Video blog discussing 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.
Obtaining government funding seems to be every nonprofit’s goal, at least in Israel. I have heard countless lecturers, founders, and foundation representatives preach the Darwinian virtues of incorporating government grants into an Israeli charity’s fundraising strategy; after all, the nonprofit is servicing the Israeli public. It is to the Government’s benefit – if not its outright duty – to ensure that this charity’s program continues to exist
Not bad on paper. In practice, however, these Israeli government grants can sometimes be more trouble than they are worth.
For the purpose of this post, as a banker I would like to restrict my focus on the budgetary challenges associated with these grants. Specifically, the two disadvantages that arise because grant monies are dispersed only after expenses are incurred.
A recent study in Israel advocates the same theory, claiming that Israel’s poor standing in charitable-giving is directly related to the Israeli Government’s comparatively lower tax-deductible incentives.
However, by placing the blame squarely on the Israeli Government – instead of the shoulders of the nonprofit organizations operating in Israel – these researchers are causing the Israeli Nonprofit Sector to leave a huge well of potential-donors untapped. The charities in Israel are failing to engage would-be donors, and it is this lost opportunity that should really be addressed.
Israeli charities (amutot in Hebrew) rely on donations from overseas – no secret there. Many foreign-based charities choose to create an American based nonprofit, more commonly referred to as a “Friends of” organization so donations can be tax-deductible vis-a-vis the American Federal Government. (In a previous post, I spoke about IRS trends when a “Friends of Organization” is applying for tax-exempt status.)
However, it could be that establishing a “Friends of” organization is not in your charity’s best interest. The following are some considerations that elaborate on: Why not to raise funds through a U.S. registered “Friends of” Organization?
International organizations have been highly successful in raising funds from the United States through U.S. based charities commonly referred to as “Friends of” organizations. These charities are registered in the States and have 501(c)3 tax-exempt status and, thus, allowing these donations to these essentially foreign organizations to be tax-deductible.
As you can imagine, many international causes consider a “Friends of” organization as a crucial step in their fundraising strategy.
Hence, recent conversations I have had are causing me to worry.
Give me the “Outright No” any day of the week and twice in a recession; you win some, you lose some. The second, drawn-out no, is still a no, but wasted my time and got my hopes up over nothing. Why not tell me no from the beginning instead of playing achy-breaky games with my heart?
Unfortunately, nonprofit organizations are being subjected to this same treatment, even more so now after the recession and the Madoff scandal.
Fundraising is done at every level of the organization. Every employee that interacts with a donor can impact the constituent’s relationship with the charity. To highlight this point I would like to share a short story that happened to me just a few days ago. I think it illustrates how even small gestures can have large (and negative) consequences.