Proper Management Status

What is often coined 'good standing report' or 'certificate of good governance' in Hebrew is literally 'certification of proper management' (ishur nihul takin). This status is granted per year to nonprofit corporations that abide by certain guidelines and standards of reporting.

This certificate serves as official recognition and enables grants and tax exemptions, as well as a status that is customary as an elementary standard for nonprofits.

Organizations must apply by submitting a set of documents, most of which reflect information from 2 years prior. In other words, if it is 2019 and you are applying for 2020, you submit documents summing up the activity and finances for the year 2018. For this reason, a new organization cannot receive proper management status until at least 2 years after registration.

Documents necessary are: 1) request for certificate; 2) annual financial report; 3) annual verbal report; 4) advisory board recommendations; 5) general assembly protocol approving annual reports; 6) list of highest salaries; 7) list of donations above 20,000 NIS from a single donor; 8) list of donations from foreign state entities. [Items 7 and 8 may be included within the annual verbal report.]

These forms are available at the Corporations Authority website, some of them may be downloaded in open word document and others only as an online form. [Expect technical challenges!] Most of the forms can be found online. After downloading and filling out the details, including appropriate signatures as necessary, the forms are submitted.

When an organization applies for certificate of proper management after years without submission of documents and reports, the associations registrar will typically demand reports accountable for 4 years back. In other words, if an organization was registered in 2012 and applies for 2020 status in the year 2019 after not submitting reports over the years prior, it would need to submit not only for 2018 but for 2015, 2016, 2017 and 2018.

The process to acquire proper management certificate is not always simple. Many organizations find themselves in situations where procedure is not clear and therefore need legal counsel and verification upon correspondence with authorities. The Associations Authority will often send a letter to the applicant organization with specifications and changes to be made before status is granted.

Standards of proper management and legal regulations are laid out in the Amutot Registrar booklet 'guidelines for certificate of proper management' should be studied and implemented. Although the authorities may grant status without ample scrutiny, once an organization receives status it is then liable for surprise audit by government outsourced accountants whose level of investigation and detail is intense.

The guidelines booklet is extensive, over 100 pages, however some of the essential guidelines that everyone in the field should know in principle and which prevent receiving the certificate are: 1) Conflict of Interest - it is illegal for first degree relatives between advisory and board members, nor between advisory or board members and significant employees; 2) Budget Proportionality - operational costs are distinguished from administrative expenses, and the latter may not rise above 22% (when the overall annual budget exceeds 10 million NIS, the percentage is lowered gradually); 3) Due Process - there must be 2 advisory board members, 2 board members, and an additional 3 amuta members at least, while the general assembly convenes at least once annually, and relevant decisions are documented and signed properly.

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