4 Takeaways from the 2021 Giving USA Report on Donor-Advised FundsJuly 2022
Donor-advised funds (DAFs) often elicit strong and polarized opinions from commentators about the role they should (or shouldn't) play in contemporary philanthropy. However, it is undeniable that these giving vehicles have achieved increasing prominence in recent years, demanding that nonprofit leaders grapple with how to best approach them. Leaders can start by gaining a clear sense of the role that DAFs play in the modern philanthropic environment, particularly by analyzing trends documented by organizations like the Giving Institute. Here are four key takeaways from the 2021 Giving USA Special Report on Donor-Advised Funds:
1. Grant dollars from donor-advised funds grew from 2014-2019 in absolute terms and in proportion to giving from other sources:
In 2019, grants from DAFs totaled $27.37 billion, amounting to 6.1% of total donations in the nonprofit sector. This represented an increase of $18.37 billion since 2014 when DAF grants constituted only 3.8% of total giving. To go back even further, DAF grants in 2006 added up to only $5.7 billion, illustrating the seismic shift in their prominence over time.
This trend follows from and parallels the long-term growth in contributions to DAFs over the same period. In 2006, DAFs received $9.0 billion in contributions and held $31.1 billion in assets. By the end of 2019, $38.81 billion went to DAFs, ballooning these funds' assets to $141.95 billion.
2. Donor-advised funds give in distinctly different patterns to donors overall:
DAFs give far less generously to religious causes and far more to educational organizations than the overall donor population. In 2019, around 31% of DAF funding went to education, more than double the proportion for all giving sources (14%), while DAF giving to religious organizations (14%) was less than half the proportion for all donors (29%). Education has also continued to increase its share of total DAF funding, especially as DAFs have also become increasingly prominent funders of higher education. Aside from these categories, however, DAF giving patterns have remained fairly stable since 2014.
DAFs also support public-society-benefit and arts/culture/humanities organizations to a greater degree than do other donors, although the disparity is much smaller for these categories. The divergence in arts support can be partially explained by the fact that more than triple the proportion of high-net-worth donors give to arts causes than do U.S. households overall.
Religious giving makes up a proportionally greater amount of total DAF giving for single-issue charities (35%) than for national funds (14%) and community foundations (5%). Alternatively, educational giving makes up proportionally more giving for national funds (32%) than for single-issue charities (14%). These disparities help to explain the total giving picture because national funds exert such an outsized impact on total giving by DAFs. The proportions of total giving by recipient are much more comparable to the amounts for DAFs housed at national funds.
3. Gifts are heavily concentrated among nonprofit organizations with the highest revenues:
Over the primary period covered in the study (2014-18), roughly half of DAF grant dollars (48-52%) went to the highest revenue-earning nonprofits ($20 million+) in any given year. This concentration of donations mirrors the landscape of overall giving and underlines the disparities faced by organizations of different financial clout. The next highest share was received by organizations in the $1-5 million revenue range which garnered roughly 12% of grant dollars. Organizations between $5-10 million and $10-20 million in revenue each received slightly lower sums (c. 8% and C. 9% respectively), while those under $1 million earned much smaller shares of the total pie.
This concentration of grant dollars also mirrors the outsized share of dollars given by larger national DAFs (61%) as opposed to DAFs at community foundations (26%) and single-issue charities (13%). Grant dollars from national funds also grew the fastest from 2014-2018 (110%), distantly followed by single-issue charities (77%) and community foundations (51%).
4. Some donor-advised funds heavily shifted their giving patterns during the pandemic, suggesting that they may be more responsive to social conditions than donors overall:
Based on a more limited dataset than the study as a whole, DAF grant dollars increased by 39% from 2019 to 2020, with particularly large increases to human service (138%) and public-service-benefit (c. 100%) organizations. The relative increases in giving to these sectors were much greater than those seen among overall donors by a wide margin. DAFs also initiated a strong shift away from religious giving (14% to 9% of the total), arts (9% to 4%), and international causes (7% to 4%). These losses translated to gains for human services organizations (12% to 27% of total grant dollars) and public-service-benefit groups (13% to 16%).
Among a subset of organizations, DAFs starkly increased their giving to racial justice causes, including to Historically Black Colleges and Universities (HBCUs). Grant dollars to these organizations shot up by 341% from 2019 to 2020 and increased from 1.5% of total philanthropic donations ($28.28 million) to 4.9% ($124.65 million). While only future datasets will say if these trends last, they do suggest that DAFs may be highly responsive to shifting social conditions in ways the other donative sources are not.
While extraordinary economic and social conditions continue to plague the nonprofit sector, organizations cannot afford to ignore changes in all types of giving. DAFs may still represent relatively uncharted territory for many organizations, however, they are clearly gaining prominence in the philanthropic scene and should be critically evaluated, especially if an organization's sector is favored by DAF donors.
Additional Resources and Readings:
Check out our article on the full 2022 Giving USA report:
- 5 Takeaways from the 2022 Giving USA Report by Patton McDowell
Also read up on our coverage of previous Giving USA reports:
4 Takeaways from the Giving USA 2020 Annual Report by Patton McDowell
62: What Should We Learn from the Giving USA Report? (Melissa Brown) by Your Path to Nonprofit Leadership podcast
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