210 karmaJoined Dec 2018


Firstly, I don't see any benefit from the proposal.  I don't think the 10% norm forms a major part of EA's public perception, so I don't believe tweaking it would make any difference.  If anything 2%/8% makes it more weird (not least because it no longer matches the tithing norm).  You haven't made any compelling argument for the reputational advantage to be gained either here or in your previous post, yet alone that this is the most effective way of gaining reputation.

Secondly, I don't see how you could implement it.  GWWC exists because it presents a clear case for its pledge.  We're not in a position to tell people how to allocate their donations, and I suspect that most people who have been convinced by the basic argument for effective giving will then not choose to allocate a fifth of their donations ineffectively for vague reputational reasons.

Thirdly, a major argument of EA is precisely that a huge benefit could be gained simply by reallocating donations from ineffective to effective causes.

"Our attempts in late 2021 and early 2022 to support top uni groups didn’t pay off as we hoped, and we passed on this strand of work to Open Philanthropy in early 2022."

"One downside of handing top university support over to Open Philanthropy is that they only supply funding to groups. We are beginning to investigate whether we can provide advice, support, and retreats to top university groups and group organizers of well established groups."

I'm a bit confused by this pair of points.  What was the problem?  Why was OP a better fit for this task?  How is the support you're now looking to provide different from the support which didn't pay off as you had hoped?  How will you avoid duplicating work with OP?

Answer by RobertJonesDec 16, 2022246

Disclaimer: I am a lawyer, but I am only able to advise on the law of England and Wales.  I have no particular knowledge of the law of the Bahamas, New York or Delaware.  What follows in any case are generic comments: any particular situation will depend on its own facts and you should take specific legal advice.

We have laws to decide what happens in this situation.  These laws generally strike a reasonable balance between the interests of the various groups affected, which is necessarily complex given that some people are bound to get burnt in an insolvency.  This will be a particularly complex case because of the numerous entities involved and the cross-jurisdictional elements.

There is probably a right answer.  Charity trustees must use their funds for their charitable purposes, so unless they are obliged to return the funds, they may well be forbidden from doing so.  If funds are returned, they must only returned to a person who can give good receipt for them, and there may be a dispute as to who that person is.  I would suggest that no funds be returned until confirmation has been obtained from all relevant jurisdictions, and this may take some time.  In particular, it's unclear to me how the US Attorney for SDNY is getting in on this.

In these circumstances, I would strongly suggest that for now, any funds which might be FTX customer funds or otherwise the proceeds of fraud should be held separately pending confirmation of the position.  Where funds have already been disbursed it's probably unnecessary (and not legally possible) to require the grantees to return them, but having been put on notice that the funds may be the proceeds of fraud, making further disbursements risks an accessory liability (which may attach to the individuals responsible).

If a UK charity is uncertain how to proceed, it may well be worth consulting the Charity Commission.  I think particularly it would be worthwhile getting the Charity Commission to approve anything which might look like a voluntary transfer (e.g. if the trustees were minded to comply with a request from a liquidator to return funds without being compelled to do so).

I'm afraid I think this is fundamentally the wrong way to look at it.  If you make a grant £X to allow another organisation to buy an asset, the fact that the donee ends up with a valuable asset is obviously an argument in favour of the grant, but you've still made a grant for £X.  You can't offset the value of the asset, because it isn't your asset.

It may be that in making the grant for £X, you're saving yourself making a series of future grants (in the case the cost of hiring venues for the conferences/retreats), and in that sense it may be financially advantageous, but you still have made a grant of £X, which needs to justified on its merits, just as you would have had to justify the counterfactual series of future grants.  Fundamentally what seems to have happened here is that value of the events themselves has been taken for granted, even though they were being very significantly prefunded.

"CEA posts an annual update on the forum."

This seems not to be true?  CEA posted annual reviews for 2019 and 2020, but the most recent update post I see is for Q2 2021.  Of course that was before the name change, so it was what we would now call an EVF update, but I can't see that EVF has ever made an equivalent post.

There is also nothing (I can find) more up-to-date on CEA's own website or EVF's own website.  In fact, the best public source of information about EVF appear to be its statutory filings, which are extremely thorough, but still only run to 30 June 2021 (the filing for 2021/2 won't be due for about 4 months).  In a sense, that's the system working as intended, but it does seem that an organisation commited to transparency might make some information available both more prominently and timelier. 

It's no concern of mine how OP spends its money, but since it's come up here: I don't think your cost estimate can be correct.

Firstly, OP doesn't have the asset, so its resale value is irrelevant to you.  It's all very well to say that proceeds would be used for EVF's general funding which would funge against OP's future grants, but (a) there doesn't seem to be anything stopping EVF from using the proceeds for some specific project which OP wouldn't otherwise fund and (b) it's possible to imagine a scenario in which OP ceases to fund EVF and there's nothing to funge against.  It seems to me that OP should just treat it as a grant of £15m (or whatever it was) to EVF.  Presumably when you publish a grant report, that's what it will say.

Secondly, this has been discussed elsewhere, but the cost can't be a flat few million from EVF's perspective.  Consider for example the case where the project is huge success and the property is held in perpetuity.  Ex hypothesi it was a sound grant, but the whole £15m (or whatever) has been expended, plus some further amount for ongoing maintenance.

One possible counterfactual is that EVF buys the property and lets it for income.  Gross rental yields in Oxfordshire are 4-5%, so EVF would receive a counterfactual income of at least £600k.  In fact a property like that would be difficult to let as is: there are various ways one might generate income from it in practice, including running it as a conference centre for profit, but £600k pa should be an approximate floor on a reasonable commercial income (assuming the sale price to have been fair).  By using the property for its own purposes EVF foregoes that income, so the cost to it is at least that much per year, and the total cost will depend on how long it's held.  By definition, the income considered in perpetuity will capitalise at the fair purchase price.

But in fact EVF would never have bought the property for that purpose, for at least two reasons.  Firstly, EVF doesn't endorse investing to give.  Secondly, if EVF did want to invest £15m for income, buying a single property in Oxfordshire would not represente a prudent investment strategy.  It's a very niche property and the resale value is going to depend on what purchasers happen to be in the market in the material time.  Of course that might work out very favourably, but the opposite possibility is approximately equally likely.

Since in general EVF considers it can do better things with £15m than invest it for 4% yield, the opportunity cost must be higher than £600k pa.  In fact EVF should probably know what it's discount rate is, which would make the calculation straightforward.

Apart from other considerations, the benefactor would have been liable for c£750k of SDLT, for which EVF can claim a charitable exemption.

In the case of individuals, owning land is commonly better than renting for tax reasons (because you aren't taxed on the counterfactual rent).  Since EVF is a charity, it is tax exempt, so the same logic wouldn't apply.

It is true of course that this isn't a flat cost of £15m, but you have to take into account the cost of converting the property (to the extent that the conversions aren't valuable to a prospective purchaser), the transaction costs (although these are lower than you might think because EVF should benefit from an SLDT exemption) and the maintenance costs (which will be large for a property of that character), in addition to the counterfactual income forgone.

Considered as an investment it suffers from the usual problem of property investment, which is that it's very lumpy.  The exposure is specifically this particular manor house in Oxfordshire, which makes it riskier than a balanced commercial property portfolio.

Presumably it would be easy to arrange a conference minibus to shuttle attendees to and from the station.  This seems like the least of the project's problems.

Yes.  It seems very plausible that conferences are good and also that conferences in attractive venues are better, but it seems surprising that this would be the most effective use of the money.

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