I assume organisations and groups considering signing up for this program have been doing donor due diligence on the legal and reputational risks of this funding opportunity
Perhaps I am being dense here but… do you literally mean this? Like you actually think it is more likely than not that most groups and orgs considering signing up have been doing legal due diligence? Given the relatively small amounts of dollars at play, and the fact that your org might get literally zero, I would expect very few orgs to have done any specific legal due diligence. Charitable organisations need to be prudent with their resources and paying attourneys because of the possibility you might get a small grant that might have some unspecified legal issue—though you are not aware of any specific red flags—does not seem like a good use of donor resources to me.
I don’t think most will do this, nor do I believe due diligence has to be very extensive. In most cases this is delegated to the grant maker if there is enough prior information on their activities. For individuals it can be a short online search or reaching out to people who know them. For organisations it can also be asking around if others have done this, what I was doing here—having a distributed process can reduce the amount of work for all.
In this case Manifund has a lot of information online, so as others haven’t chimed in I’ll do this as an example.
Then went into their notes to find out about their compliance processes, especially concerning donor and grantee due diligence.
I found this note with “getting a better sense of manifund’s due diligence for individual projects” linking to an ops document without any due diligence checks.
There’s a doc about international payments and fiscal sponsorship that raises questions if they are aware of the steps needed to vet foreign entities as well as if they have the resources needed (probably not needed now but in case foreign orgs take part in the program). One remarkable quote:
Places I’m worries we (would) fall short (if we did this for LTFF):
money management/accounting
we’re just pretty loose about this right now: we have one big pot, and track things in our txns table in a way that basically works but we probably want to refine if we have more different pots that shouldn’t mix
I am personally bad about this in my own life as well, wary of having millions of dollars controlled by my 21 year old self + Austin who’s VERY “move fast and break things”
Their main donor last year was anonymous: “We decided to do a regranting program after we were introduced to an anonymous donor, “D”, in May 2023. D liked Future Fund’s regranting setup, and wanted to fund their own regrantors, to the tune of $1.5m dollars across this year.”
So just looking at these documents my quick takes:
Seems pretty transparent, including publishing mistakes and not so favourable notes
No red flags in terms pointing to major criminal behaviour
Yellow flag concerning taking bigger anonymous donations in combination with weak governmence and compliance processes
Overall I would see a moderate chance of the organisation failing to pay out user assets due to underfunding, seeing serious risks to their charitable status or failing IRS checks on grantmaking. However I don’t see the level of professionalism I would like to see in organisations in the EA ecosystem post FTX and OpenAI board discussions, which is why I wouldn’t want to partake in a Manifund project with an EA branding and an anonymous donor.
But I’m probably missing information and context and happy to update with further facts.
Note that Manifund know who the donor is (as do I, and can vouch that I see no red flags), the donor just doesn’t want their identity to be public. I think this is totally fine and should not be a yellow flag.
EDIT: To clarify, I’m referring to the regranting donor, who may not be the same as the community choice donor
It’s still a yellow flag in my book. A would-be grantee org would be delegating its responsibility to assess the donor for suitability to Manifund. I don’t think Manifund keeps its high degree of risk tolerance a secret (and I get the sense that it is relatively high even by EA standards). I also think it is well-understood that Manifund gives little weight to optics/PR/etc. And it’s hard for a young charity (or other org) to say no to a really big chunk of mone, which might further increase risk tolerance over and above the Manifund folks having a higher risk tolerance out of the gate.
So the would-be grantee is giving up the opportunity to evaluate donor-associated risks using its own criteria. We can’t evaluate the actual level of risks from Manifund’s major donors, but its high risk tolerance + very low optics weighting means that the risk could be high indeed. That warrants the yellow flag in my book.
OK, I don’t believe that this is a yellow flag about, eg, Manifund’s judgement. But I can agree this should be a yellow flag when considering whether to accept Manifund’s money.
(fwiw, I think I’m much less risk tolerant than Manifund, and disagree with several decisions they’ve made, but have zero issues with taking money from this donor)
I read Patrick as saying that he didn’t see evidence of the “level of professionalism” that he would find necessary to “partake in a Manifund project with . . . an anonymous donor.” In other words, donor anonymity requires a higher level of confidence in Manifund than would be the case with a known source of funds. I don’t read anyone as saying that taking funds from a donor whose identity is not publicly known is a strike against Manifund’s judgment.
Yes, thank you for putting it this way, that was what I want to convey. For example I would be more comfortable with taking a grant funded by an anonymous donation to Open Phil as they has a history of value judgments and due diligence concerning grants and seem to be a well-run organisation in general.
I don’t know your organization, of course, but I don’t see how some of this stuff would impact the average EA CC grantee very much (at least in expectancy). The presence of allegedly weak internal controls and governance would be of much more concern to me as a potential donor to Manifund than it would be as a potential grantee.
I want to be very clear that I have not done my own due diligence on Manifund because I am not planning to donate to or seek money through them. I’m jumping to some extreme examples here merely to illustrate that the risk of certain things depends on what one’s relationship to the charity in question is.
In extreme cases, IRS can strip an organization of its recognition under IRC 501(c)(3), or another paragraph of subsection (c). This certainly has adverse consequences for the organization and its donors, the most notable of which include that donors can’t take tax deductions for donations to the ex-501(c)(3) going forward and that the nonprofit will have to pay taxes on any revenues realized as a for-profit. However, I am not coming up with any significant consequences for organizations that had received grants from the non-profit in the past, at least not off the top of my head. States can also sue to take over nonprofits, but it takes a lot—usually significant self-dealing like at the Trump Foundation or the National Rifle Association—to trigger such a suit. They aren’t quick, and the state still has to spend the monies consistent with the charity’s objectives and/or donor intent. So consequences that sound really bad in the abstract may not be on a grantee’s radar at all, because the consequences would not actually hit the grantee.
I think Manifund ’s internal affairs would have some relevance to the risk that a grantee organization might not get money it was expecting. But to the extent that an organization would be seriously affected by non-receipt of an anticipated $5-$10K, the correct answer is usually going to be just not counting on the money before it hits the org’s bank account. Maybe there’s an edge case in which investing resources to better quantify that risk would be worthwhile, though. It seems unlikely here, where the time between application and expected payment is a few months.
As far as the risk of a FTX-style clawback . . . yeah, it’s possible that some donations to Manifund could be fraudulent conveyances (which don’t, contrary to the name, have to involve actual fraud). Since we don’t know who the major donors are, that’s hard to assess. However, under a certain dollar amount, litigation just isn’t financially viable for the estate. That being said, many of us (including myself) would feel an ethical obligation to return donations in some cases involving actual capital-F Fraud. So that would be a relevant consideration, but the base rate is low enough that it’s hard to justify spending a lot of time on this at moderate donation levels.
It sounds like “D” is anonymous in the sense that Manifund isn’t going to tell the world who they are, but not in the sense that their identity is unknown to Manifund (or IRS, which would receive the information on a non-public schedule to Form 990). Although extreme reliance on a single non-disclosed donor is still a yellow flag, that would be an important difference.
All that is to say that I expect that the significant majority of organizations would not find those yellow flags enough to preclude participation at the funding level at play here. (Whether they would find the connection between Manifund and Manifest a barrier is not considered here.) Nor would I expect most orgs to have done more than a cursory check at the $5-10K level. But again, you’re the expert on your organization and I don’t want to imply you are making the wrong decision for your own org!
Thank you for that assessment! I agree that the legal risk is low, and for this reason, I wouldn’t refrain from participating in the project.
On the reputation side, I might have updated too much from FTX. As an EA meta organisation, I want a higher bar for taking donations than a charity working on the object level. This would be especially the case if I took part in a project that is EA branded and asked me to promote the project to get funding. Suppose Manifund collapses or the anonymous donor is exposed as someone whose reputation would keep people from joining the community. In that case, I think it would reflect poorly on the ability of the community overall to learn from FTX and install better mechanisms to identify unprofessional behaviour.
Perhaps the crux is whether I would actually lose people in our target groups in one of the scenario cases or if the reputational damage would be only outside of the target group. In the last Community Health Survey, 46% of participants at least somewhat agreed with having a desire for changes post-FTX. Leadership and scandals were two of the top areas mentioned, which I interpret as community members wanting fewer scandals and better management of organisations. Vetting donors is one way that leaders can learn from FTX and reduce risk. But there is also the risk of losing out to donations.
Perhaps I am being dense here but… do you literally mean this? Like you actually think it is more likely than not that most groups and orgs considering signing up have been doing legal due diligence? Given the relatively small amounts of dollars at play, and the fact that your org might get literally zero, I would expect very few orgs to have done any specific legal due diligence. Charitable organisations need to be prudent with their resources and paying attourneys because of the possibility you might get a small grant that might have some unspecified legal issue—though you are not aware of any specific red flags—does not seem like a good use of donor resources to me.
I don’t think most will do this, nor do I believe due diligence has to be very extensive. In most cases this is delegated to the grant maker if there is enough prior information on their activities. For individuals it can be a short online search or reaching out to people who know them. For organisations it can also be asking around if others have done this, what I was doing here—having a distributed process can reduce the amount of work for all.
In this case Manifund has a lot of information online, so as others haven’t chimed in I’ll do this as an example.
First I had a cursory look at the Manifund website reading through their board of director meeting notes. What stood out:
“Technically underwater, after pending Manifold for Charity donations”
Seems like they had -$42,789
In the overview sheet the deficit is gone now but probably because asset numbers were not updated
Seems like the only grant in the last year was from SFF, so not sure how extensive grantmaker oversight was
More details about their structure in the SFF application
Seemingly no independent board oversight
Then went into their notes to find out about their compliance processes, especially concerning donor and grantee due diligence.
I found this note with “getting a better sense of manifund’s due diligence for individual projects” linking to an ops document without any due diligence checks.
There’s a doc about international payments and fiscal sponsorship that raises questions if they are aware of the steps needed to vet foreign entities as well as if they have the resources needed (probably not needed now but in case foreign orgs take part in the program). One remarkable quote:
There is a process for selecting grantees
Their main donor last year was anonymous: “We decided to do a regranting program after we were introduced to an anonymous donor, “D”, in May 2023. D liked Future Fund’s regranting setup, and wanted to fund their own regrantors, to the tune of $1.5m dollars across this year.”
So just looking at these documents my quick takes:
Seems pretty transparent, including publishing mistakes and not so favourable notes
No red flags in terms pointing to major criminal behaviour
Yellow flag concerning taking bigger anonymous donations in combination with weak governmence and compliance processes
Overall I would see a moderate chance of the organisation failing to pay out user assets due to underfunding, seeing serious risks to their charitable status or failing IRS checks on grantmaking. However I don’t see the level of professionalism I would like to see in organisations in the EA ecosystem post FTX and OpenAI board discussions, which is why I wouldn’t want to partake in a Manifund project with an EA branding and an anonymous donor.
But I’m probably missing information and context and happy to update with further facts.
Note that Manifund know who the donor is (as do I, and can vouch that I see no red flags), the donor just doesn’t want their identity to be public. I think this is totally fine and should not be a yellow flag.
EDIT: To clarify, I’m referring to the regranting donor, who may not be the same as the community choice donor
It’s still a yellow flag in my book. A would-be grantee org would be delegating its responsibility to assess the donor for suitability to Manifund. I don’t think Manifund keeps its high degree of risk tolerance a secret (and I get the sense that it is relatively high even by EA standards). I also think it is well-understood that Manifund gives little weight to optics/PR/etc. And it’s hard for a young charity (or other org) to say no to a really big chunk of mone, which might further increase risk tolerance over and above the Manifund folks having a higher risk tolerance out of the gate.
So the would-be grantee is giving up the opportunity to evaluate donor-associated risks using its own criteria. We can’t evaluate the actual level of risks from Manifund’s major donors, but its high risk tolerance + very low optics weighting means that the risk could be high indeed. That warrants the yellow flag in my book.
OK, I don’t believe that this is a yellow flag about, eg, Manifund’s judgement. But I can agree this should be a yellow flag when considering whether to accept Manifund’s money.
(fwiw, I think I’m much less risk tolerant than Manifund, and disagree with several decisions they’ve made, but have zero issues with taking money from this donor)
I read Patrick as saying that he didn’t see evidence of the “level of professionalism” that he would find necessary to “partake in a Manifund project with . . . an anonymous donor.” In other words, donor anonymity requires a higher level of confidence in Manifund than would be the case with a known source of funds. I don’t read anyone as saying that taking funds from a donor whose identity is not publicly known is a strike against Manifund’s judgment.
Yes, thank you for putting it this way, that was what I want to convey. For example I would be more comfortable with taking a grant funded by an anonymous donation to Open Phil as they has a history of value judgments and due diligence concerning grants and seem to be a well-run organisation in general.
Sure, this seems reasonable
I don’t know your organization, of course, but I don’t see how some of this stuff would impact the average EA CC grantee very much (at least in expectancy). The presence of allegedly weak internal controls and governance would be of much more concern to me as a potential donor to Manifund than it would be as a potential grantee.
I want to be very clear that I have not done my own due diligence on Manifund because I am not planning to donate to or seek money through them. I’m jumping to some extreme examples here merely to illustrate that the risk of certain things depends on what one’s relationship to the charity in question is.
In extreme cases, IRS can strip an organization of its recognition under IRC 501(c)(3), or another paragraph of subsection (c). This certainly has adverse consequences for the organization and its donors, the most notable of which include that donors can’t take tax deductions for donations to the ex-501(c)(3) going forward and that the nonprofit will have to pay taxes on any revenues realized as a for-profit. However, I am not coming up with any significant consequences for organizations that had received grants from the non-profit in the past, at least not off the top of my head. States can also sue to take over nonprofits, but it takes a lot—usually significant self-dealing like at the Trump Foundation or the National Rifle Association—to trigger such a suit. They aren’t quick, and the state still has to spend the monies consistent with the charity’s objectives and/or donor intent. So consequences that sound really bad in the abstract may not be on a grantee’s radar at all, because the consequences would not actually hit the grantee.
I think Manifund ’s internal affairs would have some relevance to the risk that a grantee organization might not get money it was expecting. But to the extent that an organization would be seriously affected by non-receipt of an anticipated $5-$10K, the correct answer is usually going to be just not counting on the money before it hits the org’s bank account. Maybe there’s an edge case in which investing resources to better quantify that risk would be worthwhile, though. It seems unlikely here, where the time between application and expected payment is a few months.
As far as the risk of a FTX-style clawback . . . yeah, it’s possible that some donations to Manifund could be fraudulent conveyances (which don’t, contrary to the name, have to involve actual fraud). Since we don’t know who the major donors are, that’s hard to assess. However, under a certain dollar amount, litigation just isn’t financially viable for the estate. That being said, many of us (including myself) would feel an ethical obligation to return donations in some cases involving actual capital-F Fraud. So that would be a relevant consideration, but the base rate is low enough that it’s hard to justify spending a lot of time on this at moderate donation levels.
It sounds like “D” is anonymous in the sense that Manifund isn’t going to tell the world who they are, but not in the sense that their identity is unknown to Manifund (or IRS, which would receive the information on a non-public schedule to Form 990). Although extreme reliance on a single non-disclosed donor is still a yellow flag, that would be an important difference.
All that is to say that I expect that the significant majority of organizations would not find those yellow flags enough to preclude participation at the funding level at play here. (Whether they would find the connection between Manifund and Manifest a barrier is not considered here.) Nor would I expect most orgs to have done more than a cursory check at the $5-10K level. But again, you’re the expert on your organization and I don’t want to imply you are making the wrong decision for your own org!
Thank you for that assessment! I agree that the legal risk is low, and for this reason, I wouldn’t refrain from participating in the project.
On the reputation side, I might have updated too much from FTX. As an EA meta organisation, I want a higher bar for taking donations than a charity working on the object level. This would be especially the case if I took part in a project that is EA branded and asked me to promote the project to get funding. Suppose Manifund collapses or the anonymous donor is exposed as someone whose reputation would keep people from joining the community. In that case, I think it would reflect poorly on the ability of the community overall to learn from FTX and install better mechanisms to identify unprofessional behaviour.
Perhaps the crux is whether I would actually lose people in our target groups in one of the scenario cases or if the reputational damage would be only outside of the target group. In the last Community Health Survey, 46% of participants at least somewhat agreed with having a desire for changes post-FTX. Leadership and scandals were two of the top areas mentioned, which I interpret as community members wanting fewer scandals and better management of organisations. Vetting donors is one way that leaders can learn from FTX and reduce risk. But there is also the risk of losing out to donations.