As I See It | Missy Gale, CFRE | President & CEO

Demystifying Donor-Advised Funds – Two New Reports

For years I’ve wondered how donor-advised funds (DAFs) work and, as a fundraiser, how I can steer my clients toward receiving gifts from donors who hold them.  This month, two new reports help demystify the giving vehicle and shed some light on who is receiving gifts through them: The new Giving USA Special Report, Donor-Advised Funds: New Insights, was funded and published by the Giving USA Foundation and researched and written by the Lilly Family School of Philanthropy and The 2021 DAF Report, which is the 15th annual report published by National Philanthropic Trust.

First, in the 2021 DAF Report published by National Philanthropic Trust, DAFs are defined as a giving vehicle that enables donors to support charitable organizations and causes. The first DAFs were established nearly a century ago at community foundations. Today, they exist at different types of charitable sponsors, such as universities, hospitals, charities affiliated with corporate entities and those connected to religious institutions. Many donors use DAFs for traditional individual and family giving, and an increasing number have adapted DAFs to facilitate workplace giving programs, online fundraising platforms and other models that expand philanthropy.

The key phrase in this definition is that DAFs are housed with charitable sponsors who administer and make gifts on the donor’s behalf. Because of this relationship, donors who hold DAFs are most often unknown to charities in advance of their giving and furthermore, part of sponsors’ role is to help them vet charities and to find those they may be most interested in supporting. In contrast to family foundations whose giving is public record, DAFs are reported in aggregate through their sponsors reporting vehicles.

The Giving USA Special Report, Donor-Advised Funds: New Insights focus is where gifts from DAFs are going:

Education, religious, and public-society benefit organizations—which include United Ways and many organizations focusing on community development and civil rights—attracted the most DAF grant dollars from 2014 to 2018, according to a new study released today by the Giving USA Foundation and the Indiana University Lilly Family School of Philanthropy at IUPUI. DAFs are considered among the fastest-growing charitable giving vehicles, but there has been little quantitative research on where DAF grant dollars go since the Giving USA Foundation’s previous special report on DAFs in 2018. The new study’s findings are based on grant data from 87 DAF-sponsoring organizations for 2014 to 2018. The study is one of the largest of its kind, representing nearly 75% of all DAF grant dollars in the philanthropic sector during those years. The study’s dataset includes $74 billion in grant dollars from DAFs to more than 240,000 recipient nonprofit organizations.

“As dollars to and from donor-advised funds continue to grow, there have been questions in the field about how to understand giving from this charitable giving vehicle,” said Laura MacDonald, CFRE, Chair of Giving USA Foundation and Principal and Founder of Benefactor Group.

“The goal of this special report is to shed new light on what types of organizations receive DAF grants and to provide insight into the role DAFs play in the philanthropic landscape. It is designed to help demystify DAFs and to complement the annual Giving USA report. The special report includes an analysis of how DAFs’ granting patterns compare with the distribution patterns of all types of charitable giving shown in Giving USA.”

“To demonstrate our commitment to research on donor-advised funds as part of the philanthropic environment, starting in 2022 the annual Giving USA report will present a new estimate of the types of organizations that receive grants from DAFs,” said MacDonald.

When you look at the growth in the number of DAFs and the increase in charitable giving from them, it’s clear that these are not to be ignored in your fund-raising strategy.  I recommend a few ways to stay connected to both donors who may have DAFs and to their sponsoring organizations.

Be sure you know your local communities’ foundations, their goals, and initiatives. Communities’ foundations often offer educational opportunities for their donors and for the community. They keep a pulse of community needs to help advise their donors. Similarly, get to know other sponsoring companies and organizations. As for your donors, the most important thing to do is to listen to their interests and ask them how they prefer making their gift. Priority one for your organization is making your case and hearing from the donor if your needs are something they’d like to support. If it’s appropriate for them to give to your organization by using their DAF, they will most likely reach out to their sponsoring organization directly and you may only learn that the gift came through their DAF after its received.

 

 

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About the Author

As president and founder of M. Gale & Associates, Missy Gale has dedicated almost three decades to crafting unique strategies and solutions to complex fundraising projects and organizational issues, resulting in transformational fundraising success for her clients. With more than ten years at the helm of M. Gale & Associates, Missy has assisted nonprofits in North Texas and the Southwest in healthcare, arts and culture, social services, and education. Missy is a graduate of the University of Texas at Arlington and holds the Certified Fundraising Executive credential. She has presented at numerous international, national and regional conferences. In 2014 Missy was honored as the Outstanding Professional Fundraiser by the Association of Fundraising Professionals Fort Worth Metro chapter. She has also served as national chair of the Association of Philanthropic Counsel (APC).