The Implications of the Madoff Affair for Israeli Non-Profit Organizations

This year has not been a good one for Israeli non-profit organizations in their efforts to increase contributions from supporters and to attract new donors. First there was the world financial crisis and the losses many people experienced to their investment portfolios and now we are faced with the fall out from Bernard Madoff’s Ponzi Scheme. This appears to be “the largest financial fraud in history” according to the New York Times this week.

It not only has an impact on those people who invested directly in his firm but will also impact people who invested through a large range of investment firms, banks, and private firms that in turn invested their assets with Madoff. He had been a known figure in international finance since the 1960’s. With hundreds, if not thousands of investors, experiencing losses of huge sums of money this will mean a severe decrease in philanthropists and contributors ability to continue funding causes and organizations they have supported.

This will mean both a decrease in the resources people had available for charitable donations as well as the amount of funds raised by organizations that allocate funds to non-profits, i.e., both Jewish Federations and foundations. Obviously there will be increased competition in approaching those individuals and groups that will continue to provide support to Israeli non-profits, on one hand. On the other hand, there is likely to be a more thorough planning process as these bodies determine their priorities for the coming 2 – 5 years. Thus, Israeli organizations will need to study the funding directions that will be established by those who continue to make their resources available for overseas projects and programs.

Simultaneously, it will mean the funders will look for the most effective and efficient organizations that are using funds wisely and have complete transparency in their management and implementation of services. Of course, there may be a “silver lining in this cloud” here, and it may motivate Israeli non-profits to develop better practices and to be more accountable for their use of these scarce resources. Hopefully, although we are approaching more lean times, we will see positive developments throughout the third sector in Israel.

Stephen G. Donshik, D.S.W. has worked for over 40 years in the organized Jewish community and has established a private consulting firm in Israel dedicated to strengthening organizations and their leaders for tomorrow.