- A 2021 report uses flawed methodology to falsely assert DAFs have led to less money for charities, ignoring the significant benefits of DAFs to donors, charities and the communities they serve.
- Top experts in charitable sector research have identified significant problems with the report’s methodology.
- Policymakers must take a critical look at these data, which are unfortunately being circulated on capitol hill in support of proposed restrictions on popular giving vehicles.
In May 2021, noted donor-advised fund critics Ray Madoff, a Boston College law professor, and James Andreoni, a professor of economics at the University of California San Diego, published a report with the Boston College Law School Forum on Philanthropy and the Public Good called “Impact of the Rise of Commercial Donor-Advised Funds on the Charitable Landscape.” The title connotes a sweeping analysis of the charitable sector and a rigorous discussion of the impact of donor-advised funds (DAFs), but the report leaves the reader with more questions than answers. Most problematic is the methodology, which excludes religious institutions, despite the fact that these are among the leading recipients of charitable gifts.
The report claims the recent growth of giving to DAFs and foundations meant $300 billion less in contributions went to so-called “working charities” between 2014 and 2018.
This policy brief will address three major flaws with the methodology behind this estimate and suggest additional areas for study:
- Methodology Ignores Unique Benefits of DAFs to Charities. The assumptions about what giving would look like in the absence of DAFs ignore the benefits DAFs offer to donors, which encourage giving, and to charities themselves thanks to asset appreciation within DAFs that yields larger gifts.
- Different Datasets Were Compared. The dataset used excludes many small nonprofits and religious organizations, leading to a fundamental underestimation of how much individuals give to charities each year. The authors arrive at the estimated “shortfall” by comparing apples to oranges: their estimates, which exclude religious giving, to annual data published by Giving USA, which include religious giving.
- Giving Is Not Down, It Is Up. The premise relies on only one measure of charitable giving: donations as a share of disposable income, ignoring the actual increase in money going to charities over recent years.