“We Must Look To The Past To Know The Future” – George Santayana

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

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

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

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

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

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

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

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

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

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

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

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

The new initiative database will:

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

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

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

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

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

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

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

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

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

6. Interior Ministry to Reward Local Authorities on Social Activities

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But maybe not anymore?

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

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

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

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

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

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

Tizku Lemitzvot,

Shuey

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

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

Links to the articles I’ve reviewed and posted to Twitter between July 18 – July 24, 2011.  This week’s topics include:  U.S. Regulations  •  Jewish & Israeli Sector  •  Trends & Op-Eds  •  Governance & Strategy  •  Fundraising & Marketing  •  Personal Finance

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

Tizku Lemitzvot,

Shuey
@nonprofitbanker

U.S. REGULATIONS

Definition & changes to the US law: What is an Endowment? by Charitylawyer http://ow.ly/1uN91P

Super intriguing: new “Human Capital Performance Bond” for nonprofit orgs that increase taxes http://ow.ly/1uWvPf via NAFund & Smartgivers

JEWISH & ISRAELI SECTOR

eJPhil: The Jewish Professional Talent Shortage: Striving for Excellence http://ow.ly/1uVi1Y

TRENDS & OP-EDS

Brave post >> GTak & Tactphil: Lack of Criticism in Philanthropy Causing Failure, by Philosopher20 http://ow.ly/1uWd0O

EmilyChan & Socialcitizen: Young & Restless: The 20-something nonprofit executive http://ow.ly/1uMcr5

Why Fair Bosses Fall Behind http://ow.ly/5Gz4P // being a good-guy is a longer road, but ultimately the best for everyone

New breed of summer camps aim to teach finance & entrepreneurial skills to teens http://ow.ly/1uJ6KW

GOVERNANCE & STRATEGY

More & more nonprofit orgs face this very question: Clarity of Purpose or Chase the Money? http://ow.ly/5Iuj1 by Stephen Donshik in eJPhil

Why due dilligence b4 a nonprofit merger is crucial http://ow.ly/1uObAZ via GTak & Emilychan

Agreed! Buildnpcapacity: Great insights on serving as a Fiscal Sponsor http://ow.ly/1uVWQJ by Emilychan // great links at the end of the article too

FUNDRAISING & MARKETING

Npquarterly: Celebrities in fundraising – 5 myths http://owl.li/5uOqp // Don’t believe the title. These tips are universal

Tech isnt the golden messiah. Cause marketing is about strategy & sticking to the basics, by Joewaters http://ow.ly/1uP6s3

PERSONAL FINANCE

How to slash your utility bills this summer, by Sarahnadav http://ow.ly/5JTkt via JackieGold (specific to Israel, but with lessons for all)

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.

Towards this end, I have highlighted themes in the article through blocks of text.

Charity Law as an Extension of US Policy

Using tax-exempt donations to help Jews establish permanence in the Israeli-occupied territories – effectively obstructing the creation of a Palestinian State.

Mr. Obama has particularly focused on them as obstacles of peace.

As the American government seeks to end the four-decade Jewish settlement enterprise…the American Treasury helps sustain the settlements through tax breaks on donations to support them.

Washington has consistently refused to allows Israel to spend American government aid in the settlements.

The article hints to a link between United States charity regulation and governmental policy.   While there necessarily shouldn’t be a connection between the two, the facts on the ground seem to hint otherwise.  More because of increased scrutiny by the governmental department tasked with overseeing nonprofits rather than because of changes in law.

It would behoove organizations operating overseas to consider this growing link (at least during President Obama’s tenure) and to consider US policy when formulating strategy and governance.

Board Members and Officers Should Not Be A Rubber Stamp

It [Shuva Israel, a US tax-exempt charity] has two volunteers who double as board members. “I’ve never been to the board,” said one of them, Jeff Luftig.

Independence and control: two running themes in nonprofit legislation, regulation, and audits.

Volunteers who agree to serve as a board member should understand that this voluntary service comes with mandatory responsibilities. The same holds true for a nonprofit searching for potential candidates.  The United States Government and the public look to a Board of Directors as the brains and power behind a charity; as such, the board is expected to actively participate in the running and planning of a nonprofit.

Local Charity, Local Board

Although IRS rules require that American charities exhibit “full control of the donated funds and discretion as to their use,” Shuva Israel [a US tax-exempt charity] appears to be dominated by Israeli settlers.

The IRS does not want an American charity to be a puppet, subservient to the wishes of another organization or individual — local or foreign.  While foreigners are allowed to sit on the boards of American charities, the nonprofit should never appear as if it has lost its American identity and independence.

Silence Speaks Volumes

Settlements violate international law…

In some ways, American tax law is more lenient than Israel’s.

Asked whether it had ever filed a tax return, he responded, “I’m not in a position to answer that.”

Records from the group [Manhigut Yehudit] say a portion of the $5.2 million collected has gone to Israeli “community facilities”…neither man would answer questions about the nature of the “community facilities.”

Silence can sometimes be the worst answer an organization can give as it hints that perhaps no employee knows the answer or, even worse, that the organization has never bothered to ask the question.  Conferencing with lawyers, accountants, and other professionals can often turn up most of the potential challenges facing the charity. It is to the benefit of the organization to prepare responses to expected Frequently Asked Questions and designate  employees and volunteers best equipped to answer them.

The organization’s reputation demands an answer better than silence.

Filing with the IRS: The Best Defense is a Good Offense

Religious charities are still more opaque; the tax code does not require them to disclose their finances publicly.

Religious groups have no obligation to divulge their finances, meaning that settlements may be receiving sums that cannot be traced.

Religious organizations – like many of the charities that support Israel – that expect to come under government or general scrutiny should consider filing relevant IRS paperwork even though they are not required. Entering background, managerial, and financial information information ahead of any “investigative piece,” is convincing evidence that the nonprofit’s intentions are noble, as well as legal.

Conclusion

As the United States Government loses millions of dollars from noncollectable donations to tax-exempt organizations, charities will always be subject to public and governmental scrutiny.

After reading the excerpts from the Times article, one can certainly understand more of the public and regulatory sentiment towards US registered charities operating abroad, especially those supporting Israel. This said, American nonprofits can still fulfill their mission, operating at their peek capacity.

Among the many DON’Ts mentioned by the authors were also some excellent DOs, which, if followed, can prevent the very accusations highlighted in the article:

The [US] tax code encourages citizens to support nonprofit groups that may diverge from official policy, as long as their missions are educational, religious or charitable.

The Time’s review of pro-settler groups suggests that most generally lie within the rules o the American tax code. Some, though, risk violating them by: (1) by using the money for political campaigning and residential property purchases, (2) by failing to file tax returns, (3) by setting up boards of trustees in name only and (4) by improperly funneling donations directly to foreign organizations.

But the IRS does allow deductions for donations to American nonprofits that support charitable projects abroad, provided the nonprofit is not simply a funnel to another group overseas.

Truly, good advice to follow.

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.

A list of great articles from around the web that I posted to Twitter from May 2 – May 15, 2010.  This week’s topics include: Strategy & Governance; Social Media & Internet >> Fundraising; Social Media & Internet >> Recreation; Israel; Banking & Economy; and Potpourri.

I didn’t have so much time last week, forcing me to combine 2 weeks worth of links. Man, oh man. I hope you’ve got some time, there are some great articles below.  Not to mention some really funny ones, as well. Enjoy them both.

Tizku Lemitzvot,

Shuey (@nonprofitbanker)

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Strategy & Governance

Protect your #Nonprofit: 3 critical manuals all NPOs should create http://ow.ly/1JQRl via @NonprofitSRQ @npa_online @PamelaGrow

IRS interim report “Exempt Organizations – Universities Compliance Project” http://ow.ly/1Jdeq – focus on unrelated income & executive comp

4 Reasons Why IRS Interim Report “Exempt Orgs – Universities Compliance Project” is an Important Read http://ow.ly/1JheM

RT @socialcitizen: Is the $5 Donor a Philanthropist? http://ow.ly/1Grmq >> Great question raised. I weighed in, interested in your feedback

Koret CEO Jeff Farber shares: “It’s time #Jewish #philanthropy stop operating like a charity” http://ow.ly/1GN3Z

Well said! >> RT @nptechblogs: With great market share comes great responsibilityhttp://bit.ly/c5QwgE (via @socialsignal)

How to tell if your brand is useless (2 min VIDEO) on @jeffbrooks http://ow.ly/1KJmA // @CharlieKalech reminds me of speech you gave @ GBN

Great resource for boards >> RT @HeidiEKMassey: RT @npmaven: Creating online ‘readings’ handout 4 #nonprofit boards.http://is.gd/c2Lsh

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Social Media & Internet >> Fundraising

Dan Brown of @eJPhil gives highlights from 2010 eNonprofit Benchmarks Study.http://bit.ly/94DYxy >> important numbers for email campaigns

NPTimes: Charity apps combine education & fun & translate into $ w/o limits of text-2-give-campaigns http://ow.ly/1GNor

To Mama With Love: Social Network Fundraising succeeding in Engagement & Conversation, by @askdebra http://bit.ly/cqNwuz via @shoshanak

Social Media is NOT about jumping on the bandwagon >> 10 Trends in SUSTAINABLE Social Media, by @askdebra http://ow.ly/1Lxm8 via @lblumenthal

Crucial Message! >> RT @PaulDunay: Social media is not a campaign: It’s your customerhttp://ff.im/-k6khS by @travismurdock

RT @nonprofitorgs & @askdebra How@EnvDefenseFund created its social media guidelines, by @kiramarch http://is.gd/c4D6v

RT @PaulDunay: 7 Things Your Organization/Company Must Do Because Of Social Media, by @augieray http://ff.im/-kif9L

Holy smart-bomb Batman! US Airforce has awesome Social Media Response Plan flowchart! http://ow.ly/1JQiP via @nptechblogs @wildapricot

It’s all about making it personal! >> RT@askdebra @bfholmes: NGO thinks outside-the-box to give homeless a voice (VIDEO) http://ow.ly/1Jidw

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Social Media & Internet >> Recreation

RT @GuyKawasaki: How to make your Facebook profile more private [2 min VIDEO]http://is.gd/c8eNj // Facebook privacy settings are in 5 dif places!

RT @HilzFuld @Minervity: Top 5 Social Blogging Tools http://su.pr/2QpKQd by @RuhaniRabin

RT @askdebra: Very interesting – FB backlash. Diaspora: an antidote 2 FB? Http://bit.ly/aoubb0 via @pampelmoose

RT @lblumenthal: 8 kinds of websites we need to stop building, by @oatmeal http://ow.ly/1KQj7 // Funny. Hard 2 agree w #6, need of more secure FB

RT @mayerreich: This is funny and why I hate Facebook. http://bit.ly/dbSyHs // Facebook intrudes just a tad, doesn’t it

Are social networks hurting or helping children develop emotionally/socially? http://ow.ly/1GnIg via @power2b @dovemerson @rabbigreen

RT @GuyKawasaki: “How do I delete my Facebook” query growing http://is.gd/c4Iif

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Israel

RT @inwnews: Globes: CITI mulls retail banking in #Israel http://ow.ly/1GnlC >> more competition & lower fees? I hope so

RT @ISRAEL21C: OECD accepts Israel as member http://su.pr/2Joo35 #Israel#economy #business

RT @Israel_News: Euro drops sharply vs Shekel as IMF judged EU’s emergency fund as a temp solution. http://ow.ly/1Js4A

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Banking & Economy

The New Poor: Even w/ rebounding economy, many jobs – tnx to tech advances – won’t be coming back ever http://s.nyt.com/u/wuwm

US Crisis Panel to probe how big banks routinely – and legally – fudge their quarterly books. http://ow.ly/1Hb8q

US Treasury Sec urged Congress 2 impose 10-yr $90 billion bank-tax 2 recoup 2008 bailout-costs http://ow.ly/1Hbbr

As stimulus $ dwindles down, expect States to make deep cuts http://ow.ly/1IQwd via @NAFund @PANONonprofit @robertegger

RT @askdebra: Social media and the banking industry, by @davidfinch http://is.gd/c6YkI // Essential services made easier, free advice & more

Thanks for the referral Debra >> RT @askdebra: Mobile banking set to soar, courtesy of @emarketer http://is.gd/c5ZPJ

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Potpourri

RT @Neil_Hamburger: Another “world’s oldest person” died today. Clearly, a dangerous competition that should be stopped. http://ow.ly/1GUIC