Donor-Advised Funds Are Important Tools for Private Foundation Grantmaking

Donor-Advised Funds Are Important Tools for Private Foundation Grantmaking

Oct 27, 2020 Sara Barba

This month, The Chronicle of Philanthropy released an updated tally of grants made from private foundations to donor-advised funds. In 2018, the analysis found 375 private foundations donated more than $740 million to DAFs. To put that number in context, it’s a little less than 2 percent of the more than $37 billion in total DAF gifts made that year and a little less than 1 percent of the more than $75 billion in total foundation grantmaking that year.  

As many of you know, donor-advised funds are the fastest-growing philanthropic vehicles, providing donors—including private foundations—with flexibility and privacy in their grantmaking. As TPR’s Joanne Florino states in the article: 

Donor privacy is essential to a vibrant civil society. It protects donors who give to controversial causes, donors who give anonymously from a sense of humility or deeply held religious beliefs, and donors who wish to minimize off-mission solicitations. 

That critical protection of donor privacy is one of many reasons private foundations sometimes choose to make gifts to donor-advised funds with the goal of be granting them out shortly thereafter. Others include collaboration with other funders, off-mission grantmaking, training the next generation of future board members, and protecting the safety of private foundation staff, family members, and grantees who are targets of violence here and abroad. 

According to the Chronicle, critics say these numbers are problematic since donors, including private foundations, can stockpile charitable dollars in donor-advised funds without the resources ever getting to operating charities. The reality is that most DAFs have policies to encourage timely payouts, and when that happens, it can only be used for charitable purposes. The average payout rate from donor-advised funds in 2018—which includes DAFs that received private foundation gifts—was around 20 percent.  

 The Philanthropy Roundtable supports the freedom afforded to all Americans to donate and grant their philanthropic dollars how, where, and when they choose; donor-advised funds are efficient and effective tools that help donors get resources out the door in times of critical need.