We often hear from critics that the government should impose new rules on donor-advised funds (DAFs) to accelerate the payout of their charitable assets to charities. However, new research suggests that criticisms of DAF payout rates are unfounded and such proposed restrictions are unnecessary. A new study out of the DAF Research Collaborative examines internal policies and practices of the 100-plus largest donor-advised fund sponsoring organizations.
The study’s conclusion: DAFs effectively regulate themselves.
Dr. Dan Heist and Kendra Stone, both of Brigham Young University, authored the study, titled, “Self-Regulating Donor-Advised Funds: An Analysis of Inactive Account Policies and Endowed DAFs,” with support from the Philanthropy Roundtable. This study was undertaken to shed light on two factors that impact DAF payout rates – inactive funds and endowed accounts.
The authors find:
- “The vast majority of sponsors, at least 83%, have written policies about regulating inactive accounts;”
- “Almost half (47%) of DAF sponsoring organizations offer an endowed DAF;” and
- “The internal policies on these two issues generally follow industry standards but vary somewhat in the details of how they are administered.”
Contrary to the unfounded criticisms of DAFs as “warehouses” of assets that may never reach charities, the study finds that these largest DAF sponsors proactively address inactive funds and ensure the DAFs are used as intended: as robust giving vehicles. According to the study, “After reviewing over 100 policy documents, we conclude that DAF sponsoring organizations are generally being managed by policies that encourage grantmaking and thoughtfully allow for a wide range of philanthropic activity including long-term, sustainable grantmaking.”
To read the study, visit the DAF Research Collaborative website here.