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

The arrests of 44 individuals–including, 3 mayors, 5 respected community rabbis, a score of government officials, and others–on Thursday of last week (July 23) should highlight the dangers of organizations donating to international causes; and I guarantee you, the I.R.S. is having similar thoughts.

I believe that two reactions can be expected.

1. Greater Scrutiny of Charities

The fear that a charitable donation might not be used for a charitable purpose is not new. The U.S. Department of Treasury has long known the important role that charities play in financing terror and released in 2006 its third version of “Financing Guidelines: Voluntary Best Practices for U.S. Based Charities.” Continue reading

The New Jersey Scandal, Pt. 2: The Israel Fallout

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. Continue reading

The New Jersey Scandal, Pt. 1: The Facts

Last week (July 23) in New Jersey, an undercover police operation revealed a rainbow of criminal dealings. The implications of the scandal vis-à-vis charities are too vast and far-reaching to be dealt with in one post.  Over the next day or two I will address the pertinent issues.  Questions and comments are welcome.

The Facts

Among the myriad accusations is the charge of the laundering of charitable donations totaling approximately 3 million dollars. The Jerusalem Post quotes sources saying that “at least some of the millions came from Israel” while the New York Times notes “much of the cash they provided him [the informant] came from Israel.” The Post explains that one of the rabbis detained “used a source in Israel to supply money through ‘cash houses’ [money changer].” The Post also quotes former Jerusalem Police Chief Mickey Levy who said Israeli authorities weren’t involved yet but didn’t rule out their involvement a later stage of the investigation. Continue reading

Israeli Study Finds that Foundations Are not Effective in Checking Nonprofits

An article was recently posted on Midot’s website highlighting a joint study done by Midot and Sheatufim.   The study was presented at a Sheatufim conference on June 23, 2009.  The many findings of the study include:

  • Israeli philanthropic foundations are investing great resources in the grant process and in grant selection before the transferring of funds to nonprofits; however, most foundations lack clear criteria that accompany the process and rely only on the reports from the recipients themselves.
  • Even though the processes of the different foundations are similar, there exists little cooperation between the various foundations.
  • Most foundations do not rely on external professionals to help check the recipients’ usage of the grants.
  • Most foundations do not implement a suitable analysis before the donation is given.
  • Foundations reported a lack of evaluation and measurement tools to check recipient organizations.  Foundations also noted a lack of tools to help analyze the financial statements of the organizations. Continue reading

Guidestar Arrives in Israel (and is looking for volunteers)

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.

guidestar_logo

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. Continue reading

Defining an Israeli Nonprofit Organization

For those individuals or corporations familiar with nonprofit organizations in the United States, any analysis of the status of an Israeli charity should begin with a comparison.  This contrast will shed light on the many differences that exist in the two countries’ legislation and definition of a nonprofit organization. Continue reading

Understanding Credit in Israel, Pt 2: Bridge Loan vs. Line of Credit

In a previous post, I mentioned that a loan and a line of credit serve the same purpose.  While that may be true in a broad sense, they actually can be quite different.  Hence, the different names.  The bank will look at both types of credit the same way, evaluating the amount of credit requested against the amount and type of collateral offered.  The customer, however, only cares about one thing, which option is cheaper. Continue reading