A common criticism of giving through donor advised funds is that they warehouse billions of dollars that should be going directly to operating charities. After all, the critics say, there’s no legal requirement for DAFs to ever grant out any money, and DAF organizations report an increase of billions of dollars in assets each year.
But several reports from recent months show the strength of DAFs. These accounts hold resources set aside for future charitable grants.
Those resources are especially helpful during times of financial volatility and great need. Any money previously contributed to the DAF can only be used for charitable purposes. So even if donors are currently experiencing financial setbacks, many still have funds available to give to nonprofits.
Donor advised fund giving increases
I’ve read several news releases from major donor advised fund sponsors, along with an article by Karl Zinsmeister for the quarterly Philanthropy magazine. All told, they paint a picture of DAF donors rising to the occasion by recommending increased grants during this time of heightened need. Consider the statistics below.
- Schwab Charitable reported a surge in DAF giving for the first six months of 2020, with over $1.7 billion in 330,000 grants. Compared to the same period last year, there was a 46% increase in dollars granted and a 44% increase in the number of grants.
- Zinsmeister writes: “A study of thousands of small accounts at 64 different community foundations found that their donors gave away 60% more this March and April than last March and April.”
- Fidelity Charitable reported that, from January through April 2020, its donors had recommended grants totaling $2.5 billion, up 18% over the same period last year. Grants to human services organizations (which includes food banks and shelters) saw a 68% increase in grant volume.
- National Philanthropic Trust also reported a record level of giving for its fiscal year ending in June. Grants for the whole year totaled $2.1 billion, up 54% from the previous fiscal year. But from March to June, NPT’s grant volume was up 69% and the dollar value up 159% compared to the same period last year. “Those grants supported pandemic-related causes in their communities, nationally and globally. Many were unrestricted as philanthropists are relying on nonprofits to allocate gifts to where the need was greatest,” National Philanthropic Trust CEO Eileen Heisman said in the news release.
Do DAFs need payout rules?
There is still room for increased giving from donor advised funds now and in the future. And it also seems wise to have charitable resources in reserve—who knows what challenges still lie ahead?
But these reports would seem to yet again confirm that DAF donors on the whole are voluntarily recommending generous grants without a mandatory payout rate or other proposed regulations.
For donors who use DAFs, consider whether now is a time to increase your giving. Contact the nonprofits you most strongly support to find out how you can best help them carry their mission forward.
For nonprofits, approach DAF donors the way you would any other major donor. Build the relationship. Communicate clearly the need and the opportunity. Invite them to see for themselves how their investment is accomplishing great work.
Photo by Amy Hirschi on Unsplash
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Published August 21, 2020