Sunday, June 03, 2012

The 990 tax return of Nefesh B'Nefesh. (Didn't look too great)

As an accountant (although don't do many non for profits) but was looking at their tax returns. Started with 2009 and finally found 2010. 2011 is likely not released yet.

Here are the links to the two tax returns. Thanks to the FDNcenter for this info.

Just to update this: I was looking at charity navigator for how they would rate charities (as it is somewhat then a for profit enterprise) and they would give their financials 2/4 stars which is fair but not great. The bad points are reduction in donations, limited assets to pay for expenses, and expenditures for program  costs went up .2% as most of the increase in expenses was administrative which it would be understandable if expenses increased due to program expenses but most of the increases in 2010 were administrative expenses. Also in the last 5 years they have averaged 1.2 million more in expenses then what has been received. Now to read my original analysis.

In addition the officer salaries was doubled from 321,089 in 2009 to 698,697 with two new key emplyees of Ruth Halevi and Yael Katzman as controller and marketing director. Not sure why during a recession you would increase costs for officers and key emplyees which as stated above there wasn't much of an increase in program spending.

In 2010 donations were way down!! In 2009 there was 11.3 million in non-government donations. In 2010 it was 4.7 million. of non-government donations. -1 Government grants went up from 7.7 million to 9.5 million. Which in 2010 2/3rds of the revenue came from government grants. Why donations were so down in 2010 was it the recession or a few donors dropping them don't really know at this point. -1

But overall contribution was down 5 million from 19 to 14 mil in 2010 yet expenses actually increased about a million.  In 2010 they spend 4 million more then they collected.

Being the only game in town for this purpose and getting 2/3rds of its support from the government grant (which I think is the Israeli government) is not a good situation and declining donations from other sources and having 11.3 million liabilities some (3.7 mil) which is short term accounts payable and being in a financial situation like this causes an organization to not be able to make good decision when there are so desperate for funding that they will give in to demands that are not good for the people trusting this group to make Aliyah. They also have to demand money from the Israeli government to pay expenses and that may lead to having to make compromises. Let us say a new PM takes over and even Netanyahu has some corruption that again this is not a good situation to be in.

 Their financial issues is  maybe why there were layoffs recently which is both in terms of donations decreases but also that they have liabilities that are increasing in the wrong areas.

What composes this liability as stated above also is of concern.

 In 2009 7.7 million of the liability was for payment to former officers and key employees which they may have agreed to work for pay that was deferred until the agency had the money. It still is considered payroll back then though if is on the books as a liability.  There was only 630,000 in payable in the beginning of 2009. By the end of 2010 the former officer and  key employees owed to them is down to 1.4 million while payables is now up to 3.8 million. So while they are paying what is owed to key employees and owners they are becoming more liabilities to basic payables which I would think is not a good trend. These are not liabilities you can just delay for goodwill as was with officers who wanted to work for a good cause. Liquid assets are only 47,000 in cash and 900,000 in receivables for the 3.7 owed in payables.

So it doesn't look to me like Nefesh B'Nefesh is doing a good job of its own finances. I understand there are expenses involved but they should have some reserves which they have none and are paying out people who worked for them but having more liability now for general expenses that likely can't be put off. In a down economy not sure why they want to get paid now if their motivation in the beginning was they were willing to put some of their own salary to receive right away for the cause. Now they need it when obviously contributions are down and the economy is bad. It doesn't seem the right time to me to take their income as this shouldn't be what they were dependent on if in the first place they were willing to put it off.

These financial issues create a situation were NBN can easily be leveraged that are not in the best interest of people relying on the organization to make Aliyah. I do wish there were other organizations since any time anything is a monopoly there is corruption and I don't see that this organization is showing responsibility in minimizing it's costs when it can as obviously some of the expenses for the purpose of the group are expensive. but looking at page 10 of the various expenses some of it I don't know. Salaries and Benefits is 4.8 million of expenses. At a time when many people sadly don't have benefits. And moving to Israel would be tough.  I understand you want to attract good people. But I would think some sense of sacrifice or people who do this part time.

These are some of my thoughts. I know groups that at the end don't help as much as they should and when they are in debt they are more likely to be in a position of low leverage and will not do what is in the best interest of those sacrifices to make Aliyah which they should sacrifice as well and maybe they are but it seems some are making a good living while asking other to make major sacrifices and don't want to be left hanging.

Note: Numbers were rounded to the nearest hundred thousands. Most of the info was taken pages 1, and 9-11 of both years.

1- See page 9 of the 990 e and f. Government Grants and All Other Contributions.

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