Separating the Myths from the Realities of Donor-Advised Funds at Community Foundations

We know donor-advised funds (DAFs) are the engine of growth for many community foundations, but what do we know about the role they play in our communities? This is an often-discussed and debated topic among community foundation staff and boards.

Thirty-one community foundations representing approximately one-third of the field’s DAF assets shared data on more than 6,000 funds and their behaviors over the last 10 to 15 years. Through their contributions, CF Insights and FSG have been able to explore community foundation aspirations, practices, and donor behaviors in managing DAF programs.

With the support of these participating community foundations, The James Irvine Foundation, the Council on Foundations, and the Community Foundations Leadership Team, we are now able to answer important questions about the strategic value of DAFs for community foundations:

• To what extent do DAFs increase local grantmaking?
• Do DAFs align grantmaking in support of community priorities and actively partner to address community needs?
• Do DAFs serve as an entry point to build flexible assets that benefit the community, or build community endowment through planned gifts?
• Do they contribute to the sustainability of the community foundation?

Some of our findings confirm assumptions long held by community foundations, while others challenge prevailing myths. And the DAF programs at individual community foundations vary according to local priorities or context. For example, a focus on local giving is important to many community foundations and more than two-thirds of the grant dollars from community foundation DAFs go to local organizations. However, the degree to which foundations aspire to focus on local grantmaking differs, and the percentage of local giving (in terms of total dollar value) by DAF donors in different communities varies widely—from just over 30 percent to more than 80 percent.

If you are intrigued and would like to learn more, meet us at the “New Insights into Donor Advised Funds: Myths and Realities” session hosted by CF Insights and FSG at the Council’s Fall Conference for Community Foundations* in New Orleans. It is being held Tuesday, September 11, 10–11:30 a.m.

Our goal is that community foundations everywhere ask themselves questions about the strategic value of DAFs for their own community and inform their decisions with research rather than hypotheses. Those who contributed to this study hope that it helps each community foundation achieve greater strategic clarity and greater impact in your community.

We look forward to seeing you in New Orleans!

Eva Nico is a director at FSG, a nonprofit social impact consulting firm specializing in strategy, evaluation, and research. Rebecca Graves is the executive director of CF Insights, a resource created by community foundations to help improve performance and sustainability, and a managing director at FSG.

* Register for the conference by August 3 to take advantage of the $150 early bird discount.