How Charities Can Regain Lost Trust (Part II)

In order to continue supporting our “brother Israelite” in times
Of need, both donors and non-profits must transform their
relationship. Donors and non-profits have an informal agreement
in which donors give money to specific non-profits with the
expectation that the non-profits are effectively supporting their
brother Israelite. This agreement is based on trust. At present,
this trust has been lost. The Wall Street meltdown and the Madoff
scandal have caused donors to feel uncertain; donors no longer are
certain that their dollars are being used effectively. The present
system of giving, based on trust, must be transformed to a system
based on transparency. Those non-profits that highlight
their transparency will regain the trust of donors; those
non-profits that highlight their mission, without providing
financial transparency, will lose support.

Following are recommendations for transforming the donor-charity
relationship. This week’s blog will discuss actions that the donor
should take. Next week’s blog will discuss actions that non-profits
should take.

Recommended Donor actions:
1) Be personally responsible with the dollars you give.
Do rigorous due diligence when giving money charity.
This entails looking beyond the mission statement of the
charity you give money to. Examine the charity’s financial
efficiency, its ability to survive an economic downturn, and
its investment practices.
2) Access the following resources:
a) Charity Navigator (http://www.charitynavigator.org/)
provides comparative efficiency ratings based on the most
recently filed tax returns.
b) Guidestar (http://www.guidestar.org/) provides the actual
tax return filed by the non-profit.
3) Communicate directly with your target charity. Ask the charity
about their finances. Ask the charity how financially efficient it is.
Ask the charity about their investment practices. Ask the charity
if it had invested money with Madoff. A reluctance to answer your
questions should give you caution about donating to this charity.
4) Use donor advised funds to park your charitable money while
doing your due diligence. Donor advised funds are intermediate
vehicles that allow you make a tax deductible contribution, that
allow you to maintain control over your money, and allow you to
keep your money in a safe place. Examples of donor advised
funds are:
a) Jewish Communal Fund
(http://www.jewishcommunalfund.org/) has been helping
individuals, families, corporations and communal groups achieve
their philanthropic goals for over 36 years. It had no exposure
to Madoff investments.
b) Jewish National Fund
(http://www.jnf.org/) provides donor advised funds in addition
to being a vital part in helping the State of Israel develop its land.
c) Jewish Federations in the following cities offer donor advised
funds: Atlanta, Baltimore, Boston, Chicago, Cleveland,
Detroit, and San Francisco.
d) Fidelity Charitable Gift Fund
(http://www.charitablegift.org/) is the largest donor advised
fund in the nation. Since 1991, it has helped more than 55,000
donors recommend more than $9 billion in grants to over 129,000
nonprofit organizations.

Next Week's Blog: Recommended non-profit actions

How Charities Can Regain Lost Trust (Part I)

Intrinsic to the precepts of Judaism is the act of giving.
A verse in the Torah states, when a “…man (is) reduced
to poverty and cannot support himself in the community,
you shall uphold him…” (Leviticus 25:35) The real
tragedy of the Wall Street meltdown / Madoff scandal in
the Jewish community is not a loss of money, but a loss
of trust. Our ability to help our brother Israelite has been
harmed. Though we still seek to support our brother Israelite,
we are now afflicted with fear and uncertainty on how to
give effectively.

First, let us examine the facts:
1) The troubles in the housing and financial markets have a
far greater impact on charities than the troubles caused by Madoff.
2) Jewish non-profits, like all non-profits, have been harmed.
However, very few have been devastated.
3) According to Gary Tobin, the President of the Institute for
Jewish & Community Research, “thousands of (Jewish)
organizations generally have sound fiduciary control in place,
and in the constellation of Jewish communal life, very few of them
have been affected in a serious way by Mr. Madoff’s cheating.”
(Chronicle of Philanthropy: page 46; Januray 15, 2009)

The breakdown in trust caused by Fannie Mae, Freddie Mac,
Lehman Brothers, Merrill Lynch, AIG has instilled fear and
uncertainty in the people trusting them with their money.
The breakdown in trust caused by Madoff has instilled fear and
uncertainty in donors to Jewish non-profits. As a result, donors
may cut back on the amount they donate to charities, or at least
put off their donations for a while.

It is understandable that people withdraw when confronted with
uncertainty. This lack of trust has a bright side. It will lead to a
discussion about transparency in American philanthropy. Charities
that are transparent, efficient, and follow good practices of
accounting should be rewarded. Charities that do not follow these
practices should mend their ways. Finally, donors need to be more
personally responsible for their giving. They should do rigorous
due diligence when giving their money to charity. Donors should
look beyond the mission statement of the charity they give money
to. They need to examine the charity’s investment practices, its
efficiency, and its ability to survive an economic downturn.

The tragedy of Wall Street / Madoff may actually be a watershed
moment in time. In the future, donors will look back upon this
moment as a time when we learned how to better support our
brother Israelite.

American Jewish Congress

Mission: The American Jewish Congress (AJ C), www.ajcongress.org is an association of Jewish Americans organized to defend Jewish interests at home and abroad through public policy advocacy - using diplomacy, legislation, and the courts. Five subjects comprise the core of our agenda: safety and security of Israel and the world Jewish community, especially in the face of worldwide terrorism; fighting to eradicate the new anti-Semitism; preserving religious freedom in the United States through separation of Church and State; energy independence and stopping the flow of petrodollars that fund terrorism; and supporting moderate Muslim countries and prominent individuals who oppose radical Islam and believe in "enlightened moderation" as the message of Islam.

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

Overall Rating: One Star *

Organizational Efficiency:
Efficiency Rating: 0 Stars
Program Expenses: 59.8%
Administrative Expenses: 8.1%
Fundraising Expenses: 31.9%
Fundraising Efficiency: $0.57
(AJC spends $0.57 to raise $1)

Organizational Capacity:
Capacity Rating: Two Stars **
Primary Revenue Growth: - 0.7%
Program Expenses Growth: 1.8%
Working Capital Ratio: 2.93
(AJC can sustain itself for 2.93 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 Executive Director, Neil Goldstein,
was $206,232 which represents 3.33% of expenses.
For comparison purposes, compensation for the President
of the American Jewish World Service, Ruth Messinger, was
$191,000 which represent 0.79% of expenses.

As of 2006, AJC had net assets of $17,125,899.
Of this figure, AJC had investment-securities
assets of $16,035,469 and fixed assets of
land, buildings and equipment less accumulated
depreciation of $294,019.

Discussion:
AJC’s working capital ratio of 2.93 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 and such random
shocks, as the Wall Street meltdown and the Madoff
affair, to which its flow of funds is subject. It is important
to note, however, that there is no direct or established
relationship between balances of working capital items
and the pattern that future cash flows are likely to assume.
The AJC acting co-executive director, Marc Stern, was
quoted in Jewish Week (12/19/08) as saying that the
AJC “…took a loss that we would rather have not taken.
It’s not trivial, but it’s not fatal.” Stern said that the
AJC had two endowment funds invested with Madoff,
but its “…operating funds were safely invested elsewhere.”
Normally, a working capital ratio of 2.93 years is a
Sufficient cushion for a non-profit to fall back upon;
However, the reliability of this figure is now in question.
Depending upon the severity of its Madoff investments,
the AJC may not be in good position to weather the
present economic downturn.

Recommendations:
On the home page of its website, the AJC provides
access to its annual report of its accomplishments in
2008. This report, however, provides no financial
information. Due to the lack of financial transparency
on Wall Street, and by Madoff, the public has become
more selective to giving to non-profits. As the AJC has
received low ratings from Charity Navigator, the AJC
should re-issue its annual report and include financial
information. In addition, the AJC should also provide
easy access to its financial statements and tax returns.
The AJC should provide access to this information on
the homepage of its website, http://www.ajcongress.org.
Negative information is better than hidden information.
In order to keep the trust of its donors, the AJC needs to
be become more transparent about economic matters.

Next week’s blog: Just One Life

Yeshiva University

Mission:
Now in its second century, Yeshiva University (YU),
http://www.yu.edu/, ranks among the nation's leading academic
research institutions. It embraces the heritage of the best
of western civilization, along with the ancient traditions of
Jewish law and life. YU's undergraduate schools and
divisions include Yeshiva College, Stern College for Women,
and Sy Syms School of Business. We bring wisdom to life
by combining the finest, contemporary academic education
with the timeless teachings of Torah. Our 7,427 students
can choose from a full spectrum of undergraduate and
advanced degrees, at any of our four U.S. campuses or our
campus in Israel.

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

Overall Rating Four Stars****

Organizational Efficiency:
Efficiency Rating Four Stars ****
Program Expenses: 94.5%
Administrative Expenses: 2.9%
Fundraising Expenses: 2.5%
Fundraising Efficiency: $0.06
(YU spends $0.06 to raise $1)

Organizational Capacity:
Capacity Rating Four Stars ****
Primary Revenue Growth: 5.6%
Program Expenses Growth: 9.4%
Working Capital Ratio (years): 0.75 years
(YU can sustain itself for 0.75 years
without generating any 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, Richard Joel, was
$689,124 which represents 0.11% of expenses.
Percentagewise, this is a very low figure.
As of 2006, YU had net assets of $1,902,047,022.
Of this figure, YU had investment-securities
assets of $1,511,846,995 and fixed assets of
land, buildings and equipment less accumulated
depreciation of $427,654,364.

Discussion:
YU’s working capital ratio of 0.75 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 and such random
shocks, as the Wall Street meltdown and the Madoff
affair, to which its flow of funds is subject.
According to a letter sent to the YU community from
President Richard Joel, the damage caused by these
“random events” has caused the YU endowment to
drop; it was $1.7 billion in January and is now
$1.2 billion. Most of the loss was due to the
Wall Street meltdown, NOT from the Madoff scandal.
As YU has received four star organizational efficiency
and organizational capacity ratings, YU is well
positioned to weather this economic downturn.

Recommendations:
Due to the lack of financial transparency on Wall
Wall Street, and by Madoff, the public has become
more selective to giving to non-profits. Since
YU has received the highest ratings from Charity
Navigator, YU needs to publicize this favorable
information. YU should publicize that its president
receives compensation that is very low percentage
wise.In addition, YU should also provide
easy access to its financial statements and
tax returns. YU should provide access to this
information on the homepage of its website,
http://www.yu.edu/.

Next week’s blog: The American Jewish Congress

Hadassah, The Women's Zionist Organization of America

Mission: Hadassah, the Women's Zionist Organization of America (HWZOA) http://www.hadassah.org/, was founded in 1912 by Henrietta Szold. Since its inception, Hadassah has remained unwavering in its devotion to Judaism, Zionism, and American ideals. As the largest volunteer organization and the largest women's organization in America, Hadassah is committed to strengthening the unity of the Jewish people. In Israel, we accomplish this through progressive healthcare, education, youth institutions, volunteerism, and land reclamation. In the U.S. we reach our goals through Jewish and Zionist education programs, Zionist Youth programs, and health awareness programs, as well as by advocating for issues of importance to women and to the American Jewish community.

FINANCIAL EFFICIENCY EVALUATION: According to Charity Navigator (http://www.charitynavigator.org/), America’s leading charity evaluator, HWZOA has an overall rating of four stars (four stars is the highest rating.) Charity Navigator provides the following financial breakdown of HWZOA based on 990 tax returns trough 2006: Overall Rating: 4 stars **** Organizational Efficiency: Efficiency Rating 4 stars **** Program Expenses: 82.8% Administrative Expenses: 11.1% Fundraising Expenses: 6.0% Fundraising Efficiency: $0.07 (HWZOA spends $0.07 to raise $1) Organizational Capacity: Capacity Rating 4 stars **** Primary Revenue Growth: 6.9% Program Expenses Growth: 6.1% Working Capital Ratio (years) 4.0 (HWZOA can sustain itself for 4.0 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 like to sustain their programs and services over the long haul.

HWZOA has net assets of $674,007,498. Compensation for its Executive Director, Morlie Levin, was $275,000 which represents 0.2% of expenses. For comparison purposes, compensation for the President of the American Jewish World Service, Ruth Messinger, was $191,000 which represent 0.79% of expenses.


Recent News: In October, HWZOA announced that Intel and Hadassah College Jerusalem are collaborating with education departments in various municipalities to create ‘The Best in Education’, an innovative program which utilizes quality resources by enabling volunteers from the private sector to contribute to science and technology education. Volunteers will offer their experience and personal leadership in an institutionalized fashion as part of an academic team at various schools. This month, twenty-seven engineers from Intel began preparations for teaching. They are currently receiving training for an ‘Instructional Support’ role in the fields of science and technology. The curriculum for the training program has been developed by Hadassah College Jerusalem, and is currently in session at the Intel campus in Petach Tikva.

Recommendation: According to Charity Navigator, HWZOA is a highly efficient non-profit with consistent revenue and expenses growth. It is likely to sustain itself over the long haul, especially in difficult economic times like now. It has a working capital ratio of four years, thus HWZOA will be able to sustain its programs even if there is large drop-off in donations.

Next week’s blog: Yeshiva University will be re-evaluated in light of the recent Madoff financial scandal

The Board of Jewish Education of Greater New York

Mission: Founded in 1910, The Board of Jewish Education of Greater
New York (BJE), www.bjeny.org motivates, strengthens and increases Jewish identity and commitment to the Jewish people through educational services and acculturation programs in New York. BJE serves the entire metropolitan area, Nassau/Queens and Westchester County, and every denomination - Conservative, Reform, Orthodox, Reconstructionist and unaffiliated - with sensitivity to each. We provide comprehensive services to more than 700 Jewish day, congregational and nursery schools, serving 176,000 youngsters, as well as group leaders from community centers and camps.

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

Overall Rating: 2 stars **
Organizational Efficiency: Efficiency Rating 3 stars ***
Program Expenses: 81.2%
Administrative Expenses: 16.0%
Fundraising Expenses: 2.6%
Fundraising Efficiency: $0.04 (BJE spends $0.04 to raise $1)

Organizational Capacity: Capacity Rating 1 star *
Primary Revenue Growth: -6.9%
Program Expenses Growth: -1.1%
Working Capital Ratio (years) 1.02
(BJE can sustain itself for 1.02 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 like to sustain their
programs and services over the long haul.

BJE has net assets of $8,023,940. Compensation for its
Chief Executive Officer, Martin Schloss (no relation to the
author), was $199,919 which represents 3. 36% of expenses.
For comparison purposes, compensation for the President of
the American Jewish World Service, Ruth Messinger, was
$191,000 which represent 0.79% of expenses.

Recent News:
Based on twenty years of special education research, BJE's
Special Education Center in conjunction with BJE's Early Childhood Center and the Jewish Board of Family and Children Services (JBFCS) has initiated a reading disability prevention program aimed at kindergarten and pre-1A youngsters in Jewish day schools. The program will attempt to replicate the recent federally supported work of Drs. Frank Vellutino and Donna Scanlon. Vellutino and Scanlon developed both an assessment tool and intervention program geared to detect and correct potential reading problems in youngsters. In a recent article reviewing their research, Vellutino and Scanlon demonstrated that as many as 50% of students classified in fourth grade as having learning disabilities in the area of reading actually had no real disabilities other than, perhaps, poor instruction.

Recommendations:
In order to receive a higher overall rating from Charity Navigator, BJE needs to improve its organizational capacity. By improving its organizational capacity, BJE will look more attractive to grantmakers. BJE could also improve its efficiency rating by reducing administrative costs.

Next week’s blog: Haddash, The Women’s Zionist Organization of America

Abraham Fund Initiatives

Mission:
Founded in 1989, The Abraham Fund Initiatives (AFI),
www.abrahamfund.org works to advance coexistence,
equality and cooperation among Israel's Jewish and Arab
citizens by creating and operating large-scale initiatives,
cultivating strategic grassroots projects and conducting
public education and advocacy that promote its vision of
shared citizenship and opportunity for all of Israel's citizens.
Based in Jerusalem and New York, The Abraham Fund sees
civic equality for Israel's Jewish and Arab citizens as a moral
and pragmatic imperative, whereby individual rights and the
political, cultural and religious character of the Arab minority
must be clearly and unambiguously recognized and respected.

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

Overall Rating: 4 stars ****
Organizational Efficiency: Efficiency Rating 4 stars ****
Program Expenses: 84.4%
Administrative Expenses: 7.6%
Fundraising Expenses: 7.8%
Fundraising Efficiency: $0.05 (AFI spends $0.05 to raise $1)

Organizational Capacity: Capacity Rating 4 stars ****
Primary Revenue Growth: 22.9%
Program Expenses Growth: 21.0%
Working Capital Ratio (years) 0.46
(AFI can sustain itself for 0.46 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 like to sustain their
programs and services over the long haul.

AFI has net assets of $2,168,938. Compensation for its
President, Ami Nahshon, was $275,000 which represents
6.32% of expenses. For comparison purposes, compensation
for the President of the American Jewish World Service,
Ruth Messinger, was $191,000 which represent 0.79% of
Expenses.


Recent News:
Arab Women and the Workplace: A seminar entitled
“Challenges Facing the Arab Woman and her Integration into
the Workplace” was held last week in Shaghor and Nahef.
70 women, along with Mayor Ahmad Dabah, attended the
Shaghor seminar and 30 women attended the Nahef seminar.
The aim of the seminars is to expose women to the program
“Sharikat Hi’a” sponsored by The Abraham Fund as part of
its “Women in the Workplace “ initiative.

Recommendations:
The Abraham Fund Initiatives is a highly efficient non-profit
and is well positioned to continue supporting its programs
and services. For comparison purposes, Airline Ambassadors
International, a non-profit associated with the United Nations
that provides humanitarian aid to children and families
worldwide, has been given an overall rating of two stars by
Charity Navigator.

Next Week’s Blog: The Board of Jewish Education of Greater New York