Benefits Data Trust Story Draws Suggestions for Funders, Calls for Support

To the Editor:

The BDT debacle detailed in Sara Herschander’s recent article “Why $20 Million From MacKenzie Scott Couldn’t Save This A.I. Nonprofit” (July 24) is a reminder that large unrestricted donations can sometimes do more harm than good. It’s incumbent on grant makers to help overly optimistic nonprofits avoid going off the fiscal cliff when the money runs out.

To do so, foundations should require nonprofits to spend large donations over time. As a rule of thumb, a nonprofit should not have access to new, unrestricted money greater than 10 percent of its budget in any given year. This level of growth seems manageable for most organizations. For example, if a grant were 30 percent of an organization’s budget, it should be spent over at least three years.

For those concerned about philanthropic paternalism, the 10 percent rule could be the default under what I will call a “restrictable grant,” allowing recipients to self-impose alternative restrictions or to request immediate access to the full donation. Such an approach would reduce the risk of reckless choices by making fully unrestricted one option rather than the default option. It would also be consistent with Scott’s nonprofit-friendly, trust-based approach and give nonprofits even more freedom — the freedom to self-regulate.

Would my nonprofit reject a fully unrestricted windfall from MacKenzie Scott because of the inherent risk? Of course not! But I know we would be better off receiving a restrictable grant with a 10 percent default, as would many other nonprofits.

John MacIntosh
Managing Partner
SeaChange Capital Partners

To the Editor:

Nonprofit leaders need trust and unrestricted support. They also need to innovate to stay relevant, which requires some risk. Framing Benefit Data Trust’s story as a cautionary tale — as Sara Herschander’s recent article “Why $20 Million From MacKenzie Scott Couldn’t Save This A.I. Nonprofit” (July 24) does — will only discourage the laudable investments we’ve seen from Scott and others. It will also discourage innovation and put even more pressure on nonprofit leaders when so many are fleeing the field.

Grant makers need to remember that most large donations have been managed responsibly and are needed to build capacity. Nonprofits need more grant makers like Scott who will commit to longer-term support to sustain critical work.

Christine Chen
Senior Consultant
La Piana Consulting