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The State, Volunteers and Nonprofit Organizations in Israel: Just 20 years ago the Israel National Council on Social Welfare, in cooperation with the Ministry of Labor and Social Affairs, prepared a unique report on the relationship between voluntary and governmental agencies in the field of social services in Israel (National Council on Social Welfare, 1982). The interest in this topic developed due to a remarkable steady increase in volunteerism that made whole areas of services dependent largely on efforts of voluntary organizations. But government primacy always prevailed due to successive Labor governments, their quasi-socialist economies and a strongly entrenched conservative civil service bureaucracy that rejected any change in the status quo. Unfortunately, the 1982 report lamented that there was no distinct "voluntary sector" in Israeli society and "the interrelationship between the various voluntary organizations and their coordinating mechanisms is not strong" (NCSW, pg. 31). How amazing and satisfying it has been to witness an upheaval of change and growth in the last 20 years. As we will soon see, the scope of activity, economic and political power, competition and cooperation with government and the role of the nonprofit sector in Israeli society are incomparable to past dimensions. Among the reasons cited for this growth is decreased government spending due to the economic slowdown following the 1973 Yom Kippur War, civil discontent with government bureaucracy, limited government initiative, politicization of services, disappointment with the welfare state and a new reliance on grass-roots self help. Also crucial was the change in government in 1977 when the Likud Party under Mr. Menachem Begin introduced economic liberalization, promoting private enterprise and initiative, and relatively less emphasis on central government. Ironically, the commencement of the market economy and post-welfare state era that has since been endorsed by every subsequent government, Labor and Likud alike, marked the rise of the contemporary Third Sector or the "nonprofit sector". Apparently the decline of the welfare state is signaled by the blossoming of the nonprofit sector. Or perhaps this is a natural phenomenon that happens when the welfare state reaches its limits (Perlman, 1981). This monograph takes a look at the current relationship between the State and volunteers and the nonprofit sector in Israel today. What is the scope of the Sector, how does the State or government relate to the Sector today, and what message does it project officially and practically about its relationship with the Sector? What is the scope of volunteering and charitable giving in Israel today and where does the revenue for nonprofit organizations come from? How do Israeli trends compare with other countries? These are some of the questions that this monograph will discuss. With this background I will then describe some of the current dilemmas regarding the nature of the relationship between the State and the nonprofit sector, along with some recommendations for new legislation and change. I want to stress that I share these comments not only as an academic who has worked hard to create and develop the study of nonprofit organizations, volunteering and philanthropy in Israel, but also as founder and volunteer chairman of the Israel Free Loan Association (IFLA). This nonprofit association has provided over $35 million in interest free loans to more than 18,000 new immigrants and other needy Israelis since 1990. This work as a volunteer at the IFLA and several other nonprofit organizations has provided a lifetime of pleasure that comes from integrating theory and practice, and most of all, helping people to help themselves reach their maximum potential and participation in society (Jaffe, 1991, 1995b). The Three Sectors In all countries social scientists speak of three "sectors" of social, civil and economic activity (Anheier and Salamon, 1998; Salamon, 1999). Briefly, the sectors are:
Nonprofit organizations are usually created by groups of individuals banding together to reduce, alleviate or eliminate their own pain or that of others. Members in classic grass-roots organizations and their leadership sense "pain" 24 hours a day, not just during working hours, and this explains much of the motivation for their activity and involvement. Civil and democratic societies are measured by citizen involvement. In Israel, the degree of involvement is directly tied to times of personal or national crises, and the desire to create social, economic or political change (Jaffe, 1993). It is inconceivable to think of Israel today without the nonprofit sector. There would hardly be any of the pervasive, rich civil society and citizen involvement that characterizes the country today. Only political and self-interest groups would be the norm rather than the huge network and economy of nonprofit associations that exists today. Size and Scope of the Nonprofit Sector in Israel In 1960, the year I immigrated to Israel and began teaching at the Hebrew University of Jerusalem, the "Third Sector" was a non-subject in academia, and viewed by most as a minor past-time for a small minority of well-meaning older women. In its early years the social work profession in Israel was stigmatized by this stereotype of good-hearted. nonprofessional, volunteer women. Citizens, mostly immigrants, were struggling to make a living, find decent housing, get an education or learn a trade, serve in the army and maintain secure borders with neighboring states. Nevertheless, by 1982 there were 12,000 registered nonprofit organizations (Roter, et al, 1985). As the population increased to over 5 million in 2001 and the post-socialist new market economy prevailed, government and lawmakers pulled back on social spending and human services, choosing to contract out to nonprofit organizations and businesses. By early 2002 there were 29,000 registered nonprofit organizations and 1,000 more being registered every year. The "Third Sector" is now recognized as a major area of massive public involvement in society and a major part of the Israeli economy. In 1998 the total expenditure of the Sector was 33 billion shekels, or 13% of the GDP (Gidron, et al, 1999). The Sector employed 147,000 full-time workers (172,000 including volunteer positions), or 9.2% of all Israeli employees (10.7% including volunteers). The comparable percent of nonprofit organization's share of total employment is 12.4% for Holland, 10.5% for Belgium, 7.8% for the U.S.A., 6.2% for the U.K., 4.9% for France and 3.5% for Japan. A 22 country average was 4.9% in 1995 (Salamon, et al, 1997, 1998). The data on the nonprofit sectors' share of the total employment in each of the 21 countries, including Israel, appears in Fig. 1. The Sector has clearly concentrated its efforts on specific areas of activity in Israel. For example, 98% of all university education, 88% of all ambulatory medical care, 64% of all vocational education, 47% of all care for the chronically ill and 42% of all child care programs are provided by nonprofit organizations (Gidron, et al, 1999). A good case-in-point is the Yad Sarah organization which has branches in 92 cities and 6,000 volunteers that loan out medical and orthopedic equipment to 51% of all Israelis. Each week the organization does 5 tons of laundry for the incontinent, and answers 13,000 home emergency buzzers. Each year the services that the organization provides save the government $320 million (Dachaf, 2001). A study on volunteering in 1997 reported that 32% of all Israelis volunteer. In the United States a study in 2001 showed that 44% of all adults (83.9 million) over age 21 volunteered for a total of 15.5 billion hours, equivalent to over 9 million full time workers (Independent Sector, 2002). In Israel, the average number of hours volunteered was 155 hours per year, or 162 million hours per year. Of these, 72 million hours were volunteered within the framework of a nonprofit organization. The money value of Israeli volunteers in 1997 was $200 million per year (Shye, et al, 2000, Gidron and Katz, 1998). In the U.S. the value of volunteer time was $239 billion in 2001. Despite stereotypes and myths about Israeli philanthropy, Israelis give consistently and impressively to charity. Most Israelis and Jews around the world have absolutely no idea of the scope of charity and philanthropic work going on in Israel and what they think they know is often incorrect. This is probably because the fundraising activities of thousands of Israeli nonprofit organizations that solicit funds abroad give the impression that little funding or fundraising is available or being done in Israel. This stereotype is far from true and does great injustice to Israeli individuals, foundations, and corporations that give donations and grants to a wide range of charitable organizations and programs. A comprehensive discussion regarding the nonprofit sector in Israel, the laws governing nonprofits, and advice to donors appears in the book "Giving Wisely: The Israel Guide to Nonprofit and Volunteering Organizations" (Jaffe, 2000). The book also presents detailed full profiles of hundreds of nonprofit organizations, including mission statement, funding sources, financial information, and areas of activity. A second volume, "Sources for Funding: The Israel Guide to Foundations" provides profiles of foundations working in Israel and a review of the growth and development of the "foundation sector" (Jaffe, 2001). In addition to the above, partial and full profiles of nearly 28,000 Israeli nonprofit organizations and foundations appear on a unique website created by this author as a project with the School of Social Work at the Hebrew University of Jerusalem (the address of the website is http://www.givingwisely.org.il). The profiles attest to extensive fund raising activity and impressive success at providing truly imaginative and essential services to the Israeli public. Without the support of the public, few of these organizations could survive. A study in 1997 by Shye and others of Ben Gurion University's Israeli Center for Third Sector Research showed that 77% of all Israeli adults, more than 1.75 million, contributed to a charity of their choice. The average annual donation per household was $260.00 and benefited organizations providing welfare services (40%), healthcare (20%), religious needs (25%), education (14%) and other services (1%). The total amount donated directly to charity in 1997 by Israeli citizens was NIS 465 million or $143 million (Shye, et al, 2000). In 2001, American citizens gave an estimated $212 billion to charity, an increase over previous years, but not necessarily because of the September 11 terror attack (Giving USA, 2002). Another study by the Israeli Center showed that in 1996 the ultra-orthodox community 89% of all adults were donors compared to 85% of the orthodox, 71% for the traditional, and 68% for the secular community. University educated persons gave primarily to welfare and health services, while those without a high school degree gave almost equally to welfare, health, and religions organizations. In the ultra-orthodox community, 61% donated 1% or more of their income to charity, compared to only 3% of donors in the secular community (Gidron and Katz, 1998). According to Gordis and Fenton (1999), the average ultra- orthodox Israeli donates $285 per year, the average orthodox Israeli donates $144 per year, and the average secular Israeli $38 per year. Gidron's study found that although 83% of those with high income donated, 63% of those with very low income also donated. Most donors (77%) were married, but 57% of single adults also donated to charity. Regarding age, 65% of those aged 22-39 donated, compared with a peak of 79% for those aged 30-40 and 71% for those aged 65 and older. These are very important statistics, showing that the Israeli public is very much involved in giving charity and funding nonprofit organizations and takes serious responsibility for this work. This is not a recent phenomenon, but has been a characteristic of the State since before its creation. It is very typical of Jewish values practiced in the Diaspora and is an integral part of Jewish behavior, religion, and culture (Frisch, 1924). Although there are relatively few central campaigns and limited faith in proxy giving, Israelis have always been quick to offer aid, both financial as well as volunteer time, to aid other people in times of need (Jaffe, 1992). Funding Sources for Israeli Nonprofits Charitable giving is only one of three major sources of income for the nonprofit sector in Israel. The other two are public (i.e. government) funding and earned income. Of the three, the major source by far is public or tax-based government grants and contracts. In 1998, public funding accounted for 64% of the revenue of the nonprofit sector in Israel. Sources for this funding come from legislated support transfers (NIS 21.4 billion), reimbursement for services (NIS 1.2 billion), support grants (NIS 2.6 billion), and from bequests or legacy funds left to the State (NIS 72 million). Together, these State funds totaled NIS 25.74 billion. In 1997, only about 3,200 of the nonprofit organizations received government support (Gordis and Fenton, 1999). The bulk of the funding went to major health organizations (e.g. Kupat Holim, etc.), education (e.g. universities), welfare, and other institutions, mostly by legislated or contractual purchase of service arrangements. A second source of income is earned income, including fees from clients and consumers of products and services sold by the nonprofits, membership dues, and income from assets. This income totaled 26% of nonprofit sector funding in 1995 (Gidron, Katz and Bar, 2000). In comparison with 19 other countries, Israel rates fairly high as "government dominant" concerning the source of revenue for its nonprofit sector, as opposed to "fee dominant" countries, such as Mexico, Peru, Japan, and the USA. A comparison of sources of income for nonprofits in 19 countries, including Israel, appears in Fig. 2. The third source, contributions by individuals, corporations and foundations, accounts for 10% of the sector's income. Part of this income comes from philanthropic transfers to Israel from abroad, primarily the USA, including private and government grants and gifts. The Reports Unit of the Central Bank of Israel notes that in the year 2000 about 80% of the reported transfers were made in US dollars, bringing the total amount of donations and gifts from the USA to approximately $2.6 billion, compared with the Israeli government operating budget that year of $55 billion (Boms, 2001). It is important to point out that foreign philanthropic gifts and donations transfers to Israel from 1985 through 2000 consistently and dramatically increased during those years while united Jewish appeals sponsored by Jewish federations abroad were either flat or declining during this same period (Jaffe, 1985, 1987; Berman, 1998; State of Israel, 1996). In my view, this is due to the phenomenon of direct giving as a norm and the increasing sophistication of Israeli nonprofit fundraising from individuals, foundations and government agencies abroad. This trend is clearly evident in Fig. 3. There are over 3,200 foundations registered in Israel today, including over 1,722 "hekdeshot" or trusts and 292 "companies for the benefit of the public" (Tannenbaum and Kaplan, 1996; Reiter, 1996; Adler, 1999; Barnai, 1994). In 1999 the capital held by Israeli foundations amounted to nearly one billion dollars (Shye, Lazar, Duchin, Gidron, 2000; Jaffe, 2002; Siegel, 2000; State of Israel, 1998; New Israel Fund, 2002; PEF - Israel Endowments Funds, 2002). Israeli foundations, community funds, hekdeshot, company sponsored and family foundations and federated giving foundations are all major partners in the nonprofit sector. The remarkable growth of the foundation wing of the Israeli nonprofit sector is important for the growth of the Sector in general, and for direct, independent involvement of donors in Israel and abroad in shaping Israeli society (Freeman, 1991; Giles, 1999; Goodman 1989; Gordis and Fenton, 1999; Jaffe, 1998b; Sadan, 2000). Beyond the income from foreign transfers and local foundations it is important to remember that most of the private donations come from individual Israeli donors (77.3%), legacies and bequests (7.6%) and corporate gifts (5.1%), which indicates increased indigenous Israeli philanthropy (Shye, Lazar, Duchin, Gidron, 2000). A Summary of Trends In view of the information presented above we can summarize some of the salient features of the Israeli nonprofit sector.
Models for the Relationship Between the State and the Nonprofit Sector There are a variety of ways that the State and the nonprofit sector can interact and relate to each other. I will briefly present five major models and assess what I believe is the relationship which best describes the situation in Israel. These models are important not just for theory, but because they explain and predict policies, legislation, resource allocation, program development, income, clientele and many other phenomenon related to the nonprofit sector in a given country. 1. A Partnership Relationship This model, best articulated by Lester Salamon of Johns Hopkins University (1987a, 1987b, 1999) perceives a harmonious relationship where government is the major "philanthropist" and where this yields a collaborative, partnership, cooperative, relationship between government and nonprofit organizations. Another researcher, Ralph Kramer (1981) who pioneered in the study of government contracting out of services to the nonprofit sector, operationalizes the concept of a partnership reality, rather than separation or antagonism between government and nonprofit organizations (Campbell, 2002; Saidel, 1991). Basically, this model views government influence and involvement as very positive and essential for the nonprofit sector (Wayman, 1996; Brinkerhoff, 1999; Coble 1999). 2. Government and Market Failure According to Burton Weissbrod (1988) the nonprofit sector is active despite government and in place of government. When government services and programs fail to provide services, the civil sector establishes, by default and out of necessity, services to fill the vacuum. This means that government is not working in tandem with nonprofit organizations, but often in different and opposite directions. Under such circumstances, no funding is generated by government and this is not good for growth of the sector. 3. The Shadow State This model, developed by Jennifer Wolch (1990) acknowledges that human services provided by voluntary organizations do indeed receive massive government funds, but this is always subject to state control. Basically, this dependency subverts the nonprofit sector as an arm of the State. On the one hand this is good for the sector, enabling expansion, wider participation of citizens and provision of more services. On the other hand, this is bad for the sector because it destroys independence, serves the government's political and ideological needs, politically "correct" services, and restricts advocacy. Under different regimes the nonprofit organizations are used as tools by both the political and economic forces of the left and the right to promote their respective agendas (Young, 2000; Dawes, 1988). 4. Total Government Control Totalitarian regimes still exist in many countries of the world, and only recently did the Soviet Union and Eastern European countries move to more democratic types of government. In this model, government fears citizen organizations that are not controlled by the state. Such uncontrolled (and unfunded) indigenous activity is seen as a threat to the state. This model is anathema to the concept of the civil society and a healthy nonprofit sector (James, 1989; Heinrich, 2001; Regulska, 1998, Kuti, 1999, Pustintsev, 2001). 5. The Love-Hate Ambivalent Relationship This model is my view of the situation in Israel today, where the government has a love-hate relationship with the nonprofit sector. Within the framework of the transition from a quasi-welfare state to a post-welfare state market economy, successive recent governments have pulled back on human services and social insurances, greatly increased contracting-out for services from the nonprofit and business sectors, and provide grants to support various selected nonprofit activities (Smith and Lipsky, 1993; Peat, 2001). In classic form, local and national government now supervises, licenses and sets standards for the work of many nonprofit service-providing organizations. The nonprofit sector is overwhelmingly dependent on the government for 64% of its income and part of it would probably collapse without this support. However, 80% of Israeli nonprofit organizations do not receive any government support. This support goes primarily to very large organizations providing massive primary health care and higher education, most of whose relationships with government are legally regulated (Bar, 2002). Why does government have a love-hate relationship with the nonprofit sector in Israel? I suggest the following analysis and reasons: WHY HATE?
WHY LOVE?
A State Personality Disorder The love-hate model manifests itself in many ways, some which are regressive and detrimental to the growth and development of the nonprofit sector. I have selected six examples of government friction and antagonism of the sector that represent at best, ambivalence, and at worst exploitation of the Third Sector in Israel. Negative Stereotypes and Generalizations There are many stereotypes and generalizations about corruption in nonprofit organizations. Alongside praise and public awards ceremonies there is a prevailing suspicion about corruption and lack of accountability in general. While the Registrar of Amutot has been reluctant to cancel licenses on the one hand (until very recently), the licensing procedure has become very bureaucratic, lengthy and costly. The fact that licenses are not massively cancelled and relatively few nonprofit board members have been prosecuted, suggests that by and large the sector is honorable and responsible. Yet the media and the government do little to spare the sector from stereotyping whenever misdeeds of the few that are discovered. The Licensing Maze In the field of nonprofit and philanthropic work the four most important laws which regulate charitable, nonprofit organizations in Israel are the following: The Amutot - Nonprofit Societies Law (1980, revised in 1996), the Trust Law (1979), the Value Added Tax Law (1975), and the Income Tax Ordinance (1962). Lack of space prevents us from describing these laws in detail, but suffice it to say that in general, a nonprofit organization must first be registered as an Amuta, and then must apply separately to the Ministry of Finance for tax exempt status ("mosad tziburi") and two other licenses, if they desire these licenses. Any serious nonprofit organization must acquire at least five licenses in order to fundraise properly and be fully recognized in Israel. These licenses are for the status of "amuta", "mosad tziburi", "malkar", "Paragraph 46", and "nihul takin". Each license is issued by various government authorities as follows:
For organizations that wish to be registered as a trust, the legal status of the hekdesh requires that it must be registered and licensed with the Registrar of Hekdeshot at the Ministry of Justice. The hekdesh must have a board of trustees, allow public inspection of the trust deed, submit annual reports to the Registrar and allow supervision of the trustees' actions by the Registrar on behalf of the State. During the Ottoman Turkish conquest of Palestine, Moslem Shaaria law prevailed and lands that were bequests for public use were called "Wakfa lands". Even the Sultan himself could not confiscate wakfa land. In this way, many Jewish hekdeshot were created (97 between 1881 and 1889), many of which exist to this day. The British Mandate government transferred jurisdiction of hundreds of hekdeshot created before 1917, during the Ottoman period, to the Rabbinical Courts in 1922, and in 1959 the Israeli Parliament transferred their jurisdiction to the civil District Courts of the State of Israel and established the Office of the Registrar of Hekdeshot in the Ministry of Justice (Tannenbaum and Kaplan, 1996; Barnai, 1994). Another type of nonprofit license, but less ubiquitous in Israel, is "the company for the benefit of the public". This legal nonprofit entity is defined according to Article 32 of the Companies Act of 1983, which recognizes a company founded for the promotion of commerce, arts, science, religion, charity, or any other social function with the aim of benefiting the public. This type of association can obtain tax exemption for donations, but it is governed as any normal commercial company. It is not a profit-making body, and directors and members cannot share dividends. Like all registered companies, the company for public benefit can be dissolved (unlike a trust) and the responsibility of board members is not personal (unlike amutot). Company structure requires accepted procedures for accounting, hiring, firing, and decision marking by the board. Most of these foundations are very large institutions with a wide scope of activity that provide services to the public. Most of them rely very heavily on public and government (national or municipal) funding. Unlike hekdeshot, very few of them had their own funds when they were established. Some classic examples of companies for public benefit are the medical service providers or "sick funds" such as the General Kupat Holim (founded by the General Federation of Jewish Labor, better known as the Histadrut), the Israel Museum, the Open University, the Jerusalem Theater, ORT Foundation and many others. The company for public benefit must be registered with the Registrar of Hekdeshot at the Ministry of Justice, which is responsible for receiving annual financial reports and overseeing accountability according to the Companies Act in areas of education, health, welfare, religion, and other public services. This is why many of the hekdeshot in Israel (and abroad) are foundations. The best translation for hekdesh in English would be a "trust", where the assets of a private donor, i.e. a bequest, grant, or property, are deposited or dedicated to a permanent fund, the fruits of which are earmarked for specific public welfare projects. This brief explanation of the licenses and permits needed to operate a nonprofit organization in Israel shows that the number of permits needed, expenses, reporting required, and the number of different government authorities involved is awesome. Taxation of Nonprofits Taxation laws are one of the best ways to determine a government's attitude towards its nonprofit sector. Israeli tax laws are not supportive, and in fact, earn revenue from the sector while paying lip service to the importance of the sector. The following is a list of the various taxes paid by all nonprofit organizations, related to employees:
In my estimation, based on data from the Ministry of Finance for 1998 the total amount of taxes collected from the nonprofit sector was 7.9 billion shekels. In that same year the total amount of government grants to the sector was 25 billion shekels. In other words, the sector returned in taxes over one-third of its government grants. (See table Number 1 for the data). Compared with other countries, Israel overtaxes its nonprofits (Independent Sector, 1988; Rooney and Tempel, 2001). Perhaps the most discouraging and unfriendly relationship of government toward the sector can be seen in the tax law regarding donations. As noted above, only donations to nonprofits that have obtained from the Knesset Finance Committee the tax deductible status permit under Paragraph 46 of the Income Tax Law, are tax deductible. However, the deduction allowed is only 35% of the donation, up to 2 million shekels per year. The minimum donation to which the deduction can apply is $82.00 (Mor, 2001b). In other words, 65% of all donations to tax deductible organizations are taxable. But what if an organization does not have the Paragraph 46 permit? In that case all donations are 100% taxable, i.e. nondeductible. The irony is that of the 28,885 nonprofit organizations (amutot) registered with the Ministry of Interior in 1998, only 10,126 were also subsequently registered with the Ministry of Finance as a "public organization" (mosad tziburi), and only 3,133 organizations had the accreditation from the Knesset Finance Committee under Paragraph 46 of the Income Tax Law providing tax deductible status for donations (Mor, 2001b). This means that in 1998 only 11% of all amutot and 31% of all mosdot tztiburim had the tax exemption permit for donors. Donations to all other organizations were 100% taxable! Most Israeli donors are unaware of this situation, and most wage earners who do give to tax deductible organizations do not benefit because the donation is usually less than $82.00 (Mor, 2001). Table No. 2 presents the number of Israeli nonprofit organizations and the types of licenses they hold. The sparse number of organizations that have obtained Paragraph 46 tax deductible status can be explained by several hypotheses:
If the two latter explanations are true, then there is much room for education about fundraising and how to navigate the bureaucracy and a need to reform the licensing procedures. In view of the previous data regarding taxation of the nonprofit sector, my hypothesis is that the limited allocation of Paragraph 46 tax deduction permits is part of an overall pattern of basic unfriendly government relationship with the nonprofit sector. On the contrary, government should encourage organizations to obtain all the necessary permits and skills for fundraising and enhanced management and public recognition. Transparency vs. Secrecy Another manifestation of government ambivalence about the nonprofit sector is apparent in its policy concerning access to information, and transparency. On the one hand the Freedom of Information Law (State of Israel, 1999) was designed to allow all citizens access to information from government agencies and to end their monopoly and ownership of information. My assumption is that contracts, permits and benefits received from a public agency represent agreement to divulge information to the public. Since nonprofit organizations, including foundations, have registered with the Ministry of Interior, Finance or Justice in order to obtain special permits and status regarding funds that they hold or grants that they receive, it makes sense that the public has a right to information about them. The trade-off for these privileges should be transparency of nonprofit records and access to government files on nonprofit organizations, including tax files. Unfortunately, access to files is only available from the Registrar of Amutot, and only for amutot. Anyone can ask to read one of these files at the Registrar's office, and for a fee, the Registrar will make photocopies of pages requested. Only the barest identifying information is available on the Ministry of Interior website. At the other extreme, the Ministry of Finance, which has the most up-to-date information, especially financial data required as part of the annual license renewal procedure, allows absolutely no access to mosad tziburi or tax deductible nonprofit organization files. These files are treated as private citizen's tax reports, and are totally secret. In this respect, the American tax reports (I- 990 forms) are available to the public, and even posted free of charge on the popular "Guidestar" website or published each year (Guidestar, 1997). Other income tax and information is published annually in a variety of directories in the U.S., Canada and England (Feczko, 2000; Taft Group, 2000; Chapel & York, 2000; Canadian Centre for Philanthropy, 2000). In 1982 this author published Giving Wisely: The Israel Guide to Nonprofit and Volunteer Organizations (Jaffe, 1982). It was the first directory of profiles of Israeli nonprofit organizations, with the specific purpose of forcing more transparency on the nonprofits, and providing access and information to donors, volunteers and researchers. In 2000, a second, much enlarged edition was published, followed in 2001 with a similar volume (Sources of Funding: The Israel Foundation Directory) on foundations in Israel. Both of these books containing hundreds of full amuta and foundation profiles, were posted on the "Giving Wisely" website (http://www.givingwisely.org.il) created by this author. The site also contains partial profiles of 28,885 amutot, which is the entire database of the Registrar of Amutot. This database is purchased each year and posted on the site. The "Giving Wisely" site is a project of the School of Social Work of the Hebrew University's master's degree program in Nonprofit Management. It was initiated and implemented by this author in 2000 and funded by private foundations in Israel and the United States. Profiles can be electronically added and updated at any time, at no cost. Thousands of donors, managers, volunteers and researchers use it each week (Cashman, 2000; Watzman, 2000). The site has been a good catalyst for promoting transparency and openness of nonprofit management to providing information to the public. It will not be complete, however, until the tax information for all Israeli nonprofits are available by law for posting on the site, or on a similar government site. At best, the government is very ambivalent about sharing information, and many private foundations and politically connected nonprofits prefer not to share information with the public. This combination of vested interest in secrecy is deadly for transparency, but there is no better watchdog for accountability than the public (Bothwell, 2001; Cutt and Murray, 2000; Better Business Bureau, 2001; American Institute of Philanthropy, 2002). The Government and the Volunteer Establishment In April, 1972, the Prime Minister, Golda Meir, brought about the establishment of The National Council for Voluntarism in Israel. The country had just gone through very serious social and ethnic turmoil, and a major Report on poverty in Israel had been submitted by a prestigious government appointed committee. The Prime Minister felt very strongly that one of the responses to poverty was the need for government to encourage volunteerism by the public and the establishment of a nonprofit agency, the National Council for Voluntarism. The Council was established by the Cabinet on the recommendation of a special Ministerial Committee for Social Welfare and a minimal annual budget was allocated from the budget of the Prime Minister's Office. The mandate was to help close social gaps through recruiting volunteers, liaison with and give advice to government ministries, municipalities and nonprofit organizations (Prime Minister's Office, 1972). Over the years the work of the Council greatly expanded, representing Israel in conferences and international organizations, promoting volunteering, holding an annual national conference, and giving advice and consultation to nonprofit organizations and various ministries and municipal agencies. However, as the various government and municipal volunteer departments expanded over the years, and work with volunteers became normative, the government began to diminish the power of the National Council. This was manifested by decreasing budget allocation despite increasing activity by the Council (see Table No. 3) and by moving the responsibility for the Council from the Prime Minster's Office to the Ministry of Science in 1993 and then back to the Prime Minister's Office in 1996. In 1981 a secret protocol of the Ministerial Committee for Social Welfare revealed the basic attitude of the government towards the National Council and about volunteering in general that sums up the love- hate relationship that exists to this day. The following excerpt provides unique insight into this relationship: "The need for efficiency, manpower, financing, and implementation of social policy requires a body that will coordinate volunteer activity and implement the priorities of [government] social policy.... In mid-2002, the crisis between the government and the National Council came to an end when the NIS 600,000 budget previously approved by the Prime Minister's Office was halved, forcing the closing of the Council's office and dismissal of the staff. Throughout its history the annual budgets of the Council were negligible (NIS 103,000 in 1992 to NIS 374,000 in 1999) and its mandate never allowed the Council to be more than a weak servant of the government ministries and municipalities, by design, not default. Recipe for Partnership The growth of the nonprofit sector and the advent of the market economy in Israel indicate that old relationships between government and the sector are no longer viable in Israel. The lip-service and benevolence of government towards the nonprofit sector cannot sustain the inter-dependence of each sector upon the other. There is now a need for a real partnership that serves the goals of each sector and allows them to fulfill their maximum potential roles. This new covenant can help the country flourish, but requires some basic rethinking of current relationships and legislation. The following are recommendations for changes needed: Revision of Tax Laws Beyond the volunteerism, motivation and great ideas of dedicated leadership, no nonprofit can survive and develop without income. Despite great efforts to raise funds, taxation is perhaps the major single expense and cause of lost income. Government must show its desire for a true partnership by changing tax laws to enable nonprofit organizations to finance expansion rather than stunting their growth through harsh taxation. Such changes should include the following:
Nonprofit organizations are easy targets for taxation because they have no meaningful lobby in the Knesset, they are relatively unorganized as a sector of the economy, and because taxation is direct and administratively simple. But the heavy tax burden on this sector means that they provide far fewer services than they are capable of, resulting in greater expenditure by the government. For many organizations it is a matter of survival. One Licensing Authority The fact that four different government agencies provide various licenses to nonprofit organizations is an invitation to chaos, inefficiency, lack of accountability and expensive bureaucracy. Historical and political antecedents may be responsible for this situation, but responsible legislation can correct this situation. I believe that a single government Authority for nonprofit supervision and administration must be established that will be responsible for all licensing. The most likely host for this Authority is the Ministry of Finance since it already provides the most essential licenses (i.e. mosad tziburi, malkar) and recommends the Paragraph 46 tax deduction for donations. Such a change should also contemplate eliminating the amuta license altogether and require every nonprofit organization to obtain the mosad tziburi license as the basic operating license. The amuta license and its administration being lodged in the Ministry of the Interior are relics of the Ottoman-Turkish Empire that have never been seriously revised or reviewed since the creation of the State of Israel in 1948. The same problem is true for the registration of hekdeshot (trusts) and public companies that have historically and arbitrarily been lodged in the Ministry of Justice. All of this scaffolding must be reviewed and reconstructed in a more rational and effective structure such as a National Authority for Nonprofit Administration. A National Database on Nonprofit Organizations The problem of transparency, accountability and access to information about nonprofit organizations is of great importance in a democratic society. A single licensing Authority, as recommended above, would allow for centralization and dissemination of information about all the various types of nonprofit organizations, including tax information. It is important that this information be computerized and posted on a special website, similar to that of Givingwisely, Guidestar, or the British Charity Commission, and funded and operated by a private, or preferably, a government authority. No amount of legislation or licensing scrutiny can match the potential of the public to watchdog and evaluate nonprofit organizations. Only the public has the best potential to actually compare what is reported and what is the reality of nonprofit activities and governance. This scrutiny can only take place if the government guarantees transparency and access to information. A New Covenant Needed In summary, there is an urgent need for a new covenant between the government and the nonprofit sector. The problems facing Israel now and in the decades ahead require an end to lip service and empty expressions of support for volunteering and nonprofit organizations. It is time for new legislation to reform the tax laws, licensing arrangements, and public access to information and involvement in the sector. The changes recommended here offer a rationale and blueprint for many of these conceptual and organizational changes. In the final analysis, government must decide what its true relationship will be to the nonprofit sector. It would be a shame if the sector is seen only as a secondary tool of a controlling centralized government. The healthier scenario is a true partnership where government actively encourages cooperation, growth and maximum involvement in the sector for the welfare of the country and all of its citizens. Return to the Giving Wisely Home Page. |