A list of great articles I’ve read and posted to Twitter between May 23 – June 5, 2010.  This week’s topics include: I.R.S.; Sector Trends; Social Media & Internet; Finance & Economy; and Potpourri.

While it has been two weeks since my last Must-Read, don’t worry about overload. Between my daughter running into a door and needing stitches and my internet being on the fritz for four days, its been a slow couple of weeks.  Well, here’s hoping for a better week that last…

Tizku Lemitzvot,

Shuey

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I.R.S.

New online tax form for small US charities: Good. IRS deadline-extension of new form: Bad.http://ow.ly/1ODte via @philanthropy

The misleading reality created by the IRS 990 & 2 ways to change it (Harvard Business Review)http://ow.ly/1SGhi via @bethsteinberg

Which lines in IRS 990 give snapshot of org’s financial health? http://ow.ly/1SFDt via@NAFund @FollowMCF // G8 resources 4 NPOs/Foundations

Dangerous assumptions of volunteerism by US Gov’ harm volunteers & paid staff of #nonprofitsector http://ow.ly/1Ti4V via @NonprofitSRQ

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Sector Trends

Study shows widespread innovation among NPOs & efforts to measure programs effectiveness, on @eJPhil http://ow.ly/1STDm

RT @Philanthropy: British charities are getting hurt by a real-estate slump: 

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Social Media & Internet

RT @avinashkaushik: [For Bloggers, Twitterers] 5 Ways To Manage Your Critics http://zqi.me/d5oFu6 >> Great advice 4 online & offline critics

Cute (& true) >> RT @bkmacdaddy: Everything You Need to Know About Social Media You Should Have Learned in Pre-school http://bit.ly/cLvHz0

RT @nptechblogs: Six tips for managing an international workforce, on @wiserearthhttp://bit.ly/aVAZyg // Crucial for NPOs operating abroad

RT @GuyKawasaki: 7 tools to back up your social media content http://ow.ly/1Tige

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Finance & Economy

Bank of Israel Governor: #Israel dodged property bubble when government intervened in mortgage sector http://ow.ly/1TETK

#Israel Banks using new rules as excuse to raise mortgage rates http://ow.ly/1RXAs

Good summary of influences on the Shekel with predictions for the future. http://ow.ly/1TfrF#israel #currency

4 accurate ways to quantify the state of jitters in financial markets. http://ow.ly/1RXJ8 // Interesting, fear is quantifable

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Potpourri

RT @davidcorman: Headline of the day: Woman Follows Google Maps “Walking” Directions, Gets Hit, Sues http://selnd.com/92ipOH

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 establish a U.S. registered “Friends of” Organization to help fundraise?

1. Fees and Costs

Setup Costs: Experts estimate the fees associated with opening and registering a nonprofit organization in the United States at $5,000. With a complicated request, this number could increase. The organization has to answer to itself and to its donors if this cost is worth it. (More on startup fees can be found on the Social Citizen, “Want to Start a Nonprofit — Think Again.”)

Ongoing Administrative Costs: An American charity requires a presence in America. The government and private donors will expect a local address to handle their needs. Office space, supplies, travel, and salary are just a few of the ongoing expenses that can be expected for an American-based charity to support its ongoing costs.

2. Double the Regulatory Headache

On both sides of the ocean, international charity has become more complex in the last decade. A nonprofit that wishes to operate in two countries must, therefore, also adhere to two separate sets of relevant regulations, on issues ranging from philanthropy, tax, and law (too name but a few). Operating in accordance with one country’s regulations can be trying, let alone two countries (which by the way, can sometimes contradict one another). This is not to say that it is impossible. But an organization needs to understand from the outset that additional paperwork, manpower, and money might be required to ensure that both organizations are operating as they should.

3. Independence

Charities that want to register abroad (in this case the United States) need to understand and appreciate that for all intents and purposes, they are creating a new, separate entity there. The attempt by an Israeli institution to control, force, or participate in the American “Friends of” organization is not looked upon favorably by the I.R.S. (to put it mildly). The US government has hinted – and sometimes stated outright – that no charity shall be subservient to the control of another party; including but not limited to, donors, foundations, and other charities (local or abroad).  (For more, see my article on international charity.)

An Israeli charity might not by ready or willing to relinquish control over its fundraising efforts and branding to a separate entity – even one committed to helping raise funds. One only needs to examine the recent cases of American Friends of Magen David Adom and others to understand the potential clashes that can occur.

4. No Monopoly on Raising Money

Nowadays it is possible to issue US tax-deductible receipts to donors without actually being registered in America, namely through a Middleman Organization. Also known as Conduit Organizations, these charities’ by-laws allow them to give financial support to other worthy charities that forward similar goals. While the PEF is the most famous, many other 501(c)3 tax-exempt organizations offer similar services. Recently, some online donation portals have also joined the ranks. This is even assuming that all donors want a tax-deductible receipt, which not all donors do.

What should my organization do? Register as “Friends of” or not bother?

Only the organization – through its staff and board – can know the answer to this question; it shouldn’t hire a consulting firm or be pushed around by a big donor. Like everything else, it is about strategy and purpose.

However, there are some universal factors. The following are some considerations that might influence a decision:

Cost – It takes a buck to make a buck. Do the setup and ongoing expenses outweigh the benefits?

Volunteers – Does the organization have supporters living in the States that are willing (or unwilling) to take on the responsibilities for running a nonprofit?

Board Members – The IRS, among others, has frowned upon overlapping board members between American organizations and the foreign charities they support (see same post on international charity mentioned above). Does the organization have the fresh faces to help found an independent American charity?

Ongoing Fundraising Efforts – Will the organization be engaged in ongoing fundraising efforts in the United States throughout the year or just infrequent fundraising campaigns?

Donor Relations – One of the main reasons for creating a “Friends of” organization is to communicate, recruit, and retain donors. Can the organization accomplish these goals from Israel? (Remember that for the same job, an Israeli’s salaried employee will cost less than an American’s salary.) Will an American living in America but employed by the Israeli charity suffice?

Control – Never forget that an American charity (whether its actual called a “Friends of” or not) must be independent. Is the foreign-based charity willing and able to give up control to a group of supporters and like-minded individuals? (And yes, this consideration is so important that I mentioned it twice.)

Conclusion

I want to stress that I am not advocating one over the other – there is no objectively better option. However, I will say this: the instinctive, gut-reaction for an Israeli charity to automatically setup a “Friends of” organization, regardless of whether or not it fits into the strategy of the organization is, in my opinion, premature and incorrect. Simply put, money and time might be better spent elsewhere.

What’s your experience? Why not share a story that might help another organization out…

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.

For years we have been witnessing charitable institutions hiring business executives in order to increase fundraising or professionalize the organization.  I remember the big news when the President of Columbia University, George Rupp, accepted the presidency of the International Relief Committee in 2002.  Some of us alumni were bewildered by the move — leaving the private sector for the public sector, unheard of!?!?  However, what seemed like an isolated incident then, was actually indicative of many nonprofit organizations.

But is the reverse true?  Are the corporate and public sectors luring away nonprofit executives in the hope of improving their social standing and/or activities?

The corporate sector seems to have caught on to the trend that charity is in style.  Many organizations in the United States and in Israel donate a percentage of their profits to charitable causes.  In some professions, like banking in the United States, there are laws demanding as such.  Here in Israel, every serious bank has a page on their website entitled “BaKehila,” [in the community] that details the bank’s charitable efforts.

I would like, though, to leave the corporate sector aside for the moment.  What sparked this post was really my experience vis-à-vis the public sector, more specifically the Israeli Government.

I think that all too often we have seen nonprofit giants and social innovators (even before such lingo became commonplace) jump ship to a position in some form of the government, leaving their non-profit life behind.  Once in the public sector, the constituents – myself included – quickly lose faith in these leaders when seeing them in action. Sometimes, even to the point that their past deeds and accomplishments are completely forgotten.

Why can’t these past directors and founders of nonprofits continue to work for the common good while simultaneously holding public office?

Thus, I was pleasantly surprised — almost giddy even — when I read about two would-be laws brought forth by former nonprofit lay leaders who are currently members of The Knesset [Israel's Parliament].  The Hebrew nonprofit support site, Zavit Shalosh [The Third Perspective], reported last month the following:

• MK [Member of Knesset] Ilan Ghilon, board chairman and youth coordinator for various amutot [Israel nonprofit organization] from 1986 through 1995, put forth a change in the law that would allow children under the age of 15 to volunteer with nonprofit organizations.  The goal of the law is to allow children above the age of 12 to use their free time (which they have plenty of) productively, volunteering their time and growing from the experience gained from helping the less fortunate (in all of its myriad forms).
• MK Zeev Bielski, head of the Jewish Agency from 2005-2009, put forth a change to the law that would grant new immigrants and other less fortunate groups the opportunity to apply for free legal help from volunteers who are experts in the relevant law fields through an initiative (aptly) called “Certified Volunteer Advocates.” The goal of the addendum is to allow these underprivileged plaintiffs level the playing field with the defendants — generally companies and business owners that can afford to be represented in small claims courts with paid professionals.

The two updates by themselves are not earth-shattering.  However, I do think they represent thoughtful initiatives that will actually help nonprofit organizations and the people that require their services.

I have always been a believer that if you are willing to criticize then you should be willing to praise.  My hat goes off to these two members of parliament.  Call me an optimist, naïve, or just plain foolish, but, all in all, I think it’s an encouraging sign:  The passion is still alive, nonprofit executives can enter the public sector AND work for the common good.

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

Shuey

P.S.  Know of any other examples?  Please share.

Patrick Swayze: He was awesome. With that said, can nonprofit organizations benefit from the wisdom of his awesomeness? Absolutely. For starters, if nonprofit execs would have his dance moves, I think that they would find fundraising a much easier task. For ideas on how to apply said moves, I would suggest his classic Saturday Night Live “Chippendale” skit with Chris Farley. Lacking Patrick’s groove thang, there is still what to gain.

Patrick Swayze earned his fame from “Dirty Dancing” in 1987. From there he went on to star in “Roadhouse” in 1989 (a cult classic, though not a main stream favorite), “Ghost” in 1990, and opposite Keanu Reeves in “Point Break” in 1991. Life was very good for Mr. Swayze; he was at the top of his game. And then he just fell of the face of the well-respected-film earth, starring in films that never really made it big. Ten years later, in 2001, Swayze had his second-coming, stunning the cinematic world in a dramatic role as a motivational speaker who was a secret pedophile in “Donny Darko.” Certainly, not an easy role to play. But, man, did he play it well. The audiences were thinking, “Hey, this guy still has it in him.” While Swayze then downgraded to other small things in years to come (because of his bout with cancer and other reasons), the impression he left after that latest role in “Donny Darko” was that he was still in the game.

How does this relate to you, the nonprofit organization? Have you been having a hard couple of years? Feeling like you’re no longer the talk of the town? Is the average age of your membership approaching retirement? Don’t fret. You were once THE charity of choice for a reason. It’s time to rekindle the fire and show the world what you’ve got. If Patrick Swayze can do it, then so can you.

Some ideas that I have seen other nonprofits adopt that might help you along:

Education — Don’t just take, give! Recently, I have been seeing organizations that are seeing their model, methodology, information, or services as a valuable tool in-of-itself. Realizing this, they are turning to groups and schools to either volunteer/sell their expertise. It’s a great way to increase funds and get good PR.

Volunteering — Offer donors a chance to “get their hands dirty.” The trend is that donors are looking to make more than just a financial commitment. Offering alternative ways to “donate” to your organization allows more people to get involved and can create a more holistic connection between the donor and your organization.

Multi-Faceted — Realize that your important work touches people in different ways. Develop these diverse views of your organization to allow your cause to appeal to a wider audience.

Transparency — Foundations, donors, and pretty much everyone wants to see transparency in their charities, both with regards to funding and programs.  Not being forthcoming will probably make people suspicious and drive them off.  Transparency, like everything else, should have a strategy and be done responsibly.

Board of Directors — Open the Board up to a person or two who are different from your average board member. Could be of a different age, gender, political or religious affiliation etc. Just so long as this person believes in your work, he or she could bring a fresh new look to a fresh new audience.

But, please, don’t just re-brand or re-image without truly enacting some sort of change in your organization. Donors and others will see this as a waste of resources and just another attempt by a charity to dupe its constituents.

And now, a moment of silence for Patrick Swayze z”l (1952 – 2009).

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

Shuey