Those Darned DAFs

Donor-Advised Funds (DAFs) sure seemed prevalent in the press over the holidays.

The National Philanthropic Trust’s recent report on DAFs showed that, compared to 2011, in 2012: contributions to DAFs grew 34.6%, assets grew 18.9%, and grantmaking grew 6.7%. The growth in grantmaking exceeded the growth in grantmaking by private and corporate foundations over the same period, as reported by the Foundation Center. The rapid growth of DAFs likely continued in 2013, with three donor-advised fund managers reporting increases of more than 20% in giving in a December 13 Chronicle of Philanthropy article.

Community foundations and financial advisors, of course, published articles showcasing donor-advised funds as an easy, quick, and cheap means of taking care of year-end giving. Many highlighted the ease of donated appreciated stock and other assets. These articles and posts weren’t unexpected given the general increase of charitable giving advice and news in November and December.

Less expected was the amount of press generated by Professor Ray D. Madoff, of Boston College Law School. She is crusading for higher regulation of DAFs, calling them “warehouses of wealth” that are “taking over the charitable landscape” and starving “true charities” of resources. Her December 6 New York Times op-ed spawned additional coverage in the Boston Globe and Los Angeles Times. Other sources cited and commented on those articles. She rebutted the criticism she received by countering Five Myths About Payout Rules for Donor-Advised Funds.

Madoff had picked up on a thread of criticism of DAFs in the Chronicle of Philanthropy throughout 2012, including op-eds by nonprofit consultant Alan Cantor and comments by the National Center for Responsive Philanthropy’s Aaron Dorfman. Conservative commentator Scott Walter labeled the criticism Unphilanthropic Carping.

I don’t share the skepticism of Madoff, Cantor, Dorfman, and others – at least, not yet. Here are my quick takes on their concerns:

1) DAFs are primarily tools for financial advisors to make money from charitable giving.

Financial advisors, accountants, and attorneys also earn money from advising private and community foundations, other trusts, and even nonprofit endowments. The critics don’t seem worried about these sources of profit. In addition, there’s no data that the advisors are making more money, per philanthropic dollar advised, on donor-advised funds.

2) Fund advisors are likely granting little from their DAFs because there is no regulation forcing them to do (e.g. no equivalent to the 5% rule for private foundations).

There is no data about DAFs stockpiling charitable funds without making grants. The National Philanthropic Trust reported an average payout rate of 16% for DAF managers, far higher than the average for private foundations. In addition,advisors to the funds may have legitimate reasons for paying less in some years and more in others, including: the timing of large gifts to the funds, using funds to engage children and grandchildren in philanthropy, developing and implementing strategic giving plans, and holding payments back to incentivize matching gifts at a nonprofit.

3) Grants from DAFs can be anonymous. At minimum, this anonymity shields donors from nonprofit fundraising appeals and prospect researching. At its worst, the anonymity is suspected of being a cover for funding of controversial issues.

Donors seek anonymity for a variety of personal reasons, including religious beliefs and fear of discrimination or retaliation. Progressive critics appear suspicious of DAFs held by conservative donors, and I suspect the converse is true. I’m not willing to remove the option of anonymity for donors just because I might not like the charities they support. See my previous post Why Your Grant Proposal is Unwanted for other reasons donors to foundation or DAFs choose to be circumspect in their giving.

4) Because the overall rate of giving in the U.S. is fairly static over time, the rapid growth in giving to DAFs means other charities are receiving less money.

This argument – the shift in the use of a limited pie of charitable dollars – seems a reasonable hypothesis, but is darn tough to prove. There are too many other variables in the equation, including: timeshifting of funds (the same dollars that would have gone to non-DAF charities are distributed later); the amount of giving to DAFs that might not have gone to charity at all if not for the DAF; the increased competition from the growing numbers of nonprofits; and other trends impacting giving preferences of different generations.

Your thoughts?

If you’re a fundraiser or grant writer, I’d love to hear from you. How have donors’ use of donor-advised funds tangibly impacted your nonprofit for good or bad?

Addendum 2/14/14: Rick Cohen from the Nonprofit Quarterly – a thoughtful skeptic of organized philanthropy – posted an article today with additional rebuttals to the DAF critics. He ends the article with this sentence: “For charities interested in reaching individual donors, getting comfortable with donors who give through donor-advised funds has to be a top priority in the new world of fundraising.” 

Grassroots vs. Organization Culture in Giving


Working in philanthropy often means simultaneously holding competing values as true, or at least viable. And, there are many classic tensions of values in philanthropy to navigate. Strategic philanthropy, relationship-driven philanthropy, and impulsive giving can all useful tactics. Donors can be both builders and buyers in their support of nonprofits’ growth. The freedom of nonprofits to evolve in the pursuit of their missions and the firm legal protection of donor rights can comfortably co-exist. Effective conservation happens through both systemic policy change and individual action.

I’ll admit that I’m a “both-and” philanthropoid and a pragmatic optimist. I’ve worked for too many types of donors and grantmaking committees to be completely stuck on one approach to giving or community problem-solving. Of course, I have biases based on experience and upbringing and a firm set of values for my personal giving. But, I’m generally willing to help donors and grantmaking committees pursue the philanthropic pathways and giving styles that are most meaningful to each of them.

My “both-and” brain was excited when I read Have Your People Call our People, a recent opinion piece in NPQ by the John R. Oishei Foundation’s Paul Hogan. Hogan wrote about the competing tensions of grassroots culture and organization culture in philanthropy. In short, donors biased to a grassroots culture celebrate individual neighborhood champions and entrepreneurs. Donors biased to an organization culture put their faith in established nonprofits and structured planning processes.

Hogan does a good job of showing the faults in both cultures and of describing the challenges of navigating the middle ground between them. His experience likely feels familiar to members of Grassroots Grantmakers and other grassroots-oriented donors and philanthropoids who are surrounded by organization culture types.

I’ve encountered both criticism and support when I’ve worked in both of those cultures. Like Hogan, I see the value and problems of both. Most of all, I wish more donors, grantmakers, and nonprofit leaders were willing to work in both cultures – simultaneously holding both to be truly viable and helpful.

Philanthropic Disruption News


Foundation Center President Brad Smith had a great post last week, The Brave New World of Good. In it, he poses thoughtful questions about newer models of achieving social good that are complementing, some believe disrupting or even replacing, traditional philanthropies and nonprofits. These include open data, private markets, hackathons, innovation practices, impact investing, and transparency practices.

Lucy Bernholz then posed additional questions about the potential negative interactions between those models in her post, Good (and not so good?). Her post linked to new documents from Stanford’s Digital Civil Society Lab that look at related public policy challenges.

These posts came on the heels of articles about nonprofits that facilitate giving money directly to the poor, including GiveDirectly and Benevolent. These nonprofits and others are complementing, some say inappropriately bypassing, traditional social service intermediaries and international aid groups.

Lastly, philanthropic advisor Laura Loescher wrote an interesting post on how “Indie Philanthropists” are challenging traditional giving models.

I’ll concede that the posts probably don’t appeal to most nonprofits worried about making ends meet or the majority of donors and grantmakers who are content with their giving practices. And, as Doug Smith notes, there’s not much hard evidence to show new models and disruptions are consistently more effective than old models.

I think the posts and articles are on target for describing the increasingly messy and confusing world of improving communities and society. We don’t yet know how the models, practices, and policies will play out in the long run. But I think they’ll impact our daily work in philanthropic and nonprofit management sooner than we’re ready for them to do so.

In the meantime, if you know any graduate and doctoral students stuck for research topics, send them the links above. Hopefully they’ll find something inspiring in those topics and help us all learn how to lean into the unfolding changes.

Would Your Nonprofit Succeed With Donors Who “Give With Purpose”? (part 2)

Written for and cross-posted at

Let’s try a quick exercise: pull up the website of your favorite nonprofit. Can you answer any of these questions based on the information on that site?

  • Does the nonprofit demonstrate familiarity with evidence and best practices related to the need it addresses by citing research, data, reports, past experience, or other reliable sources of information?
  • Does the organization demonstrate cultural awareness and roots in the community?
  • Are its results likely to stick over time for the intended beneficiaries?
  • Do the board members play a meaningful role in supporting the organization through their work and financial support?

These are just four of the 35 questions from the new RISE Assessment Tool to evaluate nonprofits. The Learning By Giving Foundation offered this tool to thousands of people who participated in its Massive Online Open Course on philanthropy, Giving With Purpose, this summer. The course describes “giving with purpose” in two goals: a) satisfy your personal motivations for giving, and b) invest in high-performing organizations. In my last post, I gave my assessment of the course itself and its ability to meet the first goal. In this post, I’ll dig into the second goal.

The RISE Framework

Course instructor Rebecca Riccio created the RISE Framework for Social Change to define four “hallmarks of strong organizations”: Relevance, Impact, Sustainability, and Excellence. The RISE Assessment Tool has a set of questions and rating criteria for each hallmark. The Foundation hasn’t released a final version to the public yet, but I pasted the questions into a document (download the PDF – RISE Assessment Tool – 2013-Aug Vsn) as an example.

Hundreds of the participants in this summer’s course tried using the assessment tool on the web sites of the 700+ nonprofits nominated by other participants. The nonprofits ranged from all-volunteer, faith-based efforts to large, long-time civic anchors. Ms. Riccio briefly encourages people to visit nonprofits in person. But, the design of the course biases participants toward finding information on nonprofit websites and online services such as Guidestar and Charity Navigator.

What if Donors Use the Tool?

In my use of the RISE Assessment Tool during the course, and in feedback I saw from other participants, nonprofit websites mostly came up short on answers. The tool will likely inhibit donations if, as Ms. Riccio suggests, donors use it before they choose to make a donation.

First, most nonprofits are small and underinvest in their communications, technology, fundraising, and evaluation capabilities. Of the 1 million public charities in the U.S. that submit 990s to the IRS, about 75% have budgets of less than $500,000. (There are also 386,000 congregations and an unknown number of very tiny, local charities that don’t have to make information available publicly.) Only a small percentage of these nonprofits choose to focus their limited resources on the operational and program management criteria in the tool.

Second, not all nonprofits are in the business of “social change.” In the course, Ms. Riccio notes that the nonprofit sector is very diverse. However, I think the assessment tool and thrust of the course work best for nonprofits providing direct services (e.g. mental health, education, or international development). Historical societies, conservation groups, arts organizations, and others will fail many of the tool’s criteria for relevance and impact.

Lastly, nonprofits are receiving conflicting advice on the focus of their websites. Ms. Riccio tells participants to look past good stories and packaging to find answers to the assessment tool’s questions. Her advice, of course, isn’t new. The Better Business Bureau and others publish checklists of nonprofit information that should be publicly available. And, her questions about results and impact are similar to the new, controversial effort by Charity Navigator to rate nonprofits on the reporting of their results.

However, nonprofits hear a different story from experts who advise on fundraising communications, Millennial and Gen X giving, and engaging donors in social giving and crowdfunding models. Those advisors tell nonprofits to lead with compelling stories, share-able multimedia content, and pictures and quotes from donors’ peers. These might describe results, but not in the ways that match the expectations of the RISE Assessment Tool and its peers.

With all respect for Ms. Riccio’s hopes for success with the course and tool, my bet is still on the nonprofit websites filled with compelling, share-able multimedia content. Here’s why…

Hearts Still Win Over Heads

Ms. Riccio joins a chorus of philanthropic advisors, authors, and consultants who earn money trying to convince donors to stop, think, research, and create criteria before they give. As an example, most issues of the Chronicle of Philanthropy have a new opinion piece telling donors and foundation what they should do. All their work isn’t changing mainstream donor behavior, at least yet.

Hope Consulting’s Money for Good reports, the 2013 Millennial Impact Report, the annual Burk Donor Surveys, and other sources report that donors say they want to see tangible results and good performance in nonprofits. This hope for giving with purpose reverberates through the philanthropy media and is amplified as a real trend. But, we donors are only human. Our behavior frequently doesn’t match our intentions and we’re susceptible to all types of cognitive and emotional biases.

We have a variety of motivations for making charitable gifts, and the emotional, social, and spiritual reasons win over the intellectual ones. One of the classic books on donor motivation, The Seven Faces of Philanthropy, showed that only 15% of donors selected nonprofits based on considerable research and evaluation. The more recent Money for Good research showed that only 16% of donors were driven to primarily support high impact nonprofits.

The Money for Good research also shows that donors don’t spend much time researching nonprofits before they give. Only 35% of the 5,000 donors researched reported doing any research. And, when donors did research, it was to validate their donation, not to find the “best” nonprofit. They were looking to see if the nonprofit seemed reputable, had low overhead, and did good work (not necessarily defined as theories of change, performance measures, business plans, etc.).

Do I Now Know How to Invest in High-Performing Nonprofits?

The Tool didn’t add to my knowledge or skills. But as a long-time philanthropoid, I’m not the target audience for the Giving With Purpose course and RISE Assessment Tool.

In my previous post, I identified some potential audiences for the course – college classes, giving circles, professional advisors, and nonprofit staff and board members. Those audiences may be predisposed to spending more time exploring their giving preferences and evaluating nonprofits. The RISE Assessment Tool could be helpful if they’re realistic about the capabilities most nonprofits have (or lack) and what information is easily publicly available (or not). If the recent research on Next Gen Donors is to be believed, Gen X and Y donors may be predisposed to ask nonprofits harder questions. The Tool’s questions wouldn’t be a bad start, though the five Charting Impact questions might be a simpler start.

Despite my critiques and challenges over these two posts, I very much hope the Learning By Giving Foundation sees the summer 2013 version of the course as a good beta test. Hopefully the foundation will take the course’s advice and evaluate the participants’ behaviors and knowledge over time, use the participants’ feedback to update the content and process, and offer future, improved versions.

Should you take the course? If you’re at the point in your life that you have more time to consistently think about and act on your generosity, the course could be a helpful launchpad for that process. If a MOOC isn’t your style, ask Nathaniel James or me about the other strategic philanthropy and philanthropic planning tools on our bookshelves and browser bookmarks.

If you took the Giving With Purpose course too, I’d love to hear your experience, especially if you disagree with my take on the course.

Giving With Purpose: Will It Stick? (part 1)

Written for and cross-posted at

learnbygivingfoundationThis summer, the Learning By Giving Foundation launched its Massive Online Open Course (MOOC) on philanthropy, Giving With Purpose. News reports played up the fact that Doris and Warren Buffett were backing the course and that some nonprofits would receive “Buffett money” because of the course. That financial carrot likely drove the initial registration to upwards of 10,000 people.

I have to give kudos to the Learning By Giving Foundation and the course presenter, Rebecca Riccio. I’m thankful for their commitment to providing free philanthropy curricula, to openly experimenting with the still-evolving MOOC format for learning, and to being willing to learn from the feedback provided by thousands of course participants.

The course encourages people to “give with purpose” – described in two goals: a) satisfy their personal motivations for giving, and b) invest in high-performing organizations. In this post, I’ll cover my thoughts about the course as a whole and its ability to help participants understand their personal motivations for giving. I’ll write about the “invest in high-performing organizations” in the next post.

The Experience

The six-week course combines about an hour of video content with about an hour of  homework each week. There are a few short quizzes, but no final test and no grades assigned. Participants optionally choose to spend more time on the “Giver” track. Givers complete an initial online profile of a nonprofit to nominate it for a grant and assess six or eight other nonprofit profiles based on what they learn through the course. This summer, at least 1,300 participants also posted thoughts and commented on others’ posts on a Google+ Community.

Ms. Riccio delivers all of the educational content in short video segments. She also interviews donors ranging from Warren and Doris Buffett to the founders of Ben & Jerry’s (previews are available on YouTube.)

Ms. Riccio is often an engaging instructor and the course mercifully lacks endless slide decks. That said, if a student isn’t attracted to Ms. Riccio’s teaching style, he or she is out of luck. Some points are reinforced by visuals. However, new ideas often go by quickly or in quick lists of options that should be reinforced by written materials or downloadable slides. And, there isn’t always an easy connection between the videos and other online content. I don’t know if this disconnect is due to the Foundation’s first experimentation with online learning or to the limitation of the platform (Google’sCourse Builder). I do know there are more sophisticated online learning platforms available (the instructional firm In The Telling has one example).

At the end of the course, I was left with four questions.

1. Who is the target audience?

The course’s web site says it is “for students who are passionate about or interested in philanthropy.” It doesn’t define if it means the Learning By Giving Foundation’s traditional audience of college students or a broader audience. Judging by profile pictures in the Google+ community, most users this summer were adults.

The content is too basic for practiced philanthropists, philanthropic advisors, and foundation staff. But, I think these audiences would find the course useful:

  • College classes – while the content seems designed to stand on its own, people unfamiliar with the nonprofit sector or new to giving would benefit from a teacher or tutor providing context and reinforcing some points.
  • Giving circles – the content could be useful fodder for discussion in a giving circle and/or for new circle members who aren’t familiar with the basics of the nonprofit sector and options for giving. It could serve the same function for corporate giving offices to educate employees and service clubs to educate members.
  • Professional advisors – accountants, financial planners, and lawyers who don’t have charitable giving as part of their regular practice could use the course as a quick grounding. That said, see the caveat in the next question.
  • Staff, volunteers, and board members of nonprofits – the majority of the participants this summer seemed to already be connected to one or more nonprofits (likely because of the incentive of grants at the end of the course). Many said the course provided useful background on the sector and how to look at their favorite nonprofit(s) through a new lens. A nonprofit CEO could use the content to help staff see the nonprofit sector through the eyes of donors.

2. Is it too much of not enough?

The instructor, Rebecca Riccio, does a good job of synthesizing dozens of ideas from the literature on strategic giving and on nonprofit assessment. And, she frequently counsels participants to be fair and realistic when looking at issues such as evaluation and nonprofit overhead.

That said, participants may end up with too much of not enough information. As an example, she spends less than four minutes total introducing three tools: theories of change, logic models, and performance measurement practices. Participants are encouraged to look for these tools as signs of an effective nonprofit, but aren’t shown examples or provided context to judge quality if they do see them. Even seasoned foundation staffers have trouble assessing these tools, and too few nonprofits have good ones.

This felt like the equivalent of telling average consumers to buy a car based on the engine components. Sure, we can memorize a couple basic facts and ask the auto dealer to pop open the hood so we look like we’re being smart buyers. But it doesn’t mean we really know what we’re looking at.

3. Do I better understand my personal motivations for giving?

Each week included content designed to help participants reach both course goals (learn to satisfy your personal motivations for giving and learn to invest in high-performing organizations). Unfortunately, I don’t think the course succeeds on the first goal.

Ms Riccio poses good questions at the beginning of the course, for example: “Does a nonprofit have meaning for me?”, “Is investing in it a meaningful way for me to make a difference?” and “Does a contribution fit into my financial plan for giving?” But, the course doesn’t provide concrete tools to explore these and other values-driven and personal finance questions posed.

Truly understanding your personal motivations for giving takes time. In my experience in working with donors and donor families, they’re far more likely to take time for self-reflection and soul-searching in two circumstances. The first is when they’ve encountered a big change (e.g. selling a business, a parent dies, or inheriting wealth). The second is when they have an ally (e.g. an advisor, pastor, or life coach) and/or peer group regularly holding them accountable for the activity and documenting the results. Simply giving a scan of the ideas or presenting information freely online won’t change donor behavior.

4. Will it stick?

Thousands of people have now viewed content designed to help them be more purposeful givers. A subset of them attempted to practice what they saw on a few nonprofits’ web sites, 990s, and the often-incomplete nonprofit profiles submitted by participants. The course will accept another round of students at some point (TBD at the time of this post).

I’m not convinced that the content will stick for the majority. Like many great resources on strategic giving, the course provides a useful roadmap but following the map takes too much work for the donations under $100 that comprise most of charitable giving. In addition, even for wealthy donors, the motivation to give to high-performing nonprofits is easily undermined by other motivations and emotions (see Money for Good and other research on donor behavior).

Returning to our car-buying analogy, we may know all the right technical features we should value, but our purchases end up being driven more by emotion – the status the car conveys, the feel of the drive, the hot new color or style, loyalty to a brand, etc.

What if it does stick?

But, what if I’m wrong? What if the Giving With Purpose content does stick for hundreds or thousands of donors over time? Then, the nonprofit sector could be in trouble. The course raises expectations for the information donors should be able to easily learn about nonprofits. Most small- and mid-sized nonprofits won’t meet those expectations. That’s the subject of my next post.

If you took Giving With Purpose, please feel free to weigh in with your experience and reactions by commenting on this post! 

Why Your Grant Proposal Is Unwanted

Question: If you had $1 million or even $5 million to give away to charities, would you want to be bombarded by grant proposals from organizations you’ve never met? Be honest…

Over the past couple months, there’s been another debate about the merits of strategic philanthropy. The typical pundits have been involved. Bill Schambra, Pablo Eisenberg, the right-leaning Philanthropy Daily, the left-leaning National Committee for Responsive Philanthropy (NCRP), and others weighed in with their cautions and sometimes downright revulsion to strategic philanthropy. Paul Brest, Phil Buchanan, and others have weighed in with the advantages of strategic philanthropy done well.

Frankly, the same pundits have made many of the same points before, and some used this debate as a platform for their other beefs with foundations. That’s fine – as a philanthropy geek, I love that the debate comes up from time to time and I see merits on both sides.

However, Pablo Eisenberg and Niki Jagpal from NCRP committed an unfortunate logical fallacy. Eisenberg quoted a statistic from the Foundation Center:  60% of the 86,000+ foundations in the United States state that they do not accept unsolicited proposals. They then make the leap to assume that most or all of the foundations in that 60% are strategic grantmakers. They paint those foundations with phrases such as “[we] know what’s best for nonprofits, their constituencies, and the greater good,” “philanthropic arrogance,” and “technocratic and top-down.” An unsavory lot, indeed.

Here’s the fact they glossed over: more than 80% of all U.S. foundations and 86% of family foundations are under $5 million in assets. Small foundations and family foundations choose not to accept proposals for these reasons and more:

  • They have a few organizations they love and continue to support. They’re actually following the advice of Grantmakers for Effective Organizations and many of the pundits listed above by providing general operating support over time.
  • They don’t want inundated with requests because they don’t have paid staff or the personal time to deal with requests. Would you rather be generous in ways that are meaningful to you or spend time reading through mind-numbing piles of requests and screens of emails? Would you want to spend limited charitable resources hiring someone to screen proposals or would you rather use that money for grants?
  • They’re using their own networks of relationships, personal wisdom, local and international news about needs, site visits, presentations to churches and civic clubs, social giving resources, and more to find good charities. The pundits (looking at you Schambra) who describe strategic philanthropies as “technocrats removed from real needs” should be lauding these families.
  • They’re attempting to be quiet about their grantmaking due to their personal values or religious beliefs, or because they just plain don’t want hit up with proposals at the grocery, at parties, or even in the restroom. (I’m not lying – all three have happened to friends or me).

Put yourself in their shoes – would you really create an open proposal process? (If so, I know talented people who would happily be paid to help you with this.)

Why Your Evidence Is Ignored

“The truth is rarely pure and never simple.” – Oscar Wilde, The Importance of Being Earnest 

Thanks to the wonders of social media (specifically Darin McKeever’s Twitter feed), I just read a fascinating article – Why Policymakers Ignore Evidence – by Gerry Stoker, Professor of Politics and Governance at the University of Southampton, U.K.

Stoker’s article is meant as advice to other academics. Based on my experiences, I’d argue his advice is equally useful to nonprofit and foundation staff trying to communicate with politicians, donors, and other community leaders. From Stoker’s many points, I’ve pulled out nine questions that could be swirling in someone’s brain when presented with your facts or your proven solution:

  1. Why is this important right now, and more important than other issues?
  2. Why are you bringing me a problem analysis and no solutions?
  3. What are the administrative, financial, and/or political challenges we’ll face in doing this?
  4. How much social and political capital will we burn trying to get this done?
  5. What are the opportunity costs of diverting time and resources to this?
  6. Is the information coming from a trusted resource or ally?
  7. Does the idea match my personal values and world view?
  8. What are the unintended consequences?
  9. Are you communicating to me in language I understand?

If you’re a program officer trying to sell your board on a strategy, could you predict their answers to these questions with confidence? If you’re a nonprofit advocating for a program, how would your city councilors or state legislators respond to these questions?

I see too many of my colleagues get caught up in their causes – in the “rightness” of their ideas and evidence – that they forget to see the world through others’ viewpoints and experiences. Lord knows, I’ve made the mistakes too.

Stoker’s advice is similar to counsel provided by lobbyists and political communications strategists. Fortunately, there are free resources nonprofits and funders can use to be more successful in turning facts into persuasive communications. Two good places to start are Spitfire Strategies, and if you lean more liberal, the FrameWorks Institute.