Growing Opportunity: How Charities Can Tap Donor-Advised Funds

By Elizabeth Schwinn

Donor-advised funds have been growing fast and are now worth more than $23-billion, according to a new Chronicle tally.

But tapping those accounts for donations can be challenging. Donor-advised funds are like charity checking

accounts that people set up at financial institutions, community foundations, or other nonprofit organizations. Donors can spend the money in their funds anytime, though some funds require donors to make a distribution at least once every five years.

Donors don’t face any government requirement to disclose anything to the public about the money they have put in the funds, nor do they or the organizations that manage the funds need to report anything about the money donors channel to charity.

Still, organizations that manage donor-advised funds offer several ways charities can reach the donors who have set aside money for charity. Among them:

Look carefully at donors’ checks. Keep a record of all checks that are mailed to the organization from a donor-advised fund, according to fund leaders, because it’s the best way to identify people with money who care about a particular organization. Even if the amount of the check is small, the donor probably has more to give.

“It’s helpful because it’s an indication that the donor is committed to philanthropy,” says Kim Wright-Violich, president of the Schwab Fund for Charitable Giving in San Francisco. “And there’s potentially some level of affluence there. Even if you get a $100 check, you know they’ve set aside a sizable amount for charity.”

Read the annual reports of community foundations. Many such organizations list the names of their donors, or of donor-advised funds that are often named for the donors, in their reports.

Make sure your local community foundation is aware of you. Most community foundations tell donors about the charities the foundation supports, and many holders of donor-advised funds then decide to make grants to those charities. “Never overlook an opportunity to get to know the program officers for their respective areas,” says Gay Young, director of donor relations at the New York Community Trust.

Even if the foundation doesn’t make a grant to a particular charity, it may be willing to send donors information about it if the donors are interested in that cause. “We’re trying to serve less as a gatekeeper and more as a connector,” says Chris Andersen, executive director of the Lutheran Community Foundation, in Minneapolis. “Rather than trying to protect donors, we’re trying to offer them more opportunities.”

In fact, he says, the foundation is even asking donors about the circumstances under which they would accept grant applications.

Charities also should make sure they are listed in databases for donors, such as the one created by the Greater Kansas City Community Foundation, in Missouri, which provides profiles for donors of more than 600 nonprofit organizations, detailing the groups’ missions, programs, management, and financial data.

Other community foundations have similar projects. For instance, the Greater Houston Community Foundation, one of five organizations that is using Kansas City’s software, has put about 400 charity profiles online, says president Stephen D. Maislin. He urges small charities to respond thoughtfully to his and other foundations’ requests for information. Right now, he says, “the charities that get money are the big ones with more sophisticated PR.”

Check out the Web sites of commercial funds. While the financial companies that offer donor-advised funds won’t name their customers, Bank of America, headquartered in Charlotte, N.C., may soon identify funds that accept grant applications. It has just created an online listing of 70 foundations for which it serves as trustee or grant-making agent. In the future, the bank will add contact information for any of its customers with donor-advised funds who would like to receive grant applications, says Don Greene, an executive in the bank’s philanthropic-management group. Go to: http://www.bankofamerica.com/grantmaking.

Focus on donors, not their funds. Despite their best efforts, charities won’t be able to identify everyone with a donor-advised fund, fund officials acknowledge. Instead, they should focus on “good old-fashioned prospecting” for potential donors, Ms. Young says.

Donor-advised funds need to be taken into account in every aspect of a charity’s fund raising, experts say. For example, fund raisers who seek big gifts need to realize that a donor who’s hesitating about making a pledge might be able to make a gift from his or her donor-advised fund instead, since the money is already set aside for charity.

Tell the charity’s story well online. Commercial funds refer their donors to Web sites like GuideStar or Charity Navigator for information on charities, so it’s important for groups to burnish their image on such sites.

A charity’s own Web site is another source of information for donors, but they don’t stop there, says Ms. Wright-Violich. People with donor-advised funds frequently explore a charity on the Internet when they’re thinking of a gift, she says: “You may not get a $5-million gift online, but you better believe they’re doing research on you before they write you a check.”