For a moment, Benefits Data Trust was a golden child of the nonprofit tech world, flush with $20 million from MacKenzie Scott and widely praised for its use of A.I. to connect low-income Americans with public benefits.
But last month, the nonprofit abruptly announced it would be “winding down” operations by August amid reports of financial turmoil, leaving hundreds of thousands of beneficiaries, hundreds of employees, and stunned grant makers wondering: How did it go wrong so fast?
The collapse of Benefits Data Trust reveals a tension familiar to many nonprofits: the push to grow and innovate while maintaining financial stability. Behind the scenes, former staff say the two-decades-old organization had struggled to juggle priorities and sustain its mega-donor-fueled growth.
“It is such a shock to me that the whole organization was this vulnerable — that it was so easy to throw the baby out with the bath water,” said Hallie Martenson (who uses “they/them” pronouns). They stepped down from their role as senior philanthropy manager at Benefits Data Trust, or BDT, last December.
What was once a dream job — one that Martenson said they could imagine staying in forever — became unendurable last year, fraught with financial mismanagement, ominous communications, and what they called a “refusal to create spending and operational plans that are rooted in the reality” of the organization’s work.
“It became increasingly evident that there wasn’t a strategic plan” or spending limitations, said Martenson, one of over 60 current and ex-employees to sign an open letter demanding transparency over the Philadelphia-based nonprofit’s closure. “I was putting my signature on these grant applications and contracts with funders, but I was becoming increasingly less confident that I could account for where the money was going.”
From Call Center to A.I. Powerhouse
Where the money went remains a source of contention with staff like Martenson, who blame BDT’s growing A.I. ambitions, while others blame declining returns from the nonprofit’s traditional direct service work. The current leadership of Benefits Data Trust declined to comment.
For most of its existence, Benefits Data Trust operated as a call center on behalf of state governments, with federal funds reimbursing about half the cost of its outreach. In 2019, the organization embarked on an ambitious plan to scale its use of A.I., seeded by a five-year, $7.5 million grant from the Rockefeller Foundation and the Mastercard Center for Inclusive Growth and stewarded by the organization’s newly appointed CEO, Trooper Sanders, a former Rockefeller fellow with expertise in artificial intelligence.
Change came quickly, staff said. In years prior, the bulk of the nonprofit’s budget came from government contracts. In 2020, as the pandemic spurred demand for public benefits, Benefits Data Trust landed another five-year, $5 million grant from the Ballmer Group. In 2022, a $20 million gift from MacKenzie Scott supercharged growth. The cumulative injections of philanthropy shot up Benefits Data Trust’s revenue from roughly $12 million in 2017 to nearly $46 million in 2022.
Over that five-year period, spending roughly tripled, with much of the money going into building an A.I. and data team, plus a burgeoning policy arm, said Stephen Rockwell, who oversaw tech tools as the former chief digital officer at Benefits Data Trust. By 2024, the group’s enlarged tech team — whose salaries exceeded those of other employees — ate up about 40 percent of the organization’s expenses, though Rockwell said A.I.-related grants paid for it and more.
“The A.I. funding was supporting that complicated operating model, and maybe not making enough of the investments” in the new A.I. and data-focused initiatives, said Rockwell.
Perils of Rapid Growth
Several current and ex-employees disagreed over where the organization’s priorities went astray. But everyone agreed on what happened next: Philanthropic support stopped coming.
“It was not a secret that these multimillion-dollar grants had expiration dates,” said one former employee who spoke on condition of anonymity to abide by the conditions of a severance contract.
In some cases, success made other funders less eager to give, said Martenson: “They’re like, ‘Why would you ask us for $300,000 when you just got $20 million from MacKenzie Scott?’”
By the end of 2023, with many multiyear grants expiring amid a broader rollback in pandemic-era philanthropic support, Benefits Data Trust faced a $9.8 million deficit that some staff attributed to a failure to make the hard decisions necessary to cut costs.
Organizations getting large gifts sometimes struggle to manage growth, said Katherina M. Rosqueta, founding executive director of the Center for High Impact Philanthropy at the University of Pennsylvania.
While “that amount of money unrestricted can allow an organization to really transform itself,” she said, “it can also be challenging simply because they are so rare.” As a result, few nonprofits are truly “prepared to understand the best use of those funds.”
Many organizations have succeeded in managing an influx of unrestricted funds — a study by the Center for Effective Philanthropy found few negative consequences to Scott’s grantees — but success requires careful planning and a clear understanding of the organization’s mission and capabilities.
“Nonprofits are optimistic — they need to be and they should be,” said John MacIntosh, who advises nonprofits as managing partner at SeaChange Capital Partners.
When it comes to budgeting big gifts, “go in with your eyes wide open” he advised. “Consider not only how you’re going to grow but how you’re going to stop growing if it doesn’t work out.”
Final Days
By the beginning of 2024, despite instituting layoffs, the organization was forced to begin siphoning off their savings, say former staff members familiar with budget issues during that time.
In December, two longtime executives departed after disagreements on how to handle cuts. Sanders was pushed out in June. Then, two weeks later on June 25 and without warning, the organization announced its imminent closure.
Just the day before, Matt Zieger, a senior program officer at the GitLab Foundation, dined with other A.I. funders in New York City and caught wind of the news.
Though BDT had an active GitLab grant, “no one reached out to us beforehand,” he said. Other former staff, funders, and partners said they found out about the closure through LinkedIn, texts from former colleagues, or a short wall of text that replaced the nonprofit’s website.
“Remember that funders are really partners” to the nonprofits they support, says Zieger, who saw the failure to reach out as a missed opportunity to avert a shutdown. “We care about the long-term health of an organization; we are more than just a check.”
It can be difficult for charities like Benefits Data Trust to ask for aid before it’s too late, said Rey Faustino, CEO of the nonprofit One Degree, which has partnered with BDT and also uses tech to connect people with public resources: “The core of their business is reaching out to people to offer help, but they didn’t do that for themselves when they were in distress.”
What’s happened to BDT “just reminds me of how fragile nonprofits are,” he said. “You have a couple of off years or leadership that’s not making decisions or is asleep at the wheel, and it can be disastrous.”
