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An Overview of Administrative and General Expenses in Israeli NGOs

Joshua Pex

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It is essential that all Israeli non-governmental organizations (Israeli NGOs) only allocate a reasonable amount of their annual turnover to administrative and general expenses.  This short article gives a brief overview of what this means.

This Series of Posts

Our team of lawyers at our law firm focus on Israeli non-governmental organization law, among other fields.  This article is one in a series focusing on various issues related to Israeli non-governmental organizations or Israeli charitable organizations (an amutah in singular and amutot in plural).  These posts address various rules for proper and legal management of Israeli non-governmental organizations in order to help you administer your Israeli NGO effectively.

For more information on the Israeli Corporations Authority which oversees Israeli NGOs, see the government website.  For more articles from an Israeli lawyer and legal advice for Israeli non-governmental organizations related to the topic of this article, see our articles about the Audit Committee, a certificate of proper management and payment to board members.

Proper Management of Funds

General expenses

Israeli non-governmental organizations by definition serve an interest that is not for profit but to provide a public service to a specific group.  As a result, the government wants to ensure that Israeli NGOs are managing their funds properly, putting most of it toward fulfilling their Israeli amutah’s objectives.  Therefore, it is important that the Israeli NGO is responsibly administering any administrative or general expenses.  In the event that the Israeli non-governmental organization fails to live up to responsibly administering its finances, it may not be eligible to receive a certificate of proper management.

Salaries in Israeli Non-Governmental Organizations

Executive Board and Audit Committee members may not receive any salary from the Israeli NGO of which they are a part.  They may only be reimbursed for their attendance and expenses related to their attendance at meetings for amutah purposes.

When it comes to employee salaries, the Israeli non-governmental organization must consider a few things.  The salary may not be unreasonably high.  The employee’s qualifications should be considered while also considering what comparable positions pay in the Israeli labor market.  If the employee is also an amutah member, any unreasonably high salary is not allowed and violates permitted distribution of the amutah’s finances.  Executive Board members may be personally liable if such an event happens, unless they were unaware or have objected to this and have tried to prevent it.

Paying Fees to Suppliers

When it comes to getting services for the Israeli non-governmental organization, the Israeli NGO must try and pay reasonable fees to suppliers.  The suppliers should not be employees of the amutah as this would be a conflict of interest for the Israeli non-governmental organization.

Reasonable Administrative and General Expenses

There are limitations in the amount of money that can be allocated toward various expenses, particularly to those who have senior positions in the Israeli non-governmental organization.  This includes the following:

1) The size or amount of the amutah’s annual turnover.
2) The independence of the amutah when considering the percent of total funds it receives from the state of Israel in its annual turnover.
3) The efficiency of the amutah when considering the percentage of amutah expenses that comprise the total administrative and general expenses out of the annual turnover.
4) The management quality of the amutah, which is measured by examining whether or not the organization is operating in a deficit, if there has been an increase in activity, the overall efficiency of the amutah’s Audit Committee and more.
5) The overall quality of the holder of a particular position, which is measured by the holder’s qualifications, level of education, job experience and more.  (For example, if someone without proper credentials is hired to be a CFO, the Registrar of Amutot will rightfully be suspicious.)

Summary

In short, all these guidelines are there to ensure that the amutah is using most of its funds to promote its objectives and that only a reasonable percentage is spent on administrative and general expenses.  If the Israeli non-governmental organization fails to maintain a reasonable level of administrative and general expenses, the Registrar of Amutot may get involved if they are suspicious of misuse of funds.  The Ministry of Finance website details this further under the instructions of the Accountant General.

Contact Us

If you have questions about administrative and general expenses in your Israeli non-governmental organization or anything else related to Israeli NGO law (whether an amutah or cheletz), feel free to contact us.

Advocate Joshua Pex specializes in Israeli non-governmental organization law (Israeli NGO law) and would be happy to discuss the needs of your organization with you.

ייעוץ משפטי https://lawoffice.org.il/: 03-3724722, 055-9781688

רחוב עמל 37 פתח תקווה 4951337 ישראל, https://lawoffice.org.il/: [email protected]

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