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Beyond Giving USA: Highlighting the DAF Fundraising Report

By: Melissa Bank Stepno, President & CEO

For those of us who track trends in philanthropy, June has always been a big month. That’s because it’s typically when Giving USA releases the topline findings of its annual report—though the full version doesn’t arrive until July.

Giving USA is widely considered the most comprehensive source on giving data in the U.S., and as the longest running report it offers unmatched longitudinal data on U.S. philanthropy.

It is the O.G.  It is the legacy report.  It is the source that everyone relies on.

So much so, that its release sparks a flurry of webinars, blog posts, and analyses from consulting firms and other entities eager to share their take on the headline numbers. That content is out there, so I won’t rehash the details here.

Instead, I want to turn your attention to another important report that dropped just a day after the initial Giving USA stats were released — and it may have flown under your radar.

 

Introducing the DAF Fundraising Report 2025

Now in its second year, the DAF Fundraising Report 2025—a collaboration between Chariot and K2D Strategies—is a welcome addition to our philanthropy toolkit.

While Donor-Advised Funds (DAFs) have been around in the U.S. for nearly a century, their influence on the philanthropic sector has surged in the past decade. One reason? There are now roughly 10 times as many DAFs as there were ten years ago.

Since 2012, the National Philanthropic Trust (NPT) has produced the most comprehensive annual report on DAFs, based on data from sponsoring organizations. I rely on it regularly and eagerly await its November release each year. But as valuable as it is, it tells only part of the story.

Until now, we’ve lacked a large-scale report focused on donors who recommend DAF distributions and the nonprofits that receive them.

With the DAF Fundraising Report, we now have our first view into donor behavior, which is fascinating and perhaps more helpful to non-profit organizations looking to understand DAF giving.

 

Why is this so?  And, why do we need so many reports on philanthropy anyway?

Simply stated, every study or report offering trend analysis provides a different lens on the sector, shaped by its data sources.

Both Giving USA and the NPT report draw primarily from IRS Form 990s—tax filings submitted by nonprofits. Giving USA supplements this with econometric modeling and other datasets, but ultimately, both reports reflect macro-level trends. They don’t provide insight into donor behavior within individual organizations.

And while the sector has talked about becoming more “donor-centered” since Penelope Burk’s Donor Centered Fundraising came out over 20 years ago, the tools we use to analyze philanthropy haven’t done the same.

 

The Data Behind the Report

To be clear, I understand the challenges of benchmarking data across nonprofits. From inconsistent gift entry practices to varying definitions of key terms, even basic data can be messy. And some CRM systems don’t make the exporting and reporting process easy.  Conversely, IRS 990s offer a standardized (and easier) dataset —but “easy” doesn’t always mean “complete.”

The beauty the DAF Fundraising Report 2025 is that it leverages data provided by nonprofits, directly from their CRM databases, at the donation transaction level.  Among other data points, this includes details like an individual donor’s gift dates, amounts and channels (DAF or non-DAF).

To my earlier comments on the challenges with standardizing data, I know that the researchers of this report painstakingly ran quality checks and standardized the best that they could across participating organizations.

While only 32 organizations participated in this year’s report, it is a 60% increase in the number of participants from last year’s report.  The participating organizations represented a nice cross-section of sizes (by annual revenue raised), however it should be noted that most participants were from cause-based and/or advocacy organizations, not from other sectors like higher education or health care.  As such, my advice would be to use the findings as directional indicators and not absolutes for your specific organization.

 

Besides its growth in popularity, what makes DAF giving so important to nonprofits?

Let’s just highlight a few of the DAF Fundraising Report’s findings:

  • DAF donors have higher retention. On average, they were retained at a rate 13% higher than non-DAF donors.
  • Most DAF gifts are not major gifts. In fact, 69% of DAF gifts were under $1,000.
  • Donors who switch to DAFs give more. Median giving doubled for donors who converted from non-DAF gifts in previous years to DAF giving.
  • DAF gifts are significantly larger. At participating organizations, the median DAF gift was 12x higher than non-DAF gifts.

 

Closing Thoughts

Though still young, the DAF Fundraising Report 2025 is growing fast—and it’s already walking, if not running.  It serves as an important partner for its bigger siblings and I’m hopeful it will continue to evolve, broadening its scope and deepening its insights. In the meantime, I encourage you to take a close look. It offers a rare, donor-level view into one of the most important vehicles in modern philanthropy.

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Giving Vehicles Aplenty! Private Foundation vs. DAFs? Why Not Both?

by: Melissa Bank Stepno, President & CEO

For most of us, when we think of omni-channel fundraising, we think of the three most common giving vehicles: donating online with a credit card, mailing in a check, or providing payment information during a telemarketing phone call.

However, the options for potential giving vehicles are way longer than just “The Big Three.”

PayPal, give-by-text, cryptocurrency, gifts of stock, giving circles, donor advised funds, private foundations, real estate, impact investing, LLCs* … the list just goes on!

While some of these are more accessible to the ‘average’ donor than others, for our high-net-worth donor population, the strategy for choosing which giving vehicle to use, and when, can be very complex.

At the 2024 DAF Giving Summit, there was an entire session led by Sharon Schneider from Integrated Capital Strategies that discussed her process for consulting with UHNWIs on how to craft their own personal giving strategy.

Key takeaway: major philanthropists use more than one giving vehicle depending on what they are giving, to whom and for what purpose.

One of the topics that she covered, and the one that I get asked about most frequently, is why a family would choose to have both a donor advised fund and a private family foundation.

In fact, according to Trends 2020, a benchmarking survey of family foundations from the National Center for Family Philanthropy, we know that more than one-third of families who have family foundations also have DAFs with a community foundation.  But again, why?

Here are just a few of the reasons that I am aware of:

 

Mission

Many private foundations are set up with a specific purpose in mind (perhaps giving to health care and social services), but a family may also want to provide philanthropic support to a broader range of nonprofits (perhaps an alma mater or the local theater)

Or, sometimes a family may be divided on certain politically-charged or socially-motivated issues and want all giving from their foundation to have full family consensus.

In both scenarios, having a separate DAF (or multiple DAFs!) provides the ability to stretch beyond a foundation’s stated mission or an entire family’s interests.

 

Privacy

Sometimes, even those who are very public about their philanthropy, want to give privately.

While all gifts from a private foundation are listed on the foundation’s annual 990, gifts from a DAF have no public reporting requirement.

Therefore, for families with foundations who may want to make certain gifts anonymously, DAFs are an attractive alternative.

 

Independence

Many family foundations are controlled by multiple generations of family members who may, or may not, want to collaborate on making giving decisions.

At the conference session I mentioned above, one of the conversation topics was the sense of “forced collaboration” between family members.  Full collaboration is more of an ideal that isn’t always the reality in the modern world.

So, creating separate DAFs for individual family members or households allows them to make some of their giving decisions independently of the larger group.

 

Geography

In one very specific case study, I heard from a 4th Generation philanthropist whose great-great grandparents established a family foundation with the stipulation that all funding from the foundation be provided to non-profits within 25 miles of the family homestead.

Why?  Because that is approximately how far a horse can travel in one day and they wanted all of their giving to be “close” to where the family lived.  Remember, four generations ago it was common for multiple generations within a family to live on the same land, and neither the automobile nor airplane existed.

But, today, transportation options far broader than by horseback and the family has members scattered across the United States.

So, transferring funds from the foundation to individual DAFs at the local community foundation allows family members across the country to support organizations “close” to their local communities while keeping with the spirit of the founding documents.

 

Speed

Many foundations have complex structures established for approving distributions. Let’s say a family wants to give to an emergent situation, like a natural disaster, giving via a DAF can be immediate and without delay.

 

Distribution Requirements

Unfortunately, there are also some ‘bad actors’ who use their DAF simply to satisfy the 5% distribution requirement from their private foundation. Luckily, this seems to only happen in the minority of cases, but it is important to note because this type of behavior does exist.

 

So, if I had to sum up the list above in two words, it would be Flexibility vs. Control.  Simply put, a DAF provides significantly more flexibility than a family foundation.  On the other hand, a foundation provides its founders with significantly more control as to how their assets will be used.

We already knew that philanthropy is not a “one-sized-fits-all” endeavor.  Hopefully this post provided some insight into the rationale behind some of the flavors (or sizes!) we might encounter with our largest donors and prospects.

 

*For more reading on some of the other flavors, earlier this year, my colleague Christine Bariahtaris published an article for Intelligent Edge on giving via LLCs.

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What scares me in fundraising and prospect research

So it’s Halloween! What would today be without a blog post that somehow appropriates a spooky theme!? If you came here hoping for cute and fluffy, here you go, but after this cutie I’m getting serious.

That said, there’s enough going on in the world right now that truly is scary, so don’t expect to run away gasping from this article. The scary stuff I’m going to talk about is all fixable.

Donor Attrition

The last two years have been really tough on our sector as we watch the numbers falling in terms of individual donors supporting nonprofits. According to data from the AFP-led Fundraising Effectiveness Project, donor retention hovers around 40%,  which sounds kind of okay until you realize that means that donor attrition is around 60%. Yikes.

That said, giving continues to increase (see Giving USA). Not as much as inflation, unfortunately, but $557.16 billion is still record giving.

What we see going up is donations to donor advised funds. Yes, we talk about DAFs a lot around here, but that’s because they’re just super important for everyone in nonprofits to understand and just a huge source of funding that is going overlooked.

Okay, so how do we deal with the attrition/retention problem?

First, if there’s a donor you want to keep, find out why they love your organization. Research them, survey them, talk to them. Then do something creative with that information that helps retain them.

Second, if you want to retain mid-level regular donors, consider this: 10% of all giving right now is going into donor advised funds, and that’s a figure that’s growing yearly by leaps and bounds.

Also, and maybe more importantly: The 2024 DAF Research Collaborative National Study on Donor Advised Funds reported that “DAFs are a mid-range philanthropic vehicle, accommodating contributions larger than typical household donations yet smaller than those establishing private foundations.

  • 38% of contributions fell within the $10,000 to $49,999 range.
  • 15% of contributions were in the $50,000 to $99,999 range.
  • 19% of contributions were within the $100,000 to $499,999 range.”

That’s nothing to sneeze at. And as we’re looking to retain and upgrade mid-level donors, that group is worth paying special attention to. But more than that:

DAFs are created specifically to give away money to nonprofits. Don’t make it hard for people to give to your nonprofit with their DAF! There are low-cost apps and widgets you can add to your website and fundraising emails that not only make it easy for donors to give but also provide you with all-important specific donor data so you can personally thank and research them.

Ignoring ASK ME signals from donors

When was the last time you checked donation acceleration?

What does that mean? For example, let’s say someone gives $25 in year one, $50 in year two, $75 in year three, etc. Maybe they’re increasing their giving because you asked them to, or maybe they’re just doing it on their own. Either way, these people are jumping up and down telling you they love your mission and want to support it. A simple data science project can help identify these awesome prospects for volunteer opportunities or increased giving.

And how about volunteers? Are you also asking them to give? There’s an organization that I love and volunteer for that Will. Not. Ask. Me. for a donation. I have no idea why (and I do give even though they don’t ask) but organizations should seriously ask people who love them for financial support in addition to sweat equity. You might get an upgrade…

Under supporting/under-utilizing prospect development

Over the years I’ve had the pleasure of talking with hundreds of fundraising managers who are concerned that their prospect development team is under-performing. One of the things that scares me is when I hear, “Our research department doesn’t give us what we need.” “They’re not proactive.” “It takes forever to get anything back from Research,” or – scariest of all – “the information I get isn’t relevant/helpful.”

Yikes.

When I hear that, I like to dig down a little more.

Tell me, what’s the frontline fundraiser to research staff ratio?

What are the expectations (and budget) for continuing professional education?

What’s the budget for fee-based research and training on using the resources?

How often does Research attend development/major gifts planning/strategy meetings?

How often do you update research report templates?

How often do the researchers hear about the results of their work?

If I learn that there’s one researcher for every three fundraisers, an expectation that the researcher(s) will attend a professional conference at least every other year, and a research budget that includes a variety of fee-based resources, and/or a general disinterest from Research in strategic planning, then we start talking about remedial actions for the research team.

But (and let’s hope that I’m exaggerating here), if we’re talking about one researcher trying to meet the information needs of 7 fundraisers, 2 board volunteers, and the executive director with access only to free webinars and Google as their primary resource, then it’s time for The Talk with that fundraising manager.

Maybe this sounds like your nonprofit (or maybe just parts of it do). If you’re a fundraising leader, don’t be afraid to dig down a little further to find out if under-resourcing your prospect development team is hampering your ability to get the best information possible. Maybe it’s the people, or the systems in place, or the resourcing that needs to be fixed. Don’t be afraid to look into the issues when problems arise so they don’t get harder to deal with.

Fundraising intelligence is a critical system, like your database, your relationships with donors, and the services you provide to end users. If it’s running well, it’s going to be a whirlwind for you to keep up with, and I mean that in a good way.

AI

Okay, I saved the scariest for last. Artificial Intelligence.

I get scared when I read about reference librarians wasting hours trying to locate articles and books for patrons, or (worse?) journal articles for medical students, only to discover from the requestor that they got the recommendation from ChatGPT for a source that doesn’t exist.

Recently on a subreddit for librarians, two contributors had this to say:

We just had a student bring an entire list of books and articles that her professor recommended for her research, and not a single title on the list exists. We reached out to the professor and yep. She got the list from ChatGPT.”

I’m an academic librarian at a medical school and I get sent a fake article to find like once a week. It’s terrible. It’s not just the students either, I also cover the residents at the local hospital since the hospital got rid of their medical library and they are even worse about it.”

(yikes, if that’s not something that scares you, I don’t know what will)

Duke University librarians Hannah Rozear and Sarah Park had something to say about ChatGPT in their excellent article ChatGPT and Fake Citations, including: “Be wary of asking ChatGPT to summarize a particular source…” That’s important advice because summarizing is a big thing we’ve been encouraged to use these tools for.

If a tool you use to help you save time adds in fake information, well, that’s not adding value. It detracts from prospect research’s perceived value, which we as a profession have spent decades trying to build up.

Issues like this, at least at this point, certainly makes me and the HBG team think twice about the reliability of the resources we use, and the trust that frontline fundraisers put in the information that we provide.

Increasingly search engines are providing short-cut information that has been generated, inferred, interpreted, or just plain imagined by large learning models (LLMs). In some cases, we’re being fed data that has less reliability than a chocolate teapot, and it’s harder to spot what’s real and what’s not. I hope that the reliability will be increased, but right now that’s just not the case.

Last November Melissa Bank Stepno wrote a thought-providing article on alternative interpretations of AI in prospect research. As you consider the reliability of your sources and how to navigate using AI in your work, take a look at her advice again as an informed guide.

So those are the things that are scaring me right now in fundraising and prospect research. All fixable, with opportunities for positive change.

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Today is DAF Day

by: Melissa Bank Stepno, President & CEO (and Managing Director of DAFinitive)

Today, October 10, 2024, is the first ever DAF Day.

Here at HBG, we host an entirely separate blog dedicated to donor advised funds.  You can check out our DAFinitively Speaking blog here or follow DAFinitive on LinkedIn. But, given that today is DAF Day, there’s no reason not to cross-pollinate, just a little bit!

 

What is a DAF, you might ask?

DAF stands for Donor Advised Fund.

At its simplest, a DAF is an investment account that a donor can use to designate money for charitable purposes.

The vast majority of DAF donors are people, however a number of companies leverage DAFs as part of their corporate giving programs as well.

For non-profits, think of a DAF as a type of giving vehicle.  Just as a donor could send you a check via the mail, make an online contribution, or gift shares of stock, a donor could also direct funds from their DAF to your organization.

 

How does a DAF work?

Every DAF in the United States is managed by a sponsoring organization, which is a registered 501(c)3 non-profit.

The majority of sponsors are community foundations, like the Boston Foundation or Silicon Valley Community Foundation.

Sponsors can also be affiliated with a large financial institution, like Fidelity or Schwab, but it will always be under a separate non-profit umbrella.

Lastly, some single-issue non-profit organizations also serve as DAF sponsors.  You will see this with organizations like Jewish Community Foundations, Catholic Charities, some advocacy organizations, or even large universities.

When a donor makes a gift to a DAF, they are really making a gift to the sponsoring organization and designating their gift to be held in the DAF.  At that point in time, the funds become the fiduciary responsibility of the sponsoring organization, not the donor.  And, the donor is eligible to receive a tax deduction because, after all, they have made a bona fide gift to a non-profit organization.

While the money sits in a DAF, most sponsors offer investment options so that the money can grow over time, just like in a savings account or mutual fund.

The only way that funds in a DAF can be used or spent is for charitable purposes.  So, at their leisure, the donor can direct (or advise!) the sponsor to make a distribution from their DAF to any non-profit of their choosing.

 

So, what is DAF Day?

Ultimately, DAF Day is a marketing effort to activate DAF advisors to make distributions from their DAFs to non-profit organizations, today.  As of the writing of this post, over 1,000 non-profit organizations, 5 sponsor organizations and 20 technology partners have joined the movement.

Marketing efforts like this are not a new concept in philanthropy.  Combining a sense of community, rallying around a cause and creating a sense of urgency is a proven strategy – usually under the more generic title of a Giving Day.

As an example, Giving Tuesday was launched in 2012 to mobilize philanthropic activity on the Tuesday after Thanksgiving.  In 2022 alone, Giving Tuesday sparked $3.1 billion in giving.

According to the Annual Giving Network, “nearly 90% of colleges and universities report that giving days are increasingly important part of their annual giving program.”  While most higher education institutions tend to hold their Giving Days in the spring, dates vary, frequently to be significant to a particular institution’s events or traditions.

And, even before the phrase “Giving Day” existed, the first known ‘day of giving’ was likely the first Muscular Dystrophy Association (MDA) Telethon, which dates to the 1950s!  Hosted for decades by Jerry Lewis, it became known to many as the “Jerry Lewis Telethon,” and aired live on TV.

 

Why launch DAF Day now?

The popularity of donor advised funds has exploded in recent years.

There are roughly 10x as many DAFs today than there were a mere decade ago.

According to Giving USA, giving from DAFs accounts for nearly a quarter of all philanthropic donations.

And, one of the first-ever benchmarking studies on DAF donor behavior showed that both retention and lifetime value of donors who give through their DAFs are better than the typical one-time donor.

Yet, DAFs often get a bad rap as a place where people park money without distributing it to non-profits.

While this might be true in the minority of cases, DAF account holders are generally philanthropic individuals and the velocity of money moving in/out of DAFs is far greater than what we typically see at private foundations.

However, there’s always more than can be done to spark someone’s passion to support the charitable community.  And, research suggests that as of last year, there was more than $234 billion sitting in DAFs, earmarked for philanthropy, and waiting to be distributed.

 

So, why not now?

 

However, the proof is always in the pudding, so to speak.  Just as I do each year with so many other reports, I’ll be most interested to see the analysis after DAF Day has concluded.  If successful, I suspect that DAF Day will become an annual tradition, just like the other Giving Days that proceeded it.

 

To learn more about DAFs, check out:

 

Image Credit: “Dollar Heart” by cmpalmer is licensed under CC BY-SA 2.0.

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Your donor database has people with DAFs in it already

Chances are good that you’ve read the stats already and you know all this, but just in case this topic is new to you:

  • At the moment, there are around 2 million donor advised funds in the US alone*.
  • The number of DAFs is growing at a rate of about three percent per year, and the compound rate of growth in numbers from 2018 through 2022 is 22.6 percent.
  • The amount of money DAFs hold is astounding: $229 billion in 2022 (the most recent year we have stats for). If you look at past trends and factor in the current stock market trends, we can estimate that assets at the moment are probably around $250 billion.
  • DAFs are giving at a rate of 22.5 percent annually (as opposed to foundations, which give the 5% they’re required to and little more). In the UK, DAFs are giving closer to 25% of assets annually.
  • The average DAF size across all sponsor types (National, Community Foundation, and Single-issue) is $117,466. At community foundations, the average is $547,648. (That’s right – half a million dollars!)

And you know this, too: people are giving money to DAFs rather than directly to nonprofits. And for those of us in the nonprofit sector, that’s frustrating.

Contributions to DAFs in 2022 totaled $85.53 billion, an all-time high, and a 9 percent year-over-year increase. If total giving in the USA – including individuals, companies, foundations, and bequests was $499.33 billion in 2022, that means that giving by people to DAFs was 17% of all giving in 2022.

Not only that, but the compound annual growth rate for contributions to DAFs from 2018 to 2022 was nearly 24%. That’s some astronomical growth there.

Okay, so we know all the stats. What do we do about it?

How do we find those donors and encourage them to direct their DAF grants to our nonprofits? Why does it seem so opaque and so hard? Why don’t they just make donations directly to the nonprofits that need the money now instead of giving to an intermediary?

There are lots of good reasons for frustration and complaint, but in some cases we’re just not meeting donors where they’re at. A DAF may actually be someone’s best option for giving, and we need to understand those reasons so we can either change what we’re doing or be (somewhat? more?) satisfied with the situation that exists.

Why do donors give to a DAF rather than directly to a nonprofit?

  • They’ve had a major financial event and need to get tax relief, fast. Putting money in a DAF solves their now tax problem and gives them a breather while they decide how and where to give. They may not want to give the whole amount to one nonprofit, so parking the money makes practical sense.
  • They want to give an asset that their chosen nonprofit doesn’t take. This could be crypto, restricted stock, part of a privately-held company, a life-insurance policy, or another complicated/non-liquid asset that most small-to-medium nonprofits just don’t have the financial ability or know-how to deal with.
  • They’ve got a financial advisor that they meet with at least once a year selling them on the concept of opening a DAF.
  • People in a friend group or extended family want to pool their giving toward a certain cause, or in memory of someone dear.
  • A family wants to create a funded resource to teach the next generation about philanthropy.

So there are lots of really good reasons for people to start a DAF that have nothing to do with wanting to be purposefully opaque or hoarding money that “should” go directly to nonprofits instead.

It’s not all cases of course, but why not go forward on the assumption that the majority of DAF donors have their own very good reasons for having a DAF. We can lament the situation and/or see it as a blockade, or we can take it as the reality and opportunity that it is and plow forward.

There are things you can do to find and engage DAF donors.

In fact, chances are very good that there are donors already giving to your nonprofit via check or credit card who also have DAFs. They just haven’t given from that account (yet?).

So: what can you do about it? Here are some practical tips:

  • Educate yourself and your fundraising team (especially the gift entry folks) on what DAFs are. The more you know, the better prepared you can be for conversations with donors. There are a myriad of vendors and professional association webinars out there to get you up to speed.
  • If someone makes a gift to your nonprofit via their DAF, flag the donor/donation in your database (or keep a spreadsheet if that’s not an option). Review the list of flagged records monthly for wealth screening or research.
  • Thank the donor specially for their gift. This person has an account specifically set aside for philanthropy, and they have chosen your nonprofit as a recipient. A customized acknowledgement of their generosity is good stewardship, and good stewardship retains donors. (What to do if the sponsor didn’t include that information? Contact the sponsor and ask them who made the gift! Oftentimes the gift isn’t actually anonymous, it’s simply that the generated form with the check just didn’t include the information.)
  • Subscribe to DAFinitive® to see if donors in your database have a DAF. Find new prospects by interest area, geography, and past donations. Get on the waiting list for DAFinitive® screenings when they become available.
  • Pay special attention to Community Foundation DAF holders, especially if your nonprofit serves that sponsor’s local community. These funds hold more money on average and CF DAF donors care about their local community.
  • If you’re a nonprofit that serves a local population, make friends with your local community foundation’s officers. The more they know about your organization’s work, the better prepared they can be to recommend your nonprofit to their DAF donors whose philanthropic goals match your mission.
  • Make it easy for DAF donors to give to your nonprofit. Get a widget for your website (check out Chariot or GiveButter) to give donors one-stop ease in giving via their DAF. (And while you’re at it, you can make it easier for donors to give crypto, too, via The Giving Block widget).
  • Specifically ask for DAF donations on your website and in your communications with donors.
  • Check out our free resources to learn more about donor advised funds and how to find them.

&     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &     &

*The US is by no means alone; DAFs exist world-wide in many countries including Canada, Australia, the United Kingdom, France, Singapore, Italy, and more.

Why do you care about DAFs being international? Have you ever had to wade through the hassle to receive a cash donation from outside of your country? What about stock? Or more complicated assets?

If you’re working at a nonprofit that has an international constituency, DAFs are the most fluid way for international donors to give to your organization, bar none. It’s the sponsor’s responsibility to take care of all of the vetting and paperwork, and on the nonprofit’s end you don’t have to worry about Gift Aid or charitable receipts. It’s already done.

For example, let’s take a quick look at UK donor advised funds:

In 2022, total estimated charitable giving in the United Kingdom was £12.7 billion, according to the CAF UK Giving Report. Contributions to UK donor advised funds in 2022 totaled £868.5 million, so that means that 7 per cent of total individual giving in the UK went to a DAF.

What about Canada?

According to a recent study by KCI and CAGP Foundation, total assets held in Canadian DAFs at the end of 2021 were $8.5 billion. In 2021, the mean average size of a DAF was $406,000. The report estimated that 10% of DAFs in Canada hold assets in excess of $1 million. (yes, you read that correctly. wow!)

And so…

DAFs are everywhere, not just in the US, and they’re growing at a rate that looks like the aftereffects of the Big Bang. Chances are good that you already have DAF donors in your database; I hope that these tips help you connect with them soon.

More reading:

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It’s Time: Highlighting Six Changes

Two weeks ago, I attended my last Apra Board Meeting, immediately followed by the 2023 Apra Prospect Development Conference.  As a team building exercise, we kicked off our board meeting with “6 Word Memoirs.”  As one might expect in a group of about a dozen people, the tone and tenor of our memoirs varied – some professional, some personal, some serious, some funny, some focused on being “in the moment”, others focused on lifelong characteristics.  Mine was as follows:

This Year.  Many Changes.  Reflective.  Bittersweet.

For those who do not know me, 2023 has been a year of change.  About 6 weeks prior to the conference, I started in my current position at The Helen Brown Group.  And, after 6 years of being on the Apra Board, my term was coming to an end.

As such, my mood was very, well, reflective.  As you might imagine, a 6-year board tenure could feel like both a short and long amount of time.

On the one hand, some things within Apra and within our profession have not changed over the past 6 years – and maybe they never will.  We are still debating whether the full prospect profile is “alive” or “dead.”  We are still complaining about database conversion projects.  Most of us are planning, in, or about to finish some type of large capital campaign.  You get the idea.

On the other hand, over the past 6 years our industry has changed, evolved and grown substantially!  Like many of us, I don’t always like change.  But, change is not only a constant, it is also necessary.  I have learned to embrace the later.

Also like many of us, I often have trouble seeing the forest through the trees.  So, since the themes of change and sixes have both been on my mind, I thought: it’s time to highlight 6 “trees” that have sprouted in our industry’s “forest” over my 6 years on the Apra Board.

 

1. COVID – COVID had a transformative impact on almost every aspect of our lives – professional and personal. Did I really need to mention this?  Probably not.  However, it was so impactful that how could I not mention it?  Enough Said.

 

2. ChatGPT, AI and similar – do I think ChatGPT or AI is going to replace our profession?  No.  Do I think they are going to change the way we do our work.  Absolutely.

Some of us are old enough to remember when the Internet was rumored to replace our profession and it obviously didn’t.  We are still here!

However, I think we’d all agree that the way we work is significantly different – more efficient and faster – than the days of library visits, stacks of books and lots of phone calls to request information.  My suspicion is that this era of technology innovation will have the same type of impact, forcing (in a good way!) us to evolve.

 

3. DAFs – Did Donor Advised Funds exist 6 years ago?  Yes.  In fact, there’s a great blog post by my colleague Jayme Klein here that reviews the history of DAFs.

However, in the past few years the importance of DAFs and their impact on our industry really started to explode.  In fact, according to the National Philanthropic Trust, DAFs grew 28% in 2021 alone.

Those who follow GivingUSA have also noticed that over the past couple of years there has been a decline in individual giving alongside an associated increase in foundation giving.  Most experts attribute a portion of this shift directly to the impact of DAFs.

If donor giving patterns are changing, our industry must learn to adapt and keep up with those changes.

 

4. Data Governance and Privacy Landscape – while FERPA and HIPAA certainly existed for way longer than my six-year looking-glass, we now have an alphabet soup with GDPR, CCPA, PIPEDA and VCDPA added to the mix. This, of course, is an evolving landscape with legislation pending (or already in effect) in other states and countries.

Sites like The Nonprofit Alliance can help us track legislation.  However, knowing about the law is only ½ the battle.  Perhaps the bigger challenge will be in the nimbleness and complexity needed to adhere to all of variations across so many laws.

 

While my first 4 are broad and impact the entire philanthropic landscape, I wanted to reserve my last 2 specifically for Apra, since my tenure on the Apra board was the inspiration for this post.  Of course, many trees have sprouted within Apra over the past 6 years.  I’ll highlight two:

 

5. Apra’s DEI Data Guide – In 2021, Apra published its first version of a new DEI Data Guide (spoiler alert: an updated version is due to be published later this year, along with a brand new asset on data minimization!). The Guide’s purpose is to serve as a resource for best practices in the ethical collection, storage, and usage of DEI data.

Sure, Apra was talking about DEI 6 years ago.  And, Apra has always prided itself on providing an ethical guidepost for the philanthropy profession.  It even has an entire section of its website focused on Ethics and Compliance.

But talking about something and having text on a website does not make it a seminal cornerstone of a professional association.

It is to this end that the importance of the DEI Data Guide cannot be understated, especially as Apra is a community that lives, breathes and thrives on using data to advance philanthropy.

In quick stead, the Guide has also served as a launch pad that helped elevate Apra as “The Leader” in assuring the proper collection, use and protection of donor data across the entire philanthropic sector.  In fact, the Guide has been promoted in efforts by AFP, CASE, aasp, and the Chronicle of Philanthropy, just to name a few.

 

6. Due Diligence – Okay, full disclosure: I was having a bit of trouble picking this last one. There was so much to choose from that I really couldn’t decide!

My mind was quickly made up when I read Heather Willis’s Intelligent Edge post last week on Comprehensive Due Diligence Research.  Of course!

Due diligence has always been in the back of a researcher’s mind.  I distinctly remember an example from my time as a Prospect Researcher at Boston University when a colleague realized that a prospective donor was possibly connected to a terrorist organization.  Yikes!  What to do?  We talked about it and made some ad hoc decisions on how to handle next steps.  We had no formal policy or procedure in place.  This was twenty years ago.

Now, Due Diligence is a practice of its own with guideposts and guardrails to follow.  We’ve come a long way, baby!

In addition to Heather’s great insight, also check out Apra’s Due Diligence Toolkit, published in 2020, along with about a dozen other resources in Apra University, all published in the last few years and including a 2021 webinar featuring HBG’s very own Michele Borucki and Jayme Klein! (note: some links require an Apra membership).

 

Each one of my “sixes” is worth a full blog post on its own!  But for now, I’ll leave you with these brief thoughts on each as I set my sights on building my next 6 Word Memoir…

 

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Not your father’s DAF

Back when I was a kid, Oldsmobile ran an ad that was so creative it kicked off a whole new way of describing innovation. The phrase itself, “This is not your father’s Oldsmobile” took what had been considered a sleepy brand for dull suburban granddads and made people take a second look.

In a hot minute, permutations of the tag line entered our common lexicon in new forms.  Saying “Not your father’s/mother’s/grandma’s….” became commonly used to describe novel approaches to things. Some of us still say it occasionally.

Perception vs reality

We’re at (and in some ways, beyond) that point with donor advised funds now. We know that DAFs are hot; growing at a rate of 28% per year (2021 figure), according to the National Philanthropic Trust.

And we know that they’re giving like gangbusters. There are more than 1,000 sponsors just in the United States (and there are sponsors all over the world!), and DAF holders at just three of them, Fidelity Charitable, Schwab Charitable, and Vanguard Charitable, gave more than $20 billion combined last year.

But even with all that growth and all that giving, DAFs still have a sort of reputation as a very granddad way of giving money away. They’ll get to it. Eventually. At some point. Maybe.

Although donor advised funds donate at a rate of between 18 – 27% of the fund’s total assets annually (NPT 2021 again), our sector’s concern about their lack of transparency makes those numbers seem less tangible somehow.

They’re giving way more than foundations as a percentage of assets, but they still feel…sleepy.

They’re not sleepy. Not by a long shot. Some of them are crazy innovative.

What if I told you that in 2021, DAF donors who had funds at sponsor ImpactAssets used $1.1 billion to invest in 224 companies and funds?

You weren’t expecting that I was going to say that, were you? I was surprised myself when I learned about this. And that’s just one sponsor.

(Now, I know that it’s expected that the funds people put into their Fidelity Charitable account will be invested in some portfolio of securities because the money doesn’t just sit there in a bank account. When someone donates their money to Fidelity Charitable (or whatever sponsor they select), they also get to pick how they want that money to be invested to earn interest, sort of like a philanthropic IRA.)

But this is totally different. What I’m talking about here is money from a donor advised fund (or several) being used as a tool to invest in impact companies, in social ventures, and to use as leverage, like private equity, as loans.

This works particularly well in situations where a for-profit private equity firm wouldn’t be interested in investing in a social venture company because it would have too low of a rate of return.

For example

Here’s how it works: the sponsor identifies a company or consortium that is in business to solve a problem, like building solar or wind infrastructure that helps neighborhoods (or whole countries) get to net zero emissions. They market it to their fund holders as an impact investment opportunity.

Then, DAF donors allocate grants from their funds into a pooled resource managed by the sponsor, which then invests in the company or consortium for a time at a guaranteed rate of return. The project is completed, the funds are returned with interest, and there’s now more money to be invested by the DAF holders in the next project.

Real life example, excerpted from the Stanford Social Innovation Review

Mark Newhouse has a long and successful history as an entrepreneur. He is also a philanthropist and a donor advised fund holder. In recent years he has become a champion for impact investing and an advocate for bringing investment capital to innovative social enterprises. Realizing that investors often aren’t willing to take the risks needed to seed businesses with a double bottom line (social and financial return), he turned to donor advised funds to help solve the problem.

Working with other entrepreneurs he met at Social Venture Partners Denver, Mark engaged in a partnership with Hands of the Carpenter, a local nonprofit organization with an affiliated for-profit social enterprise. Hands of the Carpenter provides used vehicles to low-income individuals and families, especially single mothers, and provides low-cost repairs for women in need. After losing their lease on their automotive garage, Hands of the Carpenter found a new location that would help it grow its for-profit car repair and car sale business and therefore enable it to serve more women.

Hands of the Carpenter began working with Newhouse and his partners to raise impact investment capital to support the purchase of this new building. Through an innovative loan structure, Hands of the Carpenter was able to secure funding for a first and second mortgage through investments made in part through multiple donor advised funds held at The Denver Foundation.”1

So what does this have to do with prospect research?

Well, primarily, the number of DAFs, and the amounts being donated from them collectively, are just mind-bendingly huge and growing. There’s an extremely good chance that one of your current major donors has one. This is yet another way that they can use their charitable giving to support your nonprofit.

From a prospecting perspective: Is the current donor that you’re researching the type of person that might be even more intrigued to use their fund to invest in a project your nonprofit is looking to fund?

Or maybe your nonprofit, like Hands of the Carpenter, is thinking about finding new ways to engage donors and leverage funding for social impact projects. Finding DAF advisors that you know are interested in these types of projects could be a good place to start.

FURTHER READING

1 Macpherson, R., Kulow, E., & Kearney, S. (2018). How to Use Donor-Advised Funds to Make Impact Investments. Stanford Social Innovation Review. https://doi.org/10.48558/ACH1-FQ62

Change The Trajectory: 2022 Impact Report, ImpactAssets. Report here.

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What giving reports can’t report (and what to do about it)

It’s giving report time of the year!

I imagine you’ve had a look at the Giving USA statistics by now and/or heard the muttering, garment-rending, and lamentations about the decline in giving in America and what it means for the future of philanthropy.

I can easily imagine that putting Giving USA together is a lot of work. I can’t imagine how many countless hours there are to check and re-check the numbers before publishing. I’d like to imagine a Giving USA that can count more things, better, and sooner, but that’s a tough ask for lots of reasons.

I want to be very clear right up front that this is NOT a bash-Giving USA article. I’m asking you to consider that the report is one data point of many. Just like prospect research involves Lexis Nexis and Dun & Bradstreet and talking 1:1 with a donor and an article in the Chronicle, Giving USA is one of many sources that you could study as you consider how to parse out giving in the USA.

You can’t count what you don’t have.

But, despite solid methodology, like everything in the world Giving USA is imperfect because they just don’t have access to all of the information. They’re doing the best they can with the information they have in front of them.

COUNTING MORE

What isn’t in front of them is the individualized amounts donated collectively via giving circles.

Or GoFundMe.

KickStarter.

Patreon.

Direct giving from one person to another. Venmo. Zelle.

What about microloans and other charitable investments?

Buying food and donating that instead of the cash?

Countless countless countless volunteer hours, which can be even more valuable than gold.

Anything not directly given to a 501(c)(3) won’t be counted. (But more on that in a minute).

                           A selection of direct-giving vendors

Let’s say you could even get totals or gift details from all of these sources individually. Who’s going to take the time to parse out designations on all of those gifts so they can be accurately categorized and reported on?

COUNTING BETTER

Let’s take a look at how Giving USA categorizes gifts to donor advised fund sponsors. Remember I said that anything not given directly to a nonprofit won’t be counted? Well, besides that, sometimes it’s not counted accurately. Here’s Giving USA on how they categorize gifts that set up a DAF.

 How Giving USA categorizes DAF giving

Say someone donates their $5,000 to a national sponsor (like Fidelity Charitable, Schwab Charitable, or Vanguard Charitable – which are nonprofits) to set up a donor advised fund. Giving USA will count that donation under Public-Society Benefit.

If the donor sets up a DAF account at a community foundation (like the Silicon Valley Community Foundation, the Tulsa Community Foundation, or the Chicago Community Trust), that gift is designated by Giving USA as going to a foundation.

If a donor creates a DAF account at a single-issue sponsor (like a Jewish Federation or Rotary International, which sponsors DAFs), then the gift is designated by Giving USA as whatever that organization’s National Taxonomy of Exempt Entities (NTEE) code is. (“Religion Related” and “International, Foreign Affairs and National Security” respectively in this example).

So to illustrate: Let’s say this year I make a million dollar donation to set up a DAF at the Cape Cod Community Foundation. (hey, a girl can dream). That donation is categorized by Giving USA as giving to a foundation. Next year I’ll grant the whole million in equal parts to my university, an animal shelter, an art museum, an environmental organization, and to a food security nonprofit. But those grant designations are not tracked; the money’s been counted as originally gifted – I gave to the NTEE designation “foundations.”

Giving USA doesn’t have access to grant records from every DAF sponsor in the US (of which there are over 1,000). If they did, they could parse out the designation for each grant – or ask each sponsor to categorize each grant, designated to the right NTEE code.

But again, who’s going to take the time to parse out designations on all of those gifts so they can be accurately categorized and reported on? Hello AI? Have I got a job for you!

COUNTING SOONER

In your everyday research, you may have noticed that the IRS is, ahem, kind of slow in posting 990s. In a normal year, information that’s brand-newly-uploaded is from a foundation’s tax return from two years ago. The IRS is so behind now that they’re lagging even further behind that “speed” now.

What that means is that all of the resources that count on IRS data to estimate giving in America from foundations, including Giving USA, are consulting data that is at least two years old. Giving USA says that we won’t know what happened in foundation philanthropic giving in 2020 for sure until 2024:

Methodology estimating fdn giving 2020-22

You can’t turn on your phone or your computer or your radio or television without seeing/hearing another bit about how AI is taking over. How data-driven business and data-driven philanthropy are already here, now.

But for goodness sake, we can’t get accurate information from 2021, much less last year! I’d love for this to be a problem AI could actually solve – a real AI For Good hero journey instead of the Hal dystopian outlook.

So what am I trying to say here?

  • Yes, giving may have gone down. But it might not have. It might just be … different than it was 5 or 10 years ago.
  • Life’s coming at us fast. We just might not have the technological ability (now? yet? ever?) to be able to accurately count what counts.
  • Giving USA is just one report. It’s good and there are others that are good, too. We may need to piece information together going forward. For example, to track recent giving totals and designations in donor advised funds, check out these brand-new up-to-the minute reports by Fidelity Charitable, Schwab Charitable, and Vanguard Charitable which list how much they gave away last year, broken out by their DAF-holders’ giving interest areas.

 

 

 

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Innovation in the DAF space

One thing I’ve gathered in my learning journey about donor advised funds is that they are an ever-evolving and very creative philanthropic vehicle, both for the kinds of assets that go into them, and for the way the monies are invested.

A brief background for those new to donor advised funds, but with extra fun stuff…

Even though DAFs have been legally codified since the Pension Protection Act of 2006, there still isn’t a whole lot of legislation restricting their structure or reporting (which could change if the ACE Act becomes law).

Here’s how the process works on a basic level: the donor irrevocably gifts an asset such as cash, appreciated securities, cryptocurrency, private company shares, restricted stock, limited partnership interests, or thoroughbred horse-race winnings to a DAF sponsor.

The sponsor, a 501(c)(3) nonprofit, can be a commercial entity like Fidelity, a community foundation like the Boston Foundation, or a single-issue sponsor like a university, Jewish Federation, or Rotary International.

The assets then (usually) get converted into currency and invested, and the DAF donor can pick what they want their fund invested in, sort of like when you pick mutual funds for a retirement account. A DAF donor might choose a conservative bond fund, or a more aggressive stock fund.

Orrrrr…

They can designate their assets to go into an impact investment. So instead of the money going into a mutual fund, the donor can designate the money to be invested in a project for the benefit of a nonprofit.

Take for example, Habitat for Humanity in Austin, Texas. They’re currently building 150 affordable homes that will be ready for occupation next year. Normally Habitat might go to a bank for a loan and/or solicit philanthropic donations to help with their project. But their innovative financing brought together a coalition of funders from foundations, companies, individuals, and DAF donors at the Austin Community Foundation as partners invested in the project’s success.

The Austin American-Statesman put it like this:

 The drive for more affordable housing in Austin recently got an extra push when Austin Habitat for Humanity received a $4 million loan from Austin Community [Foundation] to help build 150 single-family homes.

Half of the $4 million comes from grants from St. David’s Foundation, Tito’s Handmade Vodka and Bill Wood Foundation. The remaining half comes from investments from the Shield-Ayres Foundation, the Aragona family and a group of donor-advised fund holders at the community foundation.”

The money from the DAFs is loaned to Habitat at a 2% interest rate, with the full amount paid back in 2 years, so when the money goes back into the donor’s fund, they’ve earned 2% on the amount they loaned and they got to help Habitat build affordable homes in the meantime.

This sort of arrangement isn’t new to the Austin Community Foundation DAF donors interested in making a double impact – they did this before in 2019.

Impact investing isn’t entirely new to Community Foundations, but it’s still a relatively new area. Many CFs, like the Baltimore Community Foundation, and the Silicon Valley Community Foundation (of course) have been leveraging donor money for a while. Others, like the program at the Ann Arbor Area Community Foundation and the Hawai’i Community Foundation are still nascent but growing.

Who knew loans were part of a DAF’s potential investment portfolio?! That’s some creative double-impact funding action.

What else is happening in this DAF world we live in?

How about making DAF grants to nonprofits from your phone: this week PayPal, the National Philanthropic Trust, and Vanguard announced a collaboration that will allow DAF donors to use an app called Grant Payments to donate directly to the nonprofit of their choice and, best of all for nonprofits,

Both grantmakers and charities will have access to all available grant details, including donor information when provided, via a PayPal dashboard.”

Now that‘s innovation!

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DAF assumption surprises

Post boxes. Photo (c) 2021 Kenneth Kahn

Working on DAFinitive™ over the past couple of years I’ve learned a lot of interesting things about donor advised funds. Some of my previously-held assumptions have been blown apart, and I’ve been surprised by things that I didn’t know would turn out to be factors in understanding DAF sponsors and donors.

For example:

One assumption was that people make anonymous gifts through DAFs because they want to give to causes that might conflict with their publicly-professed political or personal beliefs or because they don’t want to continue to be contacted by the nonprofit if it was just a one-off gift to a cause that’s really not a priority for them.

But digging into that question, I learned something surprising. Conservative think tank, The American Enterprise Institute (AEI), was given access to anonymous donation data from 2019 and 2020 from the five largest DAF sponsors: Fidelity Charitable, National Philanthropic Trust, Schwab Charitable, Silicon Valley Community Foundation, and Vanguard Charitable. Like a lot of us, AEI was interested in learning where anonymous DAF donations were actually going.

In their white paper “Anonymous Giving Through Donor Advised Funds” (January 2022) AEI reported that, of the 2,256,033 total grants made in 2020 from donors through the big five sponsors, only 4.3% of those gifts were given anonymously.

The top 10 recipients of anonymous DAF gifts in that year were:

  • Doctors Without Borders
  • Salvation Army
  • Feeding America
  • American Red Cross
  • St. Jude Children’s Research Hospital
  • American Civil Liberties Union Foundation
  • Planned Parenthood
  • Wikimedia Foundation
  • Samaritan’s Purse
  • Southern Poverty Law Center

Not all of them, certainly, but most of the nonprofits on that list of recipients wouldn’t raise much of an eyebrow in mixed political company. Okay, so how do anonymous priorities compare to the overall top ten list of nonprofit recipients for 2020? Are these anonymous-gift recipients the types of nonprofits that donors wouldn’t consider a priority? Check them out:

  • Doctors Without Borders
  • Salvation Army
  • Cru
  • St. Jude Children’s Research Hospital
  • American Red Cross
  • Feeding America
  • Planned Parenthood
  • United Way
  • American Civil Liberties Union Foundation
  • Samaritan’s Purse

It’s pretty much the same cast of nonprofits of good character. So maybe anonymous donors and attributed donors are the same, the former maybe just want the nonprofit’s work, and not their donation, to be the thing that shines? A caveat, though…

That said, one of the underlying issues may the use of the word “anonymous” here. While the DAF sponsor forwarding along the gift from “The R & C Donor Advised Fund” may not technically consider that donation to be anonymous, for all intents and purposes from the nonprofit’s point of view, it might as well be – unless they happen to know who R & C are.

A question of conversion

Another assumption based on lots of reporting is that people are putting money into DAFs instead of giving it directly to nonprofits.

And the reality is that they might be, but perhaps not how or why we’ve been thinking they are. Here’s something interesting to consider:

Fidelity Charitable reported that they received $331 million in digital asset deposits (cryptocurrency) last year to donor-advised funds, which was almost twelve times the amount it received in 2020 ($28 million). Bitcoin accounted for 88% of crypto donations, followed by Ether at 11%.

All told, Fidelity converted $2 billion worth of non-publicly traded assets, including crypto, private stock, restricted stock, and limited partnership interests for deposit into peoples’ donor advised funds.

Listen up

Sixty-six percent of donations to Fidelity Charitable last year were non-cash donations. Allow me to repeat that a little louder for the folks squinting at the tiny print: 66% of gifts to Fidelity Charitable in 2021 were non-cash donations.

Most nonprofits, including some of the larger universities and medical centers, still don’t accept cryptocurrency donations. Or private stock, restricted stock, or limited partnership interests. So two things may be true here:

  1. Donors who want to gift crypto and non-publicly traded assets to nonprofits have to use some sort of conversion middleman, so they’re using Fidelity and the other big sponsors like they’re a Travelex booth. (If you’ve traveled internationally then you know the place I mean: it’s that kiosk you see by the exit through customs where you can convert your cash into the local currency for a hefty fee). Maybe large DAF sponsors are just the most convenient way for donors to make gifts because they take what donors want to give, they’ll take it in huge chunks, and they’ll do it tax efficiently.
  1. Maybe now’s a good time for your nonprofit to look into accepting crypto and cut out the Travelex middleman. There’s a whole lot of opportunity out there.

There’s lots more

Nearly every day I’m finding out something about donor advised funds that increases my knowledge about them – how and why they’re used, and by whom. DAFs are the fastest growing charitable vehicle in the US right now, and not just by a little, so they’re worth our paying attention to.

Want to learn more about DAOs, DAFs, Decentralization, Giving Circles, Cryptos & The Future of Giving? Join me and a host of experts for the PyroTalks Nanoconference on March 29th at 3:00pm-4:30pm GMT / 10am-11:30pm EST. It’s a screamer deal at £25 for the 90-minute fast-paced conference. Learn more and register here: https://www.pyrotalks.com/nano-conference/p/decentralization-cryptos-and-the-future-of-giving

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