Policymakers, academics, and nonprofit leaders have been talking about the proper role and oversight of donor-advised funds (DAFs) for years. However, the discussions take on more relevance, now, as we observe the exponential growth of DAFs as preferred giving vehicles.
In 2016, an organization that sponsors donor-advised funds topped the list of charities that raised the most money for the year. Following the 2017 tax bill, donor-advised funds took on more significance as they became one of the few giving vehicles that enabled some middle-income donors to still claim the charitable deduction. For those donors, their annual giving is not enough for them to file an itemized return, so they can “bunch” or “bundle” several years of giving into a DAF and claim the deduction once every couple of years. It remains unclear the frequency in which donors are using this method to claim the charitable deduction, but some resource development staff report, anecdotally, that they are seeing more of this type of gift planning since tax changes went into effect in 2018.
Debate Over Improving DAFs
All these trends demonstrate that donor-advised funds are attractive philanthropic tools that are here to stay. As a result of the rising prominence of DAFs, academics, policymakers, and nonprofit leaders debate the extent to which best practices and accountability governing these giving vehicles need to be improved. They often cite in these conversations the need to make changes for the benefit of charities that receive DAF grants.
Unfortunately, charities that receive DAF grants rarely are in the room to discuss improvements to DAF administration and the reason is not entirely clear. Some believe that charities reliant on DAF revenue are reluctant to speak critically of them. Others assert that charities do not engage more in these conversations, because they do not see a problem with the current administration of DAFs. A third option is that conversations about the mechanics of giving vehicles, like DAFs, while interesting, just are not a priority for charities and their resource development staff. They may be more worried about getting money in the door than how it arrives.
Because no one truly understands charities’ typical experience with DAFs, it is becoming increasingly important to collect data in a way that assures organizations anonymity, which hopefully will spur honest feedback. As the primary beneficiaries of DAF funding, charities’ voices need to be in the conversation.
Thankfully, there are a few entities that are working to thoughtfully fill this data gap. Recently, the Center for Effective Philanthropy released findings from research they conducted to learn more about charities’ opinions of donor-advised funds.
Add Your Voice to the Discussion!
It is not too late to add your experience to this important discussion! Stanford Law School is working on a survey to bring more data and insights into this sector-wide discussion. Stanford Law School is conducting a survey to collect information from nonprofits about receiving and using donor-advised fund grants. The survey is a part of a research seminar on donor-advised funds, with the goal of informing and improving the practices of donors, wealth advisors, donor-advised fund sponsors, and nonprofits that receive funds (or don’t) from donor-advised funds.
Independent Sector is assisting in this research by circulating the survey to our networks. We would be grateful if you would take 10 minutes to respond to this survey by Friday, March 6, 2020.
If you have questions or concerns about the survey or research, please contact Paul Brest at pbrest@stanford.edu.
