Banks and Accountants

Registering a nonprofit organization requires a registration fee and filling out relevant forms. If the Associations Registrar requests no corrections, approval is granted and a document of incorporation is provided.

Besides ordering a donations receipt booklet and a stamp from a print shop, the next natural steps when launching the organization are:

1) appointments (board, audit, and assembly members) and

2) opening a bank account.

Surprisingly, the opening a bank account tends to be more difficult than registering the organization!

The challenges in opening a bank account arise for a number of reasons: lack of consistent policy between each bank, branch, and clerk; suspicion of money laundering through nonprofit organizations; consequences of FATCA; and general disregard towards nonprofits in the marketplace. One may be repeatedly pestered to produce new documents, signatures, and information. However, the basic requirements are:

1. incorporation documents and bylaws;

2. a letter from a lawyer stating that the organization exists and is able to open an account;

3. a statement regarding beneficiaries and shareholders,

4. protocol of the board to open the account at the particular bank and appointment of signatories;

5. FATCA declaration;

6. identification and contact details of signatories.

In the event that the nonprofit is not a new organization (simply creating a new account), the bank will request previous financial records.

It is important to remember that the bank does not automatically recognize signatories of the organization when approved by the Corporations Authority. In other words, any changes regarding signatories at the bank must be processed directly at the bank.

As previously noted , eventually an organization will want good governance status and then be liable for external auditing, so it is wise to begin operating on the right page. Nonprofits are expected to be highly accountable for expenses, thus two signatories are to approve every payment made. The standard way to conduct payments is writing checks signed by two signatories accompanied by the organization’s stamp. Petty cash is also legitimate as are direct bank transfers authorized by a fax with two signatures and stamp. Credit cards are possible if used as petty cash or if linked to a separate designated limited use account with transferred money properly approved .

At the end of every year, financial reports must be produced. If the annual financial turnover of an association (amuta) is under one million NIS, it is not necessary for the annual financial reports to be audited by a CPA. However, nonprofit companies (cheletz / public benefit company / charitable company) are always obliged to have financial reports audited by a CPA.

In financial reports the various expenses are classified in several categories, namely “operational” and “administrative.” Accountants and tax advisers would consult which expense is categorized and how. In order to maintain good governance status, the administrative expenses may not exceed a certain percentage of the annual turnover. The proportions are: 22% if 0-10 (million NIS); 18% if 10-25; 13% if 25-50; 11% if 50-100; and 7% if 100+.

Nonprofit corporations must of course register with the Israel Tax Authority (Ministry of Finance), specifically in the VAT department (exemption) and Income Tax (for salaries).

#regulations