by Brian Elmore
I wrote a blog post last year entitled Donor-Advised Funds 101, which goes over the concept of DAF and how donors use these funds to make gifts to non-profit organizations.
This post will take a look at how these funds have grown over the past year. They are becoming an increasingly popular giving vehicle, and their growth shows no signs of stopping.
The figures used in this post are from the National Philanthropic Trust’s 2018 DAF Report unless otherwise cited.
More Funds. More Cash.
The number of individual DAF grew from 289,478 in 2016 to 463,622 at the end of 2017.
The amount of assets held in DAF increased to $110 billion in 2017, a 24% increase from 2016. This is partly due to the massive gains in the stock market, and partly due to increased contributions from donors.
There was uncertainty around the future tax laws at the end of 2017, so many donors took charitable deductions prior to the passage of the Tax Cuts and Jobs Act on December 22. The standard deduction nearly doubled under this act, incentivizing many donors to “bunch” their donations in one tax year.
The average fund size decreased from $298,628 to $237,280, reflecting the popularity of funds amongst donors of lower giving capacities.
Payout Rate Remains Stable
The payout rate measures the total percentage of funds distributed from DAF to non-profit organizations. The good news for non-profits is grants made from DAF has hovered around 20% since their inception, and rose to 22% in 2017.
Non-profit organizations received $19 billion in grants, compared to $16 billion in 2016.
Source: National Philanthropic Trust
Pledges Eligible to be paid
Donors were previously not eligible to make pledge payments through a DAF. The IRS ruled in December 2017 that DAF grants are eligible to pay pledges, provided the distribution meets certain criteria.
Many, including myself, remain unconvinced about the benefits of donor-advised funds to our sector. The purpose of the charitable tax deduction is to incentivize individuals to give money to non-profit organizations.
By giving to a DAF, donors are essentially taking a tax deduction for their money to sit in an investment account. There is currently no requirement for these funds to be paid out, meaning the funds could sit in a DAF in perpetuity while massively profitable financial institutions extract management fees. These funds should be invested in our sector, providing benefits and bettering the communities we serve.
What is a Donor Advised Fund? (National Philanthropic Trust)
2018 DAF Report (National Philanthropic Trust)
Donor Advised Funds (IRS)
Philanthropy’s Dark Money (Nonprofit Chronicles)
The 'Black Hole' That Sucks Up Silicon Valley's Money (The Atlantic)
About the Author
Brian Elmore is a Certified Public Accountant and financial analyst with five years of experience in the nonprofit sector. He served on the YNPN Chicago Executive Board from 2017-2020, and continues to advocate for equity and financial transparency across the sector.
Brian lives in Humboldt Park with his partner and two cats, Cassatt and Theo. In his spare COVID quarantine hours you may find him reading dour fiction, watching the Philadelphia Union, or obsessively contemplating which Jay-Z record is the best.