According to the Chronicle of Philanthropy, a recent analysis found that in 2019, at least $1 billion has been shuttled from one commercial donor-advised fund (DAF) to another commercial DAF – not to working charities. At the same time, these DAF-to-DAF transfers inflate the payout rate, reducing transparency around how much philanthropic dollars are actually being used for public good.
It is clear the status quo of charitable giving not working as intended to increase the flow of resources to charities. DAFs can and should continue to play an important role in charitable giving, but there need to be rules to ensure that the billions of dollars of charitable funds donated to DAFs get into the hands of working charities within a reasonable period of time.
Read below for excerpts from the Chronicle of Philanthropy’s story on this novel analysis:
“Donor-advised funds housed at charities run by commercial organizations such as Fidelity and Schwab transferred at least $1 billion into other commercial DAFs in 2019 alone, according to a new report. These transfers between the giving vehicles inflate the payout data these organizations report and make it hard to know how much DAFs really distribute to working charities. The analysis from the Institute for Policy Studies shows that the amount of money donors have transferred from one DAF to another has grown exponentially in recent years.”
“Researchers analyzed data from 39 commercial DAF sponsors that filed their informational tax returns electronically in at least one year from 2017 to 2019. They analyzed five years of tax information for those fund sponsors. In 2015, those 39 DAFs granted $209 million to other commercial DAFs. By 2019, the dollar amount granted to other commercial DAFs had ballooned by 409 percent, to $1 billion.”
Read the Chronicle of the Philanthropy’s story here.