Grant making from two of the largest sponsors of donor-advised funds cooled considerably last year following bursts of giving in 2020, the first full calendar year of the pandemic.
Fidelity Charitable, the largest sponsor of donor-advised funds, according to data collected by the Chronicle, reported grants totaling $10.3 billion in calendar year 2021, a 13 percent increase over the previous year. Grant making from Fidelity grew 24 percent in 2020.
The cooldown was even more pronounced at Vanguard Charitable, which reported $1.8 billion in grant making in 2021, an increase of 6 percent over 2020. In 2020, grant making from Vanguard Charitable accounts grew 22 percent.
Vanguard Charitable is the nation’s fourth largest sponsor of donor-advised funds when measured by annual deposits in those accounts, according to Chronicle data.
Donor-advised funds allow donors to contribute cash, stocks, and other assets into accounts and take an immediate tax deduction. The donors can then decide which working charities will get the money and when, sometimes many years later.
Data compiled by the Chronicle shows that assets managed by the 10 biggest donor-advised fund sponsors have topped $100 billion, a total that is gaining rapidly on the combined assets held by the 10 largest foundations.
Charities That Benefit
Fidelity Charitable said the giving from its accounts in 2021 was made through 2.2 million grants that went to 187,000 nonprofits. The average grant size was $4,407.
Cryptocurrency accounted for $331 million of the total deposited in 2021 in donor-advised funds managed by Fidelity Charitable, up from $28 million in 2020.
Vanguard Charitable said its grant making in 2021 was spread among 54,000 charities. The top recipient from Vanguard accounts were Doctors Without Borders USA, followed by Planned Parenthood Federation of America, St. Jude Children’s Research Hospital, Cru, and Samaritan’s Purse.
Both Fidelity and Vanguard released 2021 data about grant making, but neither provided information about how much money that year flowed into the accounts they manage, nor would they provide their total asset levels for 2021.
In a response to a request for that data, Fidelity spokesman Steve Austin said Fidelity would release only “audited” figures, and those won’t be publicly available until months later, in the IRS tax forms that Fidelity Charitable is required to file. When asked why Fidelity is willing to provide unaudited grant data but not other unaudited financial data, Austin replied in an email that was because “Fidelity Charitable’s primary purpose is grant making, and it sees granting as the best measure of a DAF’s success.”
Vanguard did not respond at all to requests for 2021 data on contributions or asset totals.
The Top 10
The 2020 data from Fidelity and Vanguard is consistent with data the Chronicle collected from other large sponsors of donor-advised funds.
Deposits made to accounts managed by the top 10 donor-advised fund sponsors shot up 21 percent in fiscal 2020 to $31.7 billion, with grant making increasing 27 percent to $22.4 billion in the first full year of the pandemic, according to data collected by the Chronicle. The data was collected from the IRS tax forms that those organizations are required to file. That data is for fiscal years, so it differs from the calendar year data Fidelity and Vanguard released.
Assets held by the 10 biggest donor-advised fund sponsors, as measured by annual contributions, grew by 17 percent in 2020 to $105.4 billion.
Donor-advised funds are rapidly gaining ground on private foundations and have already eclipsed them by some measures. For example, grants distributed by the 10 largest private foundations totaled $11.7 billion in 2020, a 20 percent increase, according data provided by the data research organization FoundationMark, and yet that amounted to only about half of what was distributed from the 10 largest donor-advised fund sponsors that year. Those 10 foundations held endowments of $157.1 billion in 2020, an increase of 12 percent.
The data is sure to provide fodder for both defenders of donor-advised funds and critics who say more regulation is needed.
Defender of the status quo say ease of use makes donor-advised funds attractive for people who want to get a tax break immediately and then make careful decisions, often in consultation with their families, about when to distribute the money and to which working charities. Efforts to regulate them would hurt charitable giving, they say.
Critics have called for new regulations, including required annual distributions, arguing that donor-advised funds are essentially warehousing billions of dollars that should be flowing to working charities while generating big fees for the entities that manage them.
No Consensus
Many umbrella organization representing nonprofits have avoided taking a stand on whether donor-advised fund account holders should be required to distribute a minimum amount from their accounts annually. “We don’t have consensus among the membership on that,” said Shannon McCracken, CEO of the Nonprofit Alliance.
As the use of donor-advised funds has expanded, they have become an in increasingly vital source of revenue for nonprofits, many of which have been slow to recognize their growing importance, McCracken said.
If a consensus builds for more regulation of donor-advised funds, it should be done with a carefully considered approach that strikes the right balance, she said. “Don’t regulate for the sake of regulation,” McCracken said, “but don’t let the train get too far out of the station, either, before you address any problems.“
