In mid-October of this year, Israel’s Registrar of Charities issued “10 Golden Rules for Donors” (Hebrew).  While the document is meant as a guideline for  individuals, it holds immense value for the Israel’s charities, as well.

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)

As was mentioned in my previous post, Israel’s OFFLINE Overhaul of its Nonprofit Sector (Guidestar Conference, Part 1), the June 26th Conference Organized by Guidestar Israel tantalized the attendants with many planned improvements within the government offices tasked with overseeing Isael’s nonprofit sector.

Even more monumental, though, are the changes that are taking place online.  Here we are seeing not only an upgrade in software, but in approach and analysis as well, whose rippling effects will be felt far beyond Israel’s shores.   

AN ONLINE TOOL FOR ISRAELI CHARITIES

Avi Shapira, CEO of NP Tech, the Public Benefit Company that develops and oversees Guidestar Israel and Techsoup Israel, stressed that his organization is aware of Guidestar’s important role in Israel’s nonprofit sector. Evidence of its increasingly crucial role, he said, is seen from the growing number of views of the site from abroad — even though the current version of Guidestar Israel is primarily available in Hebrew.

Shapira believes that Guidestar sits at a unique crossroads because it is a joint project between private and government entities. As such, he wishes that organizations would proactively use Guidestar as a Transparency tool. In this vein, Shapira believes that it is only natural that Guidestar should be the address to aggregate all available Government grants — a feature he believes will be integrated in approximately four months time. (Wow!)

Following up Mr. Shapira, was Benny Shlesinger, of NPTech, who is Guidestar Israel’s project manager. Benny opened that the new site can already be previewed at http://preview.guidestar.org.il.

ROBUST SEARCH FOR THE DONOR

The current site is available in English but only in a limited capacity. The new site, however, will exist in full in English and will incorporate English in its search functions, a feature that will allow international donors to more easily find organizations of interest. Additionally, increased search capabilities will also include the ability to search by organization type, a feature geared for the potential donor with a specific charitable goal in mind but is unaware of the players in that particular field.

In the new site, Shlesinger continued, nonprofits can add even more details to their profile, including links to their social media personalities on the various networks. (Links to donation portals already exist in the current version). This enhanced profile brings with it improved navigation and color designation to make it easier to discern if the information shown originates from certified Government sources or from the charity itself.

STREAMLINED DATA OUTPUT & TIMELIER ANALYSIS

Thanks to recent efforts to bring Israel’s nonprofit online, important data on Israel’s nonprofit sector is available faster than it was in the past.

Additionally, the available data incorporates internationally recognized definitions and categories (see pgs 18-22) to enable the data to be used beyond Israel’s borders, giving the local sector a better understanding of how it fares in the global market and vice versa.

Utilizing this shorter turnaround, Prof. Nisan Limor, Chairman of NP Tech and one of Israel’s leading researchers into its nonprofit sector, presented findings from 2010.

While not the focus of this article, it is interesting to note some of the points that Prof. Limor stressed:

The whole notion of tax-deductible status is very problematic in Israel. The data shows that only 4,280 out of Israel’s approximately 35 thousand charities actually have tax-deductible status, known here in Israel as Sei’f 46a status. Limor pointed out that no other OECD country has charities appealing to parliament to get tax-deductible status. (I shared my own opinions regarding Se’if 46 in a previous piece.)

Tracking “ownership” of nonprofits is still difficult if not impossible. There are invariably charities that are managed by local municipalities, making them extensions of local government and not really charities for the sake of sector analysis. Who these are and how many is very much a mystery.

With all the outcries against “high” salaries in Israel’s nonprofit sector, the numbers show that being a nonprofit manager is no sure ticket to riches. By law, each organization must list its five highest paid employees (assuming they even have five staff members). The average of the five highest paid employees across the entire sector amounts to 8,777 NIS a month, which Limor notes is Israel’s average monthly salary. Even the average of all highest paid employees only amounted to a monthly salary of 12,593 NIS — and all this is before taxes. (No wonder so many directors leave to enter the private sector.) Again, certainly not the point of this piece, but worthy to note.

TAKE-AWAYS FROM THE OFFLINE & ONLINE IMMENENT CHANGES

Both the global and local nonprofit sectors are changing and the word Transparency seems to be an integral part of this metamorphosis.

While it is true that most of points mentioned in the Guidestar-Israel articles are predictions for the future as opposed to hard analysis of the past — and we all know what happens when you “assume” — we should consider ourselves lucky that at last week’s conference the various Government oversight bodies were kind enough to specify the application of Transparency. The exact date these changes will come into effect is of less importance that the fact that they eventually will. Case in Point: Guidestar Israel took six years but did eventually get off the ground.

Israel charities should consider implementing soon the suggestions “offered” at the Guidestar Israel Conference in order to be among the leaders of this change instead of lagging behind.

Tizku Lemitzvot,

Shuey

In case you missed: Israel’s OFFLINE Overhaul of its Nonprofit Sector (Guidestar Conference, Part 1)

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.

The June 26th Conference Organized by Guidestar Israel — a collaborative project of the Justice Department, Registrar of Corporations, Guidestar International, NP Tech, Joint Distribution Committee (JDC), and Yad Hanadiv (a.k.a. The Rothchild Foundation) — was June’s best prediction for “The Tomorrow of Jewish Philanthropy.”

In the global nonprofit sector there is much talk of cooperation and the need to combine forces to increase efficiency and cut costs, yet this synergy is hard to find. Guidestar Israel, in contrast, is actually doing it. Local charities, international organizations, private funds and government resources have all cooperated to bring the Guidestar Israel project into fruition. (And yes, it took over six years for the parties agree and get things off the ground, but we’ll choose not to focus on that for right now.)

Like many conferences, there was the good and the less good, but for those paid attention, there was also the surprising — announcements foretelling actual progress.

THE SECTOR MUST POLICE ITSELF

Advocate Alon Bachar, Director of Israel’s Corporations Authority, which oversees the Registrar of Charities and the Registrar of Companies, was quick to declare that transparency is the foundation of Israel’s nonprofit sector. Scandals, he continued, harm the sector as a whole. Thus, he concluded – and this is where things got interesting – self interest dictates that the nonprofit sector should police itself. (It would appear from his words that he considers himself and the Government office he represents to be card-carrying members of Israel’s nonprofit sector.)

Furthermore, Bachar blames the local nonprofit sector’s lack of transparency for Israel’s lack-luster standing in philanthropy as compared to other modern countries. This is a bold statement considering other experts have pointed fingers at lax Government tax incentives as the root of the problem or Israeli charities overall lack of strategic engagement with their constituents (my personal belief, which I elaborated in a previous post, “The Real Reason Israelis Don’t Donate to Charity“).

Bachar didn’t leave much to the imagination for those that were looking to understand the criterion upon which the Registrar inspects nonprofits. Bachar stressed that organizations should pay close attention to the Nihul Takin, as it explains “our priorities and how we evaluate charities.”

INFRASTUCTURE CHANGES IN THE REGISTRAR OF CHARITIES

The part of his speech that had the most practical application was Bachar’s announcement that the Registrar of Charities is adding services to increase its own transparency. In the past, Bachar explained, Israeli charities essentially had five addresses within the Registrar of Charities — including accounting, legal, managerial and compliance — where they could address their problems, seek answers, or submit reports. Two years of analysis determined this method to be less than effective and a decision was made to revamp the entire system.

As part of the Registrar’s overhaul, multidisciplinary staffs will be created to combine the five different needs into one address. Instead of five addresses, each charity will be assigned a team that will handle any and all of their requests. Furthermore, this new type of team will allow the Registrar to further specialize its staffs by discipline — whether it be sports, education, welfare, health, environment, religious etc — to better cater to nuance, experience, and trends of the different types of causes.

In a similar vein, Bachar’s Deputy Director, Advocate Avital Shreiber, announced that charities will soon also be labeled by size.  Shreiber acknowledged the difficulty of smaller organizations — many of whom function with no paid staff — to adequately file the multitude of government initiated paperwork.  Much like a system that has existed in the United States for a few years, “smaller” organizations will face scaleddown reports.  Shreiber added that it is even conceivable for their to be specialized reporting for the different philanthropic disciplines.

Transparency, as Bachar defines it for the Registrar of Charities, is uploading information quicker so that it can be utilized in a timelier manner. Toward this end, he said, the Registrar is turning totally digital, with every form and appeal to be handled online. He also announced that the Nihul Takin will be updated soon and would probably only be released on the internet.

USE GUIDESTAR OR ELSE…

Bachar also encouraged amutot to take advantage of Guidestar Israel and upload as much information as possible — even more than is necessary — so as to increase transparency of the organization and the sector as a whole. While some might see this recommendation of Guidestar as mere self-promotion, it should be taken much more seriously considering these two statements:

Bachar’s claim that the Registrar of Charities will be increasing cooperation with various Government agencies, specifically the Tax Authority & Anti Money Laundering Compliance, so as to decrease overlap.

This declaration was preceded by statements from Dr. Guy Rotkopf, CEO of the Justice Ministry which overseas Bachar’s Registrar of Corporations, in which he boldly claimed that Israeli charities that choose not to participate in Guidestar Israel have something to hide.

Definitely hints of trends to come.

Tizku Lemitzvot,

Shuey

Don’t Miss the Next & Final Post in the Series: Israel’s ONLINE Overhaul of its Nonprofit Sector (Guidestar Conference, Part 2)

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.

After years of rumors, here-say, and unwritten code that outlawed the use of credit cards by Israeli nonprofit organizations, the newest version of the Nihul Takin [Certificate of Proper Management] from Israel’s Rasham Ha’amutot [Registrar of Charities] clearly permits the use of credit cards by Israeli charities…kind of.

Unfortunately, vague unwritten guidelines have now been replaced by confusing and unrealistic written rules. Progress?

So should your amutah [Israeli Charity] use a credit card? As no two charities are the same, that answer is best left to your organization’s board, accountant, and/or lawyer.

What I can do, however, is share the research I have done and practices I have witnessed from countless nonprofits, which will hopefully save your organization precious time. 

WHAT’S  THE PROBLEM WITH CREDIT CARDS?

Israel’s Registrar of Charities takes issue with credit cards, as written in the Nihul Takin:

“Use of credit cards by an amutah [Israeli Charity] constitutes a problem because it does not enable the signature of two authorized signatories as is required, and it therefore adversely affects control over the way in which the amutah’s funds are handled.” – Nihul Takin (See below for links to the full text.)

(In short, proper financial oversight is practiced when transaction are signed by at least two signatures, but a credit card transaction can be executed by just one person.)

HOW SHOULD MY AMUTAH USE ITS CREDIT CARD?

The Registrar acquiesced in its newest version of the Nihul Takin (the third and final draft was released in June of 2010) to the use of credit cards by Israeli charities.  Israel’s Registrar of Charities lists two options whose lack-of-clarity and wordiness, unfortunately, require me to translate its instructions and has led various experts unsure as to what to recommend:

Option #1

“A credit card that is limited to the amount permitted for use as petty cash, and uses it solely for permitted petty cash expenditure…which contains a restriction on the amount of a one-time item of expenditure (such as charged card) or a monthly limit of expenditure (such as a card with a credit facility limit of a small amount).” - Nihul Takin

Translation: A credit card can replace petty-cash, used for similar purposes.

Pro: Some consider this option to be the simplest and most straight forward because it allows for a credit in the organization’s existing bank account.

Con:  Regulations (specifically those issued by the Income Tax Authority) do not specify the proper types of petty cash expenditures nor the monthly limit for petty-cash, the optimal credit limit for this kind of card is hard to know.

Con: If the Registrar is still, indeed, worried about the possibility of executing transactions by a lone signatory, this solution doesn’t address this dilemma.

 Option #2

“A credit card, as to which the payment thereof is subject to the existence of a monetary balance in a designated account opened for the purpose of use of such a card. The use of a card of this type will be subject to transfer of funds to the designated account following a signed instruction by two authorized signatories of the amutah, for the purpose of a particular item of expenditure, noting the purpose of the transfer…for example in order to make payments that can only be made through the internet, payment of a fee to the Registrar, expenses incurred during travel abroad etc.” – Nihul Takin

Translation: Open a separate account that is designated strictly for credit card. The card’s limit will be backed by cash that will be transferred from the organization’s main account. The instruction to transfer the money that will serve as the card’s collateral will be signed by at least two people.

Pro: Even though the card is used by a single individual, the usage is pre-approved and the transfer of the collateral is authorized by the magic number of two.   Those in favor of this option feel that with two signatures approving the transfer, the amutah is better protected should its governance and financial practices be audited in the future.

Con: There is an additional headache and possible additional fees (depends on your bank) for opening/managing an additional account.

Con: The Registrar actually envisions a flexible card limit that will change according to the needs and approval of the organization.  Very few cards will actually allow this and the charity might find itself in the defensive position vis-a-vis the Registrar despite having the magic “two.”

Not only are some experts unsure as to which option is the best to recommend, other professionals actually advise not use a credit card at all.  As one lawyer put it, “This language is purposely confusing, telling me without a doubt that the Registrar really doesn’t want charities to use credit cards.”

And this lawyer is probably right.

Conversations I have had with lawyers and accountants hint that the Registrar of Charities only approved the use of credit cards by Israeli charities due to public pressure and that (not-so) deep down, it hasn’t changed its belief that a credit card is dangerous.

BUT THE SECTOR NEEDS MORE

This last suggestion, while not one of the options suggested by the Registrar, does play it safe.  The logic of that last lawyer is pretty sound, that is, except for one thing: today’s businesses NEED a credit card.  Internet purchases, certain standing orders, and corporate accounts — just to name a few — won’t accept another type of payment.

But maybe more importantly, by opting out of using a credit card, a charity is allowing the Registrar to dictate unfair and unrealistic business conditions that can cost the nonprofit valuable money and time.

(For example, take one client that is forced to shop at the local mini-mart because he can’t open a corporate account at a neighborhood supermarket since his lawyer recommended against using a credit card.)

Furthermore, if a credit card isn’t allowed for the organization then often employees or board members are forced to use their own personal cards.  Not only can this be an incredible burden on the individual that needs to be reimbursed (especially with bigger expenditures like airline tickets), but this method actually exhibits less control, transparency, and fiduciary responsibility than a credit card owned and managed by the charity.  (And I say this last point even knowing that the Registrar has accepted reimbursements as a valid payment method for years.)

Instead of being intimidated by the Registrar’s awkward wording, I would like to see charities push back, using the cards in a responsible and financially-smart manner — and defending this usage should ever and whenever it be called into question.  Only by showing the Registrar the impractical nature of the current guidelines can Israel’s nonprofit sector garner enough public support to force the Registrar of Charities to rewrite these inadequate “suggestions.”

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.

The Nihul Takin: For a link to an English version of the Nihul Takin can be found on the Registrar’s website here or can be directly downloaded from my site here (the relevant paragraphs about a credit card are on page 34).  The Hebrew version is also available from my site here (with the relevant paragraphs on the bottom of page 25).  To learn more about the document and why it is a must-read for anyone thinking of joining the board of an Israeli charity, please read my previous post, “Israel’s Nihul Takin Manual Now Available in English!.”  Links to the Nihul Takin are in that post, as well.

Life Before the Update: If you’re wondering what Israel’s Registrar of Charities’ response used to be, you can read one of my earliest posts from July 2009, “Can My Israeli Nonprofit Have a Credit Card?”

Photo Credit: “Credit Card Debt” by DebtCovered

I am donning my Superman cape (doesn’t everyone have one?) in the hopes of accomplishing the near-impossible task of setting the record straight on what could potentially be a turning-point for Israeli charities.

Since early January of this year, the topic of Funding from Foreign Governments to Israeli NGO’s (Non-Governmental Organization) has been making headlines. Two ideas to promote Transparency, though, in very different contexts — a proposal put forth in January and a bill approved in February — have politicians, nonprofits, and European Governments lamenting the destruction of democracy and human-rights in Israel.

However, the pursuant rhetoric, innuendos, politicking, and here-say makes it near impossible to filter out fact from fiction and to distinguish these two very different initiatives.  

JUST THE FACTS, MA’AM

January 5, 2011 – The House Committee of the Knesset (Israel’s Parliament) proposes establishing a Parliamentary Panel of Inquiry into “left-wing” Israeli organizations that allegedly participate in “delegitimization campaigns again Israel Defense Forces soldiers.” (Ha’aretz)

February 21, 2011 – The Knesset gave final approval to a bill that “requires nonprofit organizations to report which foreign entities contribute to them, whether governmental or government supported.” (Ha’aretz)

Some background:
The Bill was submitted in 2010 way before the Proposal to establish Knesset panels to probe left-wing groups. After passing its first reading (bills need to pass three readings to become law), the Bill lost momentum, finding itself in cryogenic-stasis. A number of months later as the controversy surrounding the Panel Proposal heated up, the Bill got a “push” in late January of 2011, quickly passing both its second and third readings in February. The day after the Bill was passed, the Proposal for the Parliamentary Panel fizzled out, its proponents having asked for the vote to be postponed (effectively shelving the matter entirely).

To summarize:
Parliamentary Panel of Inquiry of only left-wing organizations doesn’t exist.
Bill requiring all nonprofits to report foreign-governmental funding does exist.

REACTIONS: SLANDER & CONFUSION

Immediately after the introduction of the Panel Proposal in early January, critics quickly labeled it anti-democratic, comparing it to the investigations initiated by Joseph McCarthy against Communists in the United States during the 1940′s and 50′s.

These claims of witch-hunting were subsequently hurled onto the Bill, as well, seemingly because both the Proposal and the Bill were within a short time of each other and both dealt with Transparency. The ensuing result was the distortion of the vast differences between the two ideas and in some cases, confusing the pubic into thinking that the two were one-and-the-same.  And I’m not referring to the unknowing masses either – even newspapers and government officials were intentionally or inadvertently grouping the two together.

(See Appendix B below for specific examples.)

THE MOST IRONIC PART IS…

On February 21st when the Bill was approved, a Member of Parliament who had voted against it “criticized the government for becoming increasingly McCarthyist.” And he wasn’t the Bill’s only opponent, not by a long shot.

But here is the punch-line: The Israeli Government hasn’t become increasingly McCarthyist (if a law pertaining to all nonprofits can even be labeled as such). The requirement for charities to report on foreign-governmental funding has existed for years!

Ofer Katz, a lawyer and expert in Israeli nonprofits who participated in Knesset discussions about the bill, said as much in a recent radio interview: February’s bill represents “nothing new.”

A careful review of the Law of Charities [Chok Ha’amutot], Paragraph 36a, shows the pre-existing stipulations:

Charities — with a yearly turnover of more than 300,000 NIS and whom have received at least a combined 20,000 NIS from foreign governments — must state in their financial statements the (1) name of the foreign government or governmental entity (2) amount of the donation (3) purpose or objective of the donation and (4) if applicable, the conditions of the donation.

SURELY, THE LAW MUST ADD SOMETHING NEW!

While not as earth-shattering as some would have us believe, the new law does introduce additional reporting measures.

1. Charities are now required to report foreign-governmental funding four times a year, within a week of the closing of each quarter (in addition to the yearly report in its financial statement).
2. The reporting requirement isn’t dependant upon yearly turnover or aggregate amount of donations. Any organization that receives any amount.
3. If the foreign grant was for a printed ad — billboard, flyer, newspaper, magazine etc. — the ad must state the source of the funding.
4. Everything that is required to appear in the quarterly report, must also be clearly and easily found on the charity’s website.

OBJECTIVE vs SUBJECTIVE

The collapse of the Knesset the Panel of Inquiry was a good thing.

Rules and stipulations of charities should be objective and established by a strict set of criteria.  These conditions can then be used to select relevant charities.  When one of the Proposal’s initiators immediately declared a list of “left-wing” nonprofits that should be examined, the objectivity of the Proposal was called into question.

Furthermore, an adhoc committee isn’t the place for this debate, but rather laws established by Israel’s Parliament (Knesset) and the Registrar of Charities (Rasham Ha’amutot).

(For a more detailed analysis, please see “NGO Inquiry Committee Has Wrong Focus, Framework” by Jason Edelstein and Prof. Gerald Steinberg of NGO Monitor.)

WHY DO WE NEED THIS NEW BILL?

Israel’s charitable-waters are a little murky.

Israel allows political advocacy groups to be considered charities and for their donations to be tax-exempt.  In America, for example, donations to political advocacy groups (designated as “c4″ organizations) are not tax-exempt and, as such, other tax-exempt charities are not allowed to forward monies to these 501(c)4 organizations.

Before February’s adoption of the new bill, the only place where one could find details about foreign funding was in an organization’s financial statements and reporting to the Registrar of Charities.  There was a large consensus that the Public was not seeing this information.

Generally, countries interact and influence each other through diplomacy.  Not so with Israel’s nonprofits.  The bill is aimed at NGOs that are advocacy and education nonprofits that are receiving grants from foreign governments.  This financial support is bypassing the diplomatic arena and is appearing in the guise of homegrown nonprofit organizations; thereby, allowing these foreign powers to push their own agendas in a much more unassuming manner.

The new bill forces charities to be more transparent on their printed media so that those seeing the content of these billboards, advertisements, and websites can get a clearer picture of whose interests are being represented.

Additionally, nonprofits that receive foreign-government funding will now report these donations quarterly, instead of yearly; thus, allowing the Israeli Government to react much faster should the need arise.

(For a more detailed argument, please read, “Transparency for NGOs is not Anti-Democratic” by Prof. Gerald Steinberg of NGO Monitor.)

CONSEQUENCES FOR THE FUTURE

The claim that the new law was made to single out government funding — while leaving other types of foreign-funding untouched — is correct.

Dissidents, though, should not be so quick to judge the unfairness of the new Bill.  Yes, the Knesset passed a law only about foreign-government funding, but this is because the foundations for the extra reporting-measures were already in place in the preexisting, previously mentioned paragraph of the Law of Charities.

However, the true significance of the Bill, what makes it a potential turning-point for Israel’s nonprofit sector, is that it lays the groundwork for further transparency measures for all types of foreign-funding.

How’s that for democratic?

Tizku Lemitzvot,

Shuey

Disclaimer: This blog expresses my own 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 Credit: “Flags” by RambergMediaImages

Appendix A: Additional Recommended Reading

The President and staff of NGO Monitor (Amuta for NGO Responsibility) have written various reports and op-eds in the previous years that are dead-on.

1. “NGO Inquiry Committee Has Wrong Focus, Framework” by Jason Edelstein, Communications Director of NGO Monitor, and Prof. Gerald Steinberg, President of NGO Monitor. January 12, 2011 in the Jewish Telegraphic Agency.
2. “Transparency for NGOs is not Anti-Democratic” by Prof. Gerald Steinberg, President of NGO Monitor. February 23, 2011 in Ha’aretz.
3. “Manipulating the Marketplace of Ideas” by Prof. Gerald Steinberg, President of NGO Monitor. November 2009 in Ha’aretz.
4. ”Resetting Europe-Israel Relations” by Prof. Gerald Steinberg, President of NGO Monitor. June 2010 in The Jerusalem Post.
5. “Europe’s Hidden Hand” June 2008 Report by NGO Monitor.

Appendix B: Examples of Inadvertent or Intentional Misrepresentation

1. In the March 25th weekend-edition of Ha’aretz, an author wrote that “Peace Now [a left-wing organization] is on the brink of a parliamentary investigation.” As the Proposal has been shelved, the author’s wording is incorrect.
2. Ha’aretz headline on February 22nd read “Knesset Passes Bill to Make Israeli NGOs Report Foreign Contributors.”  In reality and as detailed previously, the Bill didn’t “make” NGOs report anything, this requirement already existed. The new Bill only adds additional reporting measures.
3. In the above article, on the day the bill was passed a government official asked: “Why is money from the Netherlands’ government, by definition, dangerous, but money from radical evangelist organizations permitted?”  By using the word “permitted,” this minister is misrepresenting the true nature of the new bill.  February’s bill only relates to transparency and reporting; it does not touch upon what is permitted or not allowed. (Not to mention, money from the Netherlands’ Government is permitted anyway.)

Click here to return to the article “The Most Ironic Part Is…”

The phone number is clearly listed on its site, yet no one answers when I call.

It is a complaint I have heard from Israeli nonprofits and one that I recently verified — repeatedly.  So the question remains, how can someone get in touch with Israel’s Registrar of Charities [Rasham Ha'amutot]?

And make no mistake about it, reaching this office is crucial for those looking for general information, to change their by-laws, or simply see if a nonprofit’s file is available at the main office.

I was ecstatic — nearly giddy, even — when a colleague of mine shed some light on this question just today.  Treat the office like you would a lawyer: everything should be given in writing.  The Office, it seems, works best on goood, old fashioned A4 paper.

While faxing is the easiest, it is hard to confirm that the fax has indeed arrived (after all, you have to call).  The other way is to send an email with a scanned letter as an attachment; it serves the same purpose only arriving securely at the near instantaneous speed of modern technology.

However, the truly best way to reach the Registrar, suggests Arnie Draiman, a philanthropic consultant specializing in smaller nonprofits, is to go there in person.  He describes the personnel working there as “nice, courteous, helpful, and efficient. Though it’s still a government office, going there in person is 1,000 times better than calling, faxing or emailing.” I’ve been to the office and agree wholeheartedly with Arnie’s assessment. (So much so that I updated the post with this last paragraph 18 hours after its original upload — thanks Arnie!)

The contact information for the Registrar is:

• Beit Hate’omim, 15 Kanfei Nesharim St. Jerusalem
• Phone: 02-654-6600
• Fax: 02-654-6683
• Email: RashamA@justice.gov.il

This and other information can be found on the Registrar’s website:

• http://www.justice.gov.il/MOJHeb/RashamAmutot/

Happy Hunting,

Shuey

I was greeted by a wonderful surprise on the Zavit Shalosh website when I returned on Monday from a very nice vacation in the United States (hence the hiatus).  There, one of their main articles, related that the Rasham Ha’amutot [Israel's Registrar of Charities] released an updated version of the Nihul Takin on the Rasham’s website.  Furthermore, the Rasham has invited all interested parties to email comments until September 30th.

Additionally, the article added that the organization Manhigut Ezrachit is inviting all those interested to email their comments to them so that the organization can coordinate and research the comments in order to present a more powerful and unified voice.  On a personal note, this seems like a pretty good idea.  Manhigut Ezrachit has been represeting Israeli NPOs for a long time.  They have the connections and expertise to get the biggest bang for their buck.

I have yet to read the beta version of the new Nihul Takin (it’s 35 pages) but am looking forward to the task at hand.  As explained in an earlier post (“Can My Israeli Nonprofit have a Credit Card”), the Nihul Takin is one of the main instruments that confuse and muck Israeli nonprofit regulations.     I am excited at the prospect of the Rasham updating some of its regulations that might allow amutot (Israeli nonprofits) to run a little smoother.

(In short, the Nihul Takin is an additional piece of legislature beyond the khok ha’amutot [Israeli's nonprofit law].  Those organizations wishing to receive government funding need to comply to both the law and the Nihul Takin.  Many foreign organizations have adopted the standards of the Nihul Takin, as well.  Many people, at all levels, have disagreements with various aspects of the Nihul Takin and have been asking the Rasham to update the legislation for years.)

In conclusion, for all those people that have complained about Israel nonprofit regulations, this is the time to put your money where you mouth is.  Read the draft and email a comment or two.  If not directly to the Rasham, then to Manhigut Ezrachit.  Like any other charity work, if you want things to change you have to take an active role in making it happen.

Tizku LeMitzvot [May you continue to merit doing good deeds],

Shuey

The Answer

The answer should hopefully be “yes,” nonprofit organizations can use credit cards.  Credit cards have become an integral part of running any kind of business; whether it be a not-for-profit or a for-profit corporation.   Credit cards are safer than cash and are the preferred method of payment when shopping on the internet.  Not to mention, the ease of an itemized monthly billing statement.  Nonprofit governing agencies should love credit cards and promote their use whenever possible.

But, alas, in Israel the answer is no…kind of.  Cryptic, but true. That is to say that in my experience as a banker, I have both ordered credit cards for charities that wanted them and canceled credit cards for charities that were told it was “illegal” to have them.

Why is it so Complicated?

Khok Ha’amutot [The Nonprofit Law] in Israel does not restrict a charity from ordering or using a credit card.  The law details that the default by-laws of an organization require at least two authorized signatories to sign on all transaction requests.  The law also allows for changes in the organization’s by-laws.  Examples of common changes include requirements for certain combinations of signatories that are dependant upon the amount of a transactions, as well as, permission for less than two people to sign.  This last one is pertinent as credit card transactions are viewed by the Rasham Ha’amutot [Israel's Registrar of Nonprofits] as having been approved by only one signatory.

Included in the law are the various subcategories or licenses that an Israeli nonprofit can obtain (for a full list and description please view my previous post “Defining an Israeli Nonprofit”).  Among these statuses is the Nihul Takin, or Proper Management status.  As the name implies, this license is provided to organizations that are viewed as being run well; and the Rasham has its own definition of what “being run well” means (the determination is currently left up to the complete discretion of the Rasham).  The Registrar believes that all decisions should be approved by a minimum of two signatories.  While the State law allows for only one, those organizations that want to earn their Nihul Takin status are forced to adhere to the ultra-amutah standards of kosher behavior set by the Registrar of Charities.

As previously discussed, the Israeli government and many foreign foundations use the Nihul Takin as the benchmark to determine if an Israeli nonprofit is eligible to receive a grant.  So while the State law allows for credit cards decisions, the Rasham frowns upon them.  Frowning upon, of course, is not the same as outlawing them.  And since the audits done by the Rasham are subcontracted out to a wide variety of accounting firms there seems to be no set rule.  I, personally, know of charities that the first thing they were required to do was destroy any existing credit cards while a few nonprofits seem to have not been asked at all.  Go figure.

Current Possible Solutions

I have seen organizations adopt the following solutions:

1. Create an Israeli “Friends of” organization.  Being as only the “main” amutah is concerned with obtaining a Nihul Takin, some organizations have started a brother/sister organization in Israel.  This organization absorbs the expenses and practices that are frowned upon for Nihul Takin status; thereby allowing the main amutah to avoid any troubles when applying for its Nihul Takin.  Recent auditing laws and practices designed to combine all financial statement of “related” amutotare making this option less workable.  A licensed accountant can advise if this option is relevant and feasible. 
2. Having the foreign “Friends of” organization apply for a credit card.  For this option to work, the foreign supporting charity would have to operate a bank account in Israel.  Even though this organization operates in Israel, it is not subject to Israeli charity laws (this is true even for foreign charities registered in Israel).  As such, this account can absorb the expenses and practices that are frowned upon for Nihul Takin status.  Just remember, this account must reported to the United States and should conform to IRS standards.  Somewhat simpler.  Still ask an accountant.

Hopeful Signs

I was meeting with a colleague who is a partner of a leading accounting firm in Israel.  This individual is an expert in the area of amutah financial matters and has been invited to participate in various Knesset committees concerning amutot.   In one such meeting a few months ago, the issue of credit cards for amutot arose.  The matter was supposed to be covered over a short time but ended up taking up the next hour and a half.  This person presented to the committee an article that delineated the reasons why a credit card is important and numerous ways how an organization can provide proper oversight for credit card usage; for example, one idea presented was that two signatories sign on every credit card statement.  He told me that after heated debate a few MKs were even asked to join.  It was made clear that credit cards are a way of doing business in modern times and that the Nihul Takin should reflect this.  The Rasham Ha’amutot promised to take this under advisement and provide a solution.  Let’s hope we see something sooner rather than later.

Conclusion

So how do we proceed in the interim?  Like I said, credit cards in Israel are cryptic.  Ask your accountant for the final answer and he or she will let you know if it is worth ordering a card or not. 

Tizku LeMitzvot [May you continue to merit doing good deeds],

Shuey

Even before the dust settles in the States, Israel and her charities will already start to feel the effects from last week’s scandal.

First, we can expect that donors’ skepticism of Israeli charities will increase, which is understandable. The current proliferation of nonprofits already casts doubt on their authenticity: Israeli charity-representatives hound communities weekly; American Friend organizations exist in abundance; internet and email advertisements appear on every Jewish website broadcasting Israel’s fight for its physical and spiritual survival. In short, this scandal has cast a shadow on a situation already wrought with suspicion, doubt, and misconception.

Second, we can expect the relationship that exists between Israeli amutot [nonprofits] and money changers to come under fire. Charities need their donation-checks to clear as soon as possible. As opposed to banks, “cash houses,” or money changers, can exchange cash for checks (for a one to two percent fee) with a wait time of zero to two days. Thus, Israeli charities regularly deposit large sums of cash received from money changers into their bank accounts.

Depositing cash in a bank account (or not even reporting it) is not a good idea. It has never been a good idea. Recently, with the changes in American and Israeli oversight, it is an even worse idea yet, plenty of organizations still do it. Due to recent events, those charities that continue to do this are essentially taping a “kick me” sign to their backs. Don’t be surprised when the Rasham Ha’amutot [Israeli Registrar of Charities] comes a knocking to inquire about the large deposits of cash. Also, banks are required to report out-of-the-ordinary transactions to the Bank of Israel. An organization can bet that some or all of those below-the-radar cash deposits have been reported.

Third, we can expect that the Israeli police will become involved. Maybe not this week. Maybe not next month. But it is only a matter of time. For those who are not aware of it yet, the world is a small place and the United States has a very big reach. Just ask the banks in Switzerland, which until recently were known for their very discreet and private banking. That is until the US government came along and asked them nicely to give over the names of those American citizens who are hiding their assets from the IRS. Either due to U.S. initiative or common sense, it is only a matter of time before the Israeli authorities pick up where their American counterparts have left off.

Fourth, as mentioned above, we can expect that the Israeli Registrar of Charities will take a microscope to charities that receive money from abroad, specifically, in cash. In my experience I have seen nonprofit banking procedures boil down to one thing: convenience (not compliance). In addition to cash deposits, many nonprofit directors and employees use their own private bank accounts instead of opening/using an account under the organization’s name. In Israel, nonprofits are checked about once in every five years. The chance for an Israeli nonprofit to pull one over the governmental oversight committee is slim and only getting slimmer.

Fifth, we can expect that Israeli banks will introduce internal regulations to alert themselves of charity wrongdoing in accounts they manage. Israel was relatively late in getting approved as a country free of money laundering. Like any latecomer, the banks make up for lost time in their zealousness in adhering to the law.

Tizku LeMitzvot [May you continue to merit doing good deeds],

Shuey

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Related Posts:

The New Jersey Scandal, Pt. 1: The Facts

The New Jersey Scandal, Pt. 3: The IRS Expected Response

The website “Zavit Shalosh” [The Third Perspective] posted on their site yesterday (in Hebrew) that Guidestar has officially come to Israel.  Currently, the Guidestar site is in its pilot stage and is inviting Israeli amutot [nonprofits] to participate.

For those that are unfamiliar, Guidestar markets itself as providing “trusted nonprofit information” so interested parties can make “informed decisions” (quotes from the Guidestar site).  The Guidestar website does this by posting organizations’ financial documents.  For United States charities this means that the site posts the IRS’s 990 form — going back to about 2005 for some organizations.  (To date, Guidestar has had the financials for every organization that I have searched for.)   Started in the United States, Guidestar has been slowly entering additional international nonprofit markets.

For those of us working in Israel, finding information about amutot [Israeli nonprofits] can be a real pain.   The only place that has the information is the Rasham Ha’amutot [Registrar of Charities] and you need to go there in-person to get the information.  Currently, the Registrar is scanning its files so some of the files you need might not even be there (call in advance to find out).

Zavit Shalosh writes that in addition to Guidestar posting documents from the Rasham, the site will also allow organizations to upload information to their charity bio on the site.  This feature will allow viewers to get a richer understanding of the organization beyond whatever documents might appear on the site.  (The Guidestar USA site has recently undergone a heavy upgrade to also allow this possibility.)

Guidestar is planning to launch the site with 50 amutot for its trial period. Each participating organization will be able to view their financials and add details — before the site is open to the public.  Sessions will be held with each of the organization to teach them about the site and its tools.

The site is being launched in conjunction with the Israeli Ministry of Justice, JDC Israel (Joint), and Yad Hanadiv (Rothchild Foundation) — big names indeed.  A link to the press release can be found here.

Interested nonprofit organizations can email pilot@guidestar.org.ilor call 077-540-2923.  A form is also available on the Guidestar Site.  To read the original Hebrew article posted on Zavit Shalosh, click here.

In an age when the power of the web is proving to be an invaluable tool in free marketing and donor research, joining the Guidestar site can be a real benefit to a nonprofit.

Tizku LeMitzvot [May you continue to merit doing good deeds],

Shuey