In 2023, contributions to donor-advised funds (DAFs) saw a significant decrease, plunging by 21.7%. Additionally, the grants awarded to charities from these funds also experienced a slight decline of 1.4%, as disclosed in the latest report from the National Philanthropic Trust. The 2024 DAF Report analyzed the landscape of DAFs based on data collected over the 2023 fiscal year. Despite the drop in contributions and grants, the total assets within these funds increased by 9.9%, reaching an impressive $251.5 billion.
A representative from the National Philanthropic Trust commented that even though individual donations were down, grantmaking from DAFs remained steady. They emphasized that DAF contributors continue to support charities consistently, particularly during challenging economic times and fluctuating financial markets.
Danielle Vance-McMullen, a co-founder of the DAF Research Collaborative, interpreted the data differently from those who may worry that it signals a waning interest in DAFs. She stated that the findings reflect historical patterns within donor-advised funds: a decline in contributions typically occurs when the stock market downturns, but thankfully, grant distributions tend to remain resilient.
Critics of DAFs have pointed to these recent statistics as proof that affluent donors are hoarding funds in these accounts to reap tax advantages, rather than actively donating to charities in need. However, Vance-McMullen reassured struggling charities not to lose faith in DAFs, highlighting their reliability during critical fundraising periods. She remarked that the report does not deter her from seeking end-of-year donations from DAFs.
An examination of the report reveals that the data was sourced from 1,140 organizations that sponsor DAFs, encompassing national commercial sponsors, community foundations, and niche sponsors, like religious institutions or universities. These organizations were requested to provide fiscal year information, leading to a dataset that spans approximately 18 months and including some data from 2022. Vance-McMullen noted that the substantial decline in contributions could be attributed to the bear market between January and October of 2022, which impacted donation behavior.
The National Philanthropic Trust reiterated that the decline in contributions can be partially traced back to donors responding to the adverse economic climate experienced early in the reporting period. Although grant distributions shrank from $55.5 billion in 2022 to $54.8 billion in 2023, it’s important to note that these figures do not fully factor in the 4.1% inflation rate observed throughout 2023.
While assets within DAFs rose from $228.9 billion to $251.5 billion over the past year, experts suggested this growth may explain why the overall decline in non-inflation-adjusted grant totals remained minimal. According to Mitch Stein, head of strategy at Chariot, a company specializing in payments for DAFs, this indicates that donors felt confident given the performance of their DAF accounts, allowing them to maintain a steady pace of giving.
The average payout rate for DAFs, calculated as the ratio of this year’s grants to last year’s total assets, remained stable, with a slight decrease from 24.1% in 2022 to 23.9% in 2023. Nonetheless, this data raised concerns for Chuck Collins, program director at the Institute for Policy Studies, who highlighted that a considerable amount of funds—totaling a quarter trillion dollars—are not being distributed promptly to active nonprofits. He expressed worries that this reflects a tendency to warehouse funds rather than deploy them effectively.
Grant distributions varied based on the type of sponsoring organization. National sponsors such as Vanguard Charitable and Fidelity Charitable experienced a 7% drop in grants, whereas community foundations recorded a 3.1% increase. Collins pointed out that this disparity showcases the effectiveness of community foundations in channeling funds to causes.
Furthermore, the report indicated that the average DAF account size has grown from $129,000 in 2022 to $141,000 in 2023. However, experts cautioned that this average may be skewed by large donations, as the dataset may have included several outliers. Vance-McMullen emphasized that many DAFs are, in fact, of modest size, and that overall statistics should not overlook the diverse landscape of donor-advised funds.