Word to the Wise: The ABCs of DAFs
Does your development strategy include pursuing grants from donor-advised funds (DAFs)? Considering the recent growth of these charitable investment vehicles, it should.
DAFs are managed financial accounts dedicated to charitable giving. Individual account owners establish and contribute to their own fund and then direct the account manager, also known as the sponsor, about which organizations should receive donations. Cash and other non-cash assets can be contributed to these funds, with the donor generally able to receive a tax deduction at the time of the contribution to the DAF.
Many DAFs are run by community foundations, charitable organizations that manage funds on behalf of individual owners. Community foundations create a locus of interest and identify key issues and priorities in the community. DAFs are central to how community foundations have functioned and grown.
The same best practices for building relationships with your individual donors apply to DAFs but with a few small modifications. Here’s how to position your organization:
Analyze. Analyze your donor rolls to see if you are currently receiving donations from DAFs. These checks will come from a financial institution or from a community foundation rather than an individual donor.
While DAFs act as an intermediary between your organization and donor account owners, do your best to identify the account owners to establish a relationship, and thank them appropriately. If you can’t determine the owner, send a thank you note to the sponsor. The sponsor may relay your thanks and, if not, the sponsor will at least know that you appreciate your donors.
Nurture. Try to nurture relationships with DAF owners. The network of professionals who help individuals set up DAFs includes wealth, tax and legal advisors, and the donor services staff at community foundations.
When you meet with your non-DAF donors, find out their preferences for donations. Perhaps they have donated by check or cash but could donate from their DAF instead.
Think digital. Your fundraising and marketing materials should reference and encourage donors to give through their DAFs. This includes putting prompts and information on your website’s donation page including your legal name, Tax ID, address, and a contact.
The DAF sponsor may want to provide funding via ACH. Several DAF management companies support web widgets that allow donors to log into their DAFs and make grants directly from your page. Any way you can reduce the friction for accepting these donations will be helpful.
Cast a wider net. There’s no easy central index for funding from DAFs, so you’ll have to roll up your sleeves to expand your network. DAFs tend to cater to higher net worth individuals who employ professionals like wealth, tax, and legal advisors to help establish and manage funds.
Because DAFs aren’t required to distribute funds regularly, consider setting up a visit to your local community foundation. There are databases of community foundations within your area that will list their primary efforts for the community. The donor services staff at these foundations is charged with helping their donors meet their philanthropic aspirations and may find your organization of interest to one or more of their donor account owners.