Only 4.3 percent of grants from donor-advised funds in 2020 were anonymous, according to a controversial new study.
The study was conducted by Howard Husock, a senior fellow at the American Enterprise Institute who has examined donor-advised funds for years and generally opposes efforts to impose new rules on them.
Some critics of donor-advised funds say they can be used to hide the source of gifts to controversial causes, including nonprofits that have been designated as “hate groups” by progressive watchdogs.
But Husock said the new study proves there is no need to force more disclosure of grant making done through donor-advised accounts because most grants are already disclosed. Also, Husock says his research shows that most of those anonymous grants went to relatively uncontroversial nonprofits like the American Red Cross, Doctors Without Borders, and the Salvation Army.
Husock added, “I’m not suspicious of the motives of charitable givers.”
However, one prominent academic who has called for tighter regulation of donor-advised funds says the study has serious methodological flaws that cast doubt on the findings.
‘Cancel Culture’
Donor-advised funds allow people to take an immediate charitable tax deduction when they deposit money in such accounts. The money typically stays in those accounts, drawing investment returns until the donor recommends grants to specific nonprofits.
Elizabeth McGuigan, director of policy at the Philanthropy Roundtable, a conservative association of grant makers, praised the study and defended donors who decide to keep their grants secret. Sometimes people don’t want to be solicited for additional gifts, they may want to give to liberal or conservative causes without drawing public backlash, or they may simply want to keep the focus on the charity doing the work, she said.
“We live in a time of cancel culture,” McGuigan said. “People give privately for a whole range of reasons.”
More About Donor-Advised Funds
Husock collected data from the five largest sponsors of donor-advised funds — Fidelity Charitable, the National Philanthropic Trust, Schwab Charitable, Silicon Valley Community Foundation, and Vanguard Charitable. The data was provided under the condition that only combined totals would be disclosed “to protect donors’ anonymity.”
Those five organizations account for 53 percent of all assets held in donor-advised fund accounts, according to the study. The most common types of charities that received anonymous grants were religious and human-service nonprofits.
In response to inquiries from the Chronicle, all five donor-advised fund sponsors that participated in the study said donors have the option to choose whether to disclose their identities to grant recipients.
Findings Questioned
Ray Madoff, a Boston College law professor who has called for changes in the way donor-advised funds are regulated, said the study has a methodological shortcoming that makes it of “minimal value.” Donors typically can name their donor-advised funds whatever they wish. For example, a donor could call her account the Oak Tree Fund, and that might be all that’s disclosed for a grant to be counted as transparent in Husock’s study.
And even if an account mentions a person’s name, that name could be someone other than the real donor.
Husock acknowledged that donors in some cases might limit their disclosure in an account name that doesn’t identify the true source of the money but added that such instances likely were rare.
Stephen Austin, a spokesman at Fidelity Charitable, confirmed that disclosure could encompass nothing more than a title on the account that may or may not identify the person who donated the funds. However, donors typically provide their real name and address when disclosing grants, Austin said.
Madoff also said that the most controversial grants, like those given to hate groups, would be the ones in which donors would be most likely to request anonymity. Husock responded that such an assumption was “a stretch not supported by the facts. DAF donors overall are supporting humanitarian not controversial causes.” Husock also noted that liberal or left-leaning organizations, such as Planned Parenthood and the American Civil Liberties Union Foundation, were more likely to be the beneficiaries of anonymous grants. (See the chart below.)
Hate Groups
Donor-advised funds have come under fire in recent years from critics who say they allow hate groups to raise money from donors who can remain anonymous. One such effort, called Hate Is Not Charitable, was created by the Amalgamated Foundation encouraging donor-advised fund sponsors to prevent donors from earmarking grants to nonprofits that are considered hate groups. More than two dozen foundations and other philanthropic entities have signed onto the effort.
A Chronicle study last year found that at least 351 donor organizations, including private foundations and donor-advised fund sponsors, have made millions of dollars in grants over the past seven years to nonprofits designated by the Southern Poverty Law Center as hate groups. Fidelity Charitable was the second-ranked donor source in that study.
A group calling itself Unmasking Fidelity recently sent a letter to Fidelity Charitable asking it to publicly disclose all grants in the last five years to 10 nonprofits that it says “promote anti-immigrant, anti-Muslim, anti-Black, or anti-LGBTQ rhetoric and policies that enable white supremacist and fascist violence.” The group also asked Fidelity Charitable to disclose its screening practices for determining which groups can get grants.
All five organizations studied by Husock said in emailed statements to the Chronicle that they allow account holders to recommend grants to any 501(c)(3) charity in good standing with the IRS.
Fidelity’s Austin added, “Grants are not limited to specific charitable activities or fields of interest, geographical or demographic criteria, or based on political, religious, or philosophical grounds. Grants are recommended by individual donors and do not represent an endorsement by Fidelity Charitable or Fidelity Investments.”
Donor-advised funds have been growing rapidly by nearly every measure. A recent report from the National Philanthropic Trust found that the amount donors directed to charities from those funds reached $34.7 billion in 2020, a 27-percent increase from 2019. Annual contributions to donor-advised funds grew to $47.9 billion, a 20.1-percent increase from 2019.
