Friday, October 20, 2023
Yesterday, Rolling Stone reported that Fidelity Charitable and the Vanguard Charitable Endowment Program had given millions of dollars to organizations that push vaccine misinformation, including RFK Jr.'s Children's Health Defense.
And how did two of the largest public charities in the U.S. give money to anti-vaccination groups? As DAF sponsors.
But wait, you might say. DAFs? DAFs are controlled by individual donors who decide where the money goes. The sponsor is basically only the holder of the dollars.
In practice, that's roughly true. A DAF sponsor, including Fidelity and Vanguard, sends the money to whomever the donor wants. But that middle letter--which stands for "advised"--is important here: the donor can designate where the money goes, but the sponsor has legal (and, for that matter, practical) control over it. The reason, after all, that a DAF has the advantageous public charity designation, as opposed to the less-advantageous private foundation designation, is because the sponsor is the charity and it gets donations broadly from the public.
Which means that the donor loses control of the money once the donor donates it. Even if, as a practical matter, the sponsor almost always follows the donor's recommendations, the buck ultimately stops with the sponsor. If Fidelity or Vanguard or any other DAF sponsor didn't want to support vaccine misinformation groups, they absolutely and unquestionably could.
And they absolutely should. Because part of the advantage DAF donors get in donating through a DAF is that their names never appear as a donor. They face no reputational risk. That reputational risk falls 100% on the DAF sponsor.
Like many academics (and others), I've written skeptically about DAFs before. But my skepticism generally revolved around accelerating charitable deductions without the guardrails that exist for private foundations. But in a way, the ability to anonymize donations to actively harmful organizations is even worse.
In any event, DAF sponsors need to look critically at the causes they donate to. Because ultimately, they control the donation and it's their name. And Fidelity and Vanguard can argue as vehemently as they want that they don't support anti-vaccination propaganda but, according to the information Rolling Stone has dug up, that's not true. And because they don't have to follow the advice of their donors, they ultimately own it.
Samuel D. Brunson