Education Charities Continue to Receive Largest Share of Donor-Advised Fund Grants
Grants from donor-advised funds accounted for 6.1 percent of all dollars received by charitable organizations in 2018, up from 3.8 percent five years before, according to a new report from the Giving USA Foundation.
The study, an update of a similar one published in 2016, found education charities continue to receive the largest share of grants from donor-advised funds, followed by religious charities.That’s an inversion of the pattern historically seen among overall charitable giving at a national-level
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As donor-advised funds gained prominence over the past several years, education charities have continued to receive the largest share of DAF grants, followed by religious charities, according to a new report from the Giving USA Foundation. While that matches the findings of a similar report published in 2018, it’s an inversion of the pattern historically seen in overall charitable giving at a national level — religious organizations continue to raise more money than any other cause — and more in line with how wealthier households donate money.
“The overall profile of donor-advised funds is more high net worth compared to the everyday donor landscape,” said Una Osili, associate dean for research and international programs at the Lilly Family School of Philanthropy at Indiana University, which produced the report.
To determine what types of groups received money from donor-advised funds, the study used grants data from 87 DAF-sponsoring organizations from 2014 to 2018. The authors estimate their data captured roughly 75 percent of all donor-advised fund assets.
Donor-advised funds are akin to a holding account for charitable donations. They are frequently compared to private foundations, but unlike private foundations, they have no minimum annual grant-making requirements.
DAFs have grown rapidly in the past several years. According to National Philanthropic Trust, the value of assets held in donor-advised funds has grown from just under $45 billion in 2016 to more than $100 billion in 2020, and rants from donor-advised funds accounted for 6.1 percent of all dollars received by charitable organizations in 2019, up from 3.8 percent from five years before.
The lack of a payout requirement and the increasing value of assets in donor-advised funds have attracted criticism that they warehouse money that could be put to use by working charities. Proponents of donor-advised funds say the accounts are flexible tools that can be built up and tapped when need is greatest.
Education charities received on average 29 percent of all money given by donor-advised fundsfrom 2014 to 2018. Religious charities received an average of 14 percent during that time. This pattern broadly held across the study period and was in line with findings in 2018.
“There is a lot of stability in who the recipients were,” said Laura MacDonald, board chair of the Giving USA Foundation.
Contrasting that with national statistics for all types of charitable giving, religious groups received an average of 31 percent of all gifts by value, followed by education charities, which received an average of 14 percent.
The researchers also noted that arts and humanities organizations receive a greater share of grants dollars from donor-advised funds than from other sources: a rough average of 9 percent each year from 2014 to 2018. Nationally, only about 4 percent of all giving went to arts and culture groups in that time.
The report found that national DAF sponsors — which are often affiliated with financial institutions, such as Fidelity Charitable or Schwab Charitable Fund — saw the fastest rate of growth in grants from 2014 to 2018, at 110 percent. DAF grants from single-issue charities — DAF sponsors that have a specific charitable mission other than managing advised funds — grew by 77 percent during that time, followed by grants from DAFs held by community foundation, which increased 51 percent.
Researchers also examined the practice of granting dollars from one donor-advised fund to another. Such fund-to-fund transfers are controversial in part because they can inflate the grant statistics that fund sponsors file on Internal Revenue Service disclosures without providing any charitable benefit. The researchers found such transfers added up to $2.5 billion in 2018, equivalent to roughly 13.3 percent of all grants from donor-advised funds to working charities.