MISSION:“Since 1914, the American Jewish Joint Distribution Committee (JDC), www.jdc.org, has given global expression to the principle that all Jews are responsible for one another. Working today in over 70 countries, JDC acts on behalf of North America's Jewish communities and others to rescue Jews in danger, provide relief to those in distress, revitalize overseas Jewish communities, and help Israel overcome the social challenges of its most vulnerable citizens. JDC also provides non-sectarian emergency relief and long-term development assistance worldwide.” (Quote from Charity Navigator)
FINANCIAL EFFICIENCY EVALUATION:
According to Charity Navigator, (http://www.charitynavigator.org) America’s leading charity evaluator, JDC has an overall rating of four stars (four stars is the highest rating.) Charity Navigator provides the following breakdown of JDC based on 990 tax returns through fiscal year 2007:
Overall Rating ****
Organizational Efficiency: Program Expenses 92.2%
Administrative Expenses 6.4%
Fundraising Expenses 1.2%
Fundraising Efficiency $0.01
(JDC spends $0.01 to raise $1.)
Efficiency Rating ****
Organizational Capacity:
Program Revenue Growth 7.1%
Program Expenses Growth 7.2%
Working Capital Ratio (years) 1.53
(JDC can sustain itself for 1.53 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 Chief Executive Officer, Steven Schwager,
was $431,654 which was 0.17% 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. These are both extremely low
percentages for a nonprofit to pay its chief executive.
As of fiscal year 2007, JDC had net assets of $379,673,951
and total assets of $474,991,928. JDC had investments of
publicly traded securities of $337,787,541 (990 Tax return –
line 54a) and it had investments of other securities of $0 (line
54b). JDC had cash non- interest bearing investments of
$64,486,725 (line 45) and savings and temporary cash
investments of $11,482,486 (line 46.) It had pledges receivable
less allowance for doubtful accounts of $22,642,102 (line 48c.)
JDC had fixed assets of land, buildings and equipment less
accumulated depreciation of $24,292,621 (line 57c) and other
investments of $0 (line 56.)
According to this blog’s financial transparency rating system
of information provided by the nonprofit on its own website,
JDC has a transparency rating of 1 star (6 stars is the highest
Rating.) Of the following six items, JDC provided only its
Charity Navigator rating on its website:
1) The nonprofit’s Charity Navigator rating
2) A pie-chart breakdown of the nonprofit’s expenses
3) The nonprofits most recently filed 990 tax return
4) The nonprofit’s annual report
5) The nonprofit’s audited financial statement
6) The nonprofit’s investment philosophy
DISCUSSION:
As of fiscal year 2007, JDC was a highly financially
efficient nonprofit with high organizational capacity.
A large percentage of its assets, 71%, were in publicly traded
securities that have since taken a 30-40% hit from the Wall Street
meltdown. Another 5% of its assets were in pledges
receivable of which JDC discounts 21% for doubtful
accounts; this optimistic expectation will not be realized.
Though JDC had no direct exposure to Madoff investments,
the downturn on Wall Street will cause its donors to reduce their
support. Its excellent working capital ratio, of 1.53 years, will
help it limit the amount it will have to reduce its support other
nonprofits.
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,
JDC should be more transparent about its finances. JDC
should provide additional financial information on its web site.
Thursday, July 30, 2009
Thursday, July 9, 2009
A Nonprofit Financial Transparency Rating System
Mark Bane, the Chairman of the Orthodox Union Board of
Governors, wrote an article in the current issue of Jewish
Action entitled “The Financial Restructuring of the American
Orthodox Community.” In the article Bane states that many
Jewish nonprofits remain “oblivious to the bleak new economic
realities.” If corporate CEOs failed to respond to these new
realities, their actions would constitute a breach of fiduciary
duty to shareholders and creditors. Nonprofit leaders do not
have these fiduciary responsibilities, but their failure to
respond to the crisis indicates that they are not acting in a
responsible manner in the allocation of the Jewish community’s
limited resources.
During a credit crunch, lenders to business demand greater
transparency and accountability. Nonprofit donors are the
equivalent to lenders to business and they will also demand
increased financial transparency and greater accountability of
how their dollars are being used.
These demands, rather than being problematic, are actually an
opportunity for well managed nonprofits. Bane stated that
“…significant donors are likely to be even more generous when
they observe their money being used in a responsible manner.”
What should nonprofits do to better respond to donors’ growing demands for additional financial information? Bane proposed that nonprofits should have a uniform standard for reporting their financial information.
Following is a possible uniform standard for reporting financial information that would allow donors to compare the transparency of different nonprofits. This system is similar to the donor friendly four star system used by Charity Navigator for evaluating nonprofit efficiency and capacity. For each parameter provided on the nonprofit’s website, the nonprofit would receive one star. A nonprofit that provided each of the following financial parameters on its website would receive a six star rating.
Provided on nonprofit’s website:
1) The nonprofit’s Charity Navigator rating
2) A pie-chart breakdown of the nonprofit’s expenses
3) The nonprofits most recently filed 990 tax return
4) The nonprofit’s annual report
5) The nonprofit’s audited financial statement
6) The nonprofit’s investment philosophy
This transparency system would allow a donor to conclude that a
nonprofit with a five star rating is more transparent, and acting more
responsibly, than a nonprofit with a three star rating. Bane believes that not only would this system help the donor, but it would help the well managed nonprofit as donors are more likely to be more generous with the more transparent nonprofit.
Governors, wrote an article in the current issue of Jewish
Action entitled “The Financial Restructuring of the American
Orthodox Community.” In the article Bane states that many
Jewish nonprofits remain “oblivious to the bleak new economic
realities.” If corporate CEOs failed to respond to these new
realities, their actions would constitute a breach of fiduciary
duty to shareholders and creditors. Nonprofit leaders do not
have these fiduciary responsibilities, but their failure to
respond to the crisis indicates that they are not acting in a
responsible manner in the allocation of the Jewish community’s
limited resources.
During a credit crunch, lenders to business demand greater
transparency and accountability. Nonprofit donors are the
equivalent to lenders to business and they will also demand
increased financial transparency and greater accountability of
how their dollars are being used.
These demands, rather than being problematic, are actually an
opportunity for well managed nonprofits. Bane stated that
“…significant donors are likely to be even more generous when
they observe their money being used in a responsible manner.”
What should nonprofits do to better respond to donors’ growing demands for additional financial information? Bane proposed that nonprofits should have a uniform standard for reporting their financial information.
Following is a possible uniform standard for reporting financial information that would allow donors to compare the transparency of different nonprofits. This system is similar to the donor friendly four star system used by Charity Navigator for evaluating nonprofit efficiency and capacity. For each parameter provided on the nonprofit’s website, the nonprofit would receive one star. A nonprofit that provided each of the following financial parameters on its website would receive a six star rating.
Provided on nonprofit’s website:
1) The nonprofit’s Charity Navigator rating
2) A pie-chart breakdown of the nonprofit’s expenses
3) The nonprofits most recently filed 990 tax return
4) The nonprofit’s annual report
5) The nonprofit’s audited financial statement
6) The nonprofit’s investment philosophy
This transparency system would allow a donor to conclude that a
nonprofit with a five star rating is more transparent, and acting more
responsibly, than a nonprofit with a three star rating. Bane believes that not only would this system help the donor, but it would help the well managed nonprofit as donors are more likely to be more generous with the more transparent nonprofit.
Thursday, July 2, 2009
American Committee Shaare Zedek Medical Center
MISSION:
“The American Committee for Shaare Zedek Medical
Center (ACSZ), www.acsz.org, in Jerusalem provides
financial support, services and equipment for the Shaare
Zedek Hospital in Jerusalem in order to support health
care, research and nursing programs in all branches of
medicine. Founded in 1902, Shaare Zedek has been
known as the Hospital with a Heart for more than a
century. Patients have consistently streamed to our
hospital, seeking top level treatment in a compassionate,
supportive and nurturing environment. Today, while our
reputation as the most exceptional hospital for health care
treatment continues to grow, Shaare Zedek has taken its
commitment to its patients to the next level by providing
industry leading, cutting-edge medical care.”
FINANCIAL EFFICIENCY EVALUATION:
According to Charity Navigator, (http://www.charitynavigator.org)America’s leading charity evaluator, ACSZ as an overall
rating of two stars (four stars is the highest rating.) Charity Navigator provides the following breakdown of ACSZ based on 990 tax returns through fiscal year 2007:
Overall Rating **
Organizational Efficiency: Program Expenses 76.0%
Administrative Expenses 7.0%
Fundraising Expenses 16.9%
Fundraising Efficiency $0.14
(ACSZMC spends $0.14 to raise $1.)
Efficiency Rating **
Organizational Capacity:
Program Revenue Growth 2.9%
Program Expenses Growth -4.1%
Working Capital Ratio (years) 1.70
(ACSZMCcan sustain itself for 1.70 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 Executive Vice President, Paul Glasser,
was $226,173 which was 1.19% 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, ACSZ had net assets of $28,331,359.
ACSZ had investments of publicly traded securities of
$18,873,338 (990 Tax return – line 54a) and it had
investments of other securities of $0 (line 54b). ACSZ had
cash non- interest bearing investments of $1,839 (line 45) and
savings and temporary cash investments of $2,652,470
(line 46.) It had pledges receivable less allowance for doubtful
accounts of $11,230,530 (line 48c.) ACSZ had fixed assets
of land, buildings and equipment less accumulated
depreciation of $44,630 (line 57c) and other investments of
$647,961 (line 56.)
DISCUSSION:
As of fiscal year 2007, ACSZ was a moderately financially
efficient nonprofit with moderate organizational capacity.
A large percentage of its assets, 64%, were in publicly traded
securities that have taken a 30-40% hit from the Wall Street
meltdown. Another 39% of its assets were in pledges
receivable of which ACSZ discounts less than 1% for doubtful
accounts; this optimistic expectation will not be realized.
Though AMSZ had no direct exposure to Madoff investments,
the downturn on Wall Street will cause its donors to reduce their
support. Its excellent working capital ratio, of 1.70 years, will
help it limit the amount it will have to reduce its support of the
Shaare Zedek Medical Center.
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,
ACSZ should be more transparent about its finances. ACSZ
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) It should provide its Charity Navigator rating.
4) 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: Introduction of a non-profit financial
transparency rating sytem.
“The American Committee for Shaare Zedek Medical
Center (ACSZ), www.acsz.org, in Jerusalem provides
financial support, services and equipment for the Shaare
Zedek Hospital in Jerusalem in order to support health
care, research and nursing programs in all branches of
medicine. Founded in 1902, Shaare Zedek has been
known as the Hospital with a Heart for more than a
century. Patients have consistently streamed to our
hospital, seeking top level treatment in a compassionate,
supportive and nurturing environment. Today, while our
reputation as the most exceptional hospital for health care
treatment continues to grow, Shaare Zedek has taken its
commitment to its patients to the next level by providing
industry leading, cutting-edge medical care.”
FINANCIAL EFFICIENCY EVALUATION:
According to Charity Navigator, (http://www.charitynavigator.org)America’s leading charity evaluator, ACSZ as an overall
rating of two stars (four stars is the highest rating.) Charity Navigator provides the following breakdown of ACSZ based on 990 tax returns through fiscal year 2007:
Overall Rating **
Organizational Efficiency: Program Expenses 76.0%
Administrative Expenses 7.0%
Fundraising Expenses 16.9%
Fundraising Efficiency $0.14
(ACSZMC spends $0.14 to raise $1.)
Efficiency Rating **
Organizational Capacity:
Program Revenue Growth 2.9%
Program Expenses Growth -4.1%
Working Capital Ratio (years) 1.70
(ACSZMCcan sustain itself for 1.70 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 Executive Vice President, Paul Glasser,
was $226,173 which was 1.19% 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, ACSZ had net assets of $28,331,359.
ACSZ had investments of publicly traded securities of
$18,873,338 (990 Tax return – line 54a) and it had
investments of other securities of $0 (line 54b). ACSZ had
cash non- interest bearing investments of $1,839 (line 45) and
savings and temporary cash investments of $2,652,470
(line 46.) It had pledges receivable less allowance for doubtful
accounts of $11,230,530 (line 48c.) ACSZ had fixed assets
of land, buildings and equipment less accumulated
depreciation of $44,630 (line 57c) and other investments of
$647,961 (line 56.)
DISCUSSION:
As of fiscal year 2007, ACSZ was a moderately financially
efficient nonprofit with moderate organizational capacity.
A large percentage of its assets, 64%, were in publicly traded
securities that have taken a 30-40% hit from the Wall Street
meltdown. Another 39% of its assets were in pledges
receivable of which ACSZ discounts less than 1% for doubtful
accounts; this optimistic expectation will not be realized.
Though AMSZ had no direct exposure to Madoff investments,
the downturn on Wall Street will cause its donors to reduce their
support. Its excellent working capital ratio, of 1.70 years, will
help it limit the amount it will have to reduce its support of the
Shaare Zedek Medical Center.
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,
ACSZ should be more transparent about its finances. ACSZ
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) It should provide its Charity Navigator rating.
4) 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: Introduction of a non-profit financial
transparency rating sytem.
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