A National Committee for Responsive Philanthropy report analyzed by New York Times’s Stephanie Strom concludes that the reason so many foundations lost money to Madoff is that they had really small "insular" boards. The logic here, according to the National Committe's Exec is that these Foundations had small, homogenous boards where someone knew someone who trusted Bernie Madoff and that was enough for the board to say ok then, let's invest.
I suppose that yes, members of small boards are more inclined to follow another member's recommendations. And, we know that folks who get together to give away certainly don't get together to have a bad time and maybe too, some don't have financial expertise (although unlikely given how these foundations tend to get started).
BUT, I absolutely much more agree with Hildy Gottlieb who in the same Times article said, “What tends to happen is we tend to point fingers at individuals when in fact there is a failure of systems, regardless of size, organizations need to have systems in place that address what it does and needs to accomplish, including a sound investment policy.”
Small size or not, I agree and believe this failure by foundations was about systems and policies and due dilligence -- none of which appear to have been in place enough to prevent this very ugly and sad outcome for all.