Where is the money? Funding Sources and the Question of Legitimacy
Independent organizations which are not, at least formally, tied to the government, are often defined as non-governmental organizations or NGOs. But it does seem that at least at the Israeli level – as opposed to the international level where NGOs operate on a global scale – this definition is not precise. Many civil society organizations are economically dependent on government funding, and this dependence clearly influences their ability to act independently and authentically.
As can be seen from the 2018 Israel Associations Yearbook, 41% of all association revenues comes from state funding – via support and budgets or for the provision of services. The significance of this fact is dramatic: In 2018, the state gave 31.7 billion NIS out of Israeli citizens money. We can view this fact favorably and support the idea of the state taking large amounts of money from its citizens and giving it to civil society organizations, but we should also wonder about the cost of the bureaucratic mechanisms which operate this great funding apparatus – including how much it represents the actual preferences and needs of Israel’s citizens. We can assume that a high rate – too high – of these budgets goes to those with appropriate political contacts, those “close to the trough.”
Surprisingly enough, just 22% of association revenue is donations – 13% from Israel and 9% from abroad. The origin of the donations from abroad is varied and includes foreign governments, foundations, organizations and individuals, Jewish and non-Jewish, who choose to support the activity of the Israeli civil society for a variety of reasons. This reality, in which the donations of Israeli citizens are just 13% of association revenue, is a worrying one, since this reduces the commitment of organizations to work for the citizens and the direct connection between organizations and their senders, the citizens.
In recent years, a lively public debate has raged regarding the legitimacy of civil society organizations receiving donations from foreign parties. Without getting into the weeds here, we can see that there is a hierarchy of public legitimacy depending on the identity of the donor. Private donors are considered more legitimate to do what they wish with their money, even though when it’s a donation to an openly political organization, whether left or right wing, it does lead to criticism from the opposite camp. By contrast, when it comes to a foreign government donating to an Israeli organization seeking to influence policy in Israel, this could be seen as political subversiveness and cause a firestorm.
This is the place to adopt another concept from the field of international relations – a government-organized non-governmental organization – GONGO, an NGO within a government organization. Meaning, an organization advancing some issue, disguised as an organization representing a group of people who support an idea or movement of civil society, even though they are in fact the tool of the funding government which sometimes directs their activity. This government can be the one ruling the state in which the GONGO operates, serving to advance its policy and even indirectly undermine its opponents – or a foreign government seeking to influence the policy of other governments from within their own society.
The term GONGO is a kind of oxymoron expressing the way in which governments abuse the legitimacy of civil society to advance their own goals. This term is indeed commonly used regarding relations between countries, but it can also be applied in an Israeli reality in which many civil society bodies are funded by the Israeli state and are therefore required, whether explicitly or by adapting themselves, to work in accordance with the policy they seek to advance – thus not realizing the goals for which they were founded and the people they were supposed to speak for.
Worse is the assumption that the state should fund civil society as such. There’s nothing wrong with the state purchasing services from associations, but the assumption that it is the state’s duty just because it does something good (begging the question: who determines this is “good”? the public which chose not to donate or consume that association’s services?) undermines the basic logic of civil society: a civil society is not supposed to be the state’s problem, but its solution.
This reality, in which civil society organizations are primarily reliant on state funding, can lead to another problematic phenomenon in our midst: the CONGO (commercial NGO) associations established by companies or citizens seeking to grant paid services to the state – especially those related to welfare, health, and education – and who need to tag themselves legally as non-profit in order to make bids or get various economic benefits. The very granting of various services via private companies is not a problem in itself or at least not necessarily so, but too extensive state funding could create a market which does not necessarily meet the needs of the population and is therefore not economically sustainable. In fact, these are manpower companies for all intents and purposes, even if they are registered as associations, whose main revenue stream comes from the state simply because it’s east to secure. In such cases, dispersing powers to local authorities and communities will help ensure that the service provided by the funded bodies will be of both high quality and appropriate to the needs of the community.
Another phenomenon is the MONGO – my own NGO, an organization established by an individual seeking to solve some particular social problem himself. Ostensibly welcome, especially if this is a person with the means to promote the matter, but such sort of organization could try and advance a particular policy without real public backing, but rather rely on the man with the gold making the rules. It could be ideological (both on the right and left, with mutual accusations being hurled at each other) but also commercial (e.g., an energy company owner seeks to promote the use of the energy he produces, or rule out other forms in behalf of the environment).
For me, the best data point is on how 37% of all association revenue in that year came from selling services to private bodies. 34.9 billion NIS went from private hands to civil society organizations for services which provided value for the payer – a free market of social services.
The last term I’d like to mention in this context is the Pango model. This time I refer not to a term on the conception and funding of an NGO but the model which derives inspiration from it, the Israeli app we all know and love and which allows us to pay for parking via cellphone. As a business development for all intents and purposes, Pango is ostensibly not a part of civil society.
Still, the story of the app could illuminate three important points. First, no mention was made throughout this article on the phenomenon of social businesses. Israeli law does not yet recognize the distinct local entity known as the social business, even though there are quite a few bodies that see themselves that way – organized as associations, companies, and cooperatives – and which are sometimes called the “fourth sector.” In some ways, Pango can be seen as a social company. We should note that there has been an attempt made in Israel to legally define an entity known as a “company which is also a social business”, but this legislation has not been completed.
Second, the very mention of this model honors the free market which knows how to develop services of potential social value. In the Pango context, we can note the range of benefits it provides for the general public: convenient and quick payment for parking on the street and in lots without the need of cash or cards; rendering meters and their maintenance by local governments superfluous; removing those meters for the convenience of pedestrians, and more. The Pango app is one of many examples of the use of innovative technological means with a real social contribution, developed by the free market, incapable of being developed by the government or civil society. There are many other examples to be found in your cellphone and personal computer.
Finally, a warning: As noted above, the Pango model should not be interpreted as an argument that the whole business market – or any for-profit company – has potential of creating social value. Every business seeks to create products which enough customers are willing to pay for, in accordance with the value they provide, but only a few companies are established from the outset to solve social problems or are willing to consider social causes which may harm profits.
This post is the seventh part of an article published in Hashiloach journal.