Money From Donor-Advised Funds Is at Work Improving Communities (Letter to the Editor)

To the Editor:

The Chronicle’s latest look at the growth of donor-advised funds (“Disruption Ahead: What to Know About Donor-Advised Funds in 2019,” January 7) lays out many of the criticisms and questions surrounding these popular giving vehicles.

However, as the leaders of community foundations that manage donor-advised funds, we feel it is important to spotlight some crucial things one needs to know that weren’t included in the article.

Donations to donor-advised funds grew by 16.5 percent in 2017, according to the National Philanthropic Trust. But while many are focused on the amount of money going into donor-advised funds, it’s also important to look at how this money is being used.

Grants from donor-advised funds to qualified charities increased by 20 percent in 2017. That means the rate of growth in grant making to charities from donor-advised funds outpaced the rate of growth of money coming in. This continues a trend we’ve been seeing throughout the decade.

The billions of dollars that are granted from these funds each year provide critical services and are being used to solve important problems in our communities.

Amplifying the Power of Donations

Community foundations created donor-advised funds more than 80 years ago, long before for-profit companies like Fidelity and Vanguard established their own charitable arms. We work diligently to ensure they are used to improve our communities, both in the short and long term.

At community foundations, donations aren’t merely placed on a conveyor belt between donors and nonprofits. Donations are instead invested and amplified — with living and legacy donors partnering to achieve greater value together.

Not a Fixed-Sum Game

Many critics of donor-advised funds center their arguments on the incorrect idea that these funds stand between donors and the charities they support. They assume that if donor-advised funds did not exist, the money would automatically make their way to nonprofits, dollar for dollar.

But philanthropy is not a fixed-sum game. One cannot assume giving levels are fixed and transferable, regardless of giving vehicle.

In many cases, donors choose to give through donor-advised funds not because of tax incentives but because they are the only cost-effective option for making complex gifts of stock or property — or for converting the sale of a family business into philanthropy.

Others choose donor-advised funds because they want to create an ongoing and steady stream of revenue to nonprofits that will ultimately provide resources that are worth many times more than their original gift. For these philanthropists, a donor-advised fund at a community foundation is much less costly than a stand-alone foundation to serve the same purpose.

So while we share the field’s goal of ensuring that donor-advised funds remain a force for good, we worry that any efforts to remove or change the well-considered incentives that are associated with donor-advised funds will ultimately lead to much less money going to charity.

We would have appreciated the opportunity to share this perspective in the article itself rather than in a letter. Moving forward, we hope the Chronicle will present the community-foundation perspective alongside the small and vocal group of critics who regularly comment on this complex and important issue.

Dan Baldwin, Community Foundation for Monterey County

Ellen Gilligan, Greater Milwaukee Foundation

Christopher Nanni, Community Foundation of Greater Birmingham

Steve Seleznow, Arizona Community Foundation

Lorie Slutsky, New York Community Trust

Max Williams, Oregon Community Foundation

The authors are all chief executives of their foundations and members of the steering committee of the Community Foundation Public Awareness Initiative.