In April, NPQ noted that donor-advised funds (DAFs) can serve as charitable savings accounts that can be drawn upon if the economy goes south—the proverbial “saving for a rainy day.” In the past decade, DAF holdings have grown rapidly—from $29.31 billion in 2009 to $121.42 billion as of 2018 and perhaps over $130 billion today.
When we interviewed DAF sponsors, that “rainy day” purpose rang loud and clear. As Kate Guedj, Senior Vice President and Chief Philanthropy Officer at the Boston Foundation, put it, “It is raining. And now is the time to give it away.”
Yet while donations from DAFs are rising, it is uncertain by how much. The estimate we heard was that payout rates from 2020 might rise from (roughly) 20 to 30 percent. If that happened, that would mean an added $12 or $13 billion—a significant boost.
But is it enough? Some are pressing for more. Last month, NPQ published an article that promoted setting policy for three years that, in addition to doubling mandated payout rates for private foundations from five to 10 percent, would also apply a floor of 10 percent to each DAF account holder as a kind of emergency charitable stimulus.
In San Francisco, David and Jennifer Risher support that policy proposal, but they have focused on what they call a complementary “bottom-up” effort of their own. Specifically, they have called on their fellow DAF holders to ante up and commit to spending half their DAF over the next few months. They have a website and a Twitter hashtag: #HalfMyDAF. Their tagline is to “Take the #HalfMyDAF Challenge and put your money to work.”
And, to sweeten the deal, they are offering to donate $1 million from their own DAF to nonprofits named by the DAF holders who have signed the #HalfMyDAF pledge in two rounds—one in July and one in September. (The match money has since been supplemented by four other donors, who each pledged $100,000 of match money, so there is presently $1.4 million in available match.)
The way the match works is as follows:
- The donor signs a form pledging to give nonprofits at least half the money that is in their DAF by no later than September 30, 2020.
- The donor names the nonprofits that they wish to nominate for a match. Match recipients are randomly selected, with the only exception being that nonprofits that promote hate or violence are excluded.
- In mid-July, at least 50 nonprofits nominated will be selected for a 1:1 match up to $10,000 and four will be selected for a 1:1 match, up to $25,000.
- On September 30th, a second round like the first will occur.
- While many match requests are for less than $10,000, the entire $1.4 million match will be spent. The Rishers anticipate over 150 nonprofits will get funding.
In an interview with NPQ, Jennifer Risher explained the rationale for their effort.
We realized there was money stuck in donor funds. David runs a nonprofit. With COVID-19, there is so much need. It is greater and they are struggling. We have to do something for nonprofits. Well, there’s all that money sitting there. So we decided wanted to help inspire people to half their DAF and start giving now.
More broadly, Jennifer noted that the Rishers have their own DAF and believe that the way DAFs should work is to “move money through—put it in and move it out.”
On their campaign website, they offer more details behind their thinking. As the Rishers readily acknowledge, they are DAF account holders themselves. They see their value. As they write on their frequently asked questions page, “Separating the timing of a tax break from a charitable donation is great: donors aren’t always prepared to give in the year they had a taxable event. At community foundations, endowed DAFs can be critical, stable sources of long-term funding for a community.”
But they add, the DAF structure does not create “much urgency to move money out. Some people have thoughtful, multi-year charitable plans, or even use DAFs as a kind of family foundation, designed to span generations…But too often, money remains in funds due to inertia or to the ‘paradox of choice.’ In those cases, the money sits untouched, waiting for the original donor to step forward and put the money to work.”
They add that a further challenge is that even as many DAF sponsors encourage their accountholder members to make donations to nonprofits, the fund management financial model works against this. “With the average $160,000 DAF making $1,600 annually for the sponsor, there’s no financial incentive to move the money out.”
This concern does not arise solely from the current crisis. In a LinkedIn article from January, before the pandemic hit, David Risher argues that DAFs must increase the pace of money going out. As Risher observed, “A total of $37 billion flowed into DAFs during 2018 alone, but only $23 billion flowed out. In other words, DAFs are removing more philanthropic dollars from the sys