The Truth About Donor Advised Funds

Maximizing Donor Advised Funds for the greater good

A standard offering of community foundations, Donor Advised Funds (DAFs) have recently received some negative—and outright misleading—attention in the national press. The charges are worth reviewing and rebutting.

The most common claim levied against DAFs is that they are vehicles for the wealthy to “warehouse” charitable assets: donors receive an immediate tax deduction for giving funds to a DAF but are not subject to oversight ensuring their contributions are put to use in the community for some time, if ever, say the critics.

According to those critics, this purported lack of accountability also allows DAFs to become a source of “dark money” to support questionable political organizations. And, further, since DAFs have no required annual payout—unlike private foundations, which must grant at least 5% annually—critics argue that more regulatory scrutiny would ensure the charitable funds contributed to DAFs make their way into the communities they’re intended to benefit.

At the Sacramento Region Community Foundation, we take seriously our responsibility to the community we serve, and the 237 Donor Advised Funds that we manage on behalf of generous people in our region represent nearly half of our yearly grants.

Discover how we partner with area donors

Our expert Donor Engagement and Impact teams partner regularly to encourage our fundholders to actively give through their charitable funds, and we reach out annually to those donors who have not given through their funds in a year. In addition, in accordance with our inactive fund policy, we work to assure that no fund goes for more than three years without granting activity.

We are proud that we have rarely had to implement that policy. Our fundholders are active grantors, with voluntary payout percentages that well exceed the 5% required of private foundations. Further, as part of our due diligence best practices, we vet every grantee to assure there is no chance funds are misdirected to political or other non-charitable purposes. 

As the capital area’s community foundation, this is our charge.

Learn about our impact and leadership

Unlike the large commercial brokerage firms, which have generated much of the criticism leveled against DAFs since they began offering them to their clients, our sole business as a community foundation is inspiring philanthropy and facilitating transformational community change. We are committed to assuring that the funds entrusted to us are doing what they are intended to by providing the means, the education, and the stellar operational support to maximize grantmaking from the DAFs we manage. 

More and more, we partner with our fundholders through educational activities like our Summer Salons and Strategic Initiative convenings to encourage them to leverage their DAF grants with the investments the Foundation is making to address pressing community issues. Together, we increase our impact when collective resources are put to work for the greater good.

Through their partnerships with us, our DAF fundholders give to the nonprofits that serve this region with the benefit of our decades of careful philanthropic stewardship and expertise in charitable giving. That makes their granting stronger, which helps make our community stronger, and we look forward to building on those partnerships to continue enhancing generosity in our region. 
 

SETTING THE STAGE FOR PIVOTAL CHANGE

By focusing on the root causes of local challenges, seeking solutions with long-term results, and supporting the organizations that tend to the vital needs of the capital area, we help create the conditions for meaningful transformation in the Sacramento region. 

Learn MORe