Donor-advised funds contribute growing ratio of all funds to nonprofit sector

Donor-advised funds are a growing segment of the overall landscape of philanthropic giving in the United States according to a comprehensive new report compiled by the National Philanthropic Trust. In terms of total nonprofit fundraising the ratio from donor-advised funds reached 5.2% of all gifts to charitable organizations in 2013. More specifically of the total estimated charitable contributions in the United States in 2013 of $335.2 billion donor-advised fund accounts received $17.28 billion.

The new report brings complex analysis of the donor-advised fund market based upon data compiled during Q2 and Q3 this year relating to fiscal year activities during 2013.

What is a donor-advised fund?

The report provides the following definition along with a full glossary of terms which are useful to better understanding the data presented; A philanthropic giving vehicle administered by a charitable sponsor. A donor-advised fund allows donors to establish and fund the account by making irrevocable, tax-deductible contributions to the charitable sponsor. Donors then recommend grants from those funds to other charitable organizations.

The report highlights that the promising 2013 results were in large part due to a (still) recovering economy whereas since the inception of the report in 2007 much of the data has been against the backdrop of a far more troubled economic environment. The first graphic below highlights the 2012/2013 growth in contributions, grant dollars and the total number of donor-advised fund accounts.

What was revealing to me was the sheer volume of donor-advised fund accounts compared to other, perhaps better known, charitable giving vehicles. Did you realise that DAF’s outnumber the combined totals of all other planned giving vehicles which include Unitrusts, Private Foundations and Income Funds amongst others? If anything the trend toward DAF’s is growing as related in the graphic below.

The total number of DAF’s in the United States has seen a steady increase since the report began in 2007 from 161,941 up to 217,367 accounts last year – marking a six year increase of 34.2%. Moreover the total quantity of accounts has increased every single year studied. As for the total value of grants from these accounts, the increases haven’t been quite as consistent year-over-year but the improvements have culminated in a total grant of $9.66 billion in 2013 as opposed to a starting point of $6.47 billion in 2007 – an increase of 49.3% over the duration. The 2013 results were especially encouraging as a one year increase of 12.6% versus 2012 was reported.

The impact that the economy has had on DAF’s is most clearly illustrated when reviewing the total contributions to the fund accounts on a yearly basis. The graphic above demonstrates quite clearly the severe impact of the 2008-2009 recession in terms of total grant contributions and also the hearty recovery in the three years since. In total the 2013 contributions to donor-advised fund accounts reached $17.28 billion which represented an all-time high, when compared with the 2012 total of $13.99 billion this shows a one year increase of 23.5%. I also found it interesting that when comparing much of this data with the overall trajectory of nonprofit fundraising results in the US that the trends are even more pronounced in this special sub-sector, reinforcing the stronger economy/stronger results relationship when discussing donor-assisted funds.

The report also contains a very informative section about the current trends at the time of writing in addition to projections for the years to come, supporting the data with concrete analysis about grantmaking, contributions and payouts. In addition an added section that focuses on the methodology of the reporting adds value to a report that is already to be commended in terms of transparency.

I hope that you take the time to review the entire study – available here via the National Philanthropic Trust

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Miratel Solutions is a Toronto call centre, eBusiness, and letter shop mail house specializing in professional fundraising services including PCI compliant inbound telephone fundraising, outbound telephone fundraising, online fundraising, lottery fundraising services, donation processing and receipting and direct mail fundraising services. We are committed to our CSR business values in all our business decisions  and advancing the missions of the nonprofits we proudly serve.