Giving Compass' Take:

• Sean Parnell, vice president of public policy at The Philanthropy Roundtable, pushes back against some criticism of donor-advised funds, specifically that they allow charities to just hide money. To Parnell, that's simply wrong.

• It's clear that there is a debate about the efficacy of DAFs, and it's worth looking at both sides before impact investors go all-in. However, there should be some objective truths: Charities want to give money away to help people, fundamentally. DAFs don't change that.

• Here's how DAFs could provide a good onramp for smaller investors.

Two major articles were published recently on the subject of donor-advised funds (DAFs), one in The Atlantic (“The Black Hole That Sucks Up Silicon Valley’s Money”) and another in the Chronicle of Philanthropy (“Foundations Move $737 Million to Donor-Advised Funds, Chronicle Study Shows”). Both raise a number of questions about the appropriateness of DAFs and include critiques of their role in the world of philanthropy, some reasonable (if ultimately wrong) and others just wrong.

The Chronicle article focuses on private foundations that give to DAFs and then recommend distributions from those accounts to charities. The Philanthropy Roundtable recently submitted formal comments to the U.S. Treasury on this issue, responding to concerns that this was somehow inappropriate — critics often suggest that this practice is nothing more than a foundation trying to avoid disclosing where the money is going, or to get around the five percent minimum payout requirement imposed on foundations.

There’s actually a grain of truth in first critique, but one that’s readily understandable — some foundations give to organizations in turbulent foreign countries where disclosure of their grants to charities supporting human rights or religious liberties would endanger lives ...

The second critique is somewhat baffling however — foundations literally exist to give away money, and it seems that squirreling money away in a DAF with the idea that it allows the foundation to hang on to the money in perpetuity seems more than a little ridiculous — what, exactly, would have been the point in establishing a foundation in the first place if the original donor doesn’t want to give the money to charity? Who joins the board or leadership of a foundation with the idea that they’re not going to give the money away after all?

Read the full article about answering donor-advised funds' critics by Sean Parnell from The Philanthropy Roundtable at Alliance For Charitable Reform.