The research brief is a brief about interesting academic work.
The bulk of the grants that donor-advised funds distributed from 2014 to 2018 supported educational and religious nonprofits. This is what we found in one of the first studies of its kind on financial accounts, often referred to as DAFs. People with donor-aided funds use them to give money to the charity of their choice, when they are ready to do so.
About 29% of total DAF grant dollars supported education-focused nonprofits, and 14% supported churches and other religious organizations within our sample during this period, we found.
This pattern contrasts sharply with that of US charitable donations overall. About 31% of all charitable donations supported religious causes and 14% funded colleges, universities and other educational organizations in the same time frame.
DAF’s grants support arts and culture organizations and public-society for-profit organizations, such as the United Way and civil rights groups, at a higher level than the overall picture. Giving to arts and culture represented approximately 9% of total grant dollars from DAF from 2014 to 2018, and claims to public-society for-profit organizations accounted for 13% of the total.
This data is part of the Giving USA Special Report on Donor-Aided Funds. We conducted our analysis in partnership with the Giving USA Foundation, which classified 3 million grants from 87 different DAF-sponsoring organizations. As two lead researchers, we obtained data from organizations and charitable units of the Internal Revenue Service and the financial institutions that manage the DAF.
This data covers 70% of all DAF grant dollars from 2014 to 2018.
why it matters
Money distributed by the donor-advised fund represents an estimated 7% of all charitable donations in 2020 – a percentage that appears to increase over time. And yet there is little research to tell where this money went.
We believe this study is the most comprehensive and comprehensive look at where DAF grant dollars are going to date. This is more comprehensive than our earlier study that looked at data about donor-advised funding grants distributed from 2012 to 2015.
what will happen next
We are conducting additional research based on data from DAF grants for 2020. The information available so far indicates that priorities for these donors have changed during the COVID-19 pandemic. DAF grants to human services nonprofits, such as food banks and homeless shelters, grew strongly that year for the subset of organizations we studied.
In addition, we are seeing that donor-advised funding from our sample to historically black colleges and universities and racial justice organizations more than quadrupled from 2019 to 2020, which is in line with the overall trend in philanthropy. As final 2020 IRS data is released, and in the coming years, we will continue to track what DAFs are funding – and how those trends may change.
what is still not known
There are still many unknowns about DAFs, including how much money flows into different accounts each year. Many legal scholars, philanthropists and charitable leaders are debating whether DAFs should be regulated differently. The proposed legislation pending in Congress would introduce new rules, but it is unclear how the flow of money from DAFs to charities will change if that bill becomes law.
[You’re smart and curious about the world. So are The Conversation’s authors and editors. You can read us daily by subscribing to our newsletter.]