The Rundown - October 7, 2022
The latest news and notes from the nonprofit and philanthropic sectors
More Ink Spilled on Donor Advised Funds
One of the most popular topics covered in contemporary philanthropic circles is the rise of Donor Advised Funds. To some, they are a blessing; to others, a curse. To many philanthropic and non-profit practitioners they remain a mystery.
A new article from the Wealth Management website goes in depth with some of the virtues and vices of Donor Advised Funds. The report laments that fact that many donors and foundations are using the Donor Advised Funds in ways that are not putting charitable dollars in the hands of non-profit organizations that are trying to do the hard work of their cause. From the article:
Millionaires and billionaires in every corner of the country have embraced the same strategy, filings show: an industrialist in Montana, a chicken processor in Arkansas, many New York-area hedge fund managers, and the founders of Google. A Bloomberg News analysis of private foundation tax returns provides the fullest accounting to date of the torrent of money passing through this loophole—as well as just who is making the most use of it. At least $4 billion flowed from foundations into large sponsors of DAFs, including those established by Charles Schwab, Fidelity, and Vanguard, according to the review of more than 360,000 filings submitted to the Internal Revenue Service since 2016. This extraordinary transfer of philanthropic wealth allowed money managers to collect fees on assets intended for charity while letting donors give—or not give—in secrecy.
For years, the wealthiest, or at least most connected donors, used a tool called a Donor Advised Fund to manage their charitable contributions. The funds were mostly housed in community foundations or other grantmaking institutions. Donors would stick a large amount of money in these community foundations and the foundation would account for investment gains and losses in these funds. The foundation would also give the donor 100% discretion on where to donate those funds, as long as those recipient organizations were legally allowed to receive them. In addition, any investment gains made by the fund were credited to the donor advised fund giving the applicant more funds to donate to worthy causes.
Another twist to these tools is that are currently no regulations on when dollars must be spent out of the Donor Advised Fund; donors can keep and accumulate the donations in their funds for years on end. However, when a donor makes a donation to their Donor Advised Fund, they get the immediate tax benefit.
Over the last few years, Donor Advised Funds have grown exponentially. Currently 3% of all giving is coming from a donor-advised fund. In 2020, Donor Advised Funds had assets of over $34 Billion and paid out over $8 Billion in donations to non-profit organizations. In fact, if you research the largest grant-maker in the country, it’s Fidelity Charitable — which the largest donor advised fund provider in the country. In full disclosure, I have a Donor Advised Fund through Fidelity Charitable, in which my family does all our charitable giving. Also in full disclosure, we are a typical middle-class Midwestern family.
The National Philanthropic Trust reported that in 2020, the average size of a Donor Advised Fund was just north of $166,000; however over half of the Donor Advised Fund accounts had less than $25,000 in them. So, these are tools that are quickly becoming the domain of more and more middle-class families and individuals.
What can I do as a Non-Profit Leader in regards to these Donor Advised Funds?
Keep a close eye on grants from donor advised funds. If you have donors that use this tool, still track their donation and thank them because they are showing obvious support of your organization. This may require a tweak to the gift entry process to identify these owners.
Fundraisers should realize that this new tool doesn’t necessarily mean the end of fundraising as they know it. We have heard it all before, People Give To People. Donor Advised Funds are just a new tool to facilitate that giving; this is still a relationship-building enterprise.
Charities should look at ways to facilitate the conversion of non-cash assets. Since donors are donating a lot of non-cash assets to DAFs, this suggests a need for charities to do a better job at facilitating conversions of stock, cryptocurrencies, etc. Charities ought to make it easy for donors to give in the way they want to give. The National Philanthropic Trust notes that in the 2018, the growth of contributions to donor-advised funds was higher than the growth of grants made from donor advised funds, possibly as a result of the tax law. However, they predict that donors may soon reverse the trend and give more from their donor advised funds.
Be on the lookout for companies that make employee matching gifts to Donor Advised Funds. National Philanthropic Trust notes that there is a rising trend for some companies to allow payroll deductions to Donor Advised Funds and/or match employee giving to funds from Donor Advised Funds. For example, American Express will match contributions from a Donor Advised Funds but not made to a Donor Advised Funds or to establish a Donor Advised Funds.
Question of the Week!
Since we spent a lot of time talking about Donor Advised Funds, I want to know if your organization has ever received funding from a DAF.
Now Hiring!
I have a nonprofit in Sidney, Ohio that has reached out to me looking for a new Executive Director. I can tell you that this a very strong organization that needs leadership that has strong entrepreneurial and staff management skills. If you have any interest, please drop me a line at pinnaclestrategiesltd@gmail.com and let’s talk!
Registrations now open for Paul G. Duke Academy for Community Leadership!
Registrations are now open for continuing education offered by Edison State Community College in Piqua for the Paul G. Duke Academy for Community Leadership! I have been a proud alumni of both programs and have even been asked to help present sessions and teach classes. It’s an amazing program and I would encourage you to be a part of it if you are in the area! You can register here.
The Paul G. Duke Academy for Community Leadership 1.0 is a series of workshops designed to develop more effective directors, leaders, board members, staff and volunteers of nonprofit organizations. Course topics include the fundamental practices of board recruitment, planning, staffing, budgeting, evaluation, board meetings and community awareness. The classes are designed to help individuals make a difference on their boards and in their community.
The Paul G. Duke Academy for Community Leadership 2.0 has been created and designed specifically for experienced executive directors of nonprofit organizations and alumni of the Academy for Community Leadership 1.0. This challenging and intensive Academy is coordinated by the Academy development team and participants. Advanced participants will conduct original research and exchange results via reports and discussion. Participants will help to further develop the foundational agenda for each of the four monthly sessions that will explore nonprofit organizations—based upon their backgrounds, experiences, pressing issues and needs—through self-analysis, organizational analysis, guest speakers, best practices, resource review and in-depth discussions. At its conclusion, Academy 2.0 participants will be immersed in the annual Mosaic of Community Leadership Conference, both as participants and presenters. Academy 2.0 is the latest collaboration between the Paul G. Duke Foundation and the Edison State Community College Center for Leadership Development.
We are Trying Something New
Perhaps you read our last “Deeper Dive” where we talked about the amazing power of Youtube as a Social Media platform. Well, a reader challenged me and said hey, “Why don’t you start your own channel?”
Okay, challenge accepted. Here is our channel with our first four videos. We had some readers share them on LinkedIn (THANK YOU!) and the response has been positive. Check it out and let me know what you think! Feel free to drop me a line at pinnaclestrategiesltd@gmail.com or just comment below!
Here is a link to our YouTube Channel!
Check Out Some New Resources
Pinnacle Strategies has created a new resource! Check out our store here on the gumroad platform. These are the three most popular tools that I am hit up for. Take a look at these tools and of course, if you have any comments or questions, please feel free to contact me at pinnaclestrategiesltd@gmail.com.
What Can We Work on Together?
Did you know that Pinnacle Strategies works individually with nonprofit and public sector leaders to help them solve problems, achieve goals and gain confidence in their roles?
Why?
Because, this work is hard and it’s often a lonely road. Our nonprofit and public sector leaders need people that they can talk to to get solid advice and encouragement to do the work that is in front of them. If you feel that this can be of value to you, or a member of your team, please reach out to pinnaclestrategiesltd@gmail.com and let’s talk.
A Quick Note of Thanks!
Thank you all for subscribing to this newsletter. The subscription numbers continue to grow and from what I am learning, this side job seems like it has “sticking power”. I am not getting inquiries and calls from literally all over the world wanting to partner and work together to create value for you, the non profit and philanthropy leader. I feel very excited about the future of this newsletter and if you have any ideas or comments, please feel free to share them with me at pinnaclestrategiesltd@gmail.com
I know many of you have shared this with your friends and colleagues and I am very grateful. Thank you! If you haven’t shared it yet…..well, here is your chance….
Ready to Learn Something New?
One of the prettiest cities in Fall is Indianapolis and travelling there can open a perfect opportunity to sharpen your skills and meet new professionals in the field. I would encourage you to look at some of the offerings of The Fund Raising School at the Lilly School of Philanthropy at Indiana University’s campus in Indianapolis. The professional development school has great programming both on-line and in-person both in Indianapolis and at other sites across the country. Take a look at their course offerings here!
Other Ways to Connect
Our coaching practice has openings starting here in 2022. If you are interested in working with me to get your nonprofit organization on a track to achieve the big missions you have for your organization, please reach out to me at pinnaclestrategiesltd@gmail.com.
Here are some other ways you can keep in contact with Pinnacle Strategies!
Check us out on our LinkedIn Page
Check us out on the Celebrating Leadership Facebook Page.
Want to help support this newsletter?
I hope you have found value in this newsletter. If you have found it valuable and want to help, the best thing you can do is “hit the heart”! By liking this post, you help other people interact with it. Also, sharing and commenting is very helpful as well. Thank you!
Wait, what? There is now Pinnacle Strategies merch?
If you are so inclined, use this referral link to share with your friends and colleagues! Those that help get the newsletter new subscribers can earn some great Pinnacle Strategies swag - stickers, coffee mugs, free paid subscriptions and even our favorite ink pen!
And of course, “hitting that heart” is a quick and easy way to help support this publication! Thank you!
Pinnacle Strategies is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Nice overview of donor advised funds. Thanks for all the juicy data!