Proper Oversight of Donations and Public Funds

Topics of the Article

Is a donor obligated to investigate what is done with his money and to demand a detailed report about his donation? Or is it proper for him simply to donate and place trust in the organization to which he donated, assuming that everything is being run properly? What actions must a person appointed over public funds take in order to remove suspicion from himself? What transparency is required of one appointed over public funds? What is defined as public funds? Only charity funds? Or also a building committee, a workers’ committee, or a class fund? When is it permitted to appoint a single treasurer over charity funds, and when is it forbidden? What is the law regarding a private nonprofit organization? An estate entrusted to a particular guardian? If a donor established a fund and appointed two trustees, and one resigned or passed away, must the public appoint an additional trustee? How are charity collectors defined today as compared with the times of the Sages? Is it permitted to demand a report, or is it forbidden? And is it proper for the gabbaim themselves to submit a report? Is there a difference between a gabbai who is paid and one who works voluntarily? Is there a difference between an appointment made with the public’s consent and another type of appointment? Can various requirements be stipulated when appointing the gabbai? What is the importance of trust in public representatives? And if someone placed trust and that trust was betrayed, should he suspect a newly appointed representative?

Audit and Supervision, or Faithfulness and Trust

This article will address a question that troubles many: what is the proper and correct way to manage communal affairs? Is there an obligation to demand strict auditing and close supervision of every step, so that we can say with complete confidence that there is no misuse of public funds and that every shekel reaches its exact purpose?

If there is such an obligation, the question also arises: upon whom does the duty to ensure this rest? Is it an obligation upon those appointed over the responsible parties? Or perhaps upon the public? Or perhaps the obligation rests upon the donors to determine whether their donated funds indeed reach their intended destination? And are they also obligated to find out what is done with their money, or is it sufficient that they know the money reaches the needy, or supports Torah study, or outreach to those distant from Torah?

An equally important question is: what are public funds? Is it only a public fund, for example the charity fund of all residents of a city or neighborhood, or a community synagogue? Or also a private nonprofit organization that was established and receives donations from the public? Are the state treasury, a municipal budget, or a building committee also considered public funds to which these laws apply?

In order to answer these questions, we will first present several halachot connected to them, and afterward summarize the practical conclusions.

Halachot Required of Charity Collectors So They Will Not Be Suspected

Halacha (Shulchan Aruch, Yoreh De’ah 257:1–2) obligates a series of rules in order to ensure proper management of public funds:

A. When charity gabbaim collect charity money, two gabbaim are required. Below we will discuss the reason why two collectors are needed. However, there is also an additional halacha: while they are collecting money, they may not split up, with one approaching one person or knocking at one home while his fellow solicits another person, unless both gabbaim can be seen together and it is visible that each is soliciting someone else. This is so that they will not be suspected that one is collecting and placing the money in his private pocket.

B. A charity gabbai who is holding the charity box in his hand and has a wallet containing his private money, and he finds money in the street in a case where the money belongs to the finder, was forbidden to place the money into his private wallet, out of concern that he may be suspected of taking from the charity funds into his own pocket. An observer will not know that the gabbai found the money and that it is his private money, and will think that he is taking from the charity funds into his private pocket. Therefore the Sages said that he should put the money into the charity box, and when he comes home he should remove from the box the amount he found and transfer it to his private pocket.

C. Furthermore, if a charity gabbai met a friend in the street and the friend repaid a debt to the gabbai, the gabbai may not take out his private wallet and put the personal debt money into it. Rather, he should put it into the charity box, and when he comes home he should take the debt money from the box. This is so that an observer in the street will not think that the friend transferred donation money to charity and that the gabbai put it into his private pocket.

D. Another halacha states that when the charity gabbai counts the coins, he must count one by one and not two by two, because of suspicion — lest people think that the gabbai is taking from the charity funds into his pocket and therefore is not counting them all.

E. In addition, a halacha was stated according to the reality in their time, when gold, silver, and copper coins were used. Copper coins sufficed for day-to-day purchases, while silver or gold coins were used for large sums, and the exchange rate was not fixed. When the charity gabbai had a silver or gold coin and needed to exchange it into copper coins to distribute to the poor, the halacha stated that he should go to another person or to a professional moneychanger to exchange the money, and not exchange it from his own private pocket, so that he should not be suspected of converting the coin at a rate favorable to himself. Therefore he must exchange them with others, so that there will be no suspicion upon him.

F. A similar halacha was stated regarding charity gabbaim who collected food items to distribute to the poor, and on one day the collection exceeded the needs of the poor for that day. Therefore the gabbaim wish to sell what remained from the collection in order to buy food items to distribute at the next distribution if not enough is donated. The gabbai may not buy the surplus food himself; he is obligated to sell it specifically to others, so that he will not be suspected of selling it to himself cheaply when more could have been obtained for it.

The source for all these halachot is what is stated in the verse (Bamidbar 32:22): “וִהְיִיתֶם נְקִיִּם מֵה' וּמִיִּשְׂרָאֵל” — “And you shall be clean before Hashem and before Israel.” From here we learn that not only must a person be clean before the Creator of the world, Who knows the truth; he must also ensure that no one among Israel suspects him. Therefore he is obligated to avoid various actions that may make him suspected of misappropriating public funds.

The Reality in Our Times

We will briefly summarize these halachot according to the reality in our times. First, the Pitchei Teshuvah (Yoreh De’ah 257:1) wrote in the name of the Beit Yaakov (70) that all these halachot were stated only regarding large sums, but with small sums there is no concern, and one may be lenient.

In addition, nowadays, when an institution issues an orderly receipt for every donation, and everyone knows that once there is a receipt everything must be recorded in the organization’s accounting books, there is no concern. Nevertheless, every organization should be careful to issue proper receipts and maintain proper accounting records in order to remove suspicion. Therefore, in cases where an orderly receipt is given, there is no concern even if the gabbai places the funds in his personal pocket, because everyone sees that he is keeping an accurate record of how much money entered the charity.

Even in a case where it is not possible to issue receipts — for example, if several friends decided to help a friend in temporary distress and organize a one-time collection for him among members of the community, and it is not possible to establish a nonprofit organization for this case — when they collect small sums from each person, there is no problem if, when they knock on the doors of a building, the charity collectors split up, because the sums are small. Likewise, if they find small sums, or a person gives them a small sum because of a personal debt, there is no problem putting the money into a personal wallet. In addition, below we will explain why according to most poskim this prohibition does not apply in our times.

However, if they are given a large sum in public at a time when everyone knows that they are currently occupied with the needs of that charity, the money should be placed in the general box, and only afterward, at home, transferred to the personal wallet. Still, one should note that in such a case it is important to explain to the person repaying the debt that there is such a halacha in the Shulchan Aruch, so that he will not suspect that the entire box is used as personal money, and that therefore the gabbai does not mind placing the personal debt inside the box.

When counting money, if it is a small sum, the gabbai may count in the way convenient for him. But with a large sum, even if the gabbai has a tested and quick method of counting the money that is not common, if there is concern that an observer will think he is not counting correctly, such counting should be avoided.

Similarly, with currency exchange, insofar as the rate is fixed and there are clear rules for how to exchange, the gabbai may exchange for himself. But when there are noticeable differences in exchange rates and large differences in exchange commissions among those who deal with this, with small sums the gabbai may nevertheless exchange for himself. But when it is a large sum, he should turn to another person to exchange the money, in order to avoid suspicion. If the charity will lose a large commission because of this — since by changing from the gabbai’s own funds he gives the charity a higher exchange rate than can be obtained elsewhere and also does not charge a commission — he should turn to someone who deals with this to decide for the gabbai what is the proper rate at which to exchange the funds. By people knowing that he is not deciding the rate himself but receiving professional advice, he will remove suspicion from himself.

The same applies regarding selling items to the gabbai. This halacha is very common nowadays when sales are held for charity in which many people donate items they do not need, and a second-hand sale is held for the benefit of a charity organization; or charity organizations encourage a bride and groom to transfer all the gifts they received at the wedding that they do not need, and from time to time they hold a gift sale, and the money supports the organization. Similarly, there are many sales of surplus goods or slightly defective items that store owners donate to chesed organizations. The common denominator of all these sales is that the items have no fixed price, and pricing the item depends on the discretion of the sale organizer and his experience of how much people pay at such sales in that area for those items. Therefore, if the charity gabbai takes the item for himself, he can always be suspected of having set the price too low.

In these cases it is also important to remember that if the gabbai sets the price while intending to take the item for himself, he may indeed subconsciously set a lower price than he would have set without the personal interest of acquiring the item.

However, when small sums are involved, and isolated items were given to the charity fund, the gabbai may sell them to himself and does not need to search for someone else to buy them.

May One Individual Manage Charity Funds?

There is another halacha dealing with the question of how many people are required to manage a charity fund, and whether it is permitted to give management of the charity fund to one individual.

The Gemara (Bava Batra 8a) derives from what was stated in the making of the Mishkan (Shemot 28:5), “וְהֵם יִקְחוּ אֶת הַזָּהָב” — “And they shall take the gold,” meaning that Betzalel and Oholiav must together take the donation of gold and the other materials from the children of Israel for the making of the Mishkan. It is proven from this that charity should be collected by two people. Charity collection is considered an authority involving coercion, because a charity gabbai is permitted to seize collateral from the property of a wealthy person who refuses to give his share to the public fund established by the city judges for supporting the poor.

The Gemara adds that even an individual has trustworthiness, for Rabbi Yehudah HaNasi appointed two brothers over a charity fund; only in the collection of charity, where there is authority of dominion to collect from an individual, are two required.

The commentators disagree in explaining the Gemara: whether two are not required because of greater trustworthiness or less suspicion and concern, but rather because there is a halacha that coercive extraction of money is considered authority, requiring the authority of at least two. Therefore, collection of charity funds, when the collectors have authority to compel payment, must be done by two. But collection that does not involve authority to coerce, as well as appointment of a treasurer and management of charity funds, may without any problem be done by one individual.

Or perhaps the Gemara means that there are two problems with appointing one individual to collect charity funds: A. one individual does not have trustworthiness that the money will reach the charity fund in full; B. one individual does not have the power and authority to compel collection by force. Only after the funds have been counted by the gabbaim may they be transferred to one treasurer.

Collecting Charity Funds in Our Times

In the opinion of the Shulchan Aruch (Yoreh De’ah 257:3; see Rishon LeTziyon by the author of the Ohr HaChaim and Aruch HaShulchan there in his understanding), it appears that he held like the second interpretation and maintained that one should not appoint one individual or relatives over the collection of charity, whether they have authority to compel the donors or not. Only after the charity funds have been collected and counted may they be handed over to one individual or to relatives for ongoing management. [Although in Beit Yosef he wrote that it appears otherwise, in practice it seems he did not rule so as halacha.] This is also the opinion of the Perishah (Yoreh De’ah 257:3).

However, according to most poskim [Meiri (Bava Batra 8b); Radbaz (Matnot Aniyim 9:6); Beit Yosef (Yoreh De’ah 256:3); Rishon LeTziyon (Yoreh De’ah 257:3) and Chatam Sofer (glosses to Yoreh De’ah 257:3)], in a case where the charity gabbai has no authority to coerce, as is the reality in our times, there is no problem at all appointing one individual as charity gabbai, both for collection and for management, and certainly it is permitted to give the position to two relatives.

A Private Nonprofit Organization

However, according to all opinions, if a private person decides to establish a nonprofit organization or charity fund, and the donors donate to him of their own accord, there is no problem at all appointing one individual. Certainly this is true when a private person dedicates his money in his will, or dedicates a significant sum during his lifetime and hands it to one individual to manage it for him as a guardian or as owner of the fund.

But in a case where the donor or donors appointed two or more people over the funds of the organization or fund, and some of the appointees died or resigned, and now only one individual remains appointed over the charity funds, the question arises whether the public has the right to demand that an additional appointee be joined to him, or whether, since he is the only one remaining of those who received the authority, he has full authority to act as he wishes and is not obligated to bring another person into management of the fund.

The Rema (Yoreh De’ah 258:5) ruled that the public has no power to force the individual to appoint another alongside him, and certainly they have no authority to appoint an additional person over the public funds. By contrast, the Taz (there 5) ruled that if two trustees were appointed at the outset — especially in our times, when trustworthy people have become fewer — and one died or resigned, the public to whom the charity funds belong has authority to appoint an additional person alongside the last treasurer remaining among the trustees of the fund, and he cannot claim that he wants to act alone.

Why Is It Forbidden for Two Charity Gabbaim to Separate During Collection, If One Individual May Also Collect?

In light of these matters, the question arises: how can halacha rule that two charity gabbaim should not separate when collecting charity funds, if one individual may also collect charity funds, and only in a case where coercive collection is needed would he have to wait for the second to join him — particularly when from the outset the charity gabbai has no authority to coerce?

The poskim wrote several explanations:

1. As stated, this difficulty arises only according to the opinions that if there is no coercive collection, there is no prohibition for one individual to collect. But according to the Shulchan Aruch and the Perishah, who hold that even in this case it is forbidden to collect alone because of suspicion, and only after the money has been collected and counted may it be handed to one gabbai, it is clear that this prohibition applies here as well. The Perishah explains the prohibition this way according to his approach.
2. The Taz (Yoreh De’ah 247:1) explains that indeed charity gabbaim who have no authority to coerce, such as in our times, have no problem collecting separately. However, when the law for charity gabbaim is to collect together because they have authority to coerce, even if they separate and each goes to a different address, and only if coercion is needed do they unite, this is forbidden, because it is known that the law is to collect together; when the gabbai collects alone, it arouses suspicion.
3. The Rishon LeTziyon (by the author of the Ohr HaChaim, Yoreh De’ah 257:1) and the Aruch HaShulchan (Yoreh De’ah 257:10) answered that indeed the managers of the fund and the public are obligated to place trust in the charity gabbai, even if he is one individual, and to allow him to collect alone; therefore, when necessary, this is permitted. However, when it is not necessary, since there are people of poor character whose nature is to cast aspersions and suspicion on others, the responsibility rests upon the charity gabbaim to remove from themselves any shadow of suspicion. They should therefore make every effort, as far as possible, to collect in pairs, because thereby suspicion of them is reduced, and in this way they fulfill the halacha of (Bamidbar 32:22): “וִהְיִיתֶם נְקִיִּם מֵה' וּמִיִּשְׂרָאֵל” — “And you shall be clean before Hashem and before Israel.”

Appointing Relatives to Collect Charity Funds

The opinion of the Tur (Yoreh De’ah 256), the Derishah (there 7), and the Shach (there 5–6) is that relatives may be appointed as charity gabbaim, because there is no issue of trustworthiness, only of authority and the law that authority over the public is not exercised by fewer than two, and relatives are also considered two.

However, the Shulchan Aruch (Yoreh De’ah 256:3), according to the Rishon LeTziyon and the Aruch HaShulchan (there), held that relatives should not be appointed as charity collectors; only after the money has been collected and counted may it be handed to relatives to manage.

May One Demand a Report from the Charity Gabbai?

On the other hand, there is a halacha (Shulchan Aruch 257:2) that it is forbidden to demand a report from charity gabbaim, and one is obligated to trust them. It is important to note that the source of this halacha is in the days of King Yoash and Yehoyada the Kohen Gadol, when they repaired the breaches of the Temple from the damage caused by Queen Atalyah. It is stated (Melachim II 12:16): “וְלֹא יְחַשְּׁבוּ אֶת הָאֲנָשִׁים אֲשֶׁר יִתְּנוּ אֶת הַכֶּסֶף עַל יָדָם לָתֵת לְעֹשֵׂי הַמְּלָאכָה כִּי בֶאֱמֻנָה הֵם עֹשִׂים” — “And they did not reckon with the men into whose hand they gave the money to give to those who did the work, for they acted faithfully.” That is, they handed over the necessary money out of trust in those chosen to carry out the renovation and did not demand a report from them. Rashi (Bava Batra 9a, s.v. she-ein) explained the reason: if they had been required to give an accounting for every perutah, it would have delayed the progress of the urgent work.

These words contain an important message. The prophet there relates that for 23 years King Yoash placed trust in the Kohanim and transferred the funds to them, telling them that they would be supported from those funds and would engage in nothing other than renovating the Temple. However, the Kohanim did not carry out the task properly. Only after 23 years did he make a safe — that is, a locked box with a hole at the top — into which the charity funds were donated, and he gave this money to the builders of the Temple with full trust.

This teaches us that the world cannot exist without trust in others. A person is obligated to find trustworthy people; but once he finds them, if he spends all his time in suspicion, criticism, and constant fault-finding, they will not be able to advance and act properly. Even Yoash, whose money invested in renovating the Temple was misused for 23 years, once he found new trustworthy people, again placed full trust in them, and this time the Temple was properly and beautifully renovated without misuse.

When Is It Obligatory to Demand a Report from the Gabbaim?

However, the Rema (there) ruled that if there is suspicion of irregularities, a report should be demanded from the responsible parties. Avodat HaGershuni (19) and Gilyon Maharsha (Yoreh De’ah 257:1) added that even if the suspicion arose regarding other money managed by these gabbaim, a report should be demanded from them regarding all the funds and monies over which they are appointed.

In another case in which there is an obligation to demand a report from the gabbai, the Rema (there) ruled: when the gabbai was not appointed by the public but was appointed by force, for example an appointment made by the authorities, or by powerful people in the congregation who do not have halachic authority to appoint a charity gabbai. The Gra explained that the reason a report cannot be demanded is that if the public placed trust in him by appointing him to the position and determined that he is a proper and trustworthy person, the public has no authority to demand a report. But if the public did not appoint them and did not place trust in them in advance, it has the right to demand a report about public money in their hands.

In light of this, the Aruch HaShulchan (Yoreh De’ah 257:13) ruled that if a condition was stipulated with the gabbaim in advance, they may be obligated to submit a report. He further added that if the gabbaim receive payment for their work, they may be obligated to submit a report in any case.

It Is Proper for the Gabbaim to Submit a Report on Their Own

The Rema (Yoreh De’ah 257:2) ruled that although the public has no right to demand a report from the gabbaim, from the side of the gabbaim it is proper to submit a report, and thereby they will remove from themselves all slander and fulfill the halacha of “and you shall be clean before Hashem and before Israel.”

To Whom Is the Report Given?

The Shach (Yoreh De’ah 257:3) ruled that if a report is submitted, it should not be given to every person, because some expenditures are better kept discreet. The Aruch HaShulchan (Yoreh De’ah 257:13) ruled that it should be submitted for review only to two or three distinguished people of the city.

A Building Committee and Similar Cases

In practice, these laws were not stated specifically regarding charity funds, but regarding the management of public funds. Therefore these matters apply to any fund of public money, such as a building committee, workers’ committee funds, and even a class fund. In a case where there is legal authority to collect the money, such as a building committee that applies authorized sanctions against those who refuse to pay [of course, after turning to a beit din], two should be appointed for collection. In another case, one individual may be appointed. However, the responsible parties must act in every way to remove any suspicion, and it is proper for them to submit a report. But if they were appointed by the public, the public has no authority to demand a report from them, and the public is obligated to place trust in them.

Charity and Justice

To complete the matter, I will bring a beautiful idea that I heard from my friend Rabbi Pinchas Schwalb shlita. In Tanach the term “charity and justice” is mentioned together many times in a fairly fixed form [see also Sukkah 49b regarding the connection between them]. The Gemara (Sanhedrin 6b) notes that charity and justice are terms that contradict one another, and therefore it explains there how one performs charity with justice. Yet from these words we also learn that even in charity we must ensure that it is done with justice, and it is proper for the charity gabbai to ensure that the entire public is confident that every shekel is delivered to its proper and desired purpose and place.

Rabbi Samson Raphael Hirsch (Devarim 15:12) explains that when we take care of charity, we can also know that justice is true, and that no person is drawn into crime because poverty and distress have confused his mind.

Summary

What emerges from the above:

• There are two separate halachot. From the side of the charity gabbaim, there is an obligation to act as much as possible to remove every flaw and slander; anything that can be done and may reduce suspicion is incumbent upon them to do, when possible.
• On the other hand, from the side of the public and those appointing, there is a halacha that after they have chosen a proper and trustworthy person, they must give him full trust and authority and not scrutinize him excessively. Only where there is a reasonable concern or a reason may a report be demanded.
• According to most poskim, in any case where there is no authority to compel collection, there is no need to appoint two trustees. However, if two trustees were appointed and one withdrew, the poskim disagree whether the remaining trustee can be required to add another trustee alongside him.

Shulchan Aruch (Yoreh De’ah 256:3; 257:1–2).