Unlocking the Power of Donor-Advised Funds: Insights from California’s Community Foundations

This week, Philanthropy Roundtable published a report highlighting how community foundations are using donor-advised funds (DAFs) in California. DAFs have been making waves in the world of philanthropy, offering donors an effective and flexible means to support causes close to their hearts.  In California, the use of DAFs has garnered attention due to limited available data on the subject. This original research offers insight into the payout rates, flow rates and inactivity policies at community foundation using DAFs, showcasing the remarkable impact of these giving vehicles in the Golden State. 

The report also shares inspiring stories which underscore the remarkable versatility and positive influence DAFs can have in addressing diverse areas of need. After all, DAFs empower individuals with philanthropic aspirations to make significant contributions to causes they deeply care about, leaving a lasting legacy for generations to come.  

Robust Payout and Flow Rates 

One critical aspect of DAFs worth examining is their payout rate, or the percentage of DAF assets granted to charitable causes annually. According to the latest available data (fiscal years 2021 and 2022) from 22 California community foundations, the average DAF payout rate stood at an impressive 22.1%, with a median payout rate of 19%. These figures demonstrate a steadfast commitment to regular and generous giving through DAFs in the state.  

Flow rates, the proportion of grants paid out by DAF accounts compared to the contributions they receive, offer another insightful perspective. Among the 22 foundations, the median flow rate was an impressive 90%. This means DAF grants were equal to 90% of the contributions made to DAFs in the same year. On a larger scale, the pooled flow rate for all foundation grants and contributions was 96%, with $4.72 billion in contributions to DAF accounts and $4.54 billion in grants made by DAF accounts.  

Ensuring Impactful Grantmaking 

The report’s analysis also examined how these foundations dealt with inactive DAFs, revealing that, among those with publicly listed DAF inactivity policies or those who responded when asked about their protocols, 86% enforced stringent and well-defined inactivity policies. Only two foundations reported not having an inactivity policy, primarily because their DAF account payout rates consistently exceed the 5% minimum required for private foundations. However, even these foundations are considering establishing inactivity policies in line with voluntary industry standards, highlighting their commitment to responsible and impactful grantmaking. 

Catalyzing Change Through Generous Giving with Donor-Advised Funds 

Moreover, the report on “Community Foundation Use of DAFs in California” paints a vivid picture of the philanthropic landscape in the state, highlighting the impressive impact of DAFs in diverse areas of need. From childhood literacy to environmental education and support for homeless seniors, DAFs have undoubtedly emerged as a powerful catalyst for positive change. 

The generous payout rates, high flow rates and proactive approaches of California’s community foundation DAFs are commendable. Moreover, their commitment to addressing inactivity ensures DAFs remain effective tools for providing long-term support to countless individuals and communities. 

As philanthropy continues to evolve, understanding the dynamics of DAF usage among private foundations becomes increasingly critical. This report serves as a valuable resource, encouraging further exploration and research into grantmaking trends, inactivity policies and industry standards for DAF account activities. It demonstrates that DAFs in California are not just financial instruments but vehicles of hope, compassion and lasting change.

Community Foundation Use of DAFS in California: Payouts, Flow Rates, and Inactivity Policies

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