What a Donor Needs to Know When They Open a Donor Advised Fund

By Lisa Greer

When my husband and I became philanthropists, I knew that I wanted to open a donor advised fund.

Donor Advised Funds are the fastest-growing vehicle for charitable giving in the US. According to the 2018 Giving USA report, America is home to at least $110 billion in donor advised funds, up from around $90 billion the year before. DAFs, including those housed in federation-based Jewish communal funds, offer donors a tax-free way to give grants, for a small fee.

I also knew I wanted my money to benefit the Jewish community and progressive causes, so I opened one at the Jewish Community Foundation of Los Angeles, and even joined the board. I’ve had a donor advised fund for eight years, and give grants on my cell phone through a very simple portal. It’s mobile, it’s flexible, and it’s easy.

But what I did not know was going to matter was the lack of transparency about funding redlines. When I tried to donate to IfNotNow, an organization of young progressive Jews trying to shift our communal conversation around Israel, I was told that I could not. And while Jewish community members may ultimately disagree about what is good for Israel, we should all be able to agree that letting in the light and making guidelines transparent is good for everyone. Then each of us can make choices about our money with our eyes open.

When I asked why a line was being drawn at IfNotNow, the Jewish Community Foundation of Los Angeles offered me funding guidelines that were extremely general and vague. What’s more, as far as I could tell, there was no such line drawn on the right. Donors were able to contribute to extremist settlements in Israel and Islamophobic groups in the US through donor advised funds, but IfNotNow was off limits.

Ultimately, I transferred my money out of the Jewish Community Foundation of Los Angeles’ donor advised fund. I preferred to find a transparent Jewish donor advised fund that aligned with my values. I moved the funds into the New Israel Fund’s Progressive Jewish Fund (where I am also on the board).

The philanthropic trend among donor advised fund holders, as in so many other philanthropic spaces, is for donors to ask more questions and seek more transparency from the organizations and institutions that house our funds.

As values-driven donors like me ask more and more questions about where each slice of our donor advised money is going, the institutions that house these funds will face increasing scrutiny. Here are three questions donors may want to ask when deciding to open up a donor advised fund, especially in the Jewish philanthropic space:

First: Can I make a grant to any verifiable 501(c)(3) organization, irrespective of the content of their work?

If the answer to this question is yes, the organization will likely be giving out grants to NGOs that you think are wonderful – but it also may be giving out grants to NGOs that you find reprehensible. Finding a donor advised fund with a clear, transparent policy statement that reflects your values can allay that concern.

Second: What kind of guidelines does the organization have in place to determine its approval or rejection of a donor advised grant?

Donor advised funds housed at Jewish federations, for example, often mandate that the recipient organization’s mission be consistent with the particular federation’s goals. Each community foundation, whether it is part of a federation or not, can institute its own arbitrary redlines like the ones I faced when trying to donate to IfNotNow. Such ambiguity in policy is unnerving and makes it seem as if the organization has something to hide.

But when straightforward policies are available on an organization’s website, and donors can see what kinds of grants they can make and which they can’t, it is reassuring. At NIF’s Progressive Jewish Fund there are redlines around settlements, hate speech, and anti-democratic legislation. These are the kind of clear redlines that give me peace of mind, and remind me that my values align with the organization that facilitates my giving.

Third: Do I feel good about the administrative fee I am paying going back into this organization?

This question is particularly important since donors pay a premium for DAFs not housed in banks, with some community foundations charging north of 1% of the amount held in the fund. At the Jewish Community Foundation of Los Angeles, I was paying 1.5%. Donors, myself included, do this because we know that by keeping our funds in Jewish institutions, even our administrative fee goes to help our community – we get to do a “double mitzvah.”

Transparency has become the touchstone of contemporary philanthropy. Where “old school” donors wanted to cut a check every year and avoid the details, the vast majority of contemporary donors want details about where their money is going.

Contemporary donors want a more transparent window in to the organization that houses their money. Donor advised funds may have once been just a place to park money, but today these funds, like NIF’s Progressive Jewish Fund, have become partners in making values-based choices about where and how to spend individualized philanthropic dollars.

Lisa Greer is a long-time philanthropist and New Israel Fund board member who writes a philanthropy blog-newsletter called Philanthropy 451. Her book, “Philanthropy Revolution: An Insider’s Guide to Fundraising in a New Era” is due to be published by Harper Collins in the Spring of 2020. She is on Twitter as @Saving_giving.