American Friends of the Open University of Israel

MISSION:
The American Friends of the Open University of Israel (AFOUI) www.afoui.org works to expand the curriculum and facilities for the distance learning center at the Open University in Israel, and to provide scholarships to its students. Distance teaching and the self-study method provide conditions that meet the constraints of individuals who work, raise a family, manage a household or serve in the military. The various aspects of distance education developed by the Open University, along with the University's open admission policy, aim to open the world of higher education to all, irrespective of age, sex, place of residence or occupation, in order to enable every individual to realize his or her academic ability.

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

Organizational Efficiency:
Efficiency Rating: 4 Stars ****
Program Expenses: 82.2%
Administrative Expenses: 9.0%
Fundraising Expenses: 8.7%
Fundraising Efficiency: $0.03
(AFOUI spends $0.03 to raise $1)

Organizational Capacity:
Capacity Rating: Four Stars ****
Primary Revenue Growth: 21.0%
Program Expenses Growth: 2.6%
Working Capital Ratio: 2.53
(AFOUI can sustain itself for 2.53 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 President, Ingeborg Rennert,
was $0. For comparison purposes, compensation for the
National Executive Director of the American Friends of
Hebrew University, Peter Willner, was $370,253 which
represents 0.85% of expenses - a very low figure
percentage-wise for non-profits. .

As of 2006, AFOUI had net assets of $5,778,180. Of this figure, AFOUI had investments of publicly traded securities of $0 and cash non-interest bearing investments of $0 and savings and temporary cash investments of $398,110. It had pledges receivable of $4,327,626. AFOUI had fixed assets of land, buildings and equipment less accumulated depreciation of $1,052.

As of 2007, AFOUI had net assets of $4,632,895. Of this figure AFOUI had investments of publicly traded securities of $0 and cash non-interest bearing investments of $48,954 and savings and temporary cash investments of $1,905,606 It had pledges receivable of $2,649,233. AFOUI had fixed assets of land, buildings and equipment less accumulated depreciation of $1,548. Thus, in 2007, AFOUI had a deficit of $1,145,285.

Discussion:
AFOUI is a financially efficient and effective non-profit institution. This conclusion is based on the following facts:

1) AFOUI was prescient about the financial crisis of 2008. Between 2006 and 2007, it increased its investments in its liquid savings and temporary cash investments.
2) AFOUI has received an overall four star rating from Charity Navigator. It has a working capital ratio of 2.53 years. AFOUI’s working capital ratio of 2.53 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.
3) AJHS had no exposure to Madoff investments.

However, AFOUI’s ability to withstand the present economic downturn is questionable as 56% of its 2007 net assets are based on pledges. Donors’ ability to fulfill on past commitments is uncertain due to the unknown effects of the economic downturn on individual donors.

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, AFOUI should be more transparent about its finances.
AFOUI should provide the following information on its web site:
1) Though its website homepage states that it received an overall four star rating from Charity Navigator, many donors do not know what this means. AFOUI should explain the meaning of this rating.
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; AFOUI had NO exposure to Madoff investments.
5) AFOUI should state that it does not compensate its president.

Next week’s blog: One Family Fund