The Future of Family Foundations

This is a must read article for everyone connected to the world of Jewish philanthropy – here are some excerpts from this morning’s Jerusalem Post:

Analysis: Why federations were less vulnerable to Madoff than family foundations

It appears that the most devastating damage in the Jewish community may have been sustained by the rapidly expanding sector of private foundations.

The nimble and focused family foundation has been widely acclaimed for two decades as the future of American Jewish communal governance, adding untold funds and energy to communal life. Some have even suggested the private foundations could supplant the system of large communal federations – many of these over 100 years old – that tend to value long-term planning and major charitable infrastructures.

Some strong evidence has accumulated to support perspectives of this sort, including the widely-admired success of birthright israel – a product of the passion and stomach for risk-taking of Michael Steinhardt and Charles Bronfman, who pulled the Israeli government and the federations in their wake.

Small foundations are fast on their feet, responding quickly to new research and good ideas. They actively look for the next good thing, exemplified in a myriad of initiatives like the ROI network, which bills itself as a “community of young Jewish innovators and leaders,” funded by the likes of birthright and Lynn Schusterman.

Then came Bernie Madoff, the finest spokesman ever known for the importance of obsessive due diligence.

In a Diaspora community where all Jewish life is private, every institution – from soup kitchens to day schools – is dependent on philanthropy. The growing dependence on family foundations, at least a handful of which we now know were invested almost entirely in one high-earning but unsupervised and unscrupulous asset manager, could put some of the Jewish community’s most basic functions at terrible risk.

It is noteworthy that over the past two weeks, as reports came in of agencies and foundations suffering terribly or even disappearing because of Madoff investments, relatively little damage has been reported to the endowments of federations.

Was this a lucky break, or does it reflect a deeper structural strength, suggesting that some of what is sometimes perceived as a weakness in federations can be an asset?