I was dismayed when I heard that some American (and European) Foundations are requiring amutot [Israeli nonprofit organizations] to have the Se’if [Paragraph] 46a status, which declares donations to a charity to be tax-deductible.

This latest phenomenon demonstrates a lack of understanding of the intricacies of international nonprofit regulations and makes it harder for worthy Israeli charities to raise money abroad. 

WHY DEMAND THE EXTRA LEVEL OF TAX-DEDUCTIBLE (SE’IF 46) STATUS?

Simply put, people are scared.  As a result, Foundations, in particular, are subjecting their recipients to increasing levels of scrutiny; in this case, requiring Se’if 46 to provide an additional measure of protection.

An “additional measure” because Israeli nonprofits are assumed to have already received the Nihul Takin [Certificate of Proper Management] from Israel’s Rasham Ha’amutot [Registrar of Charities].

At the outset, this seems like a reasonable request.  After all, in the United States a charity or nonprofit organization is one which is categorized as 501(c)3, which declares donations to this charity to be tax-deductible.

THE DEMAND OF “PARAGRAPH  46″ ISN’T FAIR

In Israel, three different government bodies oversee charities: the Knesset, Rasham Ha’amutot [Registrar of Charities], and Mas Hachnasah [Tax Authority].  Each evaluates Israeli charities with its own particular set of lenses and priorities.

Stage 1

The Knesset, Israel’s Parliament, defines the context and framework of an Israeli charitable organization through Chok Ha’amutot [Law of Charities].   Charitable, effective, or well-governed are of no importance at this first and most basic stage.

Stage 2

The Rasham Ha’amutot, or Registrar of Charities, is the executor of the Law of Charities, reviewing the applications of charities and assigning them their amutah [charity] number.  More importantly for evaluation purposes, the Rasham oversees the Nihul Takin [Certificate of Proper Management]. This status is granted to those organizations, for lack of better word, which are governed well. The 45 page guideline detail such things as: how to transfer money, minimum number of signatories, proper way to reimburse board members, and other things (like I said, it’s 45 pages).

(It is this document, I feel, which lacking anything better, is the best test to judge if a charity is worthy).

Stage 3

The last, and certainly not least, is the Se’if 46 that is granted through both Mas Hachnasah [Tax Authority] and a Knesset sub-committee. The Tax Authority checks if the charity is financially sound (pay close attention, I didn’t say charitable) and recommends the organization for Se’if 46 — but it is the Knesset sub-committee that has the final say and  actually approves the granting of this much-coveted tax-deductible status.

This last stage poses a number of tough questions that are the roots of the incongruities between 501(c)3 and Se’if 46:

The Tax Authority — through a serious of predetermined ratios, number games, and fiduciary rules — determines if an organization is for the public good.  Isn’t this the Registrar’s job? Isn’t the Nihul Takin already tasked with determining if an organization is charitable and run well?

Furthermore, why is a Knesset sub-committee part of the process? What sort of expertise is wielded by this group of lawmakers that is somehow lacking from both the Registrar of Charities and the Tax Authority?

The message implied is that the decision to grant tax-deductible status is as much a political decision as it is a meritorious one.  (And I know of at least one organization that was approved by Mas Hachanasah but rejected by the Knesset panel.)

ADDITIONALLY, IT’S A TIME ISSUE

Much like in the States, in Israel tax-deductible status isn’t issued immediately.  More specifically, it takes a minimum of approximately two years to receive Se’if 46 (for a variety of reasons).  This means that many worthy charities can exist in their early years without the possibility — through no fault of their own — of achieving tax-deductible status.  Effectively, holding a charity’s age against them.

And yes, the process takes less time in the United States.

THE DIFFERENCE BETWEEN 501(c)3 AND SE’IF 46

Contrary to Israel, the United States has a much more simple approach to what is considered tax-deductble, focused around two ideas:

1. Cannot be organized or operated for private benefit
2. Must be serving some public good (a.k.a. charitable), or what the IRS refers to as exempt purposes.

This is in contrast to Israel, which will first inspect (for better and for worse) a nonprofit’s management & organizational composition (Nihul Takin) and then it’s financial structure (Se’if 46) in order to grant tax-deductible status.

While not declaring one set of regulations to be better than the other, it can still be said that comparing the two is nothing short of comparing apples to oranges.

So it all comes down to this:

American Foundations do not have to play by Israeli rules, so why voluntarily choose to do so?

Have you experienced increased scrutiny? Has your experience been positive or negative?  I’d love to hear them in the comments.

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.

Additional information on the structure of Israeli charities can be found in a previous post, Defining an Amutah [Israel Charity].

Photo Credit: “Money and Magnifying Glass” by Images_of_Money

ADDENDUM:  WHAT SHOULD AN ISRAELI CHARITY DO IF THEY ARE LACKING SE’IF 46?

I hope this post serves as the basis for an explanation to American Foundations why an Israeli nonprofit might lack Se’if 46.  Armed with the new-found understanding, hopefully the Foundation will process the request and forward the grant as promised.

However, it is also quite possible that if a particular Foundation already believes that the requirements for tax-deductible status in the two countries — 501(c)3 and Se’if 46 — are similar, then it is predisposed to a negative answer.

If this is the case, it might be best to immediately re-apply, using a Conduit with a Se’if 46 instead.  Obviously, both the Conduit and the Foundation would have to be open to this idea.  The colleague who suggested this idea was in the process of having his organization do exactly this.

While there will be a delay as the application will have to be re-processed, he explained that this was the only way to bypass the American Foundation’s insistence and suspicion regarding the lack of tax-deductible status — getting money late is better than not getting money at all.

Online donations are rising every year, becoming an increasingly important fundraising tool for nonprofit organizations.  To facilitate the growing demand and varied needs of charities, the number of online donation processors has been expanding accordingly.

As a result, charities have expressed their difficulty in sorting through the nuances and assorted extras to find the online solution(s) that’s right for them.

For this reason, I was thrilled to co-produce an event early in July that hosted representatives from the leading Online Donation Processors here in Israel (and the world); including Paypal Israel, IsraelGives, Taramta, Give2Gether, and Tranzilla.

The format allowed for a five minute presentation from each company-representative and a follow-up Q&A session. Each speaker was encouraged to forgo the usual humility and reserve expected of a panel participant and to, instead, guiltlessly sell themselves and their product.

What transpired was more of an intimate exploration into the concerns of nonprofit organizations than a survey of the various services.  I say this because in addition to the processing of donations, each portal offers added-value that is shaped, in part, by an understanding of the challenges facing today’s charities.

So which donation processor is right for you? Well, naturally, it depends on the particular fundraising-priorities for your organization. 

SOCIAL MEDIA

Reports have come out over recent years about how social media can be an instrumental tool for engaging an organization’s supporters. The hope being that increased engagement will at some point (sooner rather later) lead to increased fundraising or a stronger fundraising network.

With social media still in its infancy, however, organizations are finding it difficult to create a social network that is “showing them the money.”

Give2Gether’s solution to this conundrum is to harness the power of networks inherent in social media.  As a matter of fact, it seems that its platform has the most robust integration of social media around (but don’t take my word for it).

A nonprofit creates a page on the Give2Gether site whose goal is to mimic the power of giving circles and “matching” challenges.  Proving this point, another of Give2Gether’s intriguing (and some might say crazy) options, is the All or Nothing Campaign.  Organizations can set a goal and if not matched – even if short by only a few dollars – all of the money raised is returned to the various donors. Like I said, a tad insane and virtually unheard of in the nonprofit sector but similar to how an organization might fundraise face-to-face.

The Give2Gether representative advised organizations that do not have a developed social media presence to think twice before joining Give2Gether as there are fixed monthly charges (in addition to percentage fees).

CELL PHONES & SPONTANEOUS CHARITABLE GIVING

The Red Cross was all the rage when it came to Text-Donations for Haiti: a donor saw the ad, understood the pain, and was immediately able to help the cause.  Thousands of stories like this one led to a multitude of $10 donations through cell phones, totaling an approximate $7 million dollars.

While impressive as this might be, analyses of the phenomenon showed that the success of Text-Giving is generally limited to disasters and relatively small donations; thus, only truly great numbers (and truly horrific events) can raise significant money.  Furthermore, the simplicity of the text-giving process reduces engagement between the donor and the charitable recipient to virtually zilch.

But this doesn’t mean that we should abandon cell phones as an excellent source of fundraising!

The Israeli donation portal, Taramta (in collaboration with Merkaz HaMatara), released Cellarix. The product, developed especially for cell phones, combines the availability and ease of a cell phone with the flexibility and longevity of a bank account.

The system, basically an acquirer, assigns a user an account with the same number as his cell and essentially mimics a PayPal or GoogleCheckOut account.  Donations (or any payments for that matter) can be made easily between Cellarix accounts (both the donor and nonprofit must have accounts) whenever inspiration hits, without the limitations of Text-Giving.

OLD FASHIONED, DONATE DIRECTLY ON THE SITE

While technology is making inroads even with the more traditional users, not everyone is operating circa 2005 (let alone 2011). These users are comfortable entering their personal and financial information into any and every website, whether to buy clothes or to donate to local charitable campaigns.  These consumers do not want nor need the added security and “convenience” of user names, passwords, or third-party vendors.

If this is the case, why limit them?

Tranzilla offers the donor the chance to donate directly on the organization’s website with virtually any credit card.  No third-party verification or linking required.  Short and to the point.

INCREASED SECURITY AND CONVENIENCE

For a slightly more sophisticated user, entering personal and financial information on different websites can be seen as both tedious and risky.

PayPal acts as a third party “gatekeeper,” allowing users to input their information only once and will coordinate payments with various for-profit and nonprofit merchants when the user/donor chooses to execute a transaction.

With over 230 million PayPal users worldwide, the chances are good that your customer or donor either already has a PayPal account or trusts the company enough to register for a new one.

In short, nonprofits that are looking for a no-thrills way to receive funds (i.e. don’t need a true fundraising platform) will find PayPal an excellent choice.  By-the-way, did I mention that nonprofits are eligible to receive a 1% discount?

CONDUIT SERVICES 

Sometimes, donation processing isn’t enough as many charities lack the tax-deductible status that encourages an initial gift. In such case, a Fiscal Agent or Conduit is necessary.

Groups that use Conduits in this way are charities located outside of the United States (and, thus, not considered tax-exempt in the eyes of the IRS) that are looking to fundraise in America.

(For more information, see this previous post “Defining a Conduit Organization.”)

Designed with the multidisciplinary needs of Israeli charities in-mind, IsraelGives can function both as a American or UK “Friends of” Organization, issuing tax-deductible receipts directly to donors abroad.  A crucial service for those organizations lacking a formal presence in the United States.  Of course, if your organization is only looking for a donation processor, IsraelGives can do that, as well.

(For more an “Friends of” Charities, please see my previous posts, “4 Reasons Why NOT to Establish an “Friends of” Charity” and “6 Questions to Help You Choose the Right Conduit Organization.”)

CONCLUSION: A CHECKLIST

The brief descriptions above only scratch the surface of what these donation processors offer their nonprofit clientele.

Furthermore, the considerations listed above in GREEN are not all-inclusive. The discussions and questions at the end of the event honed in on a more expansive list of concerns and priorities facing charities that are looking to raise funds on the internet:

• How are donations made? Does the organization insert code into its existing site or create a separate page on the processor’s domain?
• Does the donor also have to have an account with the processor? (ex: PayPal)
• How quickly are donations processed?
• What are the fees involved? Flat, monthly or percentage?
• What other services are offered or available (for free or fee)? (i.e. one-stop shop)
• Can the processor act as a Conduit?
• What type of receipts are offered? Are receipts provided at all? What names appears on the receipt?
• Can the processor integrate with your Customer Relationship Management (CRM) software or database?
• Can the portal be integrated into social media efforts?
• Can unique landing pages be created to better facilitate fundraising through tailored pages?
• What payment options are available/lacking? What kind of donor will, therefore, be left out?
• Can the portal handle Text-Giving or integrate with cell phones, smart phones and/or tablets?
• How is the customer service and/or tech support? How easy is it to reach a human being if something goes wrong?

Any considerations that you would add?  Did you get any different/additional takeaways from the session?

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.

It was a pleasure to co-produce with Charlie Kalech (volunteer coordinator of JWP) and his team at J-Town Productions. See their other events here.

Many thanks to the people that live-tweeted the event: TheBigFalafel, IsraelGives, & Reach_3K

Dan Brown: While this piece wasn’t entitled, “Technology as a Journey” I do think it fits the bill. I guess that only leaves me one more piece for the series.

Photo: “Credit Card Swipe” by Robert Bahn

I spoke recently at the Kishor conference to Women Professionals on Raising Capital.  I really enjoyed the challenge of preparing for the talk as the subject was a business term not often used when working in the nonprofit sector.

When priming the presentation for the expected for-profit audience, I was surprised – though in retrospect I shouldn’t have been – by how much holds true when raising funds for either a nonprofit organization or a for-profit venture.

Moreover, after going over the slides I was amazed how easily I could replace “investor” with “donor” in most of the examples.  The fact that the session was attended by professionals from both sectors reinforced this belief.

(The most notable exception to the above is the definition of traction, which is not shared by for-profit and not-for-profit companies.)

Upon further analysis, I was able to gleam three live-or-die principles that span the charitable and capitalist sectors.  What follows are my presentation slides and these three takeaways.

CREATE A GOOD BUSINESS

When discussing how to raise capital in his book The Art of the Start, Guy Kawasaki quotes Arthur Rock, founder of Intel:

At a presentation I gave recently, the audience’s questions were all along the same lines: “How do I get in touch with venture capitalists?” “What percentage of the equity do I have to give them?” No one asked me how to build a business!

The success of every social and for-profit venture stems from the above quote — are you building a good business?  Questions that can steer a potential entrepreneur to the right path include:

• Are you building something worthwhile?
• Are you providing a worthwhile service? Is your product based on user’s needs or on your own?  Are you contributing to making the world a better place?
• If the answer to these questions is yes then the other building blocks must also be in place.
• What is the goal/purpose of the initiative?
• How will success be judged/measured?
• Is there a revenue model in place? (And yes, this is relevant for nonprofits, as well.)
• Have the right people been recruited to bring the project to fruition?

HONESTY TRULY IS THE BEST POLICY

Whether to donors, investors, oversight bodies, or to itself, organizations must maintain and promote honesty.  If you still doubt your mother’s advice, here’s another three that might convince you that honesty truly is the best policy:

• People interesting in supporting the project have been around and have heard most of the lies out there.  Don’t ever fool yourself into thinking you’ve found a “new” one.
• Never try to cover up lack of experience: all the great companies and entrepreneurs started at zero, just like you.
• By facing the tough questions, organizations can make the brave decisions to evolve and improve.

PURPOSEFUL DECISION MAKING

Ideas are easy to come by, but it’s the implementation that is difficult.

• Purposeful decision making is what gives tangible direction to intangible ideas.
• Additionally, donors, and the even government will have questions about decisions that a corporation has taken. When actions are deliberate, explaining oneself isn’t merely a chore but a chance to convert doubters into evangelists.
• With so many paths to choose — whether in marketing, raising funds, adopting technology, and a million other things  – intention and forethought allows us to navigate the myriad of choices available.

Incorporate these three principles and you have  the ingredients for making Guy Kawasaki’s words come true:

If you do succeed in building a business, either investors will be fighting to give you money or you won’t need their money.  Both are good problems to have.

Tizku Lemitzvot,

Shuey

Photo Credit:”Pile of Money” by Jody Klopp

Paypal is one of the leading Internet-payment options in the world for for-profits and nonprofits, alike.  With only a PayPal logo and some code easily inserted onto a website, payments are a breeze.  And with over 230 million PayPal users worldwide, the chances are good that your customer or donor either already has a PayPal account or trusts the company enough to register for a new one.

Combine the above with the one percent discount PayPal offers qualifying charitable organizations and you’re looking at a strong argument why PayPal should be the online payment-system of choice — for local donations.

However, for international fundraising, PayPal’s “cross-border fees” should prompt nonprofits to tread carefully before jumping head first into this particular pool.  

A SCHOOL PURSUES TIME SAVING MEASURES

A little over two months ago, a friend that sits on the Board of a local (a.k.a. Israeli) educational institution called me with some questions about PayPal.  I’ll repeat some of our conversation as I believe the school’s challenges are shared by many.

The Israeli school also has an international program, specifically a large contingent of students from the United States.  To improve cash flow and minimize aggravation, the school was pursuing ways to get the students to pay their down payment in a more a timely manner.

Someone suggested PayPal and the school was hooked. Written payments were a multi-step process — reading the letter, finding the check book, and then actually having to mail the check — that was failing to encourage timely payments.

With the introduction of PayPal into the equation, the school followed up a letter campaign with an email that contained a link to pay via PayPal.  The result was right on target.  In just a week over 40% of the students had paid their down payment.  A far higher number in a far shorter period of time than ever before.

It was then that the school wanted to forward the money collected from their PayPal Israel account to their bank account in Israel.  That’s when things took a turn for the unexpected and I was subsequently called.

REDUCED RATE FOR NONPROFITS

PayPal understands the important role it plays in fundraising. Whether for altruistic or capitalistic reasons, the company graciously offers qualified nonprofit organizations with a reduced rate of 2.4% — instead of the regular 3.4% handling fee — a very competitive rate.  (And let’s be honest, nothing in life that’s worth it, is free.)

However, when money arrives from outside your registered country, PayPal adds other fees to the mix.

But first, some ground rules…

PAYPAL 101

Principle 1: Recipient Pays the Fees

Whether sending a donation or payment, the recipient/seller pays the fees.  The service is essentially free to the sending/buyer. In other words, the nonprofit absorbs any and all costs.

Principle 2: Local Organization Connects to Local PayPal

PayPal exists in tens of countries.  Essentially, each country is a separate corporation.  So nonprofits in Israel, for example, will open a PayPal account with PayPal Israel.  American charities will register with PayPal USA. And so on.

Principle 3: Money Released Only to Local Bank Accounts

One of the benefits is that PayPal can accept money from other PayPal accounts throughout the world in a variety of currencies.  However, the local PayPal company will only release the money to a bank in the same country.  So PayPal Israel, following the example, will only release an organization’s money to a bank account located in Israel.

Principle 4: Money Released Only in Local Currency

Regardless of the currency in which the money was originally sent, PayPal will only release the money in the recipient’s local currency.  Thus, PayPal Israel will only release (and obviously convert) the money in New Israel Shekels.

COSTS CAN MORE THAN DOUBLE WHEN ARRIVING FROM OVERSEAS

The various additional charges can more than double the 2.4% modest fee to a somewhat daunting 5.4%.  This is assuming, of course, that the nonprofit is actually approved for the 1% discount mentioned earlier. (Otherwise, it’s 6.4%.)

Continuing the example mentioned earlier, this Israeli educational institution opened a PayPal account with PayPal Israel.  Money arrived from outside Israel, in this case from the United States, incurring a “Cross-Border” Fee.  As the money was received in Dollars, when the order was issued to PayPal to release the money into the organization’s bank account in Israel, it was then converted into Shekel, incurring a Conversion Fee.

Base Price = 2.4%
+ Cross-Border Fee = 0.5%
+ Conversion Fee = 2.5%

Total = 5.4%

What I didn’t include, but which is important to note, is the actual rate of exchange. It is quite possible that the rate itself isn’t the best.  While not an actual fee, a poor rate of exchange does ultimately mean that less money reaches the charity’s coffers.

HAPPY ENDING?

Just so that I don’t leave you in suspense…

As you can imagine, the call I got from this particular board member was to find out if there was anyway to get the money out of PayPal without paying the higher rate of 5.4%.  Unfortunately, there was no way to avoid paying the 5.4%, short of returning the money back to the students’ accounts.

It is important to note that the misunderstanding of the fee structure wasn’t necessarily PayPal’s fault.  Sometimes, misunderstandings do happen (not that that made him feel better about the situation).

BOTTOM LINE: USE PAYPAL FOR INTERNATIONAL DONATIONS, OR NOT?

Depends. (Yeah, I know that seems to be my answer for just about everything.)

The following is a list of considerations that should provide some concrete information to help answer this question:

1. Ease of Use

Whether for local or international fundraising, donating through PayPal is a cinch.  Let us not forgot the percentage increase of students that paid their down payment.  Time is money, and getting your money in a timely fashion could in the end certainly be worth the investment.

2. ETA (Estimated Time of Arrival)

PayPal minimizes lag, helping the money reach its intended destination in a timely fashion.  Once the PayPal account is setup (arguably, the biggest unknown of this whole equation), money can be in the nonprofit’s bank account and ready to use in just day(s) after the payment is made.

3. Cost

So the price can jump up to 5.4% of the donation, this doens’t mean that other options are cheaper.  Yes, it is higher, but probably not the highest.

4. Tax Deduction

PayPal is merely a funnel, not a conduit.  Those foreign organizations that have tax-exempt status can issue tax-deductible receipts through PayPal. Those that don’t, might need another option.

5. Transparency

When fundraising, donors like to know who is getting the money and that it is being received. PayPal receipts clearly show who received the money and that the money arrived in the beneficiary’s PayPal account.

Whatever you decide, be sure that your decision is based on rational factors.  It is the only way to measure the service’s effectiveness and to provide adequate answers should curious donors question your choice of payment method.

Tizku Lemitzvot,

Shuey

Additional Resources: 6 Questions to Help Choose the Right Conduit Organization

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

Photo Credit: Free Money Collection in Cash by epSos.de

I recently read an article that argued that the “fundraising process itself, in particular, donor relationship building, is program building, and not just the means to an ends.”

This got me thinking that there are other activities besides fundraising that are insufficiently explored by us nonprofit professionals.

We so often get caught up in the final destination — completing a capital campaign, obtaining a top 4-star rating from Charity Navigator, or reaching 1,000 followers on Facebook — that we fail to take notice of the journey it takes to get there.  Unfortunately, this lack of awareness prevents us from learning how the processes of fundraising, measurement, and technology-implementation can create a more effective organization.

Two quick comments: (1) While I generally write TO my audience, as a fellow guilty party I thought I would address this piece to the WE and come along for the ride. (2) I decided that the best way to develop this idea would be in three parts. Fundraising is below, with Measurement and Technology to follow.

FUNDRAISING AS A JOURNEY…

…to strengthen programs

The journey of fundraising can teach us how to create more effective programs, achieving greater impact. In the above article that inspired this piece, Gayle Gifford details seven ways that speaking to constituents and potential donors strengthening programs, thereby, helping accomplish this goal.  Some of the measures she mentions, include: getting feedback; seeing results from the field; confronting the quality and design of programs; and continuously testing the organization’s relevance.  Yes, the natural by-product of these actions is that a charity is better equipped to raise money in the future.  But more importantly, this process will help us increase the impact of our work, the true measure of a successful nonprofit.

…to friendraise

Along the path that leads to raising funds is the potentially greater opportunity of finding friends. Hildy Gottlieb argues that friends “share all their gifts with the organization…and yes, quite often, it is even money. But it is usually far more.” She is very careful to note that Friendraising (as she terms it) is not just another word for “relationship building.”  Traditional “relationships” still ask for money, just maybe not right away. In contrast, proper Friendraising leads to: the sharing of ownership; an engaged community; effective leadership and governance; more educated decisions at the board table; and, most importantly, a shifting of the focus from the scarce resource of money to the abundant strengths that everyone brings to the table.  And in today’s world, charities need be able to pull from a variety of disciplines to maximize its impact.

…to educate donors

Too often we are so focused on getting the check that we fail to educate our donors about the intricacies of giving and our organizations’ needs. Dan Palotta begs organizations to “stop giving donors what you think they want.”  Too often, he claims, in order to get the gift, nonprofits “dedicate the whole of their organization to telling them [donors] what they want to hear.”  Instead, organizations need to show courage and tell donors the truth.   After all, donors “cannot and should not be expected to have the same level of sophistication” about giving as people who dedicate their lives to the profession.

In one survey cited, 79% of donors said they wanted to know what percentage of their money went to the cause, while only 6% said they wanted to know if their donation made a difference.  (The latter, of course, being the crucial measuring stick.)  Palotta asserts that these strewed numbers are a result of donors who are suffering from “erroneous teachings” brought on by the sector’s thirst for capital.  By shifting the focus back to the process, we can educate donors how to give effectively and understand the complex needs our of charities.

…to remain relevant

Looking only at the donation, the end result, places the focus on the charity instead of the donor.  The number one way to remain relevant, however, is to concentrate on the real reasons why a donor chooses to help. Among the list of reasons, Jeff Brooks includes: personal significance; spiritual strength; assuaging guilt; comforting fear; proving that they are good people; feeling good; or for tax-deduction purposes.  Keeping this in mind allows the nonprofit to fundraise for what it needs while simultaneously appealing to what the donor needs.

Steve Yastrow once said that even the most dedicated of donors will only think about their favorite charity up to 10% of the day, while thinking about themselves over 90% of the day.  If a donor’s favorite charity can successfully have that individual donor associate himself completely with the brand, then the supporter will, essentially, be thinking about the charity EVERY time he thinks about him or herself — over 90% of the time. This is true relevance.

Note that all of these points are not contingent upon actually reaching a charity’s campaign goals (though that would be certainly be nice); thus, making the success or failure to achieve these fiscal objectives, ultimately, of second importance.

Up next:
Part Two – Measurement as a Journey
Part Three – Technology as a Journey

Tizku Lemitzvot,

Shuey

Photo Credit: “Hiking” by Luke Wisley

On February 28th, 2011, I had the privilege and pleasure of presenting a 10 minute presentation entitled “The Changing Role of Money” at the FONSI (Future of Nonprofit Summit – Israel) Conference in Jaffa, Israel.

Don’t let the somewhat intangible and grandiose name fool you, the conference was  a bold attempt to provide concrete tips, tools and trends on marketing, branding, technology and social media for the nonprofit sector.

In my short session, I described how money is changing from an object of secondary importance into a measuring stick and marketing tool.  I then detailed how financials and budgets are now being  used proactively to make sure the right message is being conveyed about a nonprofit organization.

As I promised the attendees when I spoke, below is the PowerPoint presentation that accompanied my speech.  (The presentation has been upgraded to clarify some points and include links to the articles and tools that were cited.)

Attendees were also kind enough to tweet some highlights and I’ve included them here.

Slides and tweets not enough for you, the conference was also video taped!

In the coming days and weeks I hope to write a piece or two about some of the ideas I mentioned.

For those that attended the conference, I hope your enjoyed.  Please feel free to reach out to me about anything I spoke about.

Tizku Lemitzvot,

Shuey

N.B.  I greatly enjoy sharing my experience and expertise and am available to speak — free of charge — to  organizations, conferences, board members, and donors.  More information is available here.

The sole purpose of my previous piece, Defining a Conduit Organization, was to address the more important question of this post, “How to Choose the Right Conduit?”

After all, for many organizations operating outside the United States, specifically those in Israel, fundraising in America plays a vital role in the business strategy of the nonprofit.  Some charities choose to establish an organization known as an “American Friends of” charity to offer American donors a tax-deductible option. Others, however, will decide to use Conduit Organizations to process the donations on their behalf — also a valid option.  But I digress. (If you, on the other hand, would like to digress, see 4 Reasons Why NOT to Establish an “American Friends of” Organization.)

Those Israeli nonprofits that choose the second option of a Conduit (also referred to as an Intermediary or Fiscal Agent) are in luck, as recent years have seen an quasi-explosion in the number of American charities that offer Conduit services.  This being the case, foreign organizations have the luxury and liberty — and some might argue the responsibility and obligation — to investigate the various Intermediaries so as to choose the best fit for the nonprofit. And, yes, all Conduits are by no means the same.

My six criteria for judging a potential Fiscal Agent: Cost, Currency, Time, Payment Method, Communication and Association.

1. COST

What will the Conduit charge me for the service?

The logic being that the less a charity pays in fees, the more money actually makes it the organization’s bank account to fund programmatic and administrative expenses.

Fees generally come in three flavors:

(a) Flat

The advantage of Flat fees is that you know them upfront. While the other options are calculable, this method is the most straight forward.

There are actually two structures for this option:  (1) Flat rate regardless of the amount sent and (2) Flat rate per range of money sent.  For example, $25 up to $2,000, $50 up to $10,000 and $100 up to $50,000 etc.

Example: The Jewish Funders Network, as of March 2010, offers Intermediary Services to nonprofits based in Israel. According to a seminar I attended in March of 2010, it is a flat fee of $200 for transfers up to $100,000. (As this information was obtained when the product was first launched back in March, it may not be up-to-date.)

(b) Percentage

A percentage of the amount transferred, sometimes with a minimum fee.  The advantage of this option is that you “only” pay per what you send.  This seems to be the most popular option.

Example: The Jerusalem Foundation, The New Israel Fund, The One Israel Fund and others use this method.

(c) Free

Use the service will cost the beneficiary nothing. However, to offset costs our reduce expenses, the Intermediary might impose some restrictions on the funds, turnover or method of payment

Example: The P.E.F. offers this service free of charge but will generally only forward the money to the recipient after a month (although some have told me it could be up to three) and in the form of a dollar check. I have heard some organizations get it shorter, but truly the exception.

2. CURRENCY

In what currency will the donation arrive in my account outside the United States? Will the donation be received in the original currency (dollars) or in local currency (in this case, shekels)?  Do I get to choose?

Currency is an important factor for three reasons:

(a) Conversion Rates

Conversion rates can have a big affect on donations received from abroad; namely, the better the rate the more local currency is created when converting the money. As demonstrated above, even a small change in the rate can have a substantial effect. By receiving the money in the original currency, the beneficiary can retain control over when and how much to convert.

(b) Accountability

Certain donors like to know exactly how much buying power their donation has and might demand to know the conversion rates that their money is getting. It is quite possible that an organization might be unable to obtain this information and relevant information from its partnering Conduit.

(c) Cost

Generally speaking, it is more expensive to work with foreign currency than local currency. Thus, receiving money it is original money with come with a higher handling fee for the handling bank or financial institution.  Although, these higher fees might be mitigated by other concerns (like items one or two).

3. TIME

How long will it take me to receive the donation in my account outside the United States?

As the axiom goes, time is money.  Knowing the turn-around time is important for two reasons:

(a) Currency Exposure

One of the biggest unknowns and worries for a nonprofit that relies on donations received in foreign currency is currency fluctuation. The longer a transaction through a Conduits takes, the greater risk to a change in conversion rate.

I have seen firsthand organizations that relied on Intermediaries that didn’t forward monies in a timely manner. By the time the money was received, rates had changed for the worse (though they could just as easily change for the better).

Example: Back in September of 2010 the shekel vs. dollar rate was 3.81. The following Monday morning, only four days later, the rate stood at about 3.77 – a four agurot (4/100 of a shekel) difference. For a donation of $50,000, this four-day delay would have cost the recipient 2,000 shekel (over $500), an over 1% cost (2,000/190,500).

(b) Cashflow

Checks, pledges, and grants come with dates attached.  Budgets are then built around these deadlines.  Donations that are delayed because of a Conduit can severely hamper a nonprofit’s ability to pay its bills or run its programs, possibly leading to ruined reputations, frayed nerves, debt, and/or unexpected credit charges (to name but a few) .

Allow me to tangent for a moment: Conduits that fail to forward monies in a timely fashion are doing a disservice to the end-recipient.  As a matter of fact, receiving the money on time can be even more important that being approved for the donation/grant in the first place. Without a grant or donation a program might never have taken place. No harm, no foul. With the promise of financial support, however, commitments have now been made and money spent.

4. PAYMENT METHOD

Will the money be given to me as a wire transfer or as a check?

This question is more of a concern for those organizations that will be receiving their money in its original currency (dollars).  In Israel, for example, shekel grants and donations can be easily be forwarded by wire, though, even shekel checks clear within a few days.

Foreign currency — whether in Israel or in other countries — is more costly to process and takes longer to clear.   Two points that refer to the earlier questions of Cost and Time.

5. COMMUNICATION

How will I or my donors contact the Conduit if we need to? Or vise versa?

For two reasons, never underestimate the power of communication:

(a) Donors

Donors will have to mail/wire the money to these Conduits. It is imperative when trusting a third party to deal with your donors that it is an organization you can rely on. There will be times when the Intermediary will need to contact your donor — will this be a pleasant interaction that will ensure continued support by your donor and a swift transaction?

Organizations have told me stories of their donors that were driven away or even rescinded their check due to unpleasant experiences with a Conduit.

Furthermore, referring back to an earlier point, will the Intermediary release specific information about your donor’s check/wire, such as wiring dates and conversion rates? This is important information to donors that are looking for transparency and accountability.

(b) Turn-around

Better channels of communication and trust between recipient and Intermediary can help ensure that monies are transferred as efficiently and as quickly as possible.

6. ASSOCIATION

How will my association with this Fiscal Agent affect how people view my organization?

No nonprofit exists in a vacuum. This question can have two types of affects (not mutually exclusive):

(a) Character

Does the organization that is accepting donations on my behalf have religious or political leanings that might color the organization in the eyes of the public (for good or for bad)?  Is the Intermediary known for anything unsavory? What headlines has the Conduit made?  Do people think very highly of the organization and its leadership?

These questions and others like them can alter the flavor of even the most pareve, middle-of-the-road nonprofits.

(b) Fundraising

Will the good name, reputation, or connections of a Conduit help the organization raise more money?

…AND DON’T FORGET TO BE HELPFUL

These Conduits are taking a risk vis-a-vis the I.R.S. by providing this conduit service, regardless if the Intermediary is being paid or not.  Participating charities should, therefore, appreciate a Conduit’s position and provide the necessary paperwork requested of them.

And, of course, being helpful could lead to some of those much-desired exceptions that I mentioned above.

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, please refer all questions to qualified and licensed professionals. Read the full disclaimer.

Readers of this blog know that I am not a fan of online polls (see previous post: “Why Online Contests Aren’t Worth the Click”).  These popularity contests for nonprofits tend to waste a lot of energy and time for both the organization and their donors (with, perhaps,  the exception being the winning nonprofit).

That being said, there is another type of contest, one whose winners are judged by panels (some even staffed by experts) and whose goal is to foster innovation and creativity.  These contests don’t send charities running to their donors to vote but rather to their conference tables to brain storm. While only a few actually win these contests, most, if not all, learned something in the process and have come out better from the experience.

So without further ado, take your laptop over to the couch, grab your favorite beer (mine is Pete’s Wicked Ale, but to each his own) and explore how nonprofit organizations challenged themselves to produce some real creative, innovative and, dare I say, fun material for the following contests.

Adobe-TechSoup Show Your Impact Design Contest 2010

Adobe and Techsoup, two big names in nonprofit technology, teamed up to ask nonprofits to “submit an exceptional piece of work created with Adobe products that demonstrates or showcases how your organization is generating innovative and creative ideas to address issues that impact the communities you serve with ideas and information to improve lives, communities, or the globe.”

Participants were asked to submit pieces and essay in one of three different categories: (1) Print/Photo (2) Web or (3) Other Media.

2010 Getting Attention Nonprofit Tagline Awards

Since 2008, Nancy Schwartz has been running the a contest of the “Best in Nonprofit Taglines” or what she affectionately has dubbed, The Taggies.

The contests goals are simple yet vital: “A strong tagline does double-duty — working to extend your organization’s name and mission, while delivering a focused, memorable and repeatable message to your base. It’s one of your most effective marketing tools, but a GettingAttention.org survey showed that 72% of nonprofit organizations don’t have a tagline or rate theirs as performing poorly.  I’m trying to change that with this annual award program and report, highlighting the best in nonprofit taglines.”

2010 DoGooder Nonprofit Video Awards

450 Nonprofits from 4 countries submitted videos to be considered in the various categories. With videos having a much higher click-through rate, it’s no wonder why this kind of contest arose. The contest was run by Google, Case Foundation, 3C and others.

The 10 Most Innovative Viral Video Ads of 2010

Every year Mashable collects the most viral video ads on YouTube.  This last one isn’t really for the nonprofit sector — so sue me.  It’s worth the click as some of them are just darn funny (i.e. Old Spice Responses) or plain-out cool (i.e. Master of the Business-Card Throw).

For More of the Intellectual Type…

And for those still warming themselves up by huddling around the fire place, here are the Top 10 nonprofit-sector books published in 2010. Recommendations courtesy of Beth Kanter.

I hope you enjoy the above links and that while working hard you don’t forget to play hard, even if it’s just for a little.

Best wishes for a successful 2011.

Tizku Lemitzvot,

Shuey

Jews around the globe are mobilizing to donate to help fight the effects of the recent fire in Israel’s Carmel Forest.

One of the outcomes of the Haiti Earthquake (January 12, 2010) is an in-depth case study in disaster-relief giving. Hence, those donating to Carmel Fire relief efforts need not reinvent the wheel and can rely on the many lessons learned just 11 months ago.

Money is not the Impediment

In response to the Haiti disaster in January 2010, The Stanford Social Innovation Review (SSIR) wrote in an article entitled, “Don’t Give to Haiti Now”:

Money is not the impediment to getting aid to Haiti right now…they need military and security forces to help organize rescue, logistics and transport and security operations.

While on a much smaller scale, the same logic holds true for Israel.

The recovery and rebuilding efforts do not exist in a vacuum; without certain guarantees and logistics in place, money alone will not be effective. (Just look at the Interior Ministry’s refusal to accept fire trucks from certain charities. The money was there but the trucks were never bought.)

Plan for the Long Term

With nearly half of the Carmel Forest destroyed (about 37,000 acres) and rehabilitation efforts expected to take years — if not decades — donations will be needed for far longer than just the upcoming months.

SSIR went on to write that

The rebuilding effort survives over the long term, donors need to stagger their funding and guarantee it over many years, instead of sending the money all at once…For Haiti, my advice is this: set aside money now for what you would give Haiti this year and for at least the next 3 years. Give money when aid can logistically get there, when efforts get coordinated, when you can get reports on which nonprofits are doing what and which ones are actually on the ground making an impact.

Research Before Giving

1. Prior Experience

Prior experience working in a particular geographic area or a particular field is crucial in making sure that donors get the biggest bang for their buck (or shekel) — whether on the island of Haiti or in the State of Israel.

After the Haiti Quake, for example, The Miami Herald provided a link to a database that listed the charities assisting after the disaster and if these organizations had prior experience working in Haiti.

2. Needs Most Dire

Additionally, with a country as small as Israel, popular news outlets can provide the necessary research into what needs are the most dire — and there will be many. For, example, The New York Daily News article, “How to Make Donations to Haiti Wisely” stressed that large disasters will required both “disaster relief and extensive assistance to rebuild.”

3. Donor Advisers

It is important to mention that the Haiti disaster also saw consultants play an important role; likewise, donors to the Carmel Fire relief shouldn’t shy away from advisers to help them “structure effective support.” (Investment News)

Give Cash, Not In-kind Donations

If a donor has taken the time to vet a charity, he or she should trust the organization to use the donations as it deems wise.

Furthermore, in-kind donations — food, diapers, clothing etc — cannot always be used or might have already been purchased. Donors outside of Israel should also realize that Israeli charities are charged import tariffs even on donated goods. Not to mentioned the trouble sometimes with getting goods through customs. (Read this JPost article for more information on Israeli nonprofits and import tax.)

Additional problems connected with in-kind donations were elaborated upon by these international aid bloggers after the Haiti Earthquake: Good Intentions & Aid Watch.

Closing Words…

The Haiti Disaster, observed Tactical Philanthropy, marked a “turning point in American philanthropy where donors are now expected to ‘give smart,’ not just give.”

It is my hope that this still holds true — not just for Americans, but for donors worldwide.

Tizku Lemitzvot,

Shuey

Related Posts: NonprofitBanker Video Blog: Haiti & Relevant Donor Strategy

N.B. The articles in The Miami Herald, The Daily News, Good Intentions, and Aid Watch are credited to the Tactical Philanthropy post, where I first read of them and found their links.

Welcome to the first of a new style of video posts, “Money Musings,” which will cover issues and challenges inspired by conversations with nonprofit professionals.

In this episode, I discuss 2 reasons why local nonprofit organizations should fundraise from their constituents first. While the video specifically describes a nonprofit operating in Israel, the principles are true for any charity in any country.

Alternatively, the video can be viewed directly in YouTube: http://www.youtube.com/watch?v=jFpP4wxjnOU

As always, comments are welcomed and appreciated.

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, please refer all questions to qualified and licensed professionals. Read the full disclaimer.