Abraham Joshua Heschel School (NYC)

Mission: Founded in 1983, The Abraham Joshua Heschel School (AJHS), www.heschel.org is an independent school named in memory of one of the great Jewish leaders, teachers, and activists of the 20th century. Unaffiliated with any single movement or synagogue, The Heschel School sees as essential the creation of a community with families from a wide range of Jewish backgrounds, practices and beliefs. The Heschel School is dedicated to the values and principles that characterized Rabbi Heschel's life: integrity, intellectual exploration, traditional Jewish study, justice, righteousness, human dignity, and holiness. It regards the texts of the Jewish tradition and the history of the Jewish people as fundamental resources for developing ideas, beliefs, behaviors and values to shape and inspire the lives of individuals.

FINANCIAL EFFICIENCY EVALUATION:
According to Charity Navigator
(http://www.charitynavigator.org/),
America’s leading charity evaluator, AJHS has an overall
rating of four stars (four stars is the highest rating.)
Charity Navigator provides the following financial
breakdown of AJHS based on 990 tax returns through
2006:
Overall Rating: Four Stars ****

Organizational Efficiency:
Efficiency Rating: 3 Stars ***
Program Expenses: 77.9%
Administrative Expenses: 19.3%
Fundraising Expenses: 2.6%
Fundraising Efficiency: $0.15
(AJHS spends $0.15 to raise $1)

Organizational Capacity:
Capacity Rating: Four Stars ****
Primary Revenue Growth: 14.5%
Program Expenses Growth: 21.1%
Working Capital Ratio: 1.23
(AJHS can sustain itself for 1.23 years
without generating new revenue.)
Organizational capacity refers to an organization’s
ability to sustain itself over time. Charities that exhibit
consistent revenue and expenses growth are more
likely to sustain their programs and services over the
long haul.

Compensation for its Head of School, Roanna Shorofsky,
was $401,880 which represents 1.71% of expenses.
For comparison purposes, compensation for the
Head of School of the Dalton School, Ellen Stein, was
$438,600 which represents 1.01% of expenses.

As of 2006, AJHS had net assets of $60,897,802. Of this figure, AJHS had investments of publicly traded securities of $14,403,396 and savings and temporary cash investments of $7,650,699 and cash non-interest bearings investments of $133,572. AJHS had fixed assets of land, buildings and equipment less accumulated depreciation of $40,532,811.

As of 2007, AJHS had net assets of $77,362,414. Of this figure, AJHS had investments of publicly traded securities of $9,971,728 and savings and temporary cash investments of $10,479,580 and cash non-interest bearing investments of $567,217. AJHS had fixed assets of land, buildings and equipment less accumulated depreciation of $57,024,601.

Discussion:
AJHS is a financially efficient and effective non-profit institution and is in excellent financial shape to weather the present economic downturn. This conclusion is based on the following facts:

1) AJHS was prescient about the financial crisis of 2008. Between 2006 and 2007, it reduced its exposure to publicly traded securities and concomitantly increased its investments in both savings and temporary cash investments and in fixed assets.
2)Between 2006 and 2007, AJHS increased its net assets by over 25%.
3) AJHS has received an overall four star rating from Charity Navigator. It has a working capital ratio of 1.23 years. AJHS’s working capital ratio of 1.23 years is a measure of its reserve of liquid funds in excess of current liabilities that is available as a margin of safety against future financial uncertainty.
4) AJHS had no exposure to Madoff investments.

Recommendations: The recent financial turmoil, caused by the Wall Street and Madoff scandals, has also affected the relationship between donor and non-profit. The turmoil has caused donors to become uncertain and more selective in giving to non-profits. Non-profits that are transparent about their finances will regain the lost trust of its donors sooner than those non-profits that are not transparent about their finances. In order to reach out to more selective donors,AJHS should be more transparent about its finances.
AJHS should provide the following information on its web site:
1) It has received an overall four star rating from Charity Navigator.
2) It should provide its investment philosophy and a breakdown of its investments on a semi-annual basis.
3) It should provide its three most recently filed tax returns.
4) It should provide information about its exposure to Madoff investments; AJHS had NO exposure to Madoff investments.

How Charities Can Regain Lost Trust (part III)

The present system of charitable giving entails an informal
agreement, between donor and charity, that is based on trust.
A donor gives to a non-profit and trusts that the non-profit will
use that gift to support a mutually agreed upon person in need.
Non-profits have functioned on a business model based on that
trust. The recent financial turmoil caused by the Wall Street and
Madoff scandals have caused a breakdown in the agreement
between donor and non-profit. The environment in which non-
profits have functioned has changed. The new environment of
uncertainty requires non-profits to change their business model.
The new business model must reflect the changed environment.
The present system of giving, based on trust, must be transformed
to a system based on transparency. Those non-profits that
make their finances transparent will regain the trust of
donors; those non-profits that do not make their
finances transparent will lose support.

Recommended Non-profit Actions:
1) The non-profit should make sure that it is rated by Charity
Navigator http://www.charitynavigator.org/. Charity Navigator
is America’s premier Charity evaluator and it rates charities based
on their financial efficiency.
2) The non-profit should provide it’s Charity Navigator rating on
the home page of its website. The non-profit should also explain
what the rating means.
3) The non-profit should provide its three most recently filed tax
returns on its website.
4) The non-profit should provide a breakdown of its liquid and
fixed assets. This can be found by examining the non-profit’s
investment-securities assets (Line 54b of 990 tax return) and its
fixed assets of land, buildings and equipment less accumulated
depreciation (line 57c of 990 tax return.)
5) The non-profit should provide the same type of investment
information that mutual funds provide. Specifically, the non-profit
should provide its investment philosophy and a breakdown of its
investments on a semi-annual basis.
6) The non-profit should provide donors and others with access
to an employee who can respond to financial questions upon
request. If the the employee is unable to answer the question,
the employee should promise to get back to the questioner within
24 hours.
7) The non-profit should provide information on its home page
about its its recent financial losses. It should provide information
as to weather it had direct exposure to Madoff investments. The
Jewish Communal Fund,
http://www.jewishcommunalfund.org/ provides
information about its exposure to Madoff investments on its home
page; it had NO exposure to Madoff investments.
8) The non-profit should provide information on its website about
any cutbacks it will be making. It should be specific about where
it is making its cutbacks – program expenses, administrative
expenses or fundraising expenses.

Conclusion:
Nobody likes bad news. However, hiding the bad news only
compounds the problem. Non-profits that are transparent about
their finances will regain the lost trust of its donors sooner than
those non-profits that are not transparent about their finances.
The economy runs in cycles. Today’s economic downturn will
eventually end. Those non-profits that choose to be
transparent today will benefit far more in tomorrow’s
economic upturn than those non-profits that are not
transparent. Rahm Emanuel, President Obama’s Chief of Staff,
famously said, “You never want a serious crisis to go to waste.
And what I mean by that is an opportunity to do things you think
you could not do before.” Today’s crisis in the world of Jewish
philanthropy is really an opportunity for those non-profits that
choose to be ahead of the curve. Providing financial transparency
today will allow non-profits to be more effective in supporting
their brother and sister Israelite in the future.

Next Week's Blog: Abraham Joshua Heschel School (NYC)