JDC committee suggests changes to funding structure

An internal policy committee at the American Jewish Joint Distribution Committee is offering the organization’s board 13 formal recommendations for revamping how it raises money — many of which could have a major impact on the North American network of local Jewish charitable federations.

The JDC, a $300 million a year charity that receives its core funding from the federation system, convened what it calls the Policy Group on Future Funding, made up of 28 lay and professional leaders from the organization, many of whom are also key board members at federations. The JDC and the federation system’s other overseas partner, the Jewish Agency for Israel, have both seen a significant drop in the unrestricted money that they receive each year from Jewish federations. In the case of JDC, the organization has seen its federation support for core funding drop from $45.1 million in 2001 to $32.9 million in 2009.

Compounding tensions has been a mounting disagreement over how the federation money should be divided between the two organizations. Under a longtime formula, the Jewish Agency receives 75 percent of the $100 million to $150 million per year that the federations annually provide the two organizations for core budget needs. But in talks with Jewish Agency the JDC has pressed for something closer to a 60-40 split.

Against that backdrop, the JDC policy committee met over a period of six months, studied the organization’s finances and came up with its recommendations on how to increase funding in general, but specifically core budget support. The committee released its recommendations to the board Thursday after giving it to 12 federations 10 days ago and to the federations’ umbrella organization, the Jewish Federations of North America, according to a JDC source.

According to the memo containing the recommendations, JDC says it is happy with the way some federations support for core budget needs, but “in communities where Federation funding for JDC is far below capacity, JDC should be prepared to adopt different approaches to fund raising."

Over the past couple of days, rumors have swirled that JDC could be leaving the federation system because it feels it needs more money and could do a better job of fund raising on its own. But a JDC insider denies that the organization is looking to abandon the system. Instead, the source said, JDC believes in the system, and simply wants local federations to demonstrate that they feel likewise — in the form of maintaining their current level of support for the JDC ‘s core funding over the next three years. Federations not wiling to make such a pledge face the possibility of JDC starting to fund raise in their backyards, the source said.

These are the committee’s recommendations, according to the version of the report acquired by The Fundermentalist:

RECOMMENDATION 1: In the absence of a new and acceptable national agreement on overseas funding, JDC relationships with Federations should fully transition to bilateral understandings that allow for different funding strategies for each Federation.

RECOMMENDATION 2: JDC will set criteria to assess if Federation funding of JDC meets its potential in each community. JDC will tailor its community-by-community approach in light of actual levels of Federation giving.

RECOMMENDATION 3: JDC wants to work with JFNA and the Federations towards promotion of the Israel and overseas agenda. JDC calls on the Federations and JFNA to revise the system for allocating collective overseas "core" funds: the allocation formula should be based on the philanthropic principle that funds be allocated according to global Jewish needs.

RECOMMENDATION 4: JDC should give even greater priority to foundations and high-capacity individuals. JDC should study how current and new Board and staff structures could greater engage these sources.

RECOMMENDATION 5: JDC should expand RD significantly in Jewish communities throughout the world. JDC should undertake a community-by-community analysis to determine which should be given first priority. This analysis should consider field sensitivities. A lay group should be formed to lead this direction and a long-range strategic approach should be taken.

RECOMMENDATION 6: JDC should be prepared to utilize a range of RD and marketing models in Jewish communities throughout the world.

RECOMMENDATION 7: JDC should create lay and professional capacity to operate a proactive, permanent planned giving campaign.

RECOMMENDATION 8: The Government Affairs Committee has the Policy Group’s full endorsement.

RECOMMENDATION 9: JDC should continue to explore the potential for non-American government and international agency funding. RECOMMENDATION 10: Ideas for generating profit from JDC programs should be pursued if feasible.

RECOMMENDATION 11: Business ventures led by Board members are welcome and appreciated sources of new funding for JDC. A group of lay leaders should be formed to share ideas.

RECOMMENDATION 12: When the Executive Committee has determined which recommendations are approved, the professionals will develop a multi-year implementation plan. The plan will show prioritization of recommendations and strategies together with costs, benchmarks, and funding goals.

RECOMMENDATION 13: Implementation of the Policy Group’s recommendations should prioritize increasing and maintaining flexible funds. This could require a re-conceptualization of how JDC’s program and budget is packaged to create more opportunities for flexible giving and launching new campaigns.

This is certainly a developing story, and we will have more on this — and on changes that the Jewish Agency is making. So check back on the blog and read the next Fundermentalist newsletter, which will come out Monday (click here to sign up). Here is the entire document from the policy committee.

[[READMORE]] JDC BOARD POLICY GROUP ON FUTURE FUNDING SECURING JDC’S FUTURE

RECOMMENDATIONS to the EXECUTIVE COMMITTEE
April 27, 2010 POLICY GROUP PARTICIPANTS

Leadership

• Penny Blumenstein – Chair of the Policy Group
• Irving A. Smokler – President
• Steve Schwager – Executive Vice President and CEO

Members

• Mandel L. Berman
• Nancy Grand 
• Irving Granovsky
• Alan S. Jaffe
• Irene R. Kaplan
• Arlene G. Kaufman
• S. Lee Kohrman
• Myra H. Kraft 
• H. Fred Levine
• Steven Price 
• Stanley A. Rabin
• Jacob Schimmel
• Jodi J. Schwartz 
• Betsy R. Sheerr 
• Paula Sidman
• Terri Smooke 
• Edgar Snyder 
• Louis B. Thalheimer
• Andrew H. Tisch 
• Caryn Wolf Wechsler

Lead Professional Resources

• Alan Gill 
• Eugene Philips

Consultant

• Arieh Doobov 

Resources

• Eliot Goldstein 
• Laura Spitzer

JDC BOARD POLICY GROUP ON FUTURE FUNDING

April 27, 2010 Irving A. Smokler
President
American Jewish Joint Distribution Committee

Dear Irv,

I am honored to submit the recommendations of the Board’s Policy Group on Future Funding to you and the Executive Committee.

Since 1914, JDC has responded to the most pressing needs of global Jewry. As a JDC Board Director, I am proud of our history and of our current work in Israel, the Former Soviet Union, Europe, Latin America, Africa and Asia. Together with my Board colleagues, I am committed to the program vision we have set for today and the years ahead. 

Whenever JDC sees a critical need or important opportunity, we strive to match effective program ideas with the budget necessary to have impact. In recent years, however, JDC’s leadership identified an emerging and unprecedented challenge to JDC’s capacity to act: a decline in key revenue sources is limiting JDC’s ability to fulfill its mission today – and is threatening JDC’s financial sustainability in the future. Your decision to create the Policy Group on Future Funding was prescient. Over a six-month period, we studied JDC’s philanthropic environment, examined current and potential revenue sources, and forged recommendations to guide JDC towards long-term financial sustainability. The themes of our thirteen recommendations are:

• Raising funds more assertively and creatively – and in more locations globally Creating new resource development programs so that JDC can draw from a range of strategies to suit each community
• Using new marketing and communications strategies to grow awareness of JDC
• Growing unrestricted revenue while continuing to pursue designated funds for priority programs.

The Policy Group’s recommendations are for implementation over a number of years as a whole or in part. We fully anticipate that some recommendations will take time to bear fruit and will incur substantial new costs, but our view is that now is the time to move in these directions. This summary document begins with a briefing on the reasons a special policy group was convened, and is followed by the recommendations that we respectfully submit to you and the Executive Committee for consideration. 

Yours sincerely, 

Penny Blumenstein
JDC Vice President and Chair of the Policy Group on Future Funding

JDC BOARD POLICY GROUP ON FUTURE FUNDING

BACKGROUND: WHY A SPECIAL BOARD POLICY GROUP? 

From the early 1990s, JDC programs grew multifold to meet new global Jewish needs and opportunities. JDC initiatives responded to the impoverishment of Jewish elderly and families in the former Soviet Union and eastern Europe, the opportunity to support new Jewish life in re-emerging communities, and the intensification of poverty and social challenges in Israel.  In the same timeframe, JDC saw that new trends were redefining the funding environment that sustains the organization. Jewish philanthropy became more and more of an open market. JDC responded by diversifying its funding base, creating new sources of undesignated funds, and pursuing designated funds for priority programs. JDC achieved this by taking concrete steps such as: 

• growing a global RD team and creating a marketing and communications capacity
• developing direct relationships with Federations, foundations, and supporters outside the US
• partnering with agencies responsible for restitution funds 
• creating strategic partnerships with the Israeli government
• growing the endowment to generate operating income

JDC also benefited from the Board’s leadership of JDC’s new RD strategies – as from their individual support for priority programs and JDC as a whole. Overall, these policies and action steps generated enough new revenue to keep pace with JDC’s program budget needs (with significant exceptions such as fully meeting the needs of vulnerable Jewish elderly and children in the FSU). However, a significant gap has emerged between JDC’s program vision and funds available. This is largely due to trends in US Jewish communities, the historic source of JDC funding: 

• The Federations’ collective "core" allocation to JDC is falling. This is JDC’s prime source of unrestricted funding.
• The national Federation system’s formula for allocating "core" funds is not based on a priorities review – and so JDC has no opportunity to increase its share of these funds based on needs.
• The above trends were intensified by the global economic crisis that caused a general contraction of philanthropy. 
• In aggregate, allocations to Israel and overseas are declining. Over the last decade, JDC saw Federation "core" funding and Federations’ ONAD Community Funding combined fall by 24%. 
• Other sources of undesignated or flexible funds must be raised annually (such as Supplemental Donations from foundations) or generated annually (the Legacy Draw from endowment earnings).  

The centrality of unrestricted funds cannot be underestimated: even at $71.6m or 21.4% of the 2009 JDC budget of $333.7m, JDC’s operating model is wholly dependent on these funds. Unrestricted funds are what enable JDC to set its own program priorities. Indeed, these funds are the budget source for all parts of JDC’s operating model:  

JDC OPERATING MODEL

• Operating programs critical to mission
• Initiating programs in leveraged partnerships
• Piloting new and/or innovative programs
• Having a global presence and community connections
• Maintaining and developing the professional program team
• Infrastructure and administration 

Today, as the level of restricted funds declines, each piece of the operating model is diminishing.

Programs with leveraged budgets are de-leveraging at the same ratio by which they grew. If this revenue trend is not reversed, JDC could become a different type of agency: dependent on the trends of the philanthropic market, reactive rather than proactive. JDC’s capacity to respond to major Jewish issues would shrink.  

JDC leadership identified these revenue trends and their implications for the operating model as a major short-term challenge and a long-term threat to the JDC’s sustainability.

The Policy Group on Future Funding was charged by the JDC President to recommend how JDC can secure sufficient unrestricted and restricted funds to sustain the organization’s capacity to act.

JDC BOARD POLICY GROUP ON FUTURE FUNDING POLICY RECOMMENDATIONS 

US Jewish Federations and their Communities

JDC’s historic relationship with Federations enabled JDC to pursue its mission for decades. Moving into the future, JDC’s strong preference is to renew and strengthen Federation relationships to pursue shared goals cooperatively. Today’s Federations have similar missions but give different priorities to the support of Israel and of Jewish communities across the world. This is seen in different levels of funding, the range of programs funded, and varying mechanisms for the allocation of such funds. While some Federations continue to provide exemplary support of JDC’s mission, in aggregate, Federation funding of Israel and overseas is declining. In recent years, JDC’s relationship with Federations evolved in response to these changes, and must continue to do so. Furthermore, in communities where Federation funding for JDC is far below capacity, JDC should be prepared to adopt different approaches to fundraising. 

• RECOMMENDATION 1: In the absence of a new and acceptable national agreement on overseas funding, JDC relationships with Federations should fully transition to bilateral understandings that allow for different funding strategies for each Federation.
• RECOMMENDATION 2: JDC will set criteria to assess if Federation funding of JDC meets its potential in each community. JDC will tailor its community-by-community approach in light of actual levels of Federation giving.

The Jewish Federations of North America can play a key role strengthening Federations Israel and overseas agenda. However, the significant decline of collective overseas "core" funding impairs JDC’s capacity to pursue its mission today and into the future. The current formula for allocating these funds was set in 1952 – and is today arbitrary. A parallel sharp decline in some Federations’ designated funding of Israel and overseas also gravely concerns JDC.

• RECOMMENDATION 3: JDC wants to work with JFNA and the Federations towards promotion of the Israel and overseas agenda. JDC calls on the Federations and JFNA to revise the system for allocating collective overseas "core" funds: the allocation formula should be based on the philanthropic principle that funds be allocated according to global Jewish needs.

Individual Philanthropists and Foundations 

There is substantial resource development potential among foundations and individual donors at all levels of philanthropic capacity. JDC is competing strongly in this sector and assesses that it can increase its share of this philanthropic community.

• RECOMMENDATION 4: JDC should give even greater priority to foundations and high-capacity individuals. JDC should study how current and new Board and staff structures could greater engage these sources.

World Jewish Communities

Jewish communities outside the US represent significant philanthropic growth potential. Over the years, JDC played a role in every single Jewish community by its direct support of communities or of individual Jews. JDC has funding relationships in Canada, the UK, and Australia, and has raised funds from individuals and foundations in South Africa and some European countries. There are other communities with strong philanthropic capacity (such as Mexico, Brazil, Hong Kong).

• RECOMMENDATION 5: JDC should expand RD significantly in Jewish communities throughout the world. JDC should undertake a community-by-community analysis to determine which should be given first priority. This analysis should consider field sensitivities. A lay group should be formed to lead this direction and a long-range strategic approach should be taken. 

Philanthropic cultures and structures are different in communities across the world. Different types of RD and marketing programs will be required to accommodate this diversity. RD models for consideration include expansion of international outreach to individuals, creation of funding relationships with existing Jewish organizations, and creation of new JDC-aligned organizations.

When JDC significantly globalizes funding sources, it may be necessary to internationalize JDC’s identity, as non-American donors are more likely to support a worldwide Jewish organization than an American agency.

• RECOMMENDATION 6: JDC should be prepared to utilize a range of RD and marketing models in Jewish communities throughout the world. 

Planned Giving

‘Planned giving’ is a widely utilized range of philanthropic vehicles that offer great benefits to donors and beneficiary agencies. The funding potential is estimated to be great and JDC’s endowment could grow considerably via planned giving. JDC currently receives a limited number of such commitments, and recently launched a ‘letter of intent’ program for the Board. Furthermore, there are substantial opportunities for JDC to collaborate with Federations on planned giving.

• RECOMMENDATION 7: JDC should create lay and professional capacity to operate a proactive, permanent planned giving campaign. 

Government Funding

Analysis of the sources and uses of US government funding indicates that JDC is a candidate for funds dedicated to American objectives around the world. In 2009, the Board established a Government Affairs Committee that is studying this opportunity and is developing networks to position JDC for funding. The Committee will seek support for Jewish programs and IDP.

• RECOMMENDATION 8: The Government Affairs Committee has the Policy Group’s full endorsement.

Many governments and international agencies have substantial foreign aid budgets. JDC has had limited success in receiving funds from the European Union. The Israeli government provides certain budgets for the world Jewish community.

• RECOMMENDATION 9: JDC should continue to explore the potential for non-American government and international agency funding.

Profit-Making Ventures 

A number of non-profit agencies have turned parts of their program into revenue generating enterprises to fund core mission. JDC professionals have considered opportunities for transforming programs into profit ventures, but have not identified significant profit opportunities.

• RECOMMENDATION 10: Ideas for generating profit from JDC programs should be pursued if feasible.

In recent years, a number of JDC Board members launched private business ventures whose profits are designated to JDC. This is a creative philanthropic mechanism that suits certain donors. JDC has no responsibility for managing such ventures and JDC is not exposed to any risk.

• RECOMMENDATION 11: Business ventures led by Board members are welcome and appreciated sources of new funding for JDC. A group of lay leaders should be formed to share ideas. 

Implementation Directions

The Policy Group’s recommendations represent major organizational growth and change for JDC.  RD and marketing capacities will need to grow substantially to position JDC to maximize Federation support, expand the donor base, and generally increase opportunities for undesignated and designated funds. Successful implementation will also require support from field program staff.

Implementation of all or part of the recommendations will be a multi-year growth process that will incur substantial new costs. In many cases, the revenue benefit to JDC cannot be expected for a number of years. 

• RECOMMENDATION 12: When the Executive Committee has determined which recommendations are approved, the professionals will develop a multi-year implementation plan. The plan will show prioritization of recommendations and strategies together with costs, benchmarks, and funding goals.

JDC’s current operating model depends on unrestricted funds for program and administration. To continue autonomously determining its program priorities, JDC requires sufficient flexible funds.

• RECOMMENDATION 13: Implementation of the Policy Group’s recommendations should prioritize increasing and maintaining flexible funds. This could require a re-conceptualization of how JDC’s program and budget is packaged to create more opportunities for flexible giving and launching new campaigns.

Conclusion: Successful implementation of recommendations will depend on the engaged commitment of JDC’s Board. JDC professionals will clearly have a central role, but in many cases the success of these new directions will require Board leadership and activism to a degree that should not be underestimated.