Mistaken Statistics on Charitable Funds

LETTERS TO THE EDITOR

To the Editor:

Your article on the Senate Finance Committee hearing (“Taking Aim at Charity,” April 14), misquoted the report by Jane Gravelle of the Congressional Research Service, who in turn misused data taken from a study of community-foundation donors on the Foundation Strategy Group’s Web site. Let us set the record straight.

The Chronicle’s article states that the “survey had found that last year 20 percent of donors did not distribute any money to charity from their donor-advised fund accounts — and that about two-thirds of donors distributed less than 5 percent of the money in their funds annually to charities.”

First, Ms. Gravelle’s report said 19 percent, not 20 percent, and the data cited refers to the number of grants, not the percent of assets given out. In other words, the Foundation Strategy Group’s study states that 61 percent of donors made fewer than five grant distributions. We do not know what percent of assets these distributions represent. A single grant might represent 1 percent, 10 percent, 50 percent, or 100 percent of the fund’s assets, and it is therefore impossible to draw payout conclusions from the number of grants made. The purpose of reporting this data in our study was not to characterize donor-payout practices, but to look at the administrative burden of donor-advised funds on community-foundation staff based on the number of transactions processed.

Second, Ms. Gravelle’s assertion that 19 percent of donor-advised funds made no grants in a year is itself erroneous. Our study, which was limited to six foundations, looked only at endowed funds, not all donor-advised funds. If the survey had reflected the true distribution of endowed and unendowed donor-advised funds across the field, it is reasonable to expect a higher rate of distributions.

Third, our data reflects a single year, and does not look at payout patterns over time. Some of these funds may have been opened in the last quarter of the year and, while not making a distribution within that calendar year, might well make distributions within 12 months of being opened. Alternatively, some funds may have made a large grant one year and then no grants the subsequent year. Even private foundations are allowed to carry their excess contributions forward to meet subsequent year payout requirements.

Finally and most important, the question is not whether every donor-advised fund in the country makes payments every year, but whether from a macroeconomic view, the funds going into donor-advised funds nationwide are being parked or transferred to charities at an acceptable rate. Ms. Gravelle concedes that donor-advised funds in the aggregate pay out roughly 20 percent of assets each year, many times more than the 5 percent mandated for private foundations.

As long as the total funds going into donor-advised funds in the United States are being paid out at the same or greater rate than private foundations, there is no reason that Congress should be concerned whether every single individual fund makes a grant in every year.

Rebecca Graves
Senior Consultant
Mark Kramer
Managing Director
Foundation Strategy Group
Boston

The Chronicle regrets its error in this article.