Thursday, June 25, 2009

Ohr Somayach

MISSION:
“Ohr Somayach International (OSI), www.ohr.edu provides religious, educational and charitable aid to North American and Israeli institutions. OSI began over thirty years ago as a response to the desire of a handful of young people who wanted to learn more about Judaism. It quickly grew to be not only a sensitive respondent to the needs of the Jewish community, but an active initiator of new and innovative educational programs around the world. OSI involvement in mass media has included Shma Yisrael magazine; film, radio and television programs; slide shows and video productions; computer software; and a series of books and publications entitled Jerusalem Echoes. These endeavors have helped crystallize and project OSI as an innovative force in Jewish education."


FINANCIAL EFFICIENCY EVALUATION:
According to Charity Navigator, (http://www.charitynavigator.org)
America’s leading charity evaluator, OSI has an overall rating of two stars (four stars is the highest rating.) Charity Navigator provides the following breakdown of OSI based on 990 tax returns through fiscal year 2007:

Overall Rating **
Organizational Efficiency: Program Expenses 95.4%
Administrative Expenses 1.6%
Fundraising Expenses 2.8%
Fundraising Efficiency $0.02
(OSI spends $0.02 to raise $1.)
Efficiency Rating ****

Organizational Capacity:
Program Revenue Growth 0.9%
Program Expenses Growth -5.0%
Working Capital Ratio (years) 0.07
(OSI can sustain itself for 0.07 years
without generating new revenue.)
Capacity Rating *

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 its programs and services over the long haul.

Compensation for its Director, Rabbi Pinchas Kasnett, was $110,958 which was 2.08% of expenses. For purposes of comparison, Ruth Messenger, the President of the American Jewish World Service, was $218,625 which was 0.76% of expenses.

As of fiscal year 2007, OSI had net assets of $660,993. OSI had investments of publicly traded securities of $88,310 (990 Tax return – line 54a) and it had investments of other securities of $31,104 (line 54b). OSI had cash non- interest bearing investments of $29,178 and savings and temporary cash investments of $246,081. It had pledges receivable less allowance for doubtful accounts of $0. AJWS had fixed assets of land, buildings and equipment less accumulated depreciation of $45,716. OSI has notes and loans receivable (line 51b) of $477,000 of which $469,000 is in the name of Procidine Inc.

DISCUSSION:
As of fiscal year 2007, OSI was highly financially efficient nonprofit. However, OSI has a limited organizational capacity. A large percentage of its assets are in a non-liquid note receivable (Procidine Inc.) and it has a working capital ratio of 0.07 years. Though OSI had no direct exposure to Madoff investments, the downturn on Wall Street may cause its donors to reduce their
support of OSI. OSI will probably be forced to reduce the amount
of funding it provides to its target programs; if the downturn persists
for a long term, OSI may have difficulty continuing to function.

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, OSI should be more transparent about its finances. OSI should emulate the transparency of the American Jewish World Service and provide the following information on its web site:
1) Its three most recently filed tax returns.
2) Its investment philosophy and a breakdown of the risk level of its investments.
3) Since a large percentage of its assets are connected to Procidine Inc. OSI should be transparent about the identity of Procidine Inc.
4) It should provide the fact that it has earned a four star efficiency rating from Charity Navigator and it should provide a pie chart breakdown of its expenses.
5) It should provide information about its exposure to Madoff
investments on the homepage of website, especially since it had
NO exposure to Madoff.

Next Week’s Blog: American Committee for Shaare Zedek Medical Center

Sunday, June 7, 2009

American Jewish World Service

MISSION:
“Established in 1985, the American Jewish World Service (AJWS) is an international development organization motivated by Judaism's imperative to pursue justice. AJWS is dedicated to alleviating poverty, hunger and disease among the people of the developing world regardless of race, religion or nationality. Through grants to grassroots organizations, volunteer service, advocacy and education, AJWS fosters civil society, sustainable development and human rights for all people, while promoting the values and responsibilities of global citizenship within the Jewish community.”

FINANCIAL EFFICIENCY EVALUATION:
According to Charity Navigator, (http://www.charitynavigator.org)
America’s leading charity evaluator, AJWS has an overall rating of three stars (four stars is the highest rating.) Charity Navigator provides the following breakdown of AJWS based on 990 tax returns through fiscal year 2007:

Overall Rating ***

Organizational Efficiency: Program Expenses 81.6%
Administrative Expenses 7.9%
Fundraising Expenses 10.4%
Fundraising Efficiency $0.10
(AJWS spends $0.10 to raise $1.)
Efficiency Rating ***

Organizational Capacity:
Program Revenue Growth 27.1%
Program Expenses Growth 37.8%
Working Capital Ratio (years) 0.47
(AJWS can sustain itself for 0.47 years
without generating new revenue.)
Capacity Rating ****

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 its programs and services over the long haul.

Compensation for its President, Ruth Messinger, was $218,625 which was 0.76% of expenses. Percentage wise, the 0.76% is a very low figure compared to the compensation paid to other nonprofit executives.

As of fiscal year 2007, AJWS had net assets of $15,957,924. AJWS had investments of publicly traded securities of $16,220,897 (990 Tax return – line 54a) and it had investments of other securities of $0 (line 54b). AJWS had cash non- interest bearing investments of $2,009,272 and savings and temporary cash investments of $1,117,491. It had pledges receivable less allowance for doubtful accounts of $2,903,893 (AJWS assumed there would be no doubtful accounts, that is, it assumed it would collect 100% of the monies pledged.) AJWS had fixed assets of land, buildings and equipment less accumulated depreciation of $2,353,514. In fiscal year 2007, AJWS operated with an excess of $2,075,612.

DISCUSSION:
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. During today’s present credit crisis, corporations must meet harsher requirements of transparency and accountability demanded by its creditors and lenders. In similar fashion, nonprofits need to provide their donors with increased financial transparency and accountability in order for the donors to responsibly allocate their diminished resources.

AJWS is the gold standard for nonprofit financial transparency. Until a uniform standard of financial reporting is accepted by all nonprofits, AJWS is the model of financial reporting that other nonprofits should emulate. AJWS recently provided its 2008 (fiscal year ended December 31, 2008) financial report (completed on May 14, 2009 by the accounting firm of McGladrey & Pullen) on its website. In providing this important information with such alacrity, AJWS is demonstrating its integrity to its donors and supporters. AJWS, like the rest of the world, suffered a financial hit in 2008. Its net assets dropped from $15,957,924 to $13,505,608; this represents a loss of approximately 15%. This drop resulted from a loss of investment income (both realized and unrealized losses) of $3,392,516. Admittedly, this financial information is negative and diminished funds will negatively impact AJWS’ ability to fund all of its expenses. However, donors are likely to be more generous, not less generous, when they learn that their money is being used in a responsible manner.