charities ow.ly/1RI8eo on Philanthropy via GTak

10 resolutions to bring your Social Venture to success ow.ly/1RZWcm via GTak

FUNDING, BUDGETING & IMPACT

Why Impact Sourcing is easier to implement than Impact Investing (Yes, there is a dif) ow.ly/hnBG4 by DaveBatstone on SSIReview

Bold statement >> Social Impact Investing Will Be the New Venture Capital ow.ly/1RXL4C on HarvardBiz via GTak

You realize how hard measuring impact is only after this article ow.ly/1RS9WT by andrew_zolli on SSIReview

The value of strategic financial leadership ow.ly/1RSGN9 on NAFund // sounds important enough that I might read it again

The funder’s mantra >> Those affected by a problem have to help define the solution ow.ly/1RVECZ from p2173

PHILANTHROPY

VERY important >> Philanthropy: Wealthy Young Donors Push Charities to Show Results ow.ly/1RFaeK via GailPerrync

Strategic philanthropy has a new name – Entrepreneurial Philanthropy – & 6 clear steps ow.ly/1RRrEX on SSIReview

A Case Study in Getting Nonprofit Fundraising Right ow.ly/1RSvbJ from nedgington

8 questions to make your philanthropy be more strategic ow.ly/1RHqwx via eJPhil

SOCIAL MEDIA & INTERNET

Thanx Fundraisinisfun I’m a Google+ Communities believer…almost. He makes a great argument ow.ly/1RTVD8

Can’t argue w/ the numbers >> 5 Reasons Why a Nonprofit Should Prioritize the Mobile Web NOW ow.ly/hqK6h by NonprofitOrgs

BOARDS

I’ve seen these ex w/ more than a few of my clients » Ethical Dilemmas connected w/ Nonprofit Boards ow.ly/1RX4dm on eJPhil

What 2 talk about at nonprofit board meetings? (hint: it should only be 1 thing) ow.ly/1S5SEP on npquarterly via GTak

OP-EDs

Liberating 990 Data ow.ly/1RSxrL on p2173 // amen to that!

Can the Circular Economy save our planet? (& produce nice revenues too?) blogs.hbr.org/cs/2013/01/is_… on HarvardBiz via katyaN4G

]]> http://nonprofitbanker.com/weekly-roundup/weekly-roundup-february-10/feed/ 0 http://nonprofitbanker.com/weekly-roundup/weekly-roundup-february-10/ http://feedproxy.google.com/~r/TheNonprofitBanker/~3/tzwD67b0L2g/ http://nonprofitbanker.com/regulations/israel-regulations/trends-to-look-for-in-2013-a-review-of-the-top-stories-that-affected-israels-nonprofit-sector/#comments Tue, 29 Jan 2013 10:37:11 +0000 Shuey Fogel http://nonprofitbanker.com/?p=3320 “We Must Look To The Past To Know The Future” – George Santayana

The headlines in 2012 were all about looking to the future.

While there were some stories with immediate consequences, the effects of most of the headlines will only rear their heads in 2013 (at the earliest).  Change in the wind? Yes.  On the ground, not so much.

So what’s in store for Israel’s global nonprofit sector?  The following are nine of the top news stories of 2012 and their significance:

9. Charities  Advocate for Israel’s Nonprofit Sector in the Upcoming Elections

The end of November saw Manhigut Ezrachit [ICLA or Israel Civil Leadership Association in English] release a primer (Hebrew) on the contribution to Israel by its nonprofit sector.

The goal of the one-page summary was to educate citizens in the hopes that they would support candidates that expressed an interest in supporting, developing, and strengthening Israel’s voluntary sector.

While the effort didn’t seem to garner public support, it was defintely a step in the right direction and reminded me of the much more successful efforts in the United States.

This recent effort in Israel is very much in its infancy but with the election results showing that Israel is ready for a change, I’m very to interested to see if charities decide to band together and capitalize on it for the next elections.

8. Private-Philanthropy Database to be Initiated by the Statistic Bureau and Yad Hanadiv

While a Yearbook is  great for organizational statistics (see below number 4), it does nothing to analyze those that are actually doing the giving, the donors. Thus enters Yad Hanadiv (The Rothchild Foundation) and Israel Statistics Bureau who announced in late October (Hebrew) about a joint project to establish a database of giving statistics.

Currently, the numbers are gleaned from a hodgepodge of places, including: automatic reports generated from incoming money from foreign sources; data submitted by the Tax Authority on private and business donations; and various surveys done by private and government bodies.

The new initiative will gather data from three primary sources: data submitted by the Tax Authority on private and business donations (a previous contributor); information transferred from Guidestar Israel (see below number 4); and a survey to be conducted on 300 sample charities. Building the database will take a year from when they first pieces of information will be transmitted (approximately towards the end of 2013).

The new initiative database will:

• map donations from individuals and businesses, originating  from both within and outside Israel
• and will provide information on the sources, amounts, and destinations of the philanthropy received by Israeli charities.

It could be that the goal of this project is to mimic the Giving USA Report published yearly, whose vast data is used to “track reports of similar types of charity, train board members, assist in setting organizational strategy, identify funding gaps, and teach about current trends.”

With the continuous complaints about Israel’s lack of formal philanthropy, this is an important initiative indeed.

7. Acknowledgement that it’s Time to Explore New Organizational Structures for Charities 

Two announcements from the Israeli government signaled that the powers-at-be are realizing that charities come in all different shapes and sizes; something that other countries have known for quite some time.  (In America, the B Corporation and L3C legal entities are great examples.)

With traditional fundraising drying up, alternative funding sources and the entities that can support them are crucial.

In late November, The Third Sector Roundtable run by the Prime Minister’s Office expressed its support (Hebrew) for the creation of Socially-Minded Businesses in Israel.  The directive will provide the basis necessary for legislation, regulations, and a the fiscal structure necessary for the success of such an entity.  (Similar strides were recently made in the States when the IRS declared that social investments or PRI’s would be considered tax-deductible.)

This headline followed an earlier one in September that announced that the Israeli government had created an official Request for Information (RFI) on the establishment of a Social Entrepreneurship Fund.

As exciting as this sounds, with the recent Israeli elections and reports of overspending, deficit explosions, and subsequent looming budget cuts, all this great talk might be just that: talk.

6. Interior Ministry to Reward Local Authorities on Social Activities

Real change needs to come from within, despite the sometimes much-needed external push.

Misrad Hapnim (Israel’s Interior Ministry) announced (Hebrew) that they would give financial rewards to those Local Authorities that instituted social programs that meet eight predetermined criteria.  Officials were quick to point out that type of programming they are looking for is attainable even for smaller and more cash-strapped local authorities and wouldn’t require infusions of large capital.

In addition to changes how local governments approach and prioritize social programming (hopefully), this announcement will hopefully galvanize  charities into researching further ways to collaborate with the municipalities in which they operate.

Could this actually usher in a new era of government and charity collaboration?  (And yes, I’m ever the optimist.)

5. Midot: Acting More Like a Regulator than a Social Cause 

The Israeli nonprofit organization Midot made headlines a few times in 2012.

None more explosive than in September after its CEO in an interview with Haaretz / TheMarker, one of Israel’s leading business dailies, called the majority of Israel’s charities ineffective. The article was subsequently used to confirm the public’s worst fears in the countries’ nonprofits.

This story followed Midot’s pilot program with Israel’s Chashav Haklali (Hebrew) where Midot essentially served as the gatekeeper to the government’s coffers.  A program that many feared would be misused by the government as an excuse to refuse allocation of grants.

Manhigut Ezrachit [ICLA or Israel Civil Leadership Association in English] and the Hitarginut Hamankalim [The Organization of Nonprofit CEOs] banded together in September to issue a letter (Hebrew) defending against the claims of lack-of-effectiveness.   The letter was followed by a call for Midot to act more like a “social cause and less like a regulator.”

In the past years, Midot has made inroads with big companies and Israel’s elite (in addition to the government as was demonstrated above), convincing them of the organization’s critical mission.

Recent headlines seem to suggest that the organization’s effectiveness is not universally accepted.  Midot is at a fork-in-the-road and only time will tell which path they will choose and how Israel’s nonprofit sector will be affected accordingly.

4. Creation of Israel’s First Nonprofit Sector “Yearbook”

At the June Guidestar Israel conference, a “yearbook” (or Shnaton as its referred to in Hebrew) of Israel’s nonprofit sector was released.

Using the 12 internationally recognized nonprofit classifications (see pages 18-22), the report allows Israel to analyze its own sector, as well as, compare it to others around the globe.  The hard numbers (many of which were unattainable until now) shed light on many important statistics and were used by one reporter to combat the myth that high salaries are prevalent among Israel’s charities.

The yearbook released in June was Israel’s first.  Coming years will not only continue to deliver critical data but will provide the basis for trend-watching and true analysis.

More articles on the Yearbook can be found on NPTech’s (the organization that manages Guidestar Israel) site, here (Hebrew).  Don’t miss this one either: Aren’t You Tired of Suspecting Charity CEO’s? (Hebrew)

3. Supreme Court Rules that Charities Need to Pay Tax on Land Sales

The city of Ashkelon sold 53 plots of land to private individuals.  The city charged the individuals VAT (Value Added Tax) but didn’t transfer the VAT to the Tax Authority because it was granted a VAT  exemption by the Tax Authority — as most Israeli charities do.  Even though the exemption was granted to the municipality because of its “social” status, the Tax Authority claimed that the transaction was a  commercial and not social, thus not included in the exemption.

In October, Israel’s Supreme Court ruled in favor of the Tax Authority (Hebrew), in essence ruling that all charities will need to pay VAT (currently 17%) when they sell property they own.  Until then, it was a “Don’t Ask, Don’t Tell” policy that allowed those institutions that didn’t report tax they had collected as free from VAT payments to the Tax Authority.

In Israel, many organization received land from the government or from bequeaths — land that is not needed by the charity.  Many have already sold portions of their property, while most still maintain this “extra” real-estate.

The multitude of charities and other exempt organizations affected will now have to take VAT into consideration and rethink their plans.

2. One Year for the Tax Authority to Rethink Tax-Deductible Eligibility

Many people, including myself, have complained about the lack-of-clarity facing charities that are seeking tax-deductible status in Israel, known as Se’if [Paragraph] 46.

In addition to the basic requirements associated with applying to become a Mosad Tziburi [Public Institution], the Minister of Treasury prepares a recommendation to a Knesset sub-committee that must approve the organization’s request. The problem, as Prof. Nissan Limor pointed out, is that applicants do not know beforehand what is exactly required of them.  Furthermore, Limor notes that the procedures are gathered as guidelines that have not been incorporated into any legislation.

In August, Israel’s Supreme Court ruled (Hebrew) that the Treasury has one year in which to formulate clear criteria for receiving Se’if 46.

According to Guidestar’s Yearbook released in June of this year, only 12% (4,280 out of 34,398) of charities have  tax-deductible status.

It is hopeful that new, clearer guidelines will both encourage more charities to apply for tax-deductible status and give  those organizations struggling to get an approval the boost they need to finally be granted their well-deserved eligibility.

1. Corporations Authority Releases for First Time Instructions for Business Activities by Nonprofits

The world of nonprofit financing has been changing for a while, especially after the global economic. However, regulations here in Israel haven’t been keeping pace.  Actually, they’re trailing far behind.

But maybe not anymore?

A funding method making headlines in recent years is business related income generated by the nonprofit itself, as opposed to strict reliance on donations.

Maybe saving the best for last, Israel’s Corporations Authority (CA), which governs the Registrar of Charities, released in November (Hebrew) for the first time instructions for “business” activities by charities.  The guideline’s four sections cover:

1. How decisions should be reached
2. Relevant considerations concerning business activities
3. Collaboration with other nonprofit or for-profit entities
4. Restrictions of business activity

While not perfect, the guidelines are a work in progress.  More importantly, they are signal that the regulators are realizing that charities are multifaceted, complex, economic organisms and not simply operational sub-contractors.

- – - – - – - – - – - - – - – - – - – - – - -

I’ve got high hopes for 2013.  Looking forward to joining everyone for the ride.

What were your impressions? Which headline will reverberate the most for years to come?  Can you suggest a headline that wasn’t included in the list?

Tizku Lemitzvot,

Shuey

Thank you to the team at Zavit Hashlishit (@zavit3) headed by Eilat Navon that supplies me (and most of Israel) with the latest news affecting Israel’s nonprofit sector.  This list wouldn’t be possible without their hard work.

Disclaimer:  This blog houses my personal opinions and is for informational purposes only — not advice. As charity laws can be quite complex and ever-changing, please refer all questions to qualified and licensed professionals.  Read the full disclaimer.

As always, you can stay up-to-date with these articles and more by following me on Twitter or subscribing to receive The Nonprofit Banker by email.

Tizku Lemitzvot,

Shuey
@nonprofitbanker

REVIEWS & PREDICTIONS

Too busy to read all the USA nonprofit predictions ? No prob, this link sums em up ow.ly/1QuOPU on NpQuarterly via KateSBarr

The ever insightful Nedgington shares 5 nonprofit trends to watch in 2013 ow.ly/1Qn1KZ

Askdebra lists this year’s best nonprofit tech reports. Provides a few predictions too ow.ly/1QvMvq

Fun >> p2173 scores her previous nonprofit predictions. Not just self-reflective, also a good summary of the sector ow.ly/1QwQmi

Always a gr8 summary >> Top 10 Events in 2012 ow.ly/1QMhGH by Emilychan on The Nonprofit Law Blog

2012 was a record year for “donor advised” charitable gift funds ow.ly/1Rzuvt on WSJ via eJPhil

The year in review, organized by category. Summarized & edited by NpQuarterly LINK

FUNDING & FINANCE

A great back to the basics approach to cutting your budget ow.ly/1QmKaP on NAFund

GTak: Is most efficient charity simply giving $$ 2 poor families w no strings? ow.ly/1QvgPC on TheAtlantic

Applying business model 2 social change: Intro 2 new book “The Real Problem Solvers” ow.ly/1QpmEd on SSIReview

Do too many social entrepreneurs start projects as biz when should be nonprofit? ow.ly/1QvCmp on SSIReview

What 1 Chabad Rabbi Can Teach Synagogues About Money: don’t be afraid to be… ow.ly/1Rsvxy on eJPhil

An oldie but a goodie from Nedgington >> Breaking Free of the Nonprofit Overhead Trap bit.ly/Uys3BK

A good reminder that not all financial plans need to be 365 days long ow.ly/1R6zdl by Steveboland on NAFund

Excellent >> How Small Nonprofit Orgs Can Improve Their Fiscal Health ow.ly/1RebHU on Philanthropy

MANAGEMENT & STRATEGY

NonProfitBanker: New Pinterest board: 5 take-aways for nonprofit orgs from my recent trip to the Bronx Zoo ow.ly/1QjXys

VIDEO: Reengineering your vision & when to use data in the process ow.ly/1Q1kn8 from HildyGottlieb

The strategic plan is dead. Long live strategy >> 4 questions for today’s ever changing world ow.ly/1RqMec on SSIReview

What data & how’s it used? WildApricot summarizes NTEN’s “State of Nonprofit Data” report ow.ly/1Q0G3p

VIDEO >> Great takeaways from Melinda Gates’ TED talk: What nonprofit orgs can learn from Coca-Cola on.ted.com/nKw0

In depth look at growing models for your nonprofit >> Demystifying scaling pt 4 ow.ly/1QLqix on @SSIReview

U.S. REGULATIONS

Emilychan: Tips 4 nonprofit orgs on IRS requirements for deducting donations ow.ly/1QMQHz

JEWISH & ISRAEL

NonProfitBanker: New MicroPost: Jewish Social Entrepreneurship Will Dissolve as a Distinct Discipline (Or Not) ow.ly/1QwNW3

INTERNET & SOCIAL MEDIA

Kanter talks to UNICEF regarding their recent successful “fake” Pinterest campaign ow.ly/1PZrn3

Fundraisinisfun reviews 4 new online tools Alltop, Thumb, Tout & Pixplit ow.ly/1QwEyR

FOOD FOR THOUGHT

Foods 4 thought from p2173 re: public money 4 public good (are nonprofit orgs the best solution?) ow.ly/1QzhOO

How foundations’ independence can greatly benefit the nonprofit sector ow.ly/1QDXLf on NPCthinks

The 1st Rule of Corporate Social Responsibility Is Not What You Think ow.ly/1QJdaI on SSIReview

Why the word “Dependency” shouldn’t be taboo with nonprofit orgs (& when it should) ow.ly/1Ra6Ch by PhilCEP

Very interesting study >> Altruistic Capital: Harnessing Your Employees’ Intrinsic Goodwill ow.ly/1RyMWI

BOARDS

Top 7 reasons board candidates choose 1 nonprofit over another, by AliceKorngold ow.ly/1QEpJT via GTak

A shmorgesboard of today’s most important topics >> 10 ways to energize your board ow.ly/1ReFZV from NPMaven

Young SE organizations like PresenTense, Joshua Ventures, Bikurim, ROI etc. have only grown in their acceptance and size.  Recent examples include a Schusterman $250k grant to Ashoka Israel and the Israeli Government’s RFI to create an SE Fund (Hebrew Link). 

The future of Jewish SE lies not on its disappearance as a distinct discipline, but rather in veteran institutions’ willingness to work directly with these newcomers to (hopefully) keep up with the changing times.

Photo courtesy of WiredCanvas (Flickr)

EXPRESSDEPOSIT’s are a new feature to the site, offering 100 WORDS OR LESS on funding, finance, trends, and best practices relating to Israel’s global nonprofit sector.

As always, you can stay up-to-date with these articles and more by following me on Twitter or subscribing to receive The Nonprofit Banker by email.

Tizku Lemitzvot,

Shuey
@nonprofitbanker

U.S. SECTOR

p2173: States will be critical next year incentivizing, tracking & regulating nonprofit sector ow.ly/1PR6pM

Nonprofit Corporations: 8 Items to Do By Year End ow.ly/1PFP8V by Charitylawyer // most apply no matter the country!

FINANCIAL LEADERSHIP

NonProfitbanker: Case Study: 9 Steps to Recovering from a 30% Deficit ow.ly/1PQOCZ

Frame this >> Executive Director’s Guide to Nonprofit Financial Leadership ow.ly/1PJUOs by KateSBarr & JeanneBellCP ht NAFund

Foundations Must Get Serious About Multi-Year Grantmaking ow.ly/1PMqmW on SSIReview // applicable to private donors as well

4 Times When A Nonprofit NEEDS a Strategic Plan, by Nedgington ow.ly/1PEtJe

Is “breaking even” the biggest barrier to nonprofit financial health? ow.ly/1PFiFx by KateSBarr on NAFund

6 ways a FINANCING plan DIFFERS from a FUNDRAISING plan ow.ly/frY1N from Nedgington

Links to plenty of resources >> Strategic & Business Planning 4 Nonprofit Orgs ow.ly/ftP2l on NatlCouncilNPs

Fresh, vital, relevant & healthy >> Sustainability: Not a myth, but not what u may think ow.ly/1PQbq1 by KateSBarr on NAFund

Critical article >> Nonprofit resilience relies on smarter grantmaking, by J McCray ow.ly/1POhtD 3 part series on SSIReview

MEASUREMENT & IMPACT

Rereading this one from philCEP. Excellent points >> What data and who will pay for it? ow.ly/1PEw1v

Interesting downside >> “Payment by Results” allows imp. data to remain hidden ow.ly/1PFP1G on NPCthinks

Food 4 thought re: nonprofit sector’s growing reliance on numbers 4 numbers’ sake ow.ly/1PQwQL by cingin on CEP

Nonprofit measurement: how much evidence is enough? ow.ly/1PQS9X on NPCthinks

Nice summary of efforts to date >> Impact Investing Grows Up ow.ly/1PEuNg on SSIReview

A convincing argument >> why impact is more important than ever ow.ly/1PGYJi on NPCthinks

GOVERNANCE & STRATEGY

Practical Guide 4 Nonprofit Orgs to Reduce Fraud Risk in the Digital Age ow.ly/1PDeul by billhighway via nten

Important note to founders >> NpQuarterly: Read our lips: there is NO SUCH THING as starting “your own” nonprofit ow.ly/fA3Lo

Nonprofit accountability & ethics: markers of good orgs & trends in standards ow.ly/1PCWWD on npquarterly via GTak

The wave of the future? >> The Rise of Nonprofit Administrative Collaborations ow.ly/1PGZ3C by JeanButzen on SSIReview

So true >> GTak: Trend of pursuing new over building on what works bit.ly/WJiG7e by ThisIsSethsBlog

5 Factors Your Nonprofit Needs to Successfully Carry Out Change ow.ly/1PMq3B by Nedgington

SOCIAL ENTREPRENEURSHIP

Reachglobal: The Rise of the Social Entrepreneur ow.ly/1PDb5y via GTak

On the money >> 5 predictions for the future of social entrepreneurship ow.ly/1PK2u0 from CSICL via GTak

CORPORATE CULTURE

The Dumbest Idea: Maximizing Shareholder Value (instead of creating best products) ow.ly/1POGpA by SteveDenning

A constructive followup to my previous tweet >> Can the Dumbest Idea Be Saved? ow.ly/1PONxG by SteveDenning

SOCIAL MEDIA

Shucks >> Has “endorsements” moved LinkedIn from credible marketplace to popularity workplace? ow.ly/1PRT4l by Askdebra

Loving the name >> Brandstagram: How brands r creatively using the photo sharing network Instagram ow.ly/1PRr6t by Fundraisinisfun

Recently, I had the pleasure of getting together with the aforementioned strategic CEO for coffee.

Two year ago, this female colleague applied for an Executive Director (ED) position at a particular charity knowing that the organization was facing a 500 thousand shekel (approximately $130 thousand) deficit. After about nine months on the job, the nonprofit was back on track and on the road to a surplus for the following year.

What was this ED’s technique and how could other nonprofits benefit from her experience?  

To put things in perspective, the organization’s budget was 1.5m shekel or $385k. This means that the impending deficit stood at approximately 30% of the charity’s budget. Yikes.

This ED’s financial challenge was twofold:

1. Entering the position at the beginning of the fourth quarter, she first had to make sure the organization finished the year without a deficit.
2. In the slightly longer term, she needed to return the charity to sustainability.

I asked this ED to delineate on some of the key decisions that helped get the organization back on track and that might be of assistance  to nonprofits facing a similar budget crisis:

1) A Deficit Isn’t a Temporary Problem

Credit of any sort is only a band-aid that doesn’t address the source of the budget problem. Budget problems require budget solutions – expenditures must be adjusted for reduced income.   Even meeting next year’s budget does not solve a current year’s cash crunch.  Expenses need to be cut, even if only temporarily.

2) Cutting Staff is Sometimes the Hardest but Quickest Solution

There was no avoiding the fact that more than a third of the 1.5m shekel budget was comprised of salaries. With only four months left until the end of the fiscal year and facing a 500k shekel deficit, drastic action was required. The quickest way to address the organization’s insolvency problem was to reduce the staff, which it did,shrinking to a staff of two from a staff of five.  The hope was that the reduction would be temporary until the charity once again stabilized the budget.

3) Get the Board on Board

The director was quite explicit that she couldn’t have pulled off the recovery by herself; the board of director’s support was critical. The board was very aware of the precarious financial state of the charity and was looking for a CEO that was just as self-aware, willing to make the hard choices.  The board then supported the director 100% during the recovery period.

4) Be Patient When Re-Hiring Staff

The director made the decision to rehire back the staff to their original jobs only after (1) all debts were covered (2) funds for the reinstated budget were promised and (3) there were no cashflow problems in the horizon. (And in case you’re wondering, it has been seven months since the re-hiring and there have been no additional cashflow glitches.)

5) Government Grants Might Be Good for the Budget but are Bad for Cashflow

As of my coffee conversation, this charity had yet to accept any government grants. While secure in their funding (when an organization is accepted, of course), Israeli government grants arrive only after expenditures have been made and can wreak havoc for cashflow (see previous post, Israeli Government Grants: The Broken Promised Land). The CEO made the decision that having a more stable cashflow was better than extra padding for the budget. A serious consideration for charities with budgets below the 2 million shekel mark.

6) Understand the Benefits and Limitations of Funding Sources

To prevent future budget and cashflow problems, this director rethought the organization’s funding sources.  Specifically, in the future to rely more on smaller local (Israeli) funders and less on restricted funds.   While this approach diversified the sheer number of donors, making the organization less in danger should a supporter choose to pull out, the fundraising process was more labor intensive.  On the other hand, a more local approach allowed the organization to consider — and secure — in-kind donations, a source that had yet to be utilized.  It should be noted that the charity is a grassroots organization and this local-donor-approach appealed very much to its inherent character.

7) Prestige Can be Just as Important as Cash

The organization didn’t drop foreign grants altogether.  It was more strategic about whom it approached and secured a very well-known foundation grant.  More important that the money was the prestige associated with getting a grant from this particular foundation.  Simply receiving the grant opened doors with local foundations.  For this charity it was a double-win (money and connections) that made the pursuit of this foreign grant worth the effort.

While the next two items weren’t used to help this organization climb out of the hole, the director did tell me that these tips are critical to helping the charity stay on-track:

8) Create Two Budgets

Hope for the best but plan for the worst, or more accurately, the less-than-best.  The first plan reflects a fully funded budget and the full execution of the nonprofit’s activities.  The second plan reflects more modest expenditure should promised funds not materialize.  Essentially, this director was putting into practice what the Nonprofit Assistance Fund refers to as a Rolling Financial Projection (Paragraph 1.2).

9) Prepare Early

At the time of this meeting in early November, this CEO had more than 70% of the following year’s budget promised.  While this is a tad early, this is certainly the right thinking.  No organization wants to be caught fundraising to cover the current year’s expenses, ideally  not past the first quarter and most definitely not passed the second quarter.  Otherwise, the charity is forced to focus on immediate needs and incapable of developing a more long-term financial strategy.

While there is certainly no one-size-fits-all solution for financial management, these tips certainly strike me as a skeleton key capable of opening most doors.

Tizku Lemitzvot,

Shuey

Disclaimer:  This blog houses my personal opinions and is for informational purposes only — not advice. As charity laws can be quite complex and ever-changing, please refer all questions to qualified and licensed professionals.  Read the full disclaimer.

Photo courtesy of OneCog2Many (Flickr)

As always, you can stay up-to-date with these articles and more by following me on Twitter or subscribing to receive The Nonprofit Banker by email.

Tizku Lemitzvot,

Shuey
@nonprofitbanker

ISRAEL SECTOR

NonProfitBanker: Israel releases 10 Golden Rules for Donors – & Charities Should Study It Well ow.ly/1PrQJ9

Huge! Israel court declares sale of land by nonprofit orgs as taxable (HEB) ow.ly/1Ph3V7 on Zavit3

Israel to create database of details of private philanthropy in Israel (HEB) ow.ly/1PheWV on Zavit3

To prove impact of a nonprofit, focus on causation & not correlation ow.ly/1Phthn by SteveBoland on NAFund

U.S. REGULATIONS

DonKramer: Is it a conflict of interest for a nonprofit CEO to also serve on the board? ow.ly/1PzgEv // good food for thought

FUNDING

Nice description of MRIs & PRIs happening in Michigan. Is this a growing trend? ow.ly/1PiSq7 on NPQuarterly

Food 4 thought >> What is funder’s role in financing data analysis? ow.ly/1Predq on Kanter via Nedgington

Find measurement daunting? 3 traits that will lead you to success ow.ly/1PqQiR via Nedgington

Pay back charities instead of banks? >> 1 family’s use of crowd funding instead of a mortgage ow.ly/1PpeJx

STRATEGY & MISSION

Socialbrick: Successful collaboration is often short-lived effort w clearly defined goals ow.ly/1PqgmV

NonProfitBanker: Chahal, his BeProud campaign & 3 lesson from starting a Foundation ow.ly/fe6X8

Gimmick or successful biz strategy? >> NPQuarterly & LHasey: Online Bank Donates 2 Charity of New Clients’ Choice ow.ly/1PyYsW

For those card aficionados >> What nonprofit orgs can learn from poker, by SteveBoland ow.ly/fnAnW on NAFund

Johnhaydon: How Nonprofits Are Creating The Jobs Of The Future ow.ly/1PCcpB

TECH & TOOLS

5 ways for a nonprofit to avoid buying a database system that isn’t the right fit ow.ly/eVkCf on SSIReview

Increasingly important >> Phyllismufson & MeghanMBiro: 5 Rules for LinkedIn Recommendations goo.gl/1CIb1 via YouTernMark

Perfect for a 9pm bus ride >> VID: 3 Ways Google+ can drive donors to your website ow.ly/1PiXde // FYI, +1 button now called Share

Fundraisinisfun: You mean having a Facebook Page doesn’t automatically generate sales?! ow.ly/1PzrA1 // the pros of a strategy

CORPORATE CULTURE

Another straight-to-the-point beauty >> 7 changes for higher productivity ow.ly/1Pipm7 by IlyaNeverSleeps

Here’s why:

Governments equate the tax-deductible rebate on donations to a donation by the government (via the tax authority) to the nonprofit sector as a whole.  In essence, the government views itself as a donor.  Israeli Charities, or amutot, can be sure that Israel’s Rasham Ha’amutot (Registrar of Charities), as an extension of the government, will be heeding its own advice when it vets charities for compliance.

Below are The 10 Golden Rules (in English) and its implications for nonprofits operating in Israel.  

THE 10 GOLDEN RULES FOR DONORS

1) Check the status of the amutah

“Visit the Rasham‘s site (Hebrew) to see if the charity actually exists and it’s current status (current, erased, or in the process of involvement).”

Charities:

The above site lists the charity’s name, status, registered address, and status of Nihul Takin for current and upcoming year. The site also allows people to search by name.

So…

Check the page from time to time to ensure that what appears is accurate; what you see, the donors see.  This is otherwise known as Reputation Management 101.  (More about this in rule #3.)

Additionally, it is advisable to test-search your organization by inputting its partial name or nickname.  This is a great way to observe the competition or help choose a unique name when registering your charity.

2) Confirm that the charity has a Nihul Takin [Certificate of Proper Management]

“The Nihul Takin is a certification issued by the Rasham every year to charities that fulfill the reporting requirements as dictated by the Registrar. Please note that in years when a charity was audited by the Registrar, the Nihul Takin is also a good judge that the organization’s activities are sound. As this is not the case in most years, donors are recommended to carry out their own investigations.”

Charities:

Withholding an organization’s Nihul Takin status is the Registrar’s most powerful and effective tool in its arsenal.   Organizations seeking a government grant or contract must have this status.  Additionally, many foreign funders will also only give to nonprofits that have a Nihul Takin.  (See previous post, Defining an Amutah.)

In simpler terms, having a Nihul Takin lets donors know that an objective third party — in this case  the Registrar and/or its sub-contractors — has reviewed a nonprofit’s activities.

Furthermore, the above website lists the date that the Nihul Takin was granted, meaning that viewers will know if an organization submitted their forms on time or were delinquent.

It is important to note that only charities that have two years of financial reports are eligible for the Nihul Takin.  The above site, however, will not list “not eligible” rather “none.”  Young organizations should proactively warn their constituents so current and potential donors aren’t left wondering why “their” organization is lacking this important certificate.

3) Check the charity on the site Guidestar Israel

“Guidestar Israel contains information from the Rasham [official] and other sources [less official]. The site contains financial and narrative reports, certifications, summaries of activities, and other relevant information on a charity.”

Charities

Moving onto Reputation Management 201.

Has your organization verified that the material listed on Guidestar Israel is accurate and up-to-date?  Organizations can obtain a login password to update and supplement the material that appears on the Guidestar site, including adding text in English.

It is also possible to upload a link to a fundraising site so that impressed individuals can donate directly from Guidestar.  Has your organization availed itself of this function?

Has your organization uploaded its logo for brand recognition?

4) Ask the amutah for details about the purpose and destination of your donation

“Do not hesitate to ask the receiving charity for details or for documentation regarding the intended purpose of the donation. Some of this information can be found in the yearly Narritive Report that the charity submits to the Registrar or in the Board protocols [meeting minutes] pertaining to the charity’s goals for that year.”

Charity:

Does your organization make it easy for donors to navigate its website?  Perhaps, creating a unique “landing” page for the specific drive; don’t make it hard for your donors to find the answers to the questions you know they are asking.

In general, what was considered good practice a few years ago is now the norm. Organizations should expect that would-be funders will conduct their own investigations and act accordingly.

5) When receiving a request for a donation by telephone, clarify before giving

“In the case of receiving a request by telephone, you can certainly ask the caller to either wait or to call back later so that you can properly check the request via the organization’s website or other  means.”

Charities:

Continuing on the previous point: Has your organization equipped its telephone staff with the proper background information to make the ask seem legitimate and answer basic questions?

6) Avoid donating to temporary kupot tzedekah [donation boxes or pushkas]

“It is best to avoid putting donations in these boxes, unless it is in a permanent location or well kept and connected to a organization you know well. Donation boxes are likely targets for theft or fraud. Regardless of familiarity with a particular organization or donation-box locale, it is best never to give large gifts via these pushkas.”

Charities:

The Registrar is essentially telling donors that those nonprofits that have temporary collection plates are not as careful with their funds — or else they wouldn’t collect money in ways susceptible to theft or fraud!

After all, these boxes are not monitored 24/7.  Certainly in today’s day and age, organizations can think of more efficient and safer ways to collect funds.

7) Request a receipt from the recipient for your donation

“A receipt is an essential tool for internal and external monitoring of the integrity of the organization. By law, a charity must offer a receipt for any donation. The receipt should minimally include the name of the amutah, the amutah’s registration number, and amount of the donation.”

Charities:

This is really ABCs of Israel charity management. If your organization isn’t providing receipts for every type of donation, I strongly suggest the manageent of the charity read the Nihul Takin, Israel’s guide for proper management of nonprofits. [Click for Hebrew & English versions of the Nihul Takin.]

8) Plan your donations

“If you donate regularly, once a year, at least, you should plan out your donations. This planning should include the total amount you plan on donation for the upcoming year, including the purposes of said donations so you can come to an informed decision on where you might want to give. If you have personal information about the activities of a favorite charity, or you were and have been pleasantly impressed by this nonprofit’s activities, there is preference for a contribution to this organization after the aforementioned tests have been executed.”

Charities:

Listen up and listen well: Nonprofits that help their donors create such a plan — even one that includes donations to other charities — are providing a much-needed service and proving added value.  Such an organization is engaging and connecting to its donors in a much more intrinsic and personal manner than by simply receiving a check.  This type organization will be remembered by the donor for a long time to come.

On a more basic level, this is why a nonprofit organization must invest in its branding. Does your charity clearly state its goal and how it plans to accomplish said goals? Do you make it easy for donors to understand how you fit into the social-service stratosphere?  Has your organization focused on causation to prove it is worthiness?

9) When necessary, view the charity’s file at the Registrar or request a copy of it on CD

“When necessary you can request to view an organization’s file at the office of the Registrar or to request a CD copy to be mailed to you, for a fee.”

Charities:

There is always a paper-trail.  Almost everything filed is available.  The exceptions are  documents or sections-of-documents that relate to board members or staff on a personal level.  Nuff said.

10) Report an organization’s improper or illegal activity

“If you notice something that seems wrong or illegal about the organization, please contact the offices of the Registrar of Charities by email at: RashamA@justice.gov.il. It is important to note that public inquiries are an integral ingredient used by the Rasham Ha’amutot to monitor the conduct of nonprofits and, thus, to ensure that donations are used for their intended purposes.”

Charities:

Scoff at constituents at your own risk.  Moreover, recent scandals have shown that wrongdoing was first noticed by Friends Of charities, those tasked with financially supporting the organization!

The above point includes staff, as well.  A recent lecture quoted an international report that the primary source of fraud detection in charities are internal tips.

To quote popular culture: you can run but you can’t hide.

I join Israel’s Registrar of Charities in wishing that a smarter donor and a more transparent sector will hopefully lead to greater participation and support of Israel’s charities.

What do you think: Good Rules to Live By or Too Oppressive?

Tizku Lemitzvot,

Shuey

Disclaimer:  This blog houses my personal opinions and is for informational purposes only — not advice. As charity laws can be quite complex and ever-changing, please refer all questions to qualified and licensed professionals. Read the full disclaimer.

Photo: Courtesy of Timo Studios (Flickr)