Wednesday, December 13, 2023

Will DAFs Eat the Nonprofit World?

In interesting nonprofit news, the Jewish News of Northern California reports that the Jewish Community Federation and Endowment Fund, a more than 100-year-old Bay Area Jewish charity, is significantly changing its strategy. Where it spent most of its existence providing direct charitable aid, both directly and by giving to other charitable organizations, it is transitioning to becoming a community foundation. In that role, it will advise donors and support DAFs.

The article is interesting, but there are a couple things I'd like to highlight from it. First, the article says that this move represents a national trend: donors are less interested in communal giving and more interested in directing exactly where their charitable dollars go.

Second, this represents a real shift in the Federation's charitable mission. Where before, as best I can tell, its charitable giving went primarily to support Jewish causes, if it stops giving directly and instead oversees DAFs, it kind of loses that targeted giving. in 2021-2022, 17% of the Federation's DAF giving went to Jewish causes. The other 83% went to nonsectarian charities, including civil rights groups, museums, universities, etc. That has to change the landscape for its former donees.

And third, it illustrates how people broadly view DAFs. As a legal matter, once somebody donates to a DAF, they no longer have the right to control where their donation goes. But donors assume they have some sort of control, and the public kind of agrees. One person interviewed says, 

“There’s a way of educating donors and informing them about what the possibilities are in the Jewish sector and why they are worthy of support,” Wertheimer told J. “That can’t be dictated, because the donors are the ones who call the shots when it comes to how their money will be spent.” 

AS a legal matter, that's not entirely correct: the donors only call the shots if the DAF lets them. But the DAF inevitably lets them. Should donors have that level of control? It's not clear to me that they should; at the very least, it's something we should think carefully about.

Samuel D. Brunson

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Everyone I know treats their DAF accounts as though they are their own little private foundation exempt from all the foundation rules. The whole system is badly in need of reform or elimination.

Posted by: Ken Houghton | Dec 13, 2023 10:35:41 AM

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