Jewish and Israeli organizations: US nonprofits must control operations funding

The collaboration of a U.S. nonprofit fundraising organization and its counterpart, the service organization in Israel, generally follows a template — fundraising carried out in the United States directly benefits the programs and mission in Israel. Both organizations are committed to the cause and financing it as completely as possible. The U.S. nonprofit is dedicated to raising funds, and in addition must cover associated overhead costs. The way it covers those costs, along with other aspects of its work, must be within the nonprofit’s firm control.

The reasons for maintaining control are transparency for donors, efficiency in operations and compliance with requirements for tax-exempt status. The U.S. nonprofit can’t allow itself to be viewed as an arm of the organization in Israel, and it can’t be controlled by the Israeli organization.

The U.S. nonprofit must be proactive in managing the relationship, including resisting Israeli efforts to mandate how it operates. Appropriate ownership of activities has to be clear to both organizations; reputations are at risk, not to mention the nonprofit’s tax exemption.
3 operations funding models In their approaches to funding operations, we typically see U.S. nonprofit organizations use one of these three models:
  1. A fee charged to the Israeli organization. The U.S. nonprofit reaches an agreement with the Israeli organization to receive a fee based on an estimated level of dollars raised.
  2. A fee charged on donations. The U.S. nonprofit charges an overhead fee on each gift raised. This must be explained to donors, and they must agree to the practice.
  3. Unrestricted funding. The U.S. nonprofit asks donors to provide funds that can be used for either U.S. operating expenses or the programs in Israel. This fundraising effort usually starts with board member donations and then progresses to other sources. An effective tactic is to invite a representative of the Israeli organization to come to the United States to participate in the fundraising. This unrestricted funds model is optimal. It removes the potential for donor disappointment, provides a reliable source of operational support and meets compliance requirements for tax exemption.

Collaboration and communication are key to making this international relationship work. Donor intentions must be followed, and the money must be used in accordance with those intentions. If any questions arise, the two organizations must work together to ensure a solution that is satisfactory to the donor and the organizations.

The community and donor base surrounding a Jewish or Israeli cause is strong and loyal. Keeping appropriate control, securing unrestricted funds for the operating budget, and maintaining a clear understanding will ensure that the organizations will continue to thrive — and as a result, the mission will, too.

See the full report: The State of the Not-for-Profit Sector in 2015