Reshaping Charity Channels: How Assets Flow into and out of Donor-Advised Funds

From Philanthropic Intermediaries: A Bridge Between Donors and Grantees

Here is an interesting new paper posted by Helen Flannery and Brian Mittendorf:

Abstract

Donor-advised funds, or DAFs, are key nonprofit intermediaries in the flow of resources from donors to operating charities. In this chapter, we assess the unique position of DAFs in the charity supply chain and empirically test how their rapid growth may alter the mechanics of giving. We first examine if and how the types of assets flowing into DAFs differ from those flowing into traditional public charities. We show that DAFs facilitate noncash giving, particularly noncash gifts with added tax incentives. This demonstrates both a benefit of DAFs for donors and a hidden tax expenditure for governments. We then examine how the allocation of grants from donor-advised funds to various charitable recipient sectors differs from that of traditional giving vehicles. We find that DAFs risk creating a revolving door of funds in which resources cycle between DAF sponsors before ultimate disposition to operating charities. We further find that when it comes to distributions to operating charities, DAFs disproportionately facilitate giving to educational and religious organizations at the expense of human service and health care organizations. These results suggest that as donor-advised funds continue to grow, support of organizations that meet acute societal needs – such as homeless shelters, food banks, or health clinics – may suffer.

darryll k. jones