The Harm in Misinformation: Philanthropy Needs DAFs

From the moment the Council on Foundations was established in 1949, we have stood up to attacks on philanthropy and charitable giving. Most of these have been fueled by a common culprit — misinformation.

That is why the Council is a constant presence on the Hill, travels across the country speaking to the leaders in our field, provides interviews to journalists, presents at leadership conferences, and strongly responds to mistruths when we see them, particularly when they have the potential to discourage philanthropic giving.

Donor-advised funds (DAFs) are a popular topic these days. DAFs are powerful giving mechanisms set up at financial institutions and community foundations that allow donors to support and remain connected to causes and issues they care about most.

When a DAF is established at a community foundation, donors relinquish personal control of the funds, and the entity then oversees and manages these funds on behalf of the families, groups, or individual donors. All funds distributed from these DAFs must be used for charitable purposes, and community foundations often have the discretion, and insight, to direct those funds toward the most pressing issues in their communities.

When explained, people get it. They see the power and need for DAFs. Despite the inroads we have made in educating elected officials, journalists, and the general public about DAFs, damaging misinformation continues to be put out about them.

Particularly disheartening was an article published recently in the Washington Post. “Wall Street is sitting on billions meant for American charities” offered inaccurate and misleading assertions about DAFs, specifically those created by financial institutions, and completely overlooked their value as an important philanthropic vehicle that encourages civic engagement.

Here are three truths you should know about DAFs:

First, donor-advised funds are giving vehicles that are sponsored by public charities, such as community foundations. Public charities are governed by both state and federal laws. Add to that, more than 700 community foundations are part of National Standards for U.S. Community Foundations, a rigorous accreditation program of the Council on Foundations. The operation and management of DAFs is addressed in many ways across the program.

Second, DAFs allow donors, which may be individuals or families, to channel their giving to projects that support their communities at the right time, in the right place. Community foundations, in particular, enable people to “give where they live” through such mechanisms. DAFs offer the benefit of being an efficient and a less administratively burdensome giving option for many donors. DAFs also:

• Provide flexibility. DAFs allow community foundations to quickly respond to local needs including emergency response efforts.
   
• Democratize giving. DAFs require modest financial contributions, making them within the reach of most charitable givers.
   
• Connect donors to purpose. DAFs empower individuals to support long-term solutions for tough community issues with the benefit of guidance from professionals.

Third, when DAFs are created at community foundations, they not only ensure support for a local nonprofit, they also leverage the foundation’s programs, collective giving efforts, and civic leadership to advance local causes. Their funds address immediate community needs and, importantly, long-term efforts. Community foundations in turn can leverage the collective impact of those funds with other similar DAFs that share a common interest in a specific issue, like child health or adult learning.

Consider this: During the Great Recession, DAFs allowed community foundations to sustain and even increase charitable giving at a time when individual giving and endowments plummeted and communities were in need. There are countless specific examples across the country of the enormous immediate and sustained benefits DAFs have provided local communities, including:

• A foundation in Florida launched a campaign to provide food for the 21,000 children in its community on free and reduced lunch during the school year who were not being fed during the summer. The campaign raised over $1.2 million for the local food bank, and the initial funding of $500,000 came from more than 40 donors who held DAFs.
   
• In Indiana, DAFs created an initiative to address water quality. The grant required community groups to address water quality in a manner that encompassed education, provided data driven results, and was replicable in other areas. Thanks to this grant, there is now a center devoted to furthering these efforts at a local college.
   
• A local business leader and his wife created a DAF to serve their rural region of southwest Oregon. For 18 years the fund has supported the local university, a statewide children’s literacy program, a regional land conservancy, and Oregon’s only national park.

The use of private resources for public benefit is one of the most deeply held traditions of American society. Millions of Americans in thousands of communities benefit from the focused dedication and generous support of donors nationwide.

We must continue to encourage this unique philanthropic instrument that allows communities to leverage resources, be resilient, building long-term resources to support future development, as well as nimbly addressing the urgent needs of today. Together DAFs and community foundations can and will bring local solutions to the causes and issues that matter most, but only if we protect them.

The Council will continue to monitor and respond to threats to philanthropy, particularly those that are rooted in misinformation, and dedicate time and energy to educating lawmakers and the public on how collectively we can support the evolution of American philanthropy.

Read our letter to the editor of the Washington Post cosigned by the Albuquerque Community Foundation, Arizona Community Foundation, Community Foundation of Central Georgia, Greater Kansas City Community Foundation, The Miami Foundation, New Hampshire Charitable Foundation, New York Community Trust, and The Seattle Foundation. And, the list is growing. More than 60 signatures have been added.

To signal your support, please sign into the CEOnet on Philanthropy Exchange and post your name, title, and foundation name or email us directly at govt@cof.org.