Welcome to Fundraising Update. This week, we’re looking at how mutual-aid networks responded to the pandemic and how fundraising figures into their plans for the future. Plus, a new report analyzes how much money is moving between commercial donor-advised funds — and not going to working charities.

I’m Emily Haynes, staff writer at the Chronicle of Philanthropy. If you have ideas, comments, or questions about this newsletter, please write me.

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What’s Next for Mutual Aid?

Last week we dove into what motivates people to give directly to those in need and how technology is making that easier than ever. As my colleague Eden Stiffman reported, it’s a topic that has a lot of traction right now. She explored many different forms of direct giving, including mutual aid — a practice with deep historical roots that increased significantly during the pandemic.

Mutual-aid groups emphasize an egalitarian way of meeting needs and providing help with no strings attached, Eden reports. Community-based nonprofits may participate in and collaborate with mutual-aid networks, but the groups themselves are typically volunteer led and unincorporated — often because they prefer it that way.

Some mutual-aid organizers and participants oppose the bureaucracy and hierarchies of nonprofits and the donor-recipient power dynamic that dominates many charities.

“There aren’t donors versus constituents versus volunteers, but rather we have this huge overlap of all three,” says Frank Fredericks, who is involved with Astoria Mutual Aid Network in Queens. It’s the idea that everyone has needs and everyone has something to give back. “There’s this breakdown of these categories, and that’s part of the beauty of mutual aid.”

Another nonprofit, Ioby, offers a crowdfunding platform and fundraising coaching, as well as other assistance to very small grassroots groups. The name stands for “in our backyards.” The nonprofit launched a pilot program to support 10 mutual-aid groups in the New York area. Ioby’s assistance includes fiscal sponsorship, which allows the groups to accept charitable donations even though they don’t have tax-exempt status themselves.

As local needs have ebbed and flowed since the start of the pandemic, the organizations have continued to evolve. Some are now seeking nonprofit status as a way to attract more funding from foundations and businesses so they can continue offering assistance as smaller contributions have waned. Others are working to distribute the money they raised and are considering disbanding.

The groups’ divergent paths show both the promise and the precariousness of mutual aid as a way for communities to meet their own needs at a time when other systems fail to deliver.

Fredericks, the volunteer in Queens, New York, connected with the organizers of the Astoria Mutual Aid Network and began volunteering. The network became a place where many direct services in Astoria were coalescing — shopping and delivering food and hygiene products for neighbors, checking in on the elderly, helping people navigate health care or insurance information, for example. Fredericks helped create a fundraising team, applied for grants, and worked to develop the group’s accounting practices.

He saw Astoria Mutual Aid Network as an opportunity to quickly tap into the people and resources needed to address urgent concerns.

“If that means we’re working with an old-school nonprofit, fine,” he says. “If it means we’re helping start a new nonprofit, fine. If it means we’re getting a government grant, fine. But how do we get it done so that our community is taken care of?”

That just-get-it-done attitude resonates with Erin Barnes, who co-founded Ioby. The structure an organization takes should fit the work, not donors’ expectations, she says. “You don’t do better work because you have certain indicators of incorporation. You do better work by doing better work.”

For some groups, not having tax-exempt status was — and continues to be — a logistical barrier.

Hadass Wade created the fundraising infrastructure for Bed-Stuy Strong, a mutual-aid network in Brooklyn. She stitched together a series of payment apps — Venmo, PayPal, Zelle, and Cash App — to filter into a “community fund” in a personal bank account that the group used to purchase groceries and other items that neighborhood residents needed.

“Having the flexibility of movement through those different platforms really helped us move a lot of money and provide a lot of groceries and supplies over the course of the month,” she says.

But many platforms had limits on how much money individuals could move each day or week, while groups with tax-exempt status or a corporate bank account had more flexibility.

Fiscal sponsorship through Ioby removed some of the risks for individual organizers, who no longer had to use their personal bank accounts. It also allowed groups to attract charitable gifts without incorporating as nonprofits themselves.

Bed-Stuy Strong has raised nearly $1.4 million, and organizers have committed to spend down financial reserves. The group has maintained public spreadsheets to show how much money is coming in and going out.

Organizers are working to figure out how to distribute cash grants to neighbors in need. Beyond that, they’re discussing how the group may adapt or change, Wade says. “We’re also examining the possibility that there might not be a reason for Bed-Stuy Strong to exist anymore.”

Take some time to read Eden’s full story on mutual aid. It’s well worth your time.

Need to Know

“A DAF giving to another DAF for whatever reason shouldn’t be considered moving money to frontline charities.”

Chuck Collins, who leads the Program on Inequality and the Common Good at the Institute for Policy Studies

Donor-advised funds housed at charities run by commercial organizations such as Fidelity and Schwab transferred at least $1 billion into other commercial DAFs in 2019 alone, according to a new report. These transfers between the giving vehicles inflate the payout data these organizations report and make it hard to know how much DAFs really distribute to working charities, Eden reports.

The analysis from the Institute for Policy Studies shows that the amount of money donors have transferred from one commercial DAF to another has grown exponentially in recent years.

Researchers analyzed data from 39 commercial DAF sponsors that filed their informational tax returns electronically in at least one year from 2015 to 2019. They analyzed five years of tax information for those fund sponsors.

In 2015, those 39 DAFs granted $209 million to other commercial DAFs. By 2019, the dollar amount granted to other commercial DAFs had ballooned by 409 percent, to $1 billion. Those transfers accounted for roughly 6 percent of the $17.6 billion in grants from national commercial DAF sponsors that year. That tally was reported by the National Philanthropic Trust, a sponsor of donor-advised funds that produces an annual report on DAF growth and grant making.

Plus:

  • Nonprofits continued to add jobs in August, but at a slower rate than in the previous two months, according to the Johns Hopkins Center for Civil Society Studies.

    Nonprofits added an estimated 42,000 workers last month, my colleague Michael Theis reports. The nonprofit workforce ended the month 4.5 percent smaller than it was before the pandemic, equivalent to roughly 565,000 fewer jobs in August than in February 2020.

    Despite the hiring slowdown, the authors estimate the nonprofit field will match its pre-pandemic hiring levels by July 2022, consistent with earlier predictions.

Advice & Opinion

Chasing Major Gifts

The Chronicle is working on a story about how the biggest nonprofits are approaching major gifts. Is major-gift fundraising more important to your organization now than it was in the past? Has your group shifted resources to major gifts that used to be dedicated to other types of fundraising? Get in touch to share your perspective.

Aid for Museums — and ‘Amorous Rats’

The pandemic put a tight squeeze on the budgets of cultural institutions across the country. At the Chronicle, we’ve been keeping tabs on how donors are helping museums weather the storm.

One of those donors is John Oliver, host of HBO’s late-night talk show Last Week Tonight. Last fall, he announced a funding opportunity for museums, offering a cash donation to institutions willing to display three works from his own art collection: “a still-life of ties, a portrait of TV host Wendy Williams eating a lamb chop, plus — his ‘pièce de résistance’ — amorous rats in the buff,” the Washington Post reports. The kitschy pieces weren’t hang-ups for the more than 400 institutions that applied for the grants.

The five winners won $10,000 each, and the show kicked in another $10,000 for a food bank near each museum. The traveling exhibit began this month at the Judy Garland Museum in Grand Rapids, Mich., and closes in January at the Cartoon Art Museum in San Francisco.