Written by Clark Collier, Director of Giving Strategies and Robin Elmerick, Senior Director of Effective Philanthropy
Chances are, if you work at a nonprofit, then you have some awareness of Donor-Advised Funds and how they contribute to philanthropy. If not, here’s a quick overview:
“DAFs” are giving vehicles that allow donors to contribute money or assets to a fund with tax-deductible benefit; unlike private foundations, DAF’s are not subject to any annual payout requirement. This allows donors to more strategically make charitable decisions and investments over time.
It is because of that last wrinkle that some view DAFs more as philanthropic black holes than an effective giving strategy.
But in fact, DAFs annually disburse a far greater share of their total assets than the 5% minimum of a private foundation. For example, of total DAF assets held at CICF Collaborative, the annual giving rate is NUMBER.
One reason to open and fund a DAF without specific charitable causes in mind may be to preserve the untaxed size of a gift while deciding on where it should go and when.
That’s where we come in.
HOW DAFs WORK (at CICF)
Nonprofit recipients of DAF grants are decided in one of two ways. Either a donor decides directly to give to the causes they care about, or a charitable organization is suggested by CICF’s philanthropic advisors based on community need and a donor’s stated philanthropic interests.
In the latter case, philanthropic advisors confer not only with a donor, but also other members of the larger CICF Collaborative (e.g., The Indianapolis Foundation, Hamilton Co. Community Foundation, Women’s Fund, IMPACT Central Indiana) who are, themselves, in regular contact with community members and nonprofits.
Let’s say a donor wants to bolster childcare in Central Indiana. We confer with in-house experts like the Women’s Fund. They let us know that, according to their 2024 State of Women in Central Indiana Report, Hancock County cannot satisfy even half its demand for licensed childcare—the lowest rate of any county in the region.
Our donor tells us to find an effective person or organization who can address it. Then, cut them a check for a certain amount.
End of story? We hope not, because now our grant recipient gets to “steward” that gift.
IMPORTANCE OF STEWARDSHIP
Here’s a handy Zen koan to remember the next time you meditate:
When a nonprofit receives a check from CICF, it isn’t necessarily from CICF.
Confused? We don’t blame you. Read on.
CICF itself usually not a grantor; it is a facilitator of grants from philanthropists and other CICF Collaborative members. However, when organizations receive a letter or email from us accompanied by a check and our logo, they may not look at much else.
Let’s stick with our hypothetical DAF holder who wants to donate to childcare. Well, we found a hypothetical nonprofit and mailed them a hypothetical check. The accompanying letter opens as follows:
Dear Hannah,
Congratulations! We are pleased to inform you that the Hannah Childcare Center of Hancock Co. has been awarded a grant in the amount of $3,000 from the Super-Duper Fund. A check payment for this grant award is enclosed…
If this award wasn’t something she applied for, Hannah may not even know what the Super-Duper Fund is. In fact, she may not read the entire letter to see where this money is ultimately coming from. She simply puts it to use.
Ideally, Hannah has administrative staff that can research the Super-Duper Fund and write a personalized thank-you letter. Just as likely, though, Hannah is on her own for that task, surrounded by toddlers, parents and diapers. If so, she may not feel a “mere” thank-you letter is important enough to take up her time, not when she could be Doing the Work.
We have bad news and good news for Hannah: The (not really) bad news is that grant stewardship at a nonprofit is part of Doing the Work. The good news is that successful stewardship frequently leads to more funding, enhancing the work that you do!
To support that argument, here is some testimony from one of our real DAF fundholders:
“Timely acknowledgment of a grant is very important to me because I believe gratitude for financial support (big or small) is an indicator of whether non-profits are paying attention to all aspects of their operations. I feel so strongly about this point that I have removed previous grant recipients from future consideration because of this lapse.”
In short, a thank-you letter is more than saying thank you. It is often considered evidence of a well-run (and, therefore, effective) nonprofit. That’s why we use the word “stewardship” to describe the process of grant management from the nonprofit’s perspective.
As soon as Hannah takes time to compose a letter to the Super-Duper Fund, she is already setting herself apart from the pack. But to really stick out to her donors, she needs her message to abide by the Three P’s:
Prompt
Try to send your message within a week of receiving your check. Do you know or have a relationship with the donor? Great! Send a letter or email to them directly. Was this gift sent anonymously or without direct contact? Also, great! Send your letter to the DAF-sponsoring organization (like CICF). It can ultimately be transmitted to the donor, even if they are anonymous.
Personalized
If the donor is named, learn a little about them, their founder or their mission. Use their names, if you can. If you believe they share your passion for a cause, let them know it.
Purposeful
The most important part: What does this funding enable you to do? Does it contribute to a larger effort? Will it start new programming? Even if these funds “merely” stabilize operations, let funders know why that is critical in such an unstable time.
WORTH YOUR TIME
Many nonprofit organizations are looking for alternate sources of funding in the wake of government funding freezes and recissions. With such a large share of assets granted from DAFs on an annual basis, your stewardship of a DAF donor is as important as stewarding any other donor. That advice is getting truer by the day; DAFs as a form of charitable giving continue to grow in popularity.
If you want an ongoing relationship with a passionate donor, or you want good word-of-mouth for your organization among other donors, just remember the Three P’s and Do the Work.
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