Giving Compass' Take:

• Ruth McCambridge explores the issues surrounding donor-advised funds and how regulations could keep the vehicle in line. 

• How could regulations increase transparency and effectiveness of donor-advised funds? 

• Get guidance on using donor-advised funds to make an impact. 

While the funds are championed as democratizing giving, there are some indications that the donors continue to act more like high- than low-end givers; as the Lilly Family School of Philanthropy at IUPUI reports, “there are some similarities between donor-advised fund granting patterns and the national distribution patterns…there are even more similarities when donor-advised fund granting patterns are compared to data on individual donors only.”

Some may feel that providing a veil for high-end givers primarily is unfair treatment; that veil, in fact, stands directly in the way of our understanding the extent of some of the problems identified by Madoff and Zerbe. Thus, no one really knows the extent of the problem of private foundations avoiding the 5 percent payout rate through the use of donor-advised funds, but they have been left trying to surmise it through the use of other information.

This particular problem of private foundations using contributions to DAFs to bypass payout rules should be seen as especially egregious, since it may not be illegal but certainly flouts the intent of the payout requirement. But there is no way to determine the extent of the problem without extraordinary efforts. Of course, there is a way for donor-advised fund sponsors to help make the field more transparent by funding more independent research themselves, based on increased access to the data.

Read the full article about donor-advised funds by Ruth McCambridge at Nonprofit Quarterly.