Letter to the Editor: Why Chronicle of Philanthropy Coverage of New DAF Study Misses Bigger Picture

In a Letter to the Editor of The Chronicle of Philanthropy, Philanthropy Roundtable Director of Policy Elizabeth McGuigan responded to a recent article in the publication on a study by the Donor Advised Fund Research Collaborative. McGuigan argued The Chronicle’s coverage of this research was incomplete and failed to highlight a critical piece of the study’s analysis, thus missing the bigger picture about giving from donor-advised funds. 

Read the Letter to the Editor, published In The Chronicle of Philanthropy, below: 

“The Chronicle of Philanthropy’s recent article ‘Biggest Donor-Advised Funds Are Slower to Distribute Assets, Study Finds‘ [March 29] highlighted findings from a new Donor Advised Fund Research Collaborative report on larger DAFs and their payout rates. But it missed the true importance of this account-level analysis of 13,000 donor-advised funds: to shed light on the nuanced landscape for DAFs and their donors.

Advocates for increasing restrictions on DAFs describe donors as ‘warehousing’ or ‘stockpiling’ money in the funds rather than immediately granting gifts directly to charities. However, we learn from the study that those who give to DAFs are not a homogeneous group and should not be forced into new one-size-fits-all regulations. As the study concludes: ‘In addition to size and payout differences, DAF accounts exhibit a variety of endowment structures, have donor advisors with different demographics, and exhibit different patterns of contribution and grant activity.’

Yes, the largest DAF accounts — those with $1 million or more in assets — comprise the greatest share of DAF assets. But they also make up about 73 percent of the total grants from these funds. The study’s authors found that ‘almost 80 percent of large accounts will make a grant in any given year, while about 60 percent of small accounts will make a grant.’ In other words, large DAFs are more consistent in their grant making.

It is also true that larger DAFs appeared to have lower payout rates, but the account-level data shed light on why that may be. These DAFs are more often set up as endowed funds, with the goal of helping to ‘maintain a principal corpus of charitable assets, while grant making on the earned interest,’ according to the study. More larger accounts are endowed, so they are more consistent grant makers, but this necessarily means they grant a relatively lower share of their assets each year than smaller accounts.

Finally, the study found that the larger DAFs drove a substantial increase in grant making in 2020. They ‘were responsible for 86 percent of the grant making increase between 2019 and 2020,’ according to the report, and have increased their overall grant making 142 percent since 2017. Far from serving as tax shelters for warehoused charitable assets, these DAFs play a key role in the charitable world and stepped up giving during the pandemic when it was needed most.

When it comes to DAFs, we now have an even better picture of the diverse goals and giving strategies of donors. What we do not find evidence of in this study is the stockpiling of funds with no intention to grant resources to charities and those they support.”

Read more at The Chronicle of Philanthropy