In Defense of the Donor-Advised Fund

Categories: Donors, Nonprofits, Philanthropy, Professional Advisors,

At our Community Foundation and others across the nation, many generous donors begin their relationship with charitable giving through establishing a Donor-Advised Fund (DAF), which allows donors to direct funding to cause areas they are passionate about, utilizing the local expertise and concierge advisement of community foundations, whose missions are improving quality of life within a specified region.

This entry to charitable giving empowers positive change, and we see this every day, as well as during times of need like hurricane response and especially during the pandemic.

Last fall, the US Treasury proposed regulations to the DAF model and nuances about how to manage those and other charitable giving vehicles that inhibit the utility of this important philanthropic tool to prevent possible abuse. Given that community foundations own the assets and maintain strict oversight for compliance, the perception of abuse is inaccurate. There exists a clear firewall between financial advisement and grantmaking in community foundations nationwide, including ours.

Community foundations nationwide do not see donors attempting to abuse DAFs or other funds they establish; instead, partnering with a community foundation is an efficient way to carry out meaningful philanthropy, supporting causes they care about in an effective, low-cost, and better-informed manner. These are dollars that have been invested locally in communities like ours to address acute and ongoing concerns and improve quality of life. When individuals and families partner with our knowledgeable staff, experienced in local needs and opportunities, charitable giving can make a true impact.

For community foundations, informed, local, flexible grantmaking enables expeditious response to acute community needs, the alignment of assets to ongoing community issues, and the safeguarding of community resources to ensure their sustainability for generations to come.

A Unified Front in Our Nation's Capital

Along with 15 other community foundation leaders from around the country, Community Foundation of Sarasota County President and CEO Roxie Jerde traveled to Washington, D.C., to testify on May 6th about the proposed regulations under review by the US Treasury related to DAFs.

These leaders shared with national policymakers how community foundations are uniquely equipped to empower donors and donor-advisors to create lasting impact in local communities.

Along with community foundation leaders, politicians from across the aisle have unified on this issue, voicing concern that proposed regulations could have a “chilling effect” on charitable giving. We are grateful for Congressman Vern Buchanan’s leadership in co-sponsoring a bipartisan letter from 33 Ways and Means Committee members to Treasury Secretary Yellen, outlining major concerns in a rare instance of solidarity, noting that DAFs have democratized philanthropy in our nation.

'A Critical Lifeline’

As those aware of the enormous impact community foundations have on the regions they serve know, DAFs are key to providing essential charitable dollars to help resolve pressing issues and maintain community pride points.

These proposed regulations would thwart local oversight of critical charitable gifts that are making a difference in communities across the country. Disruption in the advisor relationship may cause donors to rethink their charitable objectives or alter their philanthropic goals to the detriment of communities.

To learn more about our leadership in preserving DAFs, please see our letter requesting the opportunity to testify, which outlines Roxie’s comments. As a member of the Community Foundation Awareness Initiative, a national coalition of more than 150 community foundations whose purpose is to educate lawmakers and the public about the transformative work of community foundations, our voice has been included in that organization’s correspondence to the Treasury Department.

If you have questions about charitable giving vehicles, please contact Jay Young, Vice President of Philanthropy at the Community Foundation, by email or phone: (941) 556-7178.

About Author

Roxie Jerde

President and CEO