Zeno Swijtink
12-29-2008, 12:14 AM
Jeff Solomon, president of The Andrea and Charles Bronfman Philanthropies said: “There is shock in the non-profit world and also recognition that in good governance, social prominence never trumps due diligence.”
But why should someone who has three houses and flies between these in a private jet have "social prominence"??
- Zeno
*************
https://www.ft.com/cms/s/0/daebc570-d50d-11dd-b967-000077b07658.html
Non-profits face donor ire over Madoff exposure
By Deborah Brewster in New York
Published: December 28 2008 19:06 | Last updated: December 28 2008 19:51
Non-profit organisations may find it harder to raise money, and will almost certainly face calls for greater scrutiny by donors and regulators, after losing billions of dollars by investing with Bernard Madoff.
Mark Charendoff, the president of the Jewish Funders Network, which represents 900 philanthropists and foundations, said: “There’s no question that donors are going to be asking very, very hard questions of non-profits before they give to them.”
His views were echoed by others in the non-profit world, who said they had faced questions not only about their endowments’ exposure to Mr Madoff’s alleged $50bn “Ponzi” scheme, but also about the safety of their other investments.
Several foundations and charities have closed after losing either their endowment or their donors through investments with Mr Madoff.
Others have lost money but say they will continue and try to replace funding. Many endowments had all their money, or a large part of it, invested with Mr Madoff.
Jeff Solomon, president of The Andrea and Charles Bronfman Philanthropies, said: “There was a failure here by governing bodies to do due diligence . . . diversification is the first rule of investment.”
He said: “There is shock in the non-profit world and also recognition that in good governance, social prominence never trumps due diligence.”
Mr Madoff was a big donor to several charities, especially those specialising in Jewish causes, and appeared to gain many investors through his associations in that world. He was on the board of New York’s Yeshiva University, which lost $110m by investing with him.
Mr Solomon said: “When you have large donors to the non-profit dominating the board, there is a distortion of the investment process.”
The Bronfman Philanthropies were not exposed to Mr Madoff. They looked into investing but declined, said Mr Solomon.
Mr Solomon also said that the event highlighted the way that non-profits had started to take on financial risk in their investments.
“Twenty to 25 years ago the non-profits were all about capital protection,” he said.
Foundations funded by an individual or family do not necessarily have any obligations as to how they invest. However, charities that receive money from outside donors will be under scrutiny for the way they invest, according to those working with non-profits.
Cathy Lanyard, the executive director of the American Friends of Alyn Hospital, said: “We need to use this as an opportunity to redefine best practice. This is not an issue solely for the Jewish philanthropic community . . . it affects all charities.”
“Some of these boards have to have known there was too much in one pot,” she said, referring to the endowments which lost large sums to the Madoff funds.
“If I went to the board and said, I have $300,000 to spend on fundraising this year, and I am going to spend it all on one direct mail, someone would stop me.”
Ms Lanyard’s charity did not invest with Mr Madoff. Alyn Hospital, in Israel, is a rehabilitation centre for children, adolescents and young adults.
Some in the non-profit world, including Ms Lanyard, suggested there should be greater regulatory oversight of non-profit investments, possibly by making an amendment to the section of the US tax code, 503c(3), which exempts a non-profit from paying tax.
“They could make it that to get the 503c exemption, your investments might have to conform to certain criteria,” she said.
“No one ever asks how you are regulated,” she added. “I’m in the business 15 years and no donor has ever asked me about my 503c. Does it drive me crazy when someone calls up with 900 questions before they give an $18 gift? Sure, but they need to ask those questions, and you never know where that $18 might lead.”
“We are a small charity, but we have some criteria,” she said. Your endowment funds should never be invested in just one fund. And the auditor of that fund has to be more than three people in a small office. And it can’t be a self-clearing fund.”
Mr Madoff’s audit firm was a three-person office, a fact that raised red flags for many organisations that looked into investing with him. He also said he cleared his own trades, through his broker-dealer.
Mr Charendoff said that the event might also have hastened a generational shift in philanthropy. Many of those exposed were endowments that decided their own causes, and that were funded by older people.
“Younger people are less likely to give to endowments. They prefer to give to specific projects which they have chosen,” he said.
“Also, the younger Jews don’t give to the same things – the issues such as protecting Israel, Holocaust remembrance, are less popular with them,” he said.
But why should someone who has three houses and flies between these in a private jet have "social prominence"??
- Zeno
*************
https://www.ft.com/cms/s/0/daebc570-d50d-11dd-b967-000077b07658.html
Non-profits face donor ire over Madoff exposure
By Deborah Brewster in New York
Published: December 28 2008 19:06 | Last updated: December 28 2008 19:51
Non-profit organisations may find it harder to raise money, and will almost certainly face calls for greater scrutiny by donors and regulators, after losing billions of dollars by investing with Bernard Madoff.
Mark Charendoff, the president of the Jewish Funders Network, which represents 900 philanthropists and foundations, said: “There’s no question that donors are going to be asking very, very hard questions of non-profits before they give to them.”
His views were echoed by others in the non-profit world, who said they had faced questions not only about their endowments’ exposure to Mr Madoff’s alleged $50bn “Ponzi” scheme, but also about the safety of their other investments.
Several foundations and charities have closed after losing either their endowment or their donors through investments with Mr Madoff.
Others have lost money but say they will continue and try to replace funding. Many endowments had all their money, or a large part of it, invested with Mr Madoff.
Jeff Solomon, president of The Andrea and Charles Bronfman Philanthropies, said: “There was a failure here by governing bodies to do due diligence . . . diversification is the first rule of investment.”
He said: “There is shock in the non-profit world and also recognition that in good governance, social prominence never trumps due diligence.”
Mr Madoff was a big donor to several charities, especially those specialising in Jewish causes, and appeared to gain many investors through his associations in that world. He was on the board of New York’s Yeshiva University, which lost $110m by investing with him.
Mr Solomon said: “When you have large donors to the non-profit dominating the board, there is a distortion of the investment process.”
The Bronfman Philanthropies were not exposed to Mr Madoff. They looked into investing but declined, said Mr Solomon.
Mr Solomon also said that the event highlighted the way that non-profits had started to take on financial risk in their investments.
“Twenty to 25 years ago the non-profits were all about capital protection,” he said.
Foundations funded by an individual or family do not necessarily have any obligations as to how they invest. However, charities that receive money from outside donors will be under scrutiny for the way they invest, according to those working with non-profits.
Cathy Lanyard, the executive director of the American Friends of Alyn Hospital, said: “We need to use this as an opportunity to redefine best practice. This is not an issue solely for the Jewish philanthropic community . . . it affects all charities.”
“Some of these boards have to have known there was too much in one pot,” she said, referring to the endowments which lost large sums to the Madoff funds.
“If I went to the board and said, I have $300,000 to spend on fundraising this year, and I am going to spend it all on one direct mail, someone would stop me.”
Ms Lanyard’s charity did not invest with Mr Madoff. Alyn Hospital, in Israel, is a rehabilitation centre for children, adolescents and young adults.
Some in the non-profit world, including Ms Lanyard, suggested there should be greater regulatory oversight of non-profit investments, possibly by making an amendment to the section of the US tax code, 503c(3), which exempts a non-profit from paying tax.
“They could make it that to get the 503c exemption, your investments might have to conform to certain criteria,” she said.
“No one ever asks how you are regulated,” she added. “I’m in the business 15 years and no donor has ever asked me about my 503c. Does it drive me crazy when someone calls up with 900 questions before they give an $18 gift? Sure, but they need to ask those questions, and you never know where that $18 might lead.”
“We are a small charity, but we have some criteria,” she said. Your endowment funds should never be invested in just one fund. And the auditor of that fund has to be more than three people in a small office. And it can’t be a self-clearing fund.”
Mr Madoff’s audit firm was a three-person office, a fact that raised red flags for many organisations that looked into investing with him. He also said he cleared his own trades, through his broker-dealer.
Mr Charendoff said that the event might also have hastened a generational shift in philanthropy. Many of those exposed were endowments that decided their own causes, and that were funded by older people.
“Younger people are less likely to give to endowments. They prefer to give to specific projects which they have chosen,” he said.
“Also, the younger Jews don’t give to the same things – the issues such as protecting Israel, Holocaust remembrance, are less popular with them,” he said.