For ‘Friends’ Groups, A New Normal

For ‘Friends’ Groups, A New Normal

With the philanthropic ground under them shifting, American ‘Friends of’ nonprofits having to adjust to new realities.

Giving to American “Friends of” Israel organizations dropped sharply in recent years, but don’t blame the economic downturn, say the writers of a recent report that documented and analyzed the dip. The recession exacerbated the decrease in donations suffered by such groups as the Jerusalem Foundation, the American Friends of Open University and the Hadassah Medical Relief Organization but didn’t cause it, the report’s author, Avrum Lapin of EHL Consulting Group, told The Jewish Week..

Even if the economy should recover to its pre-recession strength, some American Friends of Israeli nonprofits are in for tough times, said Lapin and others. The rules of the game governing philanthropy in the United States have shifted even in the past five years, and if American Friends groups are to thrive and even survive, both they and their Israeli counterparts need to understand how their world has changed.

Israel receives more than $1 billion in charitable donations annually, according to Hebrew University’s Center for the Study of Philanthropy in Israel. In 2009, 62 percent of the total came from foreign, mostly American, donors.

“Israeli organizations knew that the economy was bad, but they had no idea that there was a new normal,” Lapin said. “You can’t make the same demands on your American counterpart that you used to. You used to have an expectation that money would come in; now it’s less predictable.” Most of the groups EHL surveyed for this report had only an incrementally better year in 2010 than in 2009, Lapin said. Because many of them operate on a calendar year that starts in the fall, not all of the most recent year’s data is available.

After examining the donations reported by a representative sample of 80 Friends groups on their legally required IRS Form 990s, EHL found a decline in donations of $138 million, or 16 percent, between 2006 and 2009. U.S. giving overall declined only 1.5 percent during the same period. Giving to Friends’ organizations diverged significantly from the broader U.S. trend in 2009, when U.S. donations fell only 1.1 percent, compared with a 17.8 percent drop in giving to American Friends groups.

The major American Friends giving areas are education, arts and culture, and health and human services, with education claiming over half the philanthropic pie. Accordingly, education took the biggest hit, also in part because it relies heavily on a smaller number of bigger donations, the report said. Gifts to education groups like the American Friends of Tel Aviv University fell by 14.5 percent between 2006 and 2009, compared to a 2.8 percent drop in U.S. giving.

Part of the distress in the sector lies in the history of American Friends organizations, which Israeli nonprofits established as official U.S. nonprofits in order to enable supporters to receive tax deductions for their gifts. Some of the biggest American Friends organizations date from the early days of the state, when Israel was not the economic high-flier it is today.

“Many of these organizations were created under a different paradigm,” said Andreas Spokoiny, CEO of the Jewish Funders Network, which brings donors together to reflect on their giving, strategize and form alliances. “Israel was the poor member of the family that had to be supported. They were created under the nation-building paradigm, and now we’re in the partnership paradigm. It’s a two-way street.”

To be sure, not every American Friends organization suffered a dip in gifts during this period. Giving to the American Society of the University of Haifa rose 85 percent, while a hospital and an organization that provides pediatric cardiac care to children from developing countries more than doubled their donations (they weren’t named in the report). And some observers are more sanguine about giving to Friends’ groups in the near term. Sociologist Steven M. Cohen of Hebrew Union College doesn’t see any near-term systemic problem with these groups’ fundraising potential and interprets the decline as strictly related to the recession.

But Lapin maintains that organizations whose gifts haven’t dipped have probably updated their practices to reflect their understanding — which is not universal — that the days when Israeli non-profits could count on unquestioning American support are over.

“The successful organization will see the American donor as a partner, and do what it can to bring value into the life of the donor,” Lapin said.

Spokoiny sees a similar dynamic at play with his organization’s members, all of whom donate at least $25,000 annually. They are the subject of so many appeals that if they don’t find what they’re looking for at one recipient of their generosity, they will simply turn to another, he said. Jewish philanthropists allocate only a quarter of their giving into the Jewish world, Lapin said.

Contemporary funders want their gifts to have an impact; they want to see that impact and they want to feel direct ownership of it, Spokoiny said. In this respect, both Spokoiny and Cohen said, Friends’ organizations have an edge over umbrella organizations like the federation system, in which it is harder to track the impact of a gift.

It’s of the utmost importance to the future health of Friends’ groups’ finances that they exploit this advantage, Lapin said. Some said they already are. The breadth of research underway at Tel Aviv University means that its donors can earmark their gift for a particular interest, said a spokeswoman for the American Friends group, Barbara Schreibman. In 2010, the American Friends of Tel Aviv University took in $7.6 million in contributions and grants, according to its Form 990. 2010 was slightly better for AFTAU than 2009, Schreibman said, but its revenue hasn’t returned to pre-recession levels.

Younger donors in particular want direct involvement.

“Gen X is much more hands-on,” said James Gurland, the national director for the Jerusalem Foundation’s American fundraising group. “They want to be really informed, and you have to be more transparent with them, in terms of reporting.”

Both Gurland and Schreibman said their respective organizations are actively involved in the search for their next generation of supporters. The average age of the Jerusalem Foundation U.S. arm’s top 20 donors is 65, Gurland said, and they generate 60 to 70 percent of the organization’s gifts. The Jerusalem Foundation takes in, on average, $25 million in contributions and grants annually.

“It’s an area that we need to work on,” he said, mentioning that the group is hosting its first gala in 10 years in December in the hope that the event will lure new donors. The foundation is also sponsoring a group of fellows on behalf of PresenTense, the social entrepreneurship ideas incubator, to strengthen its connections to emerging philanthropists and leaders.

That these organizations are so directly tied to Israel can also make the acquisition of younger supporters a challenge. The increase in intermarriage is correlated with a decrease in attachment to Israel, Cohen said, but the growing population of Orthodox Jews will offset that.

“The Orthodox are very attached to Israel,“ he said. “They’ll be generating lots more potential donors, so we could have a tale of two Jewries with respect to Israel.”

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