EA Funds—An update from CEA
CEA sees the EA Funds platform as a key piece of community infrastructure, not only for the convenience offered to donors who wish to give to one of the four managed Funds, but also for its ability to take tax deductible donations in the UK and US (the countries where the Centre for Effective Altruism is a registered non-profit) and regrant them to many of the organizations in the EA space.
We are now dedicating the resources required to improve and build on the early success of the platform (though we recognize this has not been the case throughout the timeline of the project). This post will go into detail on our plans for further deepening the value the EA Funds provide to the EA community, identify mistakes we have made along the way and provide a general update on our thinking regarding the future of EA Funds.
EA Funds was built during the early months of 2017, during CEA’s time as a participant in the Y Combinator startup accelerator. The platform was built as a means to facilitate donations in the EA community. This was built up from (amongst other things) experience with the Giving What We Can Trust, which performed a similar role, but which lacked some of EA Funds’ key features, and had a smaller subset of possible grantees.
In particular, we were motivated by the idea that people often set up their donations on an ongoing, recurring basis (which is good, because it removes trivial inconveniences to donating), but don’t often review them. We were also interested in increasing specialization of donation decisions, such that a smaller number of more expert people could decide the best ways to spend money, rather than everyone duplicating the effort of in-depth research.
To a large extent, this has been very successful. To date we have regranted (or are currently in the process of regranting) more than $5 million of EA-aligned money to around 50 organizations. We’ve been able to extend the platform to provide additional payment-related services (for example, the donor lottery run at the beginning of the year), and – in the wake of the crypto boom at the end of 2017 – made it straightforward for donors to donate large cryptocurrency windfalls tax-efficiently.
However, the project has always existed alongside other CEA projects, and earlier in 2018 (and given the platform had been operating stably for close to a year), we made the choice to deprioritize active work on EA Funds in favour of devoting more staff resources to other projects (where active work includes technical work to improve the user experience, operations work to e.g. bring on new grantee organizations or to check in on a regular basis with Fund managers). EA Funds has been operational and has been making regrants for the entire period, but it hasn’t been the primary focus of our technical or operations staff.
Our intention has always been to come back to EA Funds, and when we made the choice to prioritize other projects in Q1, we expected to that this would happen later in the year. Furthermore, at the most recent CEA team retreat (mid-June), we reviewed how EA Funds was operating, and decided that we were ready to re-commence work on the platform in order to ensure that it remained a trusted and reliable donation option. As such, we made the choice that we would begin again in earnest to make some overdue improvements to the operation of the platform, and have been doing so since the beginning of Q3. In other words, we’ve been aware of the same problems that have recently been raised in community discussion and working on appropriate solutions.
We regret not communicating about this situation more openly, and in retrospect recognize that waiting until we have resolved all the issues and had more concrete, positive announcements to make has led to a situation where some in the community began developing reservations about how the platform was being run. We plan to be more open about what we are working on with the platform going forward.
The two main things that community members have asked for during the period EA Funds has been operating have been:
Easy visibility of current Fund balances
A more consistent regranting schedule
The former is discussed in detail below under the heading Updates to Fund Management, the latter under Operational Updates.
Other features we’re working on at the moment:
Better integration between payroll giving providers and EA Funds (so that soon donations created through a payroll giving provider will be visible in your EA Funds dashboard)
An automated system to let Fund managers and grantees know their current account balance on a quarterly basis, to prompt more regular regranting
Updates to Fund management
We’re currently in the process of finalizing some changes to how the Funds are managed. The most significant announcement is that Nick Beckstead will step down as the manager of the EA Community and Long-Term Future Funds.
Nick Beckstead has provided the following statement, explaining his reasons for stepping down as a manager of these Funds:
At the time I drafted my April update, I told CEA that I was interested in stepping down as a manager of the EA Community and Long-Term Future Funds. My reasons are as follows.
The original premise of me as a fund manager was that I would fund the grants that I wanted to make but couldn’t fund through Open Phil, and that this wouldn’t require a substantial additional time investment on my part. However, I encountered fewer grantmaking opportunities that I couldn’t fund through Open Phil than I expected, partly because Open Phil’s funding in these areas grew more quickly than I expected. The main thing I’ve wanted to do at Open Phil, but haven’t been able to, is to increase the size of my EA and GCR (Global Catastrophic Risks) grants, which is a large part of the reason I made the set of grants that I did. I could in theory have spent additional time sourcing and evaluating other opportunities, but it has generally seemed that additional time would be better spent on grantmaking at Open Phil or other Open Phil work (especially given that other funders who have more time to devote to the effort and currently are working with smaller budgets—such as EA Grants and BERI—were becoming involved in the space).
Going forward, I believe it will be more impactful and more satisfying to our community to have people managing the EA Community and Long-term Future Funds who can’t make most of their grants through other means, and for whom it would make more sense to devote more substantial attention to the management of these funds. I believe this could also be beneficial because it would increase the diversity of perspectives of grantmakers and offer others an opportunity to gain experience and establish larger track records as grantmakers.
Nick and CEA agreed that he would step down from his role as manager of these two Funds after making his final set of grants in July 2018, and in late May 2018 a process for naming his successors was started. Nick has now recommended his final grants, and we are in late stages of the process to name the new managers for these Funds.
During this process we have been focusing on finding managers that are widely respected in the community, have some experience with funding relevant organisations at moderate scale and are able to commit the time required to making grants about twice a year or more. Given some of the considerations Nick outlines above, we’re also planning to experiment with a ‘committee’ approach, where several individuals may be involved in providing grant recommendations for a particular Fund. We look forward to announcing the new managers to the community in the coming weeks.
It’s worth noting that, notwithstanding the change in Fund manager, and the fact that we expect this to lead towards more regular regrants, we still believe that, as a general rule, grant managers should donate when they see good opportunities, not on the basis of a fixed schedule, as we think that good grants made later are likely to be better than rushed grants (at least for some bounded period of time, after which the effect of discounting would make the grants equally valuable).
Over the last few months, we have been working on making improvements to the platform so that the day to day operations run smoothly, transparently and take a reasonable amount of staff time.
The first visible result of this is an update to the EA Funds website, where each of the four main Funds now has the current balance (as of the end of the previous calendar month) displayed above the list of regrants, taken directly from our accounting system. This will bypass the need for manual updates being posted, and allows everyone access to the latest numbers at all times. If you now view a Fund’s page (see e.g. the Animal Welfare fund’s page ) you’ll see a ‘current balance’ section outlining the amount currently available to the Fund manager for regranting.
We hope to expand on this with more detailed reporting functionality in the medium term. Please do note that there will be some variability in the numbers month to month due to foreign exchange fluctuations (balances are held in both USD and GBP) and, at least initially, due to occasional accounting adjustments.
We note that we’ve had the intention to get a system for making Fund/Organization balances visible onto the website since early in the year. However, we faced the challenge of providing a definitive number for the amount of money in a fund. For a number of fairly mundane accounting reasons (e.g. the delay between a donor reporting a donation and us receiving the money via bank transfer or cheque, donors giving outside the EA Funds system, donors changing their donation allocation, complications with accounting for the appreciated value of cryptocurrency post-liquidation and decisions about whether to use numbers derived on a cash or accruals basis), it has been difficult for us to point to a single, canonical number that accurately represents the balance of a given Fund at a given point in time.
We’ve spent the better part of this quarter refining our processes so that we now feel confident that the number that we’re pulling from our accounting software is a good representation of the ‘current balance’ of the fund.
A note on differences between March balances and current balances
The balances as they appear on each Fund’s page are in some cases lower than what the last public update in March (less any grants) would suggest. This is due to the March numbers including accounts payable; money not yet held as cash but expected to come in. The largest difference is in the Animal Welfare Fund’s balance, where over $500,000 of such transactions was reported as part of the balance in March.
It appears that a number of large donations which were reported during the December ‘giving season’ turned out to be people testing/experimenting with the EA Funds platform; therefore, the March balances included amounts which were never meant as genuine donations. While it’s standard accounting practice to report accounts receivable as an asset (and then perform regular write-offs for money that doesn’t come in), we recognize this has caused confusion. As such, the account balances displayed on the site now exclude accounts receivable to prevent this confusion going forward.
We will also continue our work on the accounts in collaboration with our external accounting teams in the UK and US to reduce the need for core CEA staff to spend too much time on this, and we are developing new approaches to our regranting operations, which are currently a highly manual process. This means that we plan to process all regrants at the same time once per quarter.
We think the EA Funds is uniquely positioned to provide value to the EA community by saving the duplication of similar operations effort at other organisations, and we’re excited to keep improving the platform for the benefit of the community.
Messaging regarding effectiveness of donations to the managed Funds
We initially believed that the four managed Funds would significantly improve the effectiveness of the average EA donation. This was in part based on the assumption that our Fund Managers, drawn from GiveWell and the Open Philanthropy Project, would be able to easily find funding opportunities that they believed to be on par with their ‘institutional’ grants, but that their respective institutions would be more reticent to fund. We have since updated our thinking on this, because this has turned out not to be the case in all situations and also because we are now more worried about the effect that having Fund Managers exclusively from the Open Philanthropy Project and GiveWell has on the diversity of viewpoints represented in funding decisions within the community.
We are changing the messaging on the EA Funds site to better reflect this updated thinking. We continue to see the managed Funds as an excellent donation choice for donors who wish to save time and just want to donate whilst knowing their donation effectiveness will meet a very high bar. However, for donors more deeply engaged in the community it is completely plausible they are able to outperform the effectiveness of the managed Funds, especially in situations where they are in a unique position to fund an early stage project they are aware of due to their network, or other similar situations.
Further diversification of funding viewpoints: an extra tier of Funds
We have also been planning to further increase the diversity of views represented in the managed Funds model by creating a new ‘tier’ of Funds. Plans for this are still in early stages, and we’re not planning to increase the operational complexity of the platform until we have handled our administrative backlog discussed above. However we hope to be able to announce more detailed plans for this in the coming months.
The basic idea would be to allow less-tested grant makers, with particularly relevant personal networks or potentially less-mainstream views to manage a ‘Junior Fund’ (working title), where these would not be promoted to the same extent the main four Funds are, but would nevertheless be easily accessible to interested donors. We would then ‘let the market decide’ to a certain extent on which of these succeed, setting a minimum donation threshold to be reached within the first 12 months for these Funds to continue to be worthwhile to operate. It seems plausible that we could discover highly competent new grant-makers this way.
We will most likely run a public contest for these positions.
We would like to seek your feedback on the plans and updates laid out in this post, and I would like to encourage anyone who would like to discuss any of these matters in more detail to reach out to me on funds at effectivealtruism dot org.