How would you start a micro-grant fund? (community wealth sharing)

[anni]

So, I have some friends who recently started a mutual aid fund. I won't go into the details of where they're based or who they aim to support, but the premise is that local people with means can "redistribute their wealth," so to speak, directly to others in need. If you are interested in learning more you can PM me. People donate what they can, and then a very tiny team of volunteers fields requests for mini-grants (think $50-$100 to help buy medicine or make rent) from people in need and fund as many as they can. I'm a fan.

With donations in the $50K/month ballpark, they're starting to run into serious issues with hitting daily transfer limits and getting accounts frozen by fraud flags. I've provided what advice I can about how to "store" their money, how to transfer it, etc, but it's all just based on my experience managing my own money. I was wondering if anyone here has thoughts on how to go about it. They've been getting along really well so far with almost zero overhead and it would be great to keep it that way, if possible.

Also, without getting into the politics of mutual aid, if any experts here have legal considerations they would be mindful of as the effort (hopefully) grows, I/they would really appreciate general advice. I think they are doing a really good job with their approach, and some of the organizers' day jobs already revolve around community service, so I'm not really worried about them. But I'm a sucker for risk mitigation :)

Thanks you guys!

[mozar]

Congrats to your friends for receiving 600k in donations a year!

Are they using personal checking accounts? It might be time to move to a business account or a non-profit account. My understanding is that the banks have withdrawal limits in checking/ savings so that they don't have to reclassify your account to a "transaction" account which is a pain for them.

I used to be a financial auditor and the problem that I kept running across is organizations keeping more than what the FDIC covers in their operating accounts. I think it was 250k last time I checked.

Here is some reading on business accounts and non profit accounts. Some of which are free with a minimum.
https://www.finder.com/checking-accounts/business-checking
https://www.investopedia.com/articles/personal-finance/060216/top-10-checking-accounts-nonprofits-ever-wfc.asp

As far as advice goes I would stay out of the non-profit game. You can do basically whatever you want with a small business.

[Proud Foot]

I really like this idea of working together to help those in need.

For this kind of money I think they need to at least look into the possibility of setting up as a non-profit. Yes it would introduce some overhead and reporting requirements, however if one of the friends has the skills necessary they could handle those things rather than having to pay someone to do it.

Having a non-profit will change some of the details on how money is distributed but will add some legitimacy to what they are doing and not appear as an illegal operation.

[Rosy]

Congrats to your friends for receiving 600k in donations a year!
I used to be a financial auditor and the problem that I kept running across is organizations keeping more than what the FDIC covers in their operating accounts. I think it was 250k last time I checked.

Here is some reading on business accounts and non profit accounts. Some of which are free with a minimum.
https://www.finder.com/checking-accounts/business-checking
https://www.investopedia.com/articles/personal-finance/060216/top-10-checking-accounts-nonprofits-ever-wfc.asp

As far as advice goes I would stay out of the non-profit game. You can do basically whatever you want with a small business.

It sounds like an excellent project!

There is an organization called - 100 Who Care Alliance with chapters all over the world. Their website has resource info for new start-up chapters which might be helpful to you. Perhaps a version of what they do might work in your case.
https://www.100whocarealliance.org/

Perhaps running the money through a private club or a suitable religious organization might be an alternative?

Before 911 I would have agreed about setting this up as a small business, but the money laundering laws have become so pervasive and restrictive that a normal person/small business will be caught in frozen bank accounts without a doubt.

Our small town has two different ongoing "Micro-Grants" if you will.

1. Our small cities Angel Fund - which gives one time help or very short term help with rent, utilities (we have a lot of old folk who have trouble paying their AC-bill or food once they paid for their meds).
It is funded by private donations, gets support from the city and somehow the utilities company is involved too - they do a lot of good by keeping the wolf from the door no matter who your are or what you need help with.

2. The $100 club - 10 people pledge $100 for a particular month and that $1000 goes to an organization or person voted on by those ten people each month and funded immediately. 
They happen to be all women who live local and want to give local and they do specify exactly what the money will be used for - buying equipment or a scholarship .....

I really like the idea of direct on the spot help without going through public channels where it takes seemingly forever to decide if a person "deserves" help.

Good luck!

[kite]

Legal advice form an anonymous forum is worthless. 
Paying for legitimate legal advice is a worthwhile investment in the success and sustainability of your organization.  You also need an independent board of directors. 

[anni]

Legal advice form an anonymous forum is worthless. 
Paying for legitimate legal advice is a worthwhile investment in the success and sustainability of your organization.  You also need an independent board of directors.

I'm not asking for legal advice for them, just whether it sounds like there's anything they should be asking for legal advice about. My baseline assumption is they don't. And why do you say they need a board? Like I said, there's only a handful of folks running this thing to begin with. Low overhead, all volunteers.

[mozar]

Check out the Black Resilience Fund in Portland. It looks like they are doing something similar. Maybe they can give you advice.

[kite]

Legal advice form an anonymous forum is worthless. 
Paying for legitimate legal advice is a worthwhile investment in the success and sustainability of your organization.  You also need an independent board of directors.

I'm not asking for legal advice for them, just whether it sounds like there's anything they should be asking for legal advice about. My baseline assumption is they don't. And why do you say they need a board? Like I said, there's only a handful of folks running this thing to begin with. Low overhead, all volunteers.

Yes, they should be getting legal advice.
Their movement of money is raising suspicion.  It already looks to banks like money laundering. And if they haven’t established themselves as a legal entity, why not?  Are they trying to subvert the tax laws in the jurisdiction where they are operating?