In the past few years, community foundation DAFs, or donor advised funds, have received increased attention from the charitable sector, due to their growing popularity – and their lack of regulation.

Unlike private foundations, which must pay out at least five percent of their endowment each year, contributions to DAFs do not have a payout requirement, or a mandate to share how dollars are distributed.

Some advocates have called for federal reforms requiring time-bound payouts and increased transparency, like last year's proposed Accelerating Charitable Efforts Act. Others have opposed any reform, arguing that new requirements would have a chilling effect on giving, and limit philanthropy's flexibility to respond to community needs.

Gerry Roll, founding executive director of the Foundation for Appalachian Kentucky, has been an exception to this either-or dynamic, calling for regulation that would ensure that DAFs better consider the unique needs of rural and other marginalized communities.

In April, Roll penned an op-ed in the Chronicle of Philanthropy titled DAF Sponsors Aren’t All Created Equal. New Legislation Should Reflect That. She proposed that community foundations should be regulated differently than commercial DAF sponsors, including a national certification for community foundations to exempt them from time limits for distributing DAF contributions.

She cites the structures governing community development financial institutions (CDFIs) and community housing development organizations (CHDOs) as a framework for how such a certification could incentivize localized giving and increase government grants to foundations with strong community ties. Her past work leading the creation of a CHDO informed her perspective on how regulation can create conditions that support increased investment in rural communities.

We caught up with Roll to hear what the response to her article has been so far, and what she thinks is the way forward.

Proximate: To summarize what you proposed in your article – how would DAFs sponsored by community foundations differ in regulation from those regulated by commercial and national sponsors, and how do you think that these regulations would shift the behavior of DAF sponsors and donors?

Gerry Roll: Everybody wants to talk about DAFs as universally good or bad. But the reality is more complex.

With my article I wanted to make the case that when community foundations sponsor DAFs, that’s a good thing for local communities. Meanwhile, when commercial gift funds like Fidelity and Schwab sponsor DAFs, local communities suffer. These corporate funds have zero connection to communities. They get all the benefits of holding dollars, with none of the requirements of community connection. So let’s regulate them differently.

Read the full article "Should Community Foundation DAFs Be Regulated Differently?" by Grace Chai.