This Week: Donating to Japan • U.S. Regulations • Israel & Jewish Sector • Strategy & Governance • Budgeting • Fundraising • Marketing • Social Media • Personal Finance
Once again, the Israeli nonprofit organization Magan David Adom (MDA) and it’s American supporting charity, American Friends of Magen David Adom (AFMDA), are in the news after all five members of AFMDA’s executive board resigned, stating that they “refuse to abdicate or compromise in any way our fiduciary duty to AFMDA and its donors.”
First, allow me to say that writing this piece is painful; it is disturbing (to put it mildly) that an organization that has such a positive impact on Israel’s daily life is getting such negative press.
Two, which side is right or wrong is of secondary importance. Regardless how the situation plays out in the near or distant future, organizations can learn RIGHT NOW from the very public debates raging between the American and Israeli arms.
Specifically, the core issues — defining roles, trust, independence, and personnel — are the same faced by all international organizations, and, as such, can provide a constructive case-study for nonprofits, their board members, and their donors.
This week: Regulations & Government • Currency in Israel • Governance & Strategy • Fundraising & Marketing • Social Media & Internet
…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 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.
Recent years have seen an explosion of these types of charities. With so many to choose from, Israeli charities have the luxury of choosing their partner – and they should because all Conduits are not the same. But, of course, the only way to finding the right fit is to ask the important questions, namely: Cost, Currency, Time, Payment Method, Communication and Association.
When grants or gifts cannot be made directly to a recipient (individual or organization) many times Fiscal Agents are used. These Intermediate charities are commonly referred to as Conduit Organizations because they are not the intended final recipient, rather just a pass-through.
With the right due diligence, control, and by-laws, this type of seemingly-indirect charity can be perfectly legal and advisable. (Please consult your lawyer to see if this solution is right for you or your organization.)
One such group that uses Conduits is such a way, is a charity located outside of the United States (and, thus, not considered tax-exempt in the eyes of the IRS) that is looking to collect donations from American citizens.
In Israel, more than in most countries, foreign currency is an integral part of every facet of the country’s daily economic enterprises – private, business, and public sectors, alike.
A recent released study showed that 53% of financial support to Israeli charities came from abroad. Thus, making foreign exchange exchange fees, rates, and processing times of the utmost importance to Israeli charities.
A charitable foundation’s worst fear is that its grant will be used for non-charitable purposes. The U.S. Internal Revenue Service (IRS) stresses that this risk increases drastically when dealing with foreign grant making and expenditures. The U.S. Department of the Treasury released its third and final version of its “Anti-Terrorist Financing Guidelines: Voluntary Best Practices for U.S. Based Charities” (VBP) in September of 2006 to help charities implement procedures that will reduce the risk of unintended diversions of funds to terrorist causes.
A recent New York Times’ article attacked American charities that help build communities in Israel’s West Bank and IRS policy that enables donations to these organizations to be tax-deductable. As with any piece about the Palestinian-Israeli conflict, many people have been quick to attack or defend the veracity of the article.
To nonprofit organizations, the value of the article is not the accuracy of the authors’ claims, but rather the article’s insight into current concerns and trends influencing the nonprofit sector. These can serve as warnings and guidelines to US charities that operate internationally.