The Current Economic Crisis and Israel’s Non-Profit Sector

a guest post by David Roth and Ardie Geldman

The current world economic crisis has delivered yet another financial blow to the Israeli nonprofit sector, one that comes in the wake of a year in which Israeli institutions, whose budgets are largely based on the U.S. dollar, have already experienced at least a 30 percent devaluation in the local purchasing power of contributions. One Israeli newspaper recently published a lengthy feature article entitled “Don’t Come, There is No Money.” Among its anecdotes was the case of one major American supporter of an Israeli educational institution whose personal wealth depreciated from $800 M to $10 M over the last month. How might Israel’s highly developed, but also highly reliant, nonprofit community respond to such turmoil?

Some observers are talking about a “reserved panic” whose outcome and long-term influence on fundraising efforts is still unknown. The present situation obligates all philanthropists to stop and reconsider their relationship to the programs and projects they have been supporting, whether locally, nationally, or overseas. As a corollary, Israeli nonprofits have now gone into an emergency mode in which they are examining their operations and priorities. Obviously, all plans for development and expansion have been set aside. Where might a dollar, now worth NIS 3.8, be saved? Survival, not growth, is the short-term objective.

Israeli fundraisers and heads of institutions continue to hear from their contacts abroad about how many American Jewish institutions, synagogues, day schools, and social welfare programs, etc., also heavily dependent upon donations, are now in jeopardy. American Jewish donors, whose generosity also stretches across the ocean, are being forced to reduce or reschedule their 2008-2009 contributions within their own communities.

In either case, there is an expectation on the part of American Jewish funders that the relatively new crop of Israeli philanthropists, who live at the scene, will also step up to the plate and contribute their share of aid to Israel’s weakest populations. However, Israel’s economy is also affected by the current downturn. Ra’anana’s Amdocs, for example, one of the country’s top hi-tech corporations, has been forced to downsize. It has cut 200 employees from it ranks and is closing its Jerusalem branch. It is questionable how realistic it is to expect private Israeli funders to take up the slack to any significant degree.

While some American Jewish donors seek to secure support in this difficult period only for programs that feed the hungry, provide shelter to the homeless, or are health related, others insist that these fundamental areas are the responsibility of Israel’s government. Some take the longer view and insist that higher education and leadership development, even culture, are areas that have a direct influence upon the quality of Israel’s future, and therefore every effort should be made to sustain them with privately raised funds.

Whether the target is subsistence, education, health or culture, says a more optimistic Israeli organization director: “The second they (American Jewish donors) feel that the area is sufficiently important to them, the financial crisis, though it will cause them to give less, will not result in their completely backing away from programs that are meaningful to them. It is important for them to remain involved, and therefore they will fulfill their commitments even if there will be a decline (in their giving) in the short term.”

The problem now emanates from the uncertainty of the economy. To date, the markets remain unstable.  Because they are so dependent upon overseas contributions, Israeli directors of nonprofit institutions and their fundraising staff are following financial developments in a manner that belies their traditional roles. Many assume, or hope, that rather than forfeit their pledges, both individual donors and foundations will mostly postpone their contributions as they too continue to follow the markets. The coming months will tell all.

During this period, even as they contend with a shrinking budget and the inevitable cutbacks, directors will need to make the most of the contributions they do receive. Panic tends to feed panic, and a sense of despair can easily set in. Those who are most professionally fit stand the greatest chance for survival.

Ben & Jerry’s co-founder, Jerry Greenfield, speaking in Tel-Aviv at a conference addressing corporate social responsibility, noted: “More than anything, this financial crisis is a crisis of trust. In this crisis, companies have not acted transparently.” The same principle is applicable to the nonprofit sector. Donors who are still active, though presumably sending less to Israel, should still demand transparency and accountability for their gifts, perhaps more than in more normal times. They need reassurance that their money is being expended with maximum reasonable efficiency, effectiveness and in fulfillment of their intent.

These are not the best of times. We hope that they will not turn out to be the worst of times.

The writers are philanthropic consultants with Donor Associates in Israel, Ltd.