Why Benefits Data Trust fell apart despite millions from philanthropy and government contracts

Everybody seems to agree that benefits access in the United States is broken. So why is one of the country’s most data-forward social service nonprofits providing a solution to the problem suddenly shutting down?

The answer seems to be less about malfeasance and more a lesson familiar to many business leaders: Don’t spend money you don’t have — even in service of a worthy cause.

Earlier this month, Benefits Data Trust, an organization that over 20 years has helped hundreds of thousands access government assistance across seven U.S. states, announced it would close and let go its nearly 300 employees. The sudden move shocked the entire nonprofit community, and understandably so.

BDT’s closure announcement came just weeks after its annual impact report, which contained no indication of pending failure. The organization’s most recent 990 and external audit appeared healthy. Just two years ago it received a massive, no-strings-attached cash infusion.

Staff published a letter with questions and demands related to the wind-down plan that includes provision to operate through mid-August. After that, an org that helped 120,000 people access $182 million in 2023, per its metrics, will shutter. 

Right after the announced closure, I spoke privately  with sources close to the nonprofit and posted a video sharing what I knew. Then others reached out, speaking on condition of anonymity out of concern over how fallout might impact their career. Technical.ly has allowed anonymous sourcing for this story, having corroborated across multiple sources and in the public interest. A request for comment from the current board’s communications firm was not returned.

First: Across more than a dozen conversations, I found no allegations of financial criminality.

“This is a high-tech, new-age nonprofit that died the old fashioned way,” operating a deficit for too long and for the wrong reasons, one former executive told me.

Simply, BDT failed because it spent a lot more money than it brought in. Is that because the org was forced to make big bets on a bold future that didn’t come fast enough? Or because the board and former CEO Trooper Sanders — who was ousted a month before the closure announcement — acted irresponsibly? 

It helps to look at the financials. BDT had a $30+ million budget, roughly two-thirds of which was funded by philanthropy and the other third was from various state and local government contracts to boost resident access.

“Some states were only paying us for one or two benefits, but BDT was staffing to serve 10 to 15 benefits”, said one longtime staffer, necessitating a revolving door of philanthropic investments in new projects, experiments and an “R&D engine” on benefits access.

But a few key philanthropic proposals and renewals failed to materialize at the levels the BDT leadership bet on, according to three former staffers. One notable exception was the 2022 surprise gift of $20 million from Mackenzie Scott, the prominent philanthropist. (Watch below a clip from my April 2022 interview with Sanders.)

But that didn’t change the structural deficit. An insider told me that at one point, expenses were twice as much as revenue

“When you need $2.5 million a month but you’re only bringing in $1 million, this is what happens. [Trooper] was brought a bucket-full of dead canaries and he made the conscious choice not to make meaningful cuts in overhead early enough or do anything else about it,” said another executive. “This was a CEO who did not grasp financial management … and a board that wanted to believe the next grant would fall from the sky.”

Sanders declined to comment for this story. The board, which is led by BDT founder Warren Kantor, terminated Sanders in June. Said one exec: “About 9 months too late.”

High-cost personal touchpoints vs. low-cost online portals

BDT was founded in 2005 to harness data science, digital marketing and technology to address poverty in a straightforward way: Get more people the government funding that is already allocated to them, like food stamps and Pell grants. 

Government programs are famously, and sometimes intentionally, difficult to access. Most anti-poverty proponents consider benefits access a shortcut to reducing poverty rates because it requires no new government funding, just matching people to programs. 

Kantor, a former credit card executive, founded Benefits Data Trust to do that more effectively, starting with call centers to guide people through applying. The service model continued to evolve. 

“BDT’s call center was [just] a small part of its impact,” a longtime staff member told Technical.ly. “The point was, how can we help people that are going hungry/poor right now, and use those direct interactions with people to change the system?”

But the work was not cheap. 

On average, each application that resulted in someone getting access to benefits cost BDT a few hundred dollars, said one insider — including the marketing to get someone to contact a call center, and have that staff member stay on the line while processing an application. Other programs, notably mRelief, a Chicago-founded alternative, focused on developing primarily online applications that required a fraction of the cost.

“Philanthropy was looking at [BDT spending] maybe, as an example, $200 per application and, let’s say, it worked 90% of the time,” said one former staffer. “Or one of these online application tools that only worked, say, 40% of the time but cost only $2 per application, which one would you invest in?”

Sanders, who came on as CEO in 2019, presented a vision of growing from processing 20,000 applications per year to 100,000 with the same workforce, said the former staffer. “But we ran out of time.”

Some BDT staff pushed that rather than attempting a comprehensive benefits solution, leadership resisted focusing on “addressable problems in the system.”

“At some point in an organization’s life cycle, you have to narrow your work to focus on a few things, instead of try[ing] to solve every problem in the system,” said a BDT veteran. “How did BDT fail to see this and fail to partner with other organizations in the ecosystem so as not to duplicate efforts and burn its own staff out?”

With enough money in the bank to continue operations for the summer, did the board have to close? One former executive called the decision “rash,” and one staffer said even Sanders was surprised by the decision. Another explained it this way: “After making so many risky bets over so many years, the board turned very conservative very suddenly.”

The nonprofit is expected to spend down its cash on final payments, said one executive. Big bets only work when you aren’t risking someone else’s well being.

“I don’t agree that a reasonably well-run organization would need to suddenly close with only two months’ warning,” said another staffer. “That would surprise me.”