In Fund-raising World, Israeli and U.S. Groups Seek Amicable Splits

Israeli and American affiliates sometimes part ways amicably, but there's still plenty of acrimony.

NEW YORK – On Tuesday, a divorce was announced between an Israeli organization and its American affiliate, one of several breakups over the past few years between Israeli charities and their Diaspora fund-raising partners.

The split, however, appears more amicable than many of its predecessors. The New York affiliate of Israel-based Rabbis for Human Rights is spinning off, with a new name and an end to the $2 million to $3 million it has given the Israel organization over the past decade, said Rabbi Jill Jacobs, executive director of RHR-North America. That outfit will now be called T’ruah: The Rabbinic Call for Human Rights.

The mission of the new, totally independent organization isn't changing, aside from its end of fund-raising for the Israel group. The split comes after eight years of discussions between the two groups’ boards, Jacobs said.

Until now the situation “has been extremely confusing for donors. People think we’re a ‘friends of’organization or think one is a chapter of the other. We felt that it wasn’t fair to our supporters” to continue the institutional association, Jacobs told Haaretz.

The Israel organization will do its own fund-raising in North America, she said. The groups will continue to work together to mobilize North American rabbis and cantors around human rights concerns in Israel and the Palestinian territories, but T’ruah will also maintain its focus on domestic human rights campaigns. The change was motivated by a slight difference in mandates.

“Every year we would negotiate the amounts we’d send” to the Israel organization, said Jacobs. “From the Israeli side there’s a sense that they would do better if they were able to raise money here and be able to be really clear about their work, mission and strategy. They very well might be right, that they can raise more money here. I hope we both will.”

Yariv Mohar, spokesman for the Rabbis for Human Rights, who is based in Israel, described the reasons for the split as follows: "T’ruah /RHR-North America was established about 10 years ago by Rabbi Arik Ascherman and fellow rabbis in order to raise funds for the activities of RHR in Israel. T’ruah has developed a local agenda in the States as its main goal. RHR is about human rights in Israel, and is the only rabbinical NGO doing so for more than 20 years, and it still is."

While the RHR split reportedly leaves the groups on relatively good terms, several recent divorces between Israeli amutot, or charities, and their fund-raising affiliates have been mired in acrimony, with some spats even ending up in court.

Contentious splits and renegotiated relationships have recently taken place, for example, between ORT Israel, World ORT and American ORT; and between the Jewish National Fund (Keren Kayemeth LeIsrael) and its affiliates in the United States and Britian.

In the case of the educational organization ORT, which operates in Israel and around the world, World ORT and ORT Israel settled a case in Manhattan federal court in 2009. ORT Israel, at the time the country's largest operator of nongovernmental schools, wouldn't use the ORT name in U.S. fund-raising efforts. Its American fund-raising affiliate is now called American Friends of Sci-Tech Schools.

ORT America is an affiliate of World ORT and raises money for its own educational programs in the United States and around the world. After losing the right to use the ORT name for its Israel programs, World ORT regained that right in a case at Israel's Supreme Court in 2011.

But the court battles continue. ORT Israel has sued ORT America at the Tel Aviv District Court to recoup money it said the American group raised on its behalf, said Daniel Kurtz, a partner at New York law firm Skadden, Arps, Slate, Meagher & Flom. This month, Kurtz testified as an expert witness on ORT Israel’s behalf.

The ORT conflict may be unusually litigious, but the issues are common to many organizations, say experts on Israel philanthropy. At the heart are differences in philanthropic cultures in the United States and Israel, and ramped-up expectations of fund-raising potential, along with an increase in scrutiny and requirements by the U.S. Internal Revenue Service. After 9/11 and the adoption of the Patriot Act, the IRS has required more documentation from American nonprofit organizations sending money overseas.

The ever-important IRS

The IRS issued two rare Private Letter Rulings, one in April 2010 and the other in April 2012, offering guidance to nonprofit tax attorneys and organizations on how IRS regulations are applied. Both rulings related to attempts to gain tax-exempt 501(c)(3) status by American Friends organizations for Israel-based Orthodox educational institutions, one a yeshiva and the other a yeshiva for married men. Tax-exempt status was denied to both because the applicants — whose identities in the publicly available Private Letter Rulings was redacted by the IRS — failed to meet requirements for organizational structure, documentation of assets and proposed grant recipients.

These rulings were the first Private Letter Rulings in more than 30 years, and both related to Israeli organizations, said a nonprofit tax attorney who requested anonymity. The rulings have prompted “concern among Israeli organizations – not just among amutot who were planning to do their own 'friends of' organization and have stopped,” the attorney said. “Directors are concerned about personal liability so they’re having trouble finding board members. There’s a kind of ripple effect,” she said.

Israeli charitable groups rely heavily on fund-raising in the Diaspora, which makes the IRS rulings on the creation of new American Friends organizations all the more significant, said the attorney. “There’s less philanthropy here and the tax system doesn’t encourage it as much as it does in the States,” said attorney Jonathan Shiff, managing partner at Jerusalem law firm Reshef and Shiff.

The recent conflicts between amutot and "friends of" organizations have also created a disincentive to Israeli groups, Shiff said. “People hear horror stories about American Friends that end up not sending the money over or have struggles about how it’s used. They end up with a lot of tension between Israeli and American organizations,” he said. It's also expensive to set up an American Friends organization. “They have to have enough potential donors in the U.S. already to make it worth it.”

Israeli organizations are increasingly relying on donor-advised groups like P.E.F. Israel Endowment Fund and the New Israel Fund to collect and disburse donations on their behalf. But using those vehicles doesn’t permit an Israeli charity to raise its Diaspora fund-raising visibility the way a "friends of" organization does, Shiff said.

Still, through at least 2010, Israeli fund-raising boomed in the United States. That year, 774 American organizations provide funding to Israeli groups. The vast majority, 667, were American Friends organizations, according to a study published last April by Brandeis University’s Cohen Center for Modern Jewish Studies. That's more than double the 265 American Friends of Israeli organizations that existed in 1990. The study,  “The New Philanthropy: American Jewish Giving to Israeli Organizations,” was written by Prof. Theodore Sasson and doctoral candidate Eric Fleisch.

In 2007 alone, Americans donated more than $2 billion to Israeli causes, says Sasson, more than double the figure from the 1970s through the 1990s. In fact, according to the study, Jewish giving to Israel comprises 16 percent of all donations by Americans to international causes — far higher than the percentage of Jews in the United States. And that doesn’t include American Christian giving to Israel.

Painful culture clashes

All these relatively new organizations and the large sums at stake have produced some painful culture clashes, say people in the field.

“The core issue is that there’s a huge difference culturally between Israelis and Americans that manifests itself in the relationship between American Friends and the amutot in Israel,” said Jeffrey Solomon, president of the Andrea & Charles Bronfman Philanthropies, which since 1986 has provided 976 grants to Israeli organizations totaling $93.6 million.  

“Part of the problem is the Israeli leadership of amutot continues to believe that the streets in the U.S. are filled with gold, and no matter how successful an American Friends organization is, they believe that much more money should be coming in,” Solomon said.

According to Kurtz of Skadden, Arps, “There’s no question that this is the philanthropic capital of the world. Americans give substantially more than anybody in any country, whether you’re looking at France or Israel. So everyone from all over the world comes here to raise philanthropic capital.”

But the sharp difference in philanthropic cultures plays out, for example, when an Israeli organization starts to raise money in the United States and doesn’t appreciate what it takes to develop trust relationships with donors. “You don’t develop trust in one conversation,” said Solomon. “Many Israelis in the amutot world don’t understand that. They basically say, ‘I’m giving you a staff person in New York, what do you need a board for? Go out and raise money!’"

They also don’t always appreciate that the IRS requires American Friends organizations to have complete, autonomous control over how their funds are disbursed. American Friends groups are not permitted to simply act as funnels for donations from Americans to Israeli groups.

“There really is this disconnect,” Solomon said. “Once funds are coming through that American Friends organization, their obligation is to maintain control of that money, according to IRS guidelines. So you say to your boss ‘I need quarterly financial statements,’ and the boss says ‘I don’t report to you, you report to me.’ Very often the fund-raiser doesn’t know the IRS rules, and certainly the Israeli amutot don’t know the IRS rules. Therein lies the tension.”

What’s more, significant shifts are afoot among both American philanthropists and the way Israel is perceived in general. Today it’s seen less as a start-up nation wholly reliant on Diaspora support, and more as an economic success of the new century.

And this is starting to make an impact on Israeli charitable organizations, which are increasingly expected by Americans to find support among Israelis, say philanthropy experts in Israel and the United States.

 “One of the things you hear all the time now from American donors is ‘how much have you raised from Israelis?’ We’re seeing the beginning of a trend saying ‘if 100 percent of your board has not given, then don’t ask me for money,'" said Solomon.

According to Daniel Sokatch, CEO of the New Israel Fund, “A new generation of American Jews says, ‘why should I be funding social services and arts and culture in a rich little country?’Sokatch's outfit raised more than $30 million last year to fund civil rights and human rights work in Israel and the Palestinian territories.

“There is a generation of donors now who understand the connection they have to Israel in philanthropic terms, and there are a few more years to get that new wing for the hospital or university," Sokatch said. "But their grandchildren and children will not be similarly motivated. I have donors tell me, ‘I used to give to the youth village or the research institute or the museum,’ but they’re now asking ‘why should I do that?’

Natan Golan, a partner at the philanthropy consulting firm Golan & Kaye, said that paradoxically, because of the more complex, fragmented way Americans now consume information about the country, they come with an oversimplified view of the "new" Israel.

"In the good old days the UJA or synagogue rabbi said 'I’m back from Israel, the situation is this,' and people gave generously. Today they are being surrounded by so many different questions that there’s an air of confusion" and Americans don't always grasp the extent of the needs, he said. "There’s an abundance of engagement points we didn’t have in the past, so people are asking far more questions. The Israelis are, frankly, stuttering in their answers."

But American expectations are also often too extreme, Golan said. "They put these draconian barriers" into the process of applying for funding. "Today you need a doctorate to be able to jump through hoops and apply for a foundation grant of $10,000," he said.

This has become a serious obstacle to Israeli amutot, particularly outside Jerusalem and Tel Aviv with their many English speakers. "You don’t have the level of education or sophistication, and they just give up and say 'it’s beyond our ability.' So less and less funding is going to these organizations, whose voices can’t be heard," Golan said.

In response, last year Golan's firm started the Israel Academy of Philanthropy to train Israelis, particularly in outlying areas. And people are eager to enroll. The course will soon graduate its fourth group, bringing to 50 the number of Israelis trained there to better respond to increased donor needs for reporting and transparency.

Yael Patir