Treasury seeks to help nonprofits

As private donations dry up, easing of bureaucratic obstacles and narrowing guarantee requirements will increase state funding.

Ronnie Bar On 88 248 (photo credit: Ariel Jerozolimski)
Ronnie Bar On 88 248
(photo credit: Ariel Jerozolimski)
The Finance Ministry is easing the conditions of financial guarantees required by nonprofit organizations, which will increase state funding by an annual NIS 150 million as the global economic crisis dries up private donations. "The Treasury sees the need to help nonprofit organizations in the wake of the global crisis, which is threatening their activity as the volume of funds raised in Israel and abroad shrinks," Finance Ministry Accountant-General Shuky Oren said Sunday. "As part of the government's general stimulus measures to ease conditions in the economy in various sectors, it was decided to help this sector by removing bureaucratic obstacles and narrowing guarantee requirements." Under the terms of the new directive, government-funded nonprofit organizations will be able to provide a letter of obligation instead of monetary guarantees and the standard interest payments and fees. As a result, state funding for nonprofit organizations will be increased by NIS 150m. annually. Until now, nonprofit associations (amutot) that supply services to the state have had to put up guarantees equal to 5 percent to 10% of their state funding for the duration of the agreement. For example, a nonprofit association providing services for the Social Affairs Ministry at a cost of NIS 10m., which comes out of the ministry's budget, can release the bank guarantee and put a letter of obligation in place; the release of the guarantee will put about NIS 1m. at the disposable of the association. The letter of obligation will give the state the authorization to deduct money from the association's budgetary allocation in the event of performance failure. Since waiving the guarantees could increase the state's exposure to nonperformance or bankruptcy cases by nonprofit bodies, it was decided to apply the directive for an initial period of two years, the Treasury said. The new directive will apply only to nonprofit organizations that provide services to the state and receive state funding directly from government ministries. It will not apply to nonprofit associations defined as "supported" amutot. Local nonprofit associations have suffered badly over the past year from the sharp plunge of the value of the dollar against the shekel and a fall in donations from local and foreign sources as the global financial crisis spreads. The collapse of investment funds managed by Bernard Madoff is a another hit to many of these organizations, as many of them, or their donors, were heavily invested in Madoff's pyramid scheme and have lost hundreds of millions of dollars.