Well Managed Donor-Advised Funds Don’t Siphon Money Away From Frontline Nonprofits

To the Editor:

Alan Cantor is right to question whether Fidelity Charitable is “organized exclusively for charitable, religious, educational and scientific purposes,” as decreed in section 501(c)(3) of the Internal Revenue Code (“Tax Laws Should Discourage Giving to Funds That Waylay Help for Charities,” Opinion, November 15.)

But Mr. Cantor is wrong in saying that donor-advised funds take money away from front-line nonprofits. Creating charitable endowments, whether at the Ford Foundation, Harvard, or Fidelity Charitable, is an inherently good and stabilizing thing that provides philanthropic strength and continuity.

More important, many donor-advised funds either were or might have been small private foundations with inadequate staffing, non-diversified investment portfolios, and eye-watering administrative costs.

When I managed the California Community Foundation, I worked with the office of the California Attorney General to identify private foundations and charitable trusts with administrative costs equal to or exceeding 50 percent of income. We converted hundreds of these charitable funds into donor-advised funds, slashing administrative costs that often exceeded total income to less than 5 percent. The funds were saved from wasting away, and charity benefited.

To say that “more money is going into donor-advised funds than is coming out” is shortsighted and a non sequitur. Properly managed donor-advised funds with low administrative costs add to the nonprofit coffers rather than empty them.

Fidelity Charitable has a lot to answer for, but taking money away from other charities isn’t one of them.

Jack Shakely
President Emeritus
California Community Foundation
Los Angeles